SCOTTS LIQUID GOLD INC (Form: 10-Q, Received: 08/14/2014 10:34:54)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-13458

SCOTT’S LIQUID GOLD-INC.

(Exact name of registrant as specified in its charter)

Colorado		84-0920811
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
4880 Havana Street, Suite 400, Denver, CO		80239
(Address of principal executive offices)		(Zip Code)

303-373-4860

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨

Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes ¨ No x

As of August 13, 2014, the Registrant had 11,532,289 of its common stock, $0.10 par value per share, outstanding.

CAUTIONARY NOTE ON FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of U.S. federal securities laws. All statements, other than statements of historical facts, included in this Report that address activities, events, or developments with respect to our financial condition, results of operations, or economic performance that we expect, believe, or anticipate will or may occur in the future, or that address plans and objectives of management for future operations, are forward-looking statements. You can typically identify forward-looking statements by the use of words, such as “may,” “could,” “should,” “assume,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “potential,” “plan,” and other similar words. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements and our performance inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to:

·	changing consumer preferences and the continued acceptance of each of our significant products in the marketplace;

·	the degree of success of any new product or product line introduction by us;

·	competitive factors, including any decrease in distribution of (i.e., retail stores carrying) our significant products;

·	continuation of our distributorship agreements for Montagne Jeunesse skin care products and Batiste Dry Shampoos;

·	the need for effective advertising of our products and limited resources available for such advertising;

·	new competitive products and/or technological changes;

·	dependence upon third party vendors and upon sales to major customers;

·	the availability of necessary raw materials and potential increases in the prices of these raw materials;

·	changes in the regulation of our products, including applicable environmental and U.S. Food and Drug Administration (“FDA”) regulations;

·	the continuing availability of financing on terms and conditions that are acceptable to us;

·	future losses which could affect our liquidity;

·	the loss of any executive officer; and

·	other matters discussed in this Report, including the risks described in the Risk Factors section of this Report.

We caution you that forward-looking statements are not guarantees of future performance and that actual results or performance may be materially different from those expressed or implied in the forward-looking statements. The forward-looking statements in this Report speak as of the filing date of this Report. Although we may from time to time voluntarily update our prior forward-looking statements, we undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may arise after the date of this Report.

TABLE OF CONTENTS

		Page
PART I
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15
Item 4.	Controls and Procedures	15
PART II
Item 1A.	Risk Factors	16
Item 6.	Exhibits	16

PART I

ITEM 1.

FINANCIAL STATEMENTS.

Consolidated Statements of Operations (Unaudited)

Scott’s Liquid Gold-Inc. & Subsidiaries

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Net sales	$	5,734,000		$	4,502,100		$	11,217,800		$	9,233,800
Operating costs and expenses:
Cost of sales		3,290,000			2,415,500			6,266,600			4,998,000
Advertising		199,600			123,600			399,200			419,200
Selling		1,182,700			1,184,000			2,315,200			2,281,500
General and administrative		741,800			643,800			1,412,300			1,418,200
Total operating costs and expenses		5,414,100			4,366,900			10,393,300			9,116,900
Income from operations		319,900			135,200			824,500			116,900
Rental and other income		3,600			4,000			12,200			21,400
Interest expense		(7,300	)		(7,000	)		(14,500	)		(65,600	)
Income before income taxes		316,200			132,200			822,200			72,700
Income tax expense		7,400			9,000			15,800			9,000
Net income	$	308,800		$	123,200		$	806,400		$	63,700
Net income per common share
Basic	$	0.03		$	0.01		$	0.07		$	0.01
Diluted	$	0.03		$	0.01		$	0.07		$	0.01
Weighted average shares outstanding:
Basic		11,500,623			11,213,586			11,474,836			11,154,038
Diluted		11,794,328			11,377,225			11,773,086			11,329,259

See accompanying notes to these Consolidated Financial Statements (Unaudited).

Consolidated Balance Sheets

Scott’s Liquid Gold-Inc. & Subsidiaries

	June 30, 2014		December 31, 2013
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	4,212,100	$	3,126,200
Trade receivables, net		1,664,800		1,182,300
Inventories, net		2,661,700		3,211,200
Refundable income taxes		17,200		0
Prepaid expenses		167,300		269,200
Total current assets		8,723,100		7,788,900
Property, plant and equipment, net		457,500		518,200
Other assets		51,000		51,000
Total assets	$	9,231,600	$	8,358,100
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		832,300		860,900
Accrued payroll and benefits		575,000		553,300
Accrued property taxes		36,000		33,400
Total current liabilities		1,443,300		1,447,600
Total liabilities		1,443,300		1,447,600
Shareholders’ equity:
Common stock; $0.10 par value, authorized 50,000,000 shares; issued and outstanding 11,532,289 shares (2014) and 11,446,800 shares (2013)		1,153,300		1,144,700
Capital in excess of par		5,678,300		5,615,500
Retained earnings		956,700		150,300
Total shareholders’ equity		7,788,300		6,910,500
Total liabilities and shareholders’ equity	$	9,231,600	$	8,358,100

See accompanying notes to these Consolidated Financial Statements (Unaudited).

Consolidated Statements of Cash Flows (Unaudited)

Scott’s Liquid Gold-Inc. & Subsidiaries

	Six Months Ended June 30,
	2014			2013
Cash flows from operating activities:
Net income	$	806,400		$	63,700
Adjustment to reconcile net income to net cash used by operating activities:
Depreciation and amortization		92,800			73,200
Stock-based compensation		35,700			24,300
Loss on disposal of assets		0			7,200
Change in operating assets and liabilities:
Trade receivables		(482,500	)		(141,600	)
Inventories		549,500			(879,300	)
Prepaid expenses and other assets		101,900			(14,000	)
Net payments on obligations collateralized by receivables and inventory		0			(1,201,400	)
Refundable income taxes		(17,200	)		0
Accounts payable and accrued expenses		(4,300	)		(614,700	)
Total adjustments to net income		275,900			(2,746,300	)
Net Cash Provided (Used) by Operating Activities		1,082,300			(2,682,600	)
Cash flow from investing activities:
Net proceeds from sale of assets held for sale		0			8,922,600
Purchase of property, plant and equipment		(32,100	)		(160,800	)
Net Cash (Used) Provided by Investing Activities		(32,100	)		8,761,800
Cash flow from financing activities:
Principal payments on long-term debt		0			(3,363,300	)
Proceeds from exercise of stock options		35,700			67,200
Net Cash Provided (Used) by Financing Activities		35,700			(3,296,100	)
Net Increase in Cash and Cash Equivalents		1,085,900			2,783,100
Cash and Cash Equivalents, beginning of period		3,126,200			253,900
Cash and Cash Equivalents, end of period	$	4,212,100		$	3,037,000
Supplemental disclosures:
Cash paid during the period for interest	$	14,500		$	65,600

See accompanying notes to these Consolidated Financial Statements (Unaudited).

Notes to Consolidated Financial Statements (Unaudited)

Scott’s Liquid Gold-Inc. & Subsidiaries

Note 1.

Organization and Summary of Significant Accounting Policies.

(a)	Company Background

Scott’s Liquid Gold-Inc. (a Colorado corporation) was incorporated on February 15, 1954. Scott’s Liquid Gold-Inc. and its wholly-owned subsidiaries (collectively, the “Company”, “we”, “our”, or “us”) develop, manufacture, market and sell quality household and skin and hair care products. We are also an exclusive distributor in the United States of Montagne Jeunesse skin sachets and Batiste Dry Shampoo manufactured by two other companies. Our business is comprised of two segments, household products and skin and hair care products.

(b)	Principles of Consolidation

Our consolidated financial statements include our accounts and those of our wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

(c)	Basis of Presentation

The Consolidated Statements of Operations, Consolidated Balance Sheets, and the Consolidated Statements of Cash Flows included in this Report have been prepared by the Company. In our opinion, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at June 30, 2014 and results of operations and cash flows for all periods have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These consolidated financial statements should be read in conjunction with our financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013. The results of operations for the period ended June 30, 2014 are not necessarily indicative of the operating results for the full year.

(d)	Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts in our financial statements of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include, but are not limited to, the realization of deferred tax assets, reserves for slow moving and obsolete inventory, customer returns and allowances, and stock-based compensation. Actual results could differ from our estimates.

(e)	Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less at the date of acquisition to be cash equivalents.

(f)	Sale of Accounts Receivable

On November 3, 2008, effective as of October 31, 2008, we entered into a financing agreement with Summit Financial Resources, L.P. (“Summit”) for the purpose of providing working capital. The financing agreement with Summit was amended on March 12, 2009, March 16, 2011 (effective March 1, 2011) and June 29, 2012 (effective July 1, 2012). The agreement has a term that expires on January 1, 2015, but it may be renewed for additional 12 month periods unless either party elects to cancel in writing at least 60 days prior to January 1, 2015 and thereafter on the anniversary date of each 12 month period.

The agreement provides for a factoring line up to $1.5 million and is secured primarily by accounts receivables, inventory, any lease in which we are a lessor and all investment property and guarantees by our active subsidiaries. Under the agreement, Summit will make loans at our request and in its discretion based on: (i) its purchases of our receivables, with recourse against us, at an advance rate of 85% (or such other percentage determined by Summit in its discretion) and (ii) our inventory not to exceed certain amounts, including an aggregate maximum of $500,000. Advances under the agreement have an interest rate of 1.0% over the prime rate (as published in The Wall Street Journal) for the accounts receivables portion of the advances and 2.5% over the prime rate for the inventory portion of the borrowings. At June 30, 2014, the prime rate was 3.25%.

There is also an administrative fee of 0.85% per month on the average monthly outstanding loan on the receivable portion of any advance if the average quarterly loan in the prior quarter was less than or equal to $1,000,000, and 0.75% per month if the average quarterly loan in the prior quarter was greater than $1,000,000 and 1.0% per month on the average monthly outstanding loan on the inventory portion of any advance.

The agreement provides that neither we nor our active subsidiaries may engage in a change in control transaction without the prior written consent of Summit. Events of default include, but are not limited to, our failure to make a payment when due or a default occurring on any of our other indebtedness.

At June 30, 2014 and 2013, the entire credit line of $1.5 million was available for future factoring of accounts receivable invoices and borrowings secured by our inventory.

We report these transactions using the authoritative guidance of the Financial Accounting Standards Board (“FASB”) as a secured borrowing rather than as a sale. As a result, affected accounts receivable are reported under the “Current Assets” section within our Consolidated Balance Sheets as “Trade receivables, net.” Similarly, the net liability owing to Summit, if any, appears as “Obligations collateralized by receivables and inventory” within the “Current Liabilities” section of our Consolidated Balance Sheets. Net proceeds received on obligations collateralized by receivables and inventory appear as “net cash (used) provided by operating activities” within the “Adjustment to reconcile net income to net cash used by operating activities” section of our Consolidated Statements of Cash Flows.

On March 16, 2011, with the consent of Summit, we entered into a financing agreement with Wells Fargo Bank, National Association (“Wells Fargo”) for the purpose of further lowering the cost of borrowing associated with the financing of our accounts receivable. Pursuant to this agreement, we may sell accounts receivables from our largest customer, Wal-Mart Stores, Inc. (“Wal-Mart”), at a discount to Wells Fargo; provided, however, that Wells Fargo may reject offers to purchase such receivables in its discretion. These receivables may be purchased by Wells Fargo at a cost to us equal to LIBOR plus 1.15% per annum. The LIBOR rate used depends on the days to maturity of the receivable sold, typically ranging from 102 to 105 days. At June 30, 2014, Wells Fargo used the 104-day LIBOR rate of 0.27%.

The agreement has no fixed termination date, but continues unless terminated by either party giving 30 days prior written notice to the other party. During the six months ended June 30, 2014 and 2013, we sold approximately $2,168,100 and $2,302,800, respectively, of our relevant accounts receivable to Wells Fargo for approximately $2,159,300 and $2,292,900, respectively. The difference between the invoiced amount of the receivable and the cash that we received from Wells Fargo is a cost to us. This cost is in lieu of any cash discount our customer would have been allowed and, thus, is treated in a manner consistent with standard trade discounts granted to our customers.

The reporting of the sale of accounts receivables to Wells Fargo is treated as a sale rather than as a secured borrowing. As a result, affected accounts receivables are relieved from the Company’s financial statements upon receipt of the cash proceeds.

(g)	Inventories

Inventories consist of raw materials and finished goods and are stated at the lower of cost (first-in, first-out method) or market. We record a reserve for slow moving and obsolete products and raw materials. We estimate this reserve based upon historical and anticipated sales.

Inventories were comprised of the following at:

	June 30, 2014			December 31, 2013
Finished goods	$	1,446,900		$	1,636,500
Raw materials		1,269,700			1,621,000
Inventory reserve for obsolescence		(54,900	)		(46,300	)
	$	2,661,700		$	3,211,200

(h)	Property, Plant and Equipment

Property, plant and equipment are recorded at historical cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets ranging from three to 45 years. Production equipment and production support equipment are estimated to have useful lives of 15 to 20 years and three to 10 years, respectively. Office furniture and office machines are estimated to have useful lives of 10 to 20 years and three to five years, respectively. Carpets, drapes and company vehicles are estimated to have useful lives of five to 10 years. Maintenance and repairs are expensed as incurred. Improvements that extend the useful lives of the asset or provide improved efficiency are capitalized.

(i)	Financial Instruments

Financial instruments which potentially subject us to concentrations of credit risk include cash and cash equivalents and trade receivables. We maintain our cash balances in the form of bank demand deposits with financial institutions that we believe are creditworthy. As of June 30, 2014, and periodically throughout the year, we have maintained balances in various operating accounts in excess of federally insured limits. We establish an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information. We have no significant financial instruments with off-balance sheet risk of accounting loss, such as foreign exchange contracts, option contracts or other foreign currency hedging arrangements.

The recorded amounts for cash and cash equivalents, receivables, other current assets, accounts payable and accrued expenses approximate fair value due to the short-term nature of these financial instruments. As of June 30, 2014 and 2013, we had no long-term debt.

( j )

Income Taxes

We follow FASB authoritative guidance for the accounting for income taxes which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective income tax bases. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which related temporary differences become deductible. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Taxes are reported based on tax positions that meet a more-likely-than-not standard and that are measured at the amount that is more-likely-than-not to be realized. Differences between financial and tax reporting which do not meet this threshold are required to be recorded as unrecognized tax benefits or expense. We classify penalty and interest expense related to income tax liabilities as an income tax expense. There are no significant interest and penalties recognized in the statement of operations or accrued on the balance sheet.

( k )

Revenue Recognition

Our revenue recognition policy is significant because the amount and timing of revenue is a key component of our results of operations. We follow guidance issued by FASB, which requires that certain criteria be met in order to recognize revenue. If these criteria are not met, then the associated revenue is deferred until it is met. In our case, the criteria generally are met when we have an arrangement to sell a product, we have delivered the product in accordance with that arrangement, the sales price of the product is determinable and we believe that we will be paid for the sale.

We establish reserves for customer returns of our products and customer allowances. We estimate these reserves based upon, among other things, an assessment of historical trends, information from customers and anticipated returns related to current sales activity. These reserves are established in the period of sale and reduce our revenue in that period.

Our reserve for customer allowances includes primarily reserves for trade promotions to support price features, displays, slotting fees and other merchandising of our products to our customers. The actual level of returns and customer allowances are influenced by several factors, including the promotional efforts of our customers, changes in mix of our customers, changes in the mix of the products we sell and the maturity of the product. We may change our estimates based on actual results and consideration of other factors that cause returns and allowances. In the event that actual results differ from our estimates, the results of future periods may be impacted.

We also establish reserves for coupons, rebates and certain other promotional programs for consumers. We estimate these reserves based upon, among other things, an assessment of historical trends and current sales activity. These reserves are recorded as a reduction of revenue at the later of the date at which the revenue is recognized or the date at which the sale incentive is offered.

We have also established an allowance for doubtful accounts. We estimate this allowance based upon, among other things, an assessment of the credit risk of specific customers and historical trends. We believe our allowance for doubtful accounts is adequate to absorb any losses which may arise. In the event that actual losses differ from our estimates, the results of future periods may be impacted.

At June 30, 2014 and December 31, 2013 approximately $853,800 and $821,700, respectively, had been reserved as a reduction of accounts receivable. Trade promotions to our customers and incentives such as coupons to our consumer are deducted from gross sales and totaled $1,090,200 and $993,200 for the six months ended June 30, 2014 and 2013, respectively.

( l )

Advertising Costs

Advertising costs are expensed as incurred.

( m )

Stock-based Compensation

During the six months ended June 30, 2014, we granted options to acquire 60,000 shares of our common stock to two of our board members at a price of $0.792 per share, which vest ratably over 48 months, or upon a change in control, and which expire after five years. Such options were granted at 120% of the market value as of the date of grant. We also granted options to acquire 30,000 shares of our common stock to one of our board members at a price of $0.792 per share, which vested upon the date of grant, and expire after five years. Such options were also granted at 120% of the market value as of the date of grant. During the first six months of 2013, we granted options to acquire 85,000 shares of our common stock to two executive officers at a price of $0.41 per share, an option to acquire 30,000 shares of common stock to a board member at a price of $0.55 per share and an option to acquire 15,000 shares of our common stock to a regional sales manager at a price of $0.55 per share. These options which vest ratably over 48 months, or upon a change in control, and which expire after five years, were granted at 120% of the market value as of the date of grant.

The weighted average fair market value of the options granted in the first six months of 2014 and 2013 was estimated on the date of grant, using a Black-Scholes option pricing model with the following assumptions:

	June 30, 2014	June 30, 2013
Expected life of options (using the “simplified” method)	4.5 years	4.5 years
Average risk-free interest rate	1.65%	0.8% - 1.0%
Average expected volatility of stock	122%	139% - 141%
Expected dividend rate	None	None
Fair value of options granted	$36,917	$42,356

Compensation cost related to stock options recognized in operating results (included in general and administrative expenses) under authoritative guidance issued by the FASB was $35,700 and $24,300 in the six months ended June 30, 2014 and 2013, respectively. Approximately $114,100 of total unrecognized compensation costs related to non-vested stock options is expected to be recognized over the next 48 months. In accordance with this same authoritative guidance, there was no tax benefit from recording the non-cash expense as it relates to the options granted to employees, as these were qualified stock options which are not normally tax deductible. With respect to the non-cash expense associated with options granted to the non-employee directors, no tax benefit is recognized due to the existence of as yet unutilized net operating losses. At such time as these operating losses have been utilized and a tax benefit is realized from the issuance of non-qualified stock options, a corresponding tax benefit may be recognized.

( n )

Operating Costs and Expenses Classification

Cost of sales includes costs associated with manufacturing and distribution including labor, materials, freight-in, purchasing and receiving, quality control, internal transfer costs, repairs, maintenance and other indirect costs, as well as warehousing and distribution costs. We classify shipping and handling costs comprised primarily of freight-out as selling expenses. Other selling expenses consist primarily of wages and benefits for sales and sales support personnel, travel, brokerage commissions and promotional costs, as well as certain other indirect costs. Shipping and handling costs totaled $720,700 and $730,800 for the six months ended June 30, 2014 and 2013, respectively.

General and administrative expenses consist primarily of wages and benefits associated with management and administrative support departments, business insurance costs, professional fees, office facility related expenses, and other general support costs.

(o)	Recently Issued Accounting Standards

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). ASU 2014-09 amends the guidance for revenue recognition to replace numerous industry-specific requirements and converges areas under this topic with those of the International Financial Reporting Standards. The ASU implements a five-step process for customer contract revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts and customers. Other major provisions include the capitalization and amortization of certain contract costs, ensuring the time value of money is considered in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The amendments in this ASU are effective for reporting periods beginning after December 15, 2016, and early adoption is prohibited. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of the adoption. We are currently assessing the impact, if any, that the adoption of ASU 2014-09 will have on our financial statements.

Note 2 .

Earnings per Share.

We present basic and diluted earnings or loss per share in accordance with authoritative guidance which establishes standards for computing and presenting basic and diluted earnings per share. Per share data is determined by using the weighted average number of common shares outstanding. Common equivalent shares are considered only for diluted earnings per share, unless considered anti-dilutive. Common equivalent shares, determined using the treasury stock method, result from stock options with exercise prices that are below the average market price of the common stock.

Basic earnings per share include no dilution and are computed by dividing income available to common shareholders by the weighted-average number of shares outstanding during the period. Diluted earnings per share reflect the potential of securities that could share in our earnings. There were common stock equivalents of 110,000 and 160,000 shares outstanding at June 30, 2014 and 2013, respectively, consisting of stock options that were not included in the calculation of earnings per share because they would have been anti-dilutive.

A reconciliation of the weighted average number of common shares outstanding for the three and six months ended June 30, 2014 and 2013 is as follows:

	2014
	Three Months		Six Months
Common shares outstanding, beginning of the period		11,446,800		11,446,800
Weighted average common shares issued		53,823		28,036
Weighted average number of common shares outstanding		11,500,623		11,474,836
Dilutive effect of common share equivalents		293,705		298,250
Diluted weighted average number of common shares outstanding		11,794,328		11,773,086

	2013
	Three Months		Six Months
Common shares outstanding, beginning of the period		11,201,622		10,937,000
Weighted average common shares issued		11,964		217,038
Weighted average number of common shares outstanding		11,213,586		11,154,038
Dilutive effect of common share equivalents		163,639		175,221
Diluted weighted average number of common shares outstanding		11,377,225		11,329,259

We have authorized 20,000,000 shares of preferred stock issuable in one or more series, none of which are issued or outstanding as of June 30, 2014.

Note 3.

Segment Information.

We operate in two different segments: household products and skin and hair care products. Our products are sold nationally and internationally (primarily Canada), directly through our sales force and indirectly through independent brokers, to mass merchandisers, drugstores, supermarkets, hardware stores and other retail outlets and to wholesale distributors. We have chosen to organize our business around these segments based on differences in the products sold.

Accounting policies for our segments are the same as those described in Note 1. We evaluate segment performance based on segment income or loss before income taxes.

The following provides information on our segments for the three and six months ended June 30:

	Three Months Ended June 30,
	2014					2013
	Household Products			Skin and Hair Care Products		Household Products			Skin and Hair Care Products
Net sales to external customers	$	1,578,200		$	4,155,800	$	1,285,700		$	3,216,400
(Loss) income before income taxes	$	(149,200	)	$	465,400	$	(208,000	)	$	340,200
Identifiable assets	$	4,229,500		$	3,565,400	$	3,115,500		$	3,510,500

	Six Months Ended June 30,
	2014					2013
	Household Products			Skin and Hair Care Products		Household Products			Skin and Hair Care Products
Net sales to external customers	$	2,938,800		$	8,279,000	$	2,607,100		$	6,626,700
(Loss) income before income taxes	$	(379,600	)	$	1,201,800	$	(678,500	)	$	751,200
Identifiable assets	$	4,229,500		$	3,565,400	$	3,115,500		$	3,510,500

The following is a reconciliation of segment information to consolidated information for the three and six months ended June 30:


	Three Months Ended June 30,				Six Months Ended June 30,
		2014		2013		2014		2013
Net sales to external customers	$	5,734,000	$	4,502,100	$	11,217,800	$	9,233,800
Consolidated income before income taxes	$	316,200	$	132,200	$	822,200	$	72,700
Identifiable assets	$	7,794,900	$	6,626,000	$	7,794,900	$	6,626,000
Corporate assets		1,436,700		1,145,600		1,436,700		1,145,600
Consolidated total assets	$	9,231,600	$	7,771,600	$	9,231,600	$	7,771,600

Corporate assets noted above are comprised primarily of our cash and investments, and property and equipment not directly associated with our manufacturing, warehousing, shipping and receiving activities.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Results of Operations

Our consolidated net sales for the first six months of 2014 were $11,217,800 versus $9,233,800 for the first six months of 2013, an increase of $1,984,000 or 21.5%. We saw a 37.4% increase in net sales of the skin and hair care products that we distribute for other companies and a 3.7% decrease in net sales of our own line of skin care products. We saw a 12.7% increase in net sales of our household products. The reasons for the foregoing changes in net sales of our products are described below.

Our consolidated net sales for the second quarter of 2014 were $5,734,000 versus $4,502,100 for the second quarter of 2013, an increase of $1,231,900 or 27.4%. We saw a 44.2% increase in net sales of the skin and hair care products that we distribute for other companies and a 2.1% decrease in net sales of our own line of skin care products. We saw a 22.8% increase in net sales of our household products. The reasons for the foregoing changes in net sales of our products are described below.

Our net income for the first six months of 2014 was $806,400 versus net income of $63,700 in the first six months of 2013. Our net income for the second quarter of 2014 was $308,800 versus net income of $123,200 in the second quarter of 2013. The net income for the first six months of 2014 compared to the net income for the same period in 2013 resulted primarily from: (1) increased sales; (2) changes in our trade promotions to our customers; (3) changes in costs of sales; and (4) changes in operating expenses, as discussed below.

Summary of Results as a Percentage of Net Sales

	Year Ended December 31,			Six Months Ended June 30,
`	2013			2014			2013
Net sales
Household products		27.7	%		26.2	%		28.2	%
Skin and hair care products		72.3	%		73.8	%		71.8	%
Total net sales		100.0	%		100.0	%		100.0	%
Cost of sales		54.3	%		55.9	%		54.1	%
Gross profit		45.7	%		44.1	%		45.9	%
Other revenue		0.2	%		0.1	%		0.2	%
		45.9	%		44.2	%		46.1	%
Operating expenses		41.7	%		36.8	%		44.6	%
Interest expense		0.4	%		0.1	%		0.7	%
		42.1	%		36.9	%		45.3	%
Income before income taxes		3.8	%		7.3	%		0.8	%

Our gross margins may not be comparable to those of companies who include all of the costs related to their distribution network in cost of sales because we, like some other companies, exclude a portion of these costs (i.e., freight out to customers) from gross margin. Instead, we include them as part of selling expenses. See Note 1(n), “Operating Costs and Expenses Classification”, to our Consolidated Financial Statements (Unaudited) in Item 1.

Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013

Comparative Net Sales

	Six Months Ended June 30,				Percentage Increase
	2014		2013		(Decrease)
Total household products	$	2,938,800	$	2,607,100		12.7	%
Alpha Hydrox ^® , Diabetic cream and other skin care products		1,936,800		2,011,500		(3.7	%)
Montagne Jeunesse and Batiste Dry Shampoo		6,342,200		4,615,200		37.4	%
Total skin and hair care products		8,279,000		6,626,700		24.9	%
Total net sales	$	11,217,800	$	9,233,800		21.5	%

During the first six months of 2014, net sales of skin and hair care products accounted for 73.8% of consolidated net sales compared to 71.8% for the same period in 2013. The net sales of these products for that period were $8,279,000 in 2014 compared to $6,626,700 for the same period in 2013, an increase of $1,652,300 or 24.9%, primarily as a result of an increase in net sales of Batiste Dry Shampoo.

The net sales of our Alpha Hydrox ^® and other manufactured skin care products were $1,936,800 in the first six months of 2014 versus $2,011,500 for the same period in 2013, a decrease of $74,700 or 3.7%. This decrease is primarily attributable to a decrease in the net sales of our Alpha Hydrox products resulting from one of our customers reducing the number of our products that it carries in its stores.

The net sales of Montagne Jeunesse and Batiste Dry Shampoo were $6,342,200 in the first six months of 2014 versus $4,615,200 for the same period in 2013, an increase of $1,727,000 or 37.4%. This increase is primarily attributable to increased distribution of both Montagne Jeunesse and Batiste Dry Shampoo among new and existing customers and the improved placement of our products at existing customers. The Company currently distributes Batiste Dry Shampoo pursuant to a distribution agreement with Church & Dwight Co., Inc. (“Church & Dwight”) that expires on December 31, 2014. Following the expiration of our current distribution agreement, we will continue to distribute Batiste Dry Shampoo under a new distribution agreement with Church & Dwight that will limit our distribution to the specialty retailer channel. Please see the section below entitled “Recent Developments” for additional information on our new distribution agreement.

Net sales of household products for the first six months of 2014 accounted for 26.2% of net sales compared to 28.2% for the same period in 2013. During the first six months of 2014, the sales of our household products were $2,938,800 as compared to $2,607,100 for the same period in 2013, an increase of $331,700 or 12.7%. The increase is attributable primarily to sales of our Scott’s Liquid Gold ^® Floor Restore product, which we introduced late in the fourth quarter of 2013.

We paid our customers a total of $1,090,200 in the first six months of 2014 for trade promotions to support price features, displays, slotting fees and other merchandising of our products, versus $993,200 for the same period in 2013, an increase of $97,000 or 9.8%. This increase is primarily attributable to higher sales in the first six months of 2014.

From time to time, our customers return products to us. For our household products, we permit returns only for a limited time. With regard to our skin and hair care products, returns are more frequent under an unwritten industry standard that permits returns for a variety of reasons. In the event a skin and hair care customer requests a return of a product, we will consider the request, and may grant such request in order to maintain or enhance our relationship with the customer, even in the absence of an enforceable right of the customer to do so. Typically, customers that return products to us take a credit on our invoice equal to the original sale price plus a handling charge ranging from 8-10% of the original sales price. Our product returns (as a percentage of net sales) were 0.5% percent for the first six months of 2014 compared to 1.4% for the same period in 2013. The decrease is primarily attributable to one of our customers returning Diabetic shampoo from certain of its stores that will no longer carry our Diabetic shampoo in the first six months of 2013, which occurred to a lesser extent during the same time period in 2014.

On a consolidated basis, cost of sales was $6,266,600 during the first six months of 2014 compared to $4,998,000 for the same period in 2013, an increase of $1,268,600 or about 25.4%, on a net sales increase of 21.5%. As a percentage of consolidated net sales, cost of sales was 55.9% in the first six months of 2014 versus 54.1% for the same period in 2013.

As a percentage of net sales of our skin and hair care products, the cost of sales for our skin and hair care products increased to 57.5% in the first six months of 2014 as compared to 53.9% for the same period in 2013. This increase reflects primarily a higher percentage of net sales of the skin and hair care products that we distribute for other companies, which have a higher cost than the skin care products that we manufacture.

As a percentage of net sales of our household products, the costs of sales for our household products decreased to 51.3% in the first six months of 2014 as compared to 54.6% for the same period in 2013. This decrease is primarily attributable to a reduction in our costs for certain raw materials.

Operating Expenses, Interest Expense and Other Income

	Six Months Ended June 30,				Percentage Increase
	2014		2013		(Decrease)
Operating Expenses
Advertising	$	399,200	$	419,200		(4.8	%)
Selling		2,315,200		2,281,500		1.5	%
General and administrative		1,412,300		1,418,200		(0.4	%)
Total operating expenses	$	4,126,700	$	4,118,900		0.2	%
Rental and Other Income	$	12,200	$	21,400		(43.0	%)
Interest Expense	$	14,500	$	65,600		(77.9	%)

Our operating expenses increased by $7,800 or 0.2% in the first six months of 2014 when compared to the same period in 2013. These expenses consist primarily of advertising, selling, and general and administrative expenses, which are discussed below.

Advertising expenses for the first six months of 2014 were $399,200 compared to $419,100 for the same period in 2013, a decrease of $20,000 or 4.8%. This decrease is primarily attributable to doing a national coupon program in the first six months of 2013 as part of a national television campaign for our Scott’s Liquid Gold ^® Wood Cleaner and Preservative. Although we did a national television campaign in the first six months of 2014, we did not do a national coupon program.

Selling expenses for the first six months of 2014 were $2,315,200 compared to $2,281,500 for the same period in 2013, an increase of $33,700 or 1.5%. This increase is primarily attributable to changes in personnel within our sales organization starting in the first quarter of 2013 and the accrual in the second quarter of 2014 of potential performance bonus payments to personnel within our sales organization for 2014 offset, in part, by a decrease in the costs of freight out to our customers.

General and administrative expenses for the first six months of 2014 were $1,412,300 compared to $1,418,200 for the same period of 2013, a decrease of $5,900 or 0.4%. This change is primarily attributable to incurring expenses in the first quarter of 2013 related to the sale of our land and office, warehouse and manufacturing buildings in Denver, Colorado (collectively, the “Facilities”) on February 1, 2013 and the need to incur a non-cash expense for brokerage commissions relating to the leasing of office space in the Facilities that were previously capitalized on our balance sheet offset, in part, by the accrual in the second quarter of 2014 of potential performance bonus payments to our management and administrative support personnel for 2014.

Rental and other income for the first six months of 2014 of $12,200 included $0 of net rental receipts and $7,100 in interest earned on our cash reserves. This compares to total rental and other income for the first six months of 2013 of $21,400 which included $11,000 of net rental receipts and $6,900 in interest earned on our cash reserves. The decrease in rental income is a result of the sale of our Facilities, part of which were being leased to unaffiliated tenants.

Interest expense for the first six months of 2014 was $14,500 in administrative fees paid to Summit. Interest expense for the first six months of 2013 was $65,600 and included $17,400 in administrative fees paid to Summit. The decrease in interest expense is due to us paying off our mortgage as a result of the sale of our Facilities and maintaining since that time a zero balance on our line of credit with Summit.

Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013

Comparative Net Sales

	Three Months Ended June 30,				Percentage Increase
	2014		2013		(Decrease)
Total household products	$	1,578,200	$	1,285,700		22.8	%
Alpha Hydrox ^® , Diabetic cream and other skin care products		1,022,700		1,044,300		(2.1	%)
Montagne Jeunesse and Batiste Dry Shampoo		3,133,100		2,172,100		44.2	%
Total skin and hair care products		4,155,800		3,216,400		29.2	%
Total net sales	$	5,734,000	$	4,502,100		27.4	%

During the second quarter of 2014, net sales of skin and hair care products accounted for 72.5% of consolidated net sales compared to 71.4% for the same period in 2013. The net sales of these products for that period were $4,155,800 in 2014 compared to $3,216,400 for the same period in 2013, an increase of $939,400 or 29.2%, primarily as a result of an increase in net sales of Batiste Dry Shampoo.

The net sales of our Alpha Hydrox ^® and other manufactured skin care products were $1,022,700 in the second quarter of 2014 versus $1,044,300 for the same period in 2013, a decrease of $21,600 or 2.1%. This decrease is primarily attributable to a decrease in the net sales of our Alpha Hydrox products resulting from one of our customers reducing the number of our products that it carries in its stores.

The net sales of Montagne Jeunesse and Batiste Dry Shampoo were $3,133,100 in the second quarter of 2014 versus $2,172,100 for the same period in 2013, an increase of $961,000 or 44.2%. This increase is primarily attributable to increased distribution of both Montagne Jeunesse and Batiste Dry Shampoo among new and existing customers and the improved placement of our products at existing customers. The Company currently distributes Batiste Dry Shampoo pursuant to a distribution agreement with Church & Dwight that expires on December 31, 2014. Following the expiration of our current distribution agreement, we will continue to distribute Batiste Dry Shampoo under a new distribution agreement with Church & Dwight that will limit our distribution to the specialty retailer channel. Please see the section below entitled “Recent Developments” for additional information on our new distribution agreement.

Net sales of household products for the second quarter of 2014 accounted for 27.5% of net sales compared to 28.6% for the same period in 2013. During the second quarter of 2014, the sales of our household products were $1,578,200 as compared to $1,285,700 for the same period in 2013, an increase of $292,500 or 22.8%. The increase is attributable primarily to sales of our Scott’s Liquid Gold ^® Floor Restore product, which we introduced late in the fourth quarter of 2013.

We paid our customers a total of $560,400 in the second quarter of 2014 for trade promotions to support price features, displays, slotting fees and other merchandising of our products, versus $448,100 for the same period in 2013, an increase of $112,300 or 25.1%. This increase is primarily attributable to higher sales in the second quarter of 2014.

From time to time, our customers return products to us. For our household products, we permit returns only for a limited time. With regard to our skin and hair care products, returns are more frequent under an unwritten industry standard that permits returns for a variety of reasons. In the event a skin and hair care customer requests a return of a product, we will consider the request, and may grant such request in order to maintain or enhance our relationship with the customer, even in the absence of an enforceable right of the customer to do so. Typically, customers that return products to us take a credit on our invoice equal to the original sale price plus a handling charge ranging from 8-10% of the original sales price. Our product returns (as a percentage of net sales) were 0.8% percent for the second quarter of 2014 compared to 1.7% for the same period in 2013. The decrease is primarily attributable to one of our customers returning Diabetic shampoo from certain of its stores that will no longer carry our Diabetic shampoo in the first six months of 2013, which also occurred to a lesser extent during the same time period in 2014.

On a consolidated basis, cost of sales was $3,290,000 during the second quarter of 2014 compared to $2,415,500 for the same period in 2013, an increase of $874,500 or about 36.2%, on a net sales increase of 27.4%. As a percentage of consolidated net sales, cost of sales was 57.4% in the second quarter of 2014 versus 53.7% for the same period in 2013.

As a percentage of net sales of our skin and hair care products, the cost of sales for our skin and hair care products increased to 60.0% in the second quarter of 2014 as compared to 53.7% for the same period in 2013. This increase reflects primarily a higher percentage of net sales of the skin and hair care products that we distribute for other companies, which have a higher cost than the skin care products that we manufacture.

As a percentage of net sales of our household products, the costs of sales for our household products decreased to 50.5% in the second quarter of 2014 as compared to 53.5% for the same period in 2013. This decrease is primarily attributable to a reduction in our costs for certain raw materials.

Operating Expenses, Interest Expense and Other Income

	Three Months Ended June 30,				Percentage Increase
	2014		2013		(Decrease)
Operating Expenses
Advertising	$	199,600	$	123,600		61.5	%
Selling		1,182,700		1,184,000		(0.1	%)
General and administrative		741,800		643,800		15.2	%
Total operating expenses	$	2,124,100	$	1,951,400		8.9	%
Rental and Other Income	$	3,600	$	4,000		(10.0	%)
Interest Expense	$	7,300	$	7,000		4.3	%

Our operating expenses increased by $172,700 or 8.9% in the second quarter of 2014 when compared to the same period in 2013. These expenses consist primarily of advertising, selling, and general and administrative expenses, which are discussed below.

Advertising expenses for the second quarter of 2014 were $199,600 compared to $123,600 for the same period in 2013, an increase of $76,000 or 61.5%. This increase is primarily attributable to a national television campaign for our Scott’s Liquid Gold ^® Wood Cleaner and Preservative conducted during the first and second quarters of 2014, whereas we conducted a similar television campaign only during the first quarter of 2013.

Selling expenses for the second quarter of 2014 were $1,182,700 compared to $1,184,000 for the same period in 2013, a decrease of $1,300 or 0.1%. This change is primarily attributable to changes in personnel within our sales organization starting in the first quarter of 2013 and the accrual in the second quarter of 2014 of potential performance bonus payments to personnel within our sales organization for 2014 offset, in part, by a decrease in the costs of freight out to our customers and a decrease in certain other selling expenses.

General and administrative expenses for the second quarter of 2014 were $741,800 compared to $643,800 for the same period of 2013, an increase of $98,000 or 15.2%. This increase is due primarily to the accrual in the second quarter of 2014 of potential performance bonus payments to our management and administrative support personnel for 2014 and an increase in certain professional fees.

Rental and other income for the second quarter of 2014 consisted of $3,600 in interest earned on our cash reserves. This compares to rental and other income for the second quarter of 2013, which consisted of $4,000 in interest earned on our cash reserves.

Interest expense for the second quarter of 2014 was $7,300 in administrative fees paid to Summit. Interest expense for the second quarter of 2013 was $7,000 in administrative fees paid to Summit.

Recent Developments

We have entered into a new distribution agreement with Church & Dwight (the “New Distribution Agreement”). The Company currently distributes Batiste Dry Shampoo pursuant to a distribution agreement with Church & Dwight that expires on December 31, 2014 and will continue to distribute Batiste Dry Shampoo under the terms of the existing agreement through its expiration. Following the expiration of the current distribution agreement, the New Distribution Agreement provides that the Company will be the exclusive distributor of Batiste Dry Shampoo to the specialty retailer channel in the United States, which includes primarily: beauty supply stores, such as Ulta Beauty, one of the Company’s largest customers; apparel retailers, such as Charlotte Russe and TJ Maxx; department stores; and hair salons and distributors to hair salons. Under the New Distribution Agreement, the Company will no longer sell Batiste Dry Shampoo to food, drug and mass retailers in the United States. The New Distribution Agreement has an initial term through December 31, 2016 and automatically renews for one year terms, unless terminated at the end of any such term upon 120 days prior written notice.

Liquidity and Capital Resources

Financing Agreements

Please see Note 1(f) to our Consolidated Financial Statements (Unaudited) for information on our financing agreements with Summit and Wells Fargo.

Liquidity

At June 30, 2014, we had $4.2 million in cash on hand and the full $1.5 million of capacity under our credit line with Summit was available for future borrowing. For the first six months of 2014, the primary components of working capital (exclusive of cash that was $1,085,900 more at June 30, 2014 compared to December 31, 2013) that significantly affected operating cash flows are the following: (1) net trade receivables were $482,500 more at June 30, 2014 than at December 31, 2013 due primarily to increased gross sales activity and the timing of receiving payment; (2) inventory at June 30, 2014 was $549,500 less than at December 31, 2013 due primarily to the timing of shipments to customers; and (3) accounts payable at June 30, 2014 were $28,600 less than at December 31, 2013 due primarily to the timing of payments on our inventory.

We anticipate that our existing cash, especially given the cash proceeds from the sale of our Facilities, and our cash from operations, together with our current borrowing arrangements with Summit and Wells Fargo, will be sufficient to meet our cash requirements for the next 12 months.

During the first six months of 2014, we did not make any significant capital expenditures. We do not have any significant capital expenditures planned for the remainder of 2014. During the first six months of 2013, we made total capital expenditures of approximately $160,800 as a result of the sale of our Facilities on February 1, 2013. These capital expenditures primarily included: (1) the construction of a specially designed room and sprinkler system for the storage of certain of our aerosol products necessitated when we sold the Facilities and had to vacate the building where they were previously stored; (2) the installation of a separate security system for the parts of the Facilities that we lease; and (3) the relocation of our telecom and data systems to the parts of the Facilities that we lease.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4.

CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

As of June 30, 2014, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of June 30, 2014.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during the six months ended June 30, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1A.

RISK FACTORS.

In addition to the other information set forth in this Report, you should carefully consider the factors discussed in Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 and subsequent quaterly reports on Form 10-Q, which could materially affect our business, financial condition or future results.

ITEM 6.

EXHIBITS.

Exhibit Number		Document
10.1		Customer Agreement, executed on July 16, 2014, between Church & Dwight Co., Inc. and Neoteric Cosmetics, Inc.
31.1		Rule 13a-14(a) Certification of the Chief Executive Officer
31.2		Rule 13a-14(a) Certification of the Chief Financial Officer
32.1*		Section 1350 Certification
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

*	Furnished, not filed.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

SCOTT’S LIQUID GOLD-INC.
By:		/s/ Mark E. Goldstein
		Mark E. Goldstein
		President and Chief Executive Officer
		(Principal Executive Officer)
By:		/s/ Barry J. Levine
		Barry J. Levine
		Treasurer, Chief Financial Officer and Chief Operating Officer
		(Principal Financial and Chief Accounting Officer)

Date: August 14, 2014

EXHIBIT INDEX

Exhibit Number

Document

10.1

Customer Agreement, executed on July 16, 2014, between Church & Dwight Co., Inc. and Neoteric Cosmetics, Inc.

31.1

Rule 13a-14(a) Certification of the Chief Executive Officer

31.2

Rule 13a-14(a) Certification of the Chief Financial Officer

32.1*

Section 1350 Certification

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

*	Furnished, not filed.

EXHIBIT 10.1

Customer Agreement

This Customer Agreement (this “Agreement”) is made as of July 15, 2014 (the “Effective Date”) between Church & Dwight Co., Inc., with offices at 500 Charles Ewing Blvd., Ewing, New Jersey 08628 (“C&D”) and Neoteric Cosmetics, Inc., with offices at 4880 Havana Street, Suite 400, Denver, Colorado 80239-0019(“Customer”).

W I T N E S S E T H :

WHEREAS, C&D and/or one or more of its affiliates manufactures and/or markets, sells and distributes various products throughout the world and is interested in having Customer sell and distribute certain of C&D’s products;

WHEREAS, Customer wishes to sell and distribute certain of C&D’s products in certain specified retailer channels in the United States in accordance with the terms and conditions hereinafter set forth; and

WHEREAS, Customer currently distributes certain Batiste products pursuant to that certain Distribution Agreement, dated March 1, 2012, between C&D and Customer (the “Batiste Agreement”), which shall remain in effect and govern the terms of distribution of Batiste products by Customer through December 31, 2014 except as expressly set forth in Section 6(e) below, after which sales of Batiste products will be made pursuant to the terms of this Agreement.

NOW THEREFORE, in consideration of the premises and the mutual covenants contained herein the parties hereto do hereby agree as follows:

1. APPOINTMENT . C&D hereby appoints Customer, and Customer hereby accepts such appointment, as C&D’s exclusive customer to distribute the ”Products” (as defined below) to the “Authorized Specialty Retailers” (as defined below). C&D shall not directly distribute Products to any Authorized Specialty Retailer for resale in the United States except through Customer. C&D represents and warrants that the Products may be lawfully sold in the United States.

For purposes hereof:

(a)

The “Products” shall be certain products of C&D as authorized by C&D , including without limitation the Batiste brand of products and such additional products as shall be listed on a “Products and Pricing List” to be delivered by C&D as of the Effective Date and from time to time thereafter pursuant to the terms of this Agreement;

(b)

The “Authorized Specialty Retailers” shall be certain specialty retail stores as authorized by C&D in the United States, including without limitation the specialty retail stores as shall be listed on an “Authorized Specialty Retailer List” to be delivered by C&D as of the Effective Date and from time to time thereafter pursuant to the terms of this Agreement;

(c)	C&D reserves the right to add or delete or discontinue Products upon at least ninety (90) days notice to Customer and upon immediate notice in the event of Force Majeure (as hereinafter defined);

(d)	C&D reserves the right to add additional Authorized Specialty Retailers upon advance written request by Customer not more than once per month, as may be mutually agreed to in advance and in writing by the parties ; and

(e)	C&D may remove any Authorized Specialty Retailer upon at least four (4) months’ notice if C&D ( or an affiliate of C&D ) acquires a business that distributes Products directly to such Authorized Specialty Retailer.

2. TERM. Unless terminated earlier under other provisions hereof, the term of this Agreement shall be from the Effective Date through December 31, 2016 (the “Initial Term”), and shall thereafter automatically renew for one (1) year renewal terms, subject to being terminated at the end of the Initial Term, or any subsequent one (1) year renewal term, upon at least one hundred twenty (120) days prior written notice given by either party to the other party.

3. INTELLECTUAL PROPERTY . (a) As between C&D and Customer, C&D retains the sole and exclusive rights in all the intellectual property, including without limitation the trademarks and trade dress, copyrightable material, domain names, generic top-level domain name (gTLD), and patents used on and/or in connection with any of the Products whether used on Products, packaging, labeling, advertising, sales promotion materials, or otherwise. Customer shall not attempt directly or indirectly to register any of said intellectual property (the "Intellectual Property") or anything confusingly similar thereto, and shall not at any time do, or cause to be done, any act or thing impairing or tending to impair any of the Intellectual Property. Upon any termination of this Agreement, Customer shall promptly discontinue all use of the Intellectual Property (including without limitation any advertising and sales promotion materials depicting or embodying any of the Intellectual Property).

(b) Except as required under paragraph 6(b) hereof, Customer shall not in any way alter, or permit the alteration of, the content, composition, presentation, container, packaging, or trademarks of any of the Products as supplied by C&D or other parties approved by C&D; except Customer may repackage the Products into cartons to meet the requirements of the Authorized Specialty Retailers, overlabel EAN and/or UPC codes and use commercial stickers such as “Try Me Free”, “Buy One Get One Free”, etc. and Customer shall be responsible for any and all costs and responsibilities associated therewith and for otherwise servicing such Authorized Specialty Retailers. Any material breach of this provision shall subject Customer to termination under the terms of this Agreement.

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4. COMPETITIVE PRODUCTS . Except for the products listed on the attached “Exhibit A ” which Customer is already handling on the Effective Date of this Agreement (the “Competitive Product Exceptions”), Customer shall not, during the term of this Agreement, manufacture, market, distribute or sell any products which are directly competitive with the Products (the “Competitive Products”). Customer shall notify C&D before Customer begins to manufacture, market, distribute or sell, during the term of this Agreement, any Competitive Products . In the event Customer commences the manufacture, distribution, or sale of Competitive Products , C&D shall have the right to (a) change Customer’s exclusivity to non- exclusivity with respect to Products directly competitive with the Competitive Products at any time upon at least sixty (60) days prior written notice to Customer or (b) discontinue sales to Customer of Products directly competitive with the Competitive Products, but in case of either (a) or (b), such measures may only be taken with respect to the Products that are directly competitive with such Competitive Products that Customer begins to manufacture, distribute or sell and this Agreement shall remain in full effect with respect to all other Products .

5. SOURCE AND PAYMENT . (a) Customer shall obtain Products only from C&D or such other parties as may be approved by C&D in writing at prices and upon payment terms as established and revised by C&D or such other parties from time to time. The pricing and payment terms applicable to the Products shall be set forth in the Products and Pricing List to be delivered by C&D on the Effective Date and from time to time after the Effective Date hereof, in accordance with Section 13 hereof. C&D shall give Customer at least ninety (90) days written notice of any increase in C&D's prices for the Products, except that the prices for the Batiste products for the period January 1, 2015 through June 30, 2015 cannot be changed . For purposes of this Agreement : (i) C&D's prices for Products shall be FOB Customer; (ii) risk of loss or damage with respect to any Products shall pass to Customer at the time and place of delivery of those products to Customer ; (iii) title with respect to any products shall pass to Customer at the time and place of delivery of those products to Customer ; and (iv) Customer shall be invoiced, and shall make payment, in USD.

(b) C&D shall use commercially reasonable efforts to have each order for Products delivered by the requested delivery date. No claim for non-delivery of any order or part thereof or for any breakage, leakage, short delivery or damaged goods will be considered by C&D unless written notice thereof is received by C&D within seven (7) business days of Customer’s receipt of the relevant Products(s). C&D may satisfy any such claim which is valid by, at its option, either granting appropriate Product credit or by shipping replacement Products. No cash credit will be given. In the event of any discrepancy between the terms and conditions of any order for Products submitted by Customer and this Agreement, this Agreement shall govern.

6. SALES AND DISTRIBUTION . (a) Customer shall use Customer’s commercially reasonable efforts to promote and increase the sale and distribution of Products to the Authorized Specialty Retailers, while maintaining the reputation of the Products.

(b) Customer shall be solely responsible for any and all the requirements of the Authorized Specialty Retailers including, but not limited to, maintenance and service or packaging of the Products and any modifications to packaging by Customer shall be the sole responsibility of Customer and be in compliance with all laws and requirements of Authorized Specialty Retailers.

(c) Customer shall not knowingly export, divert or sell any Products outside of the Authorized Specialty Retailers or the United States. Furthermore, Customer shall not solicit orders for the Products from any firm, company, or other legal entity outside of the Authorized Specialty Retailers, it being the understanding and intention of the parties hereto that Customer will concentrate Customer’s efforts, relating to the Products, on the Authorized Specialty Retailers in the United States . In the event C&D becomes aware of any such knowing export or diversion by Customer outside of the Authorized Specialty Retailers , C&D shall have the right to terminate this Agreement immediately upon written notice to Customer, without prejudice to any other actions or remedies available to C&D. C&D shall have the right at any time during normal business hours to have its representatives inspect Customer’s inventories of the Products wherever they may be located.

(d) Customer (i) acknowledges that C&D is subject to the US Foreign Corrupt Practices Act as well as anti-bribery and anti-corruption laws in various other jurisdictions, (ii) agrees herein that it shall comply in all respects with such laws, rules and regulations related thereto, and (iii) shall cooperate with C&D and its designees at its expense in any inquiry or investigation of Customer’s or its agents’ conduct or presumed conduct related to compliance or failure to comply with any of the foregoing.

(e) Customer hereby acknowledges that in connection with the transition from sales of Batiste products under the Batiste Agreement to sales of such products under this Agreement, any sales or orders for Batiste products after the Effective Date through December 31, 2014 from new accounts developed solely by C&D shall be for the benefit of C&D , provided that such new accounts are not the Authorized Specialty Retailers. C&D shall notify Customer of all sales to such new accounts until December 31, 2014 and shall be responsible for fulfilling orders from such new accounts.

7. ADVERTISING AND SALES PROMOTION . (a) C&D shall be responsible for the general marketing, advertising and sales promotion of the Products.

(b) Customer may carry on marketing, advertising and sales promotion activities for the Products to be sold to Authorized Specialty Retailers provided that Customer shall submit to C&D, for review and approval in advance before use, all proposed marketing, advertising and sales promotion materials developed by Customer for the Products to be sold to Authorized Specialty Retailers. The use of C&D’s Intellectual Property in the context of such promotions shall be subject to the conditions set forth in Article 3(a) above. C&D shall not be responsible for any fees, expenses, costs or commitments of any kind incurred by Customer which C&D has not specifically agreed in writing to pay, or reimburse Customer for such; notwithstanding that the related marketing, advertising, or sales promotion plans for the Authorized Specialty Retailers may have been approved by C&D.

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(c) Customer herby acknowledges that costs for any promotional activity (e.g. rollbacks) by Customer for Batiste incurred before December 31, 2014 shall be at Customer’s expense. Thereafter, costs for any promotional activity (e.g. rollbacks/specific trade programs) initiated by C&D relating to Batiste or the Products that impact C&D’s accounts and/or may impact Customer’s accounts , shall be at C&D’s expense and any promotional activity (e.g. rollbacks/specific trade programs) initiated by Customer that impact Customer’s Authorized Specialty Retailers shall be at Customer’s expense.

8. CONFIDENTIAL INFORMATION . "Confidential Information" shall mean all information one party (“disclosing party”) provides to the other party (“receiving party”) with the exception of only the following:

a)	information that as of the time of receipt by receiving party is in the public domain or subsequently enters the public domain without receiving party’s fault;

b)	information that at the time of receipt by receiving party was already known to receiving party as evidenced by appropriate written records.

Confidential Information shall be used by receiving party only during the term of, and for purposes of, this Agreement. At all times during and after the term of this Agreement, receiving party shall maintain in confidence and shall see that receiving party’s shareholders, directors, employees and agents maintain in confidence all Confidential Information. The Confidential Information shall be disclosed by receiving party only to receiving party’s employees whose duties require possession thereof in carrying out receiving party’s activities under this Agreement and (except as may otherwise be indicated by disclosing party at the time specific Confidential Information is provided to receiving party by disclosing party) to governmental authorities as required under applicable law, rule or regulation. Such disclosure to governmental authorities, however, shall be in such manner as to have the relevant Confidential Information maintained in confidence by such authorities to the extent possible under applicable laws, rules and regulations. Upon disclosing party's written request, receiving party shall promptly return to disclosing party any and all copies of Confidential Information.

9. RECORDS . Customer shall maintain (and shall, during the term of this Agreement and for one year thereafter, permit C&D representatives to examine, upon at least two (2) business days notice and during normal business hours) books and records, including copies of invoices, substantiating the sale of any Product sold by Customer. Such invoices shall be maintained by Customer for at least one year after the year during which the originals of such invoices were rendered and shall show the full name and address of the purchaser (and of the consignee, if different from the purchaser).

10. RELATIONSHIP; AFFILIATES . (a) Customer’s conduct of business pursuant to this Agreement shall be on Customer’s own behalf and not in any way on C&D’s behalf or as an agent of C&D. The expenses, credit risks and other risks associated with such conduct shall be borne solely by Customer. Neither party shall have the right to enter into any contract or incur any commitment on behalf of the other party.

(b) As used herein, an “affiliate” of a party hereto is any person, corporation, partnership, or other legal entity, that directly or indirectly (a) owns or controls at least 50% of the ownership or controlling interests in such party hereto, or (b) is at least 50% owned or controlled by such party hereto, or (c) is at least 50% owned and controlled by a third party that also directly or indirectly owns or controls at least 50% of the ownership or controlling interests in such party hereto.

11. TERMINATION . (a) A party hereto may terminate this Agreement upon written notice to the other party in the event:

(i)	the other party breaches any material obligation under this Agreement and such breach is not remedied within ten (10) days in the case of failure to make a payment when due, and otherwise within thirty (30) days, after written notice thereof is given by the party not in default; or

(ii)

the other party is nationalized, or is adjudicated to be bankrupt or insolvent, or makes an assignment of its business or assets for the benefit of creditors, or voluntary or involuntarily becomes involved in any bankruptcy or insolvency proceedings for the benefit of creditors, or for the protection of its business or assets from creditors.

(b) C&D may also terminate this Agreement upon written notice to Customer, if there is any direct or indirect material change in greater than 50% of the ownership or voting control of Customer .

(c) Any termination of this Agreement shall be without prejudice to the right of the party not in default to recover any payments due to it hereunder and without prejudice to any other rights or remedies the party not in default may have to recover damages, or otherwise, as a result of the breach or default of the other party.

(d) Customer shall not be entitled to any termination indemnity or compensation upon termination of this Agreement pursuant to the terms hereof.

(e) Upon termination of this Agreement for any reason, C&D shall be entitled to cancel all orders placed by the Customer prior to the termination date whether or not such orders have been accepted by C&D without incurring any damages or liability of whatever nature to the Customer.

(f) Customer may dispose of any Products in the ordinary course of business during the three (3) month period following termination of this Agreement (the “Transition Period”). Upon expiration of this Agreement or at the end of the Transition Period, as applicable, (i) C&D may re-purchase from Customer, at the price paid by Customer for such Products, all Products supplied to Customer under this Agreement which are not subject to orders from Authorized Specialty Retailers and are in good and saleable condition or (ii) the parties shall agree otherwise in writing regarding the disposal of Products in a manner that reimburses Customer in full for the price paid by Customer for such Products.

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12. INDEMNIFICATION; INSURANCE . (a) Customer shall indemnify and hold harmless C&D, its affiliates, and their respective directors, officers, and employees against any and all claims, demands, proceedings, losses, costs and expenses (including reasonable attorneys’ fees and costs of defense) which may be brought against, suffered, or incurred by any of them due to (i) a breach by Customer or its affiliates of any of its warranties under this Agreement, or (ii) any failure or breach by Customer or its affiliates or agents to store, distribute or transport the Products in compliance with this Agreement and all applicable laws including without limitation claims from retail trade/consumers for non-delivery of any order or part thereof or for any breakage, leakage, short delivery or damaged goods.

(b) C&D shall indemnify and hold harmless Customer, its affiliates, and their respective directors, officers, and employees against any and all claims, demands, proceedings, losses, costs and expenses (including reasonable attorneys’ fees and costs of defense) which may be brought against, suffered, or incurred by any of them due to:

i)	a breach by C&D or its affiliates of any of its warranties under this Agreement;

ii)	the Products not complying with applicable labeling, branding, packaging, or weights and measures laws and regulations in effect as of the date of manufacture;

iii)

the Products not complying with applicable health, safety, environmental, consumer protections laws, or any other laws and/or regulations of any city, municipality, county, provincial, state, federal or international government either in effect as of the date of manufacture or thereafter enacted, and legally applicable to the Products;

iv)

the bodily injury, sickness, disease or death of any person or persons, or damage to or destruction of tangible property, including the loss of use resulting therefrom, caused by defects in the Products, including but not limited to latent defects to the extent not caused by Customer’s distribution of the Products;

the failure or alleged failure of the Products to include instructions, warnings, restrictions, accurate descriptions or other material required by, or to otherwise comply with, any federal, state, provincial, county or local law, rule, regulation or ordinance applicable to the distribution, sale, offering for sale, installation, construction, use, labeling, packaging, chemical content, registration or disposal of the Products;

vi)

the failure to comply with federal, state, provincial, county or local law, rule, regulation or ordinance regarding slavery and human trafficking in any country or countries where C&D manufactures, distributes, sells or purchases its products (e.g., The California Transparency in Supply Chains Act of 2010);

vii)	any third party claims or allegations that the Products infringe the patent, trademark, copyright, trade secret or other intellectual property or proprietary right of any third party; or

viii)

any recall of the Products made by C&D or any applicable regulator or government agency, as further provided in Section 17 below.

(c) The parties shall maintain during the term of this Agreement the following types of insurance with the limits specified below and Customer’s shall provide that C&D is an additional insured under all the policies for such insurance:

Kind of Insurance

Limits of Liability

Commercial General Liability

US $1,000,000 Combined Single Limit; US$2,000,000 Aggregate (or equivalent)

Property Damage

US $1,000,000 Combined Single Limit; US$2,000,000 Aggregate (or equivalent)

(d) Customer shall upon request of C&D provide C&D with Certificates of Insurance coverage showing that Customer possesses the above insurance at the stated limits and which provides that said insurance cannot be canceled while this Agreement is in effect or except after ten (10) days' prior written notice to C&D in which event C&D may terminate this Agreement with immediate effect.

13. ASSIGNABILITY; NOTICE . This Agreement shall not be assignable by Customer without C&D's prior written consent.

All notices required or permitted under this Agreement shall be addressed as follows:

(a)	If to Customer:

Neoteric Cosmetics, Inc.

4880 Havana Street, Suite 400

Denver, Colorado 80239-0019

ATTN: Chief Financial Officer

Telefax: 1-303-576-6030

(b)	If to C&D:

Church & Dwight Co., Inc.

ATTN: General Counsel

500 Charles Ewing Blvd.

Ewing, New Jersey 08628

Telefax: 1-609-403-7283

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All notices shall be delivered to the other party by: (a) personal delivery; (b) facsimile transmission from the office of the sending party or its legal representative, with a delivery receipt obtained; or (c) internationally recognized courier, prepaid for next business day delivery.

Notices delivered in person shall be deemed to have been delivered upon receipt by the party to which such notice was delivered; notices delivered by facsimile shall be deemed to have been delivered on the date on which the facsimile was sent as evidenced by the transmission receipt; and notices by courier shall be deemed to have been delivered one (1) business day after deposit with such courier as evidenced by the receipt provided by the courier.

14. INTERPRETATION; DISPUTES . The validity, construction and interpretation of this Agreement shall be governed by the laws of the State of New Jersey without regard to conflict of laws principles thereof. Both Customer and C&D agree to submit to the exclusive jurisdiction of courts of competent jurisdiction in New Jersey for the resolution of any disputes that may arise under this Agreement.

15. FORCE MAJEURE . Neither party shall be liable to the other for any default hereunder which is due to cause beyond the reasonable control of the party in default, including but not limited to the actions or inactions of any government agency or instrumentality, breakdown of plant or machinery or extraordinary shortages of labor, fuel, transportation or materials, fires, floods, earthquakes, war, riots or insurrections or any other contingency interfering with the production, supply, transportation, acceptance or use of any products covered by this Agreement (collectively “Force Majeure”). If either party shall seek to rely on Force Majeure, it shall give written notice to the other indicating the details of the act which it claims has put due performance of its obligations beyond its control.

16. ADVERSE EVENT REPORTING . (a) Each party shall promptly advise the other party of any material communication relating to the Products (and promptly provide copies or notes of any such communication), including but limited to, communications from any regulatory body, complaints, or adverse drug reports.

(b) Each party shall, during the term of this Agreement, have a continuing obligation to notify the other party of any material adverse event or adverse experience reported to such party arising from or in connection with the use of a Product. This notification shall occur within a reasonable time period in order for the other party to be able to comply with adverse event reporting requirements imposed by applicable regulatory authorities; provided, however, that Customer shall be responsible for any required reporting to the Authorized Specialty Retailers and C&D shall be responsible for any other or additional required reporting outside the Authorized Specialty Retailers (e.g. Health Canada or United States Food & Drug Administration).

(c) If so requested, each party will provide reasonable assistance to the other party with regard to regulatory, compliance and related matters relating to the Product as expeditiously as possible , at the expense of the party requesting such assistance.

17. RECALLS . (a) In the event that: (i) any government or regulatory authority issues a directive or order that a Product manufactured or supplied by C&D hereunder be recalled; or (ii) a court of competent jurisdiction orders such a recall; or (iii) C&D determines that any such Product should be recalled, the parties will take all appropriate corrective actions to protect the public’s health and preserve the Product’s goodwill and reputation. If a recall is due to (i) or (ii), the party primarily responsible for the cause of the recall will assume responsibility for all such costs and expenses and will reimburse the other party for any costs and expenses incurred by such party. If a recall is due to (iii), then C&D will initially bear the expenses of the recall until primary responsibility for the cause of the recall is determined, at which time the party primarily responsible for the cause of the recall will assume responsibility for all such costs and expenses and will reimburse the other party for all costs and expenses incurred by such party. Notwithstanding anything to the contrary herein, in no event will the Customer initiate a recall of Products without giving C&D at least ten (10) days’ (except in the case of an emergency or safety hazard to humans or animals) prior written notice of its intentions, thus giving C&D the opportunity to assess the basis for the recall and to initiate such recall if it deems it to be necessary and advisable under the circumstances.

For the purpose of this Agreement, “ Expenses of Recall ” will include, without limitation, the expenses of notification of customers, the expenses of return and/or destruction of the recalled Product, any necessary Product rework expense, any penalties assessed by retailers (including lost sales penalties), any legal expenses incurred and other reasonable expenses incurred as a result of the above mentioned action.

(b) In the event a recall of any of the Products is required, Customer shall identify the Authorized Specialty Retailers to which Customer sold those Products and shall retrieve any recalled Products still in possession of such Authorized Specialty Retailer . Customer shall maintain (and, upon at least twenty-four (24) hours prior written notice, shall permit one or more C&D designees to review during normal business hours) records clearly delineating the Authorized Specialty Retailers to whom Products were sold or otherwise distributed and which lot(s), by lot number, were shipped to such Authorized Specialty Retailers.

18. PUBLICITY . (a) Other than as set out at clause 18(b), no publicity or public announcement of any kind, written or oral, concerning this Agreement, the relationship of the Parties or their dealings shall be made by or on behalf of either party without the prior written consent of the other party, such consent not to be unreasonably withheld or delayed.

(b) Each party shall be entitled to make such public statements, as in the opinion of the counsel for the party intending to make such public statement, are required to comply with Applicable Law and which in any event contain only the minimum disclosure necessary to comply with the relevant Applicable Law; provided however, that each party shall provide the other party with advance written notice and reasonable opportunity to comment on any public filing statement required by the Securities and Exchange Commission that references this Agreement or the terms herein.

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19. ENTIRE AGREEMENT . The exhibits and schedules to, or delivered pursuant to , this Agreement , including without limitation the Products and Pricing List and the Authorized Specialty Retailer List, are hereby incorporated in and made a part of this Agreement as if set forth in full herein and are an integral part of this Agreement. This Agreement and the Batiste Agreement, which shall remain in effect and govern the terms of distribution of Batiste products by Customer through December 31, 2014, contain the entire understanding of the parties with respect to the subject matter of this Agreement and the Batiste Agreement and supersede all prior agreements and understandings between the parties hereto with respect to the transactions contemplated by this Agreement and the Batiste Agreement . There are no representations, promises, warranties, covenants or undertakings other than those expressly set forth in or provided for in this Agreement and the Batiste Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Customer Agreement to be executed by their respective duly authorized representatives as of the date first written above.

NEOTERIC COSMETICS, INC.		CHURCH & DWIGHT CO., INC

By:	/s/ Barry J. Levine	By:	/s/ Stacey Feldman
Name:	Barry J. Levine	Name:	Stacey Feldman
Title:	COO/CFO	Title:	VP Marketing

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“PRODUCTS AND PRICING LIST ”

The Products and Pricing List shall be delivered to Customer in accordance with the terms of the Customer Agreement entered into between the parties effective July 15, 2014.

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“AUTHORIZED SPECIALTY RETAILER LIST”

The Authorized Specialty Retailer List shall be delivered to Customer in accordance with the terms of the Customer Agreement entered into between the parties effective July 15 , 2014.

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Exhibit A

to Customer Agreement, dated July 15, 2014

" COMPETITIVE PRODUCT EXCEPTIONS "

Includes all products marketed and sold by Customer as of the Effective Date, including the following products, as more fully described in Customer’s filings with the Securities and Exchange Commission:

Operating Segment		Key Products
Household		Scott’s Liquid Gold ^® Wood Cleaner and Preservative
		Scott’s Liquid Gold ^® Floor Restore
		Scott’s Liquid Gold ^® Wood Wash
		Scott’s Liquid Gold ^® Dust ’N Go Wipes
		Scott’s Liquid Gold ^® Clean Screen
		Touch of Scent ^® Air Freshener

Operating Segment		Key Products
Skin and Hair Care		Alpha Hydrox ^® Skin Care Products
		Neoteric Diabetic ^® Healing Cream
		Neoteric Diabetic ^® Shampoo and Scalp Care
		Neoteric Massage Oils
		Montagne Jeunesse Masque Sachets

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EXHIBIT 31.1

CERTIFICATION

I, Mark E. Goldstein, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Scott’s Liquid Gold-Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 14, 2014		/s/ Mark E. Goldstein
		Mark E. Goldstein
		President and Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION

I, Barry J. Levine, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Scott’s Liquid Gold-Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 14, 2014

/s/ Barry J. Levine

Barry J. Levine

Treasurer, Chief Financial Officer,

Chief Operating Officer and Corporate Secretary

EXHIBIT 32.1

CERTIFICATION OF ANNUAL REPORT ON FORM 10-KQ OF

SCOTT’S LIQUID GOLD-INC.

FOR THE QUARTER ENDED JUNE 30, 2014

Each of the undersigned hereby certifies, for the purposes of Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of Scott’s Liquid Gold-Inc. (“Scott’s Liquid Gold”), that to his knowledge:

1. This Quarterly Report on Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Scott’s Liquid Gold.

This written statement is being furnished to the Securities and Exchange Commission as an exhibit to the Quarterly Report on Form 10-Q. A signed original of this statement has been provided to Scott’s Liquid Gold and will be retained by Scott’s Liquid Gold and furnished to the Securities and Exchange Commission or its staff upon request.

This Certification is executed as of August 14, 2014.

/s/ Mark E. Goldstein

Mark E. Goldstein

President and Chief Executive Officer

/s/ Barry J. Levine

Barry J. Levine

Treasurer, Chief Financial Officer,

Chief Operating Officer and Corporate Secretary