The following assumptions are used in the Black-Scholes option pricing model for the six months ended June 30, 2014 and 2013 to value the stock options under the Stock Option Plans granted during the period:
The following is a summary of stock options outstanding outside of the existing Stock Option Plans for the six months ended June 30, 2014 and 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
Number of Shares
|
|
Average
|
|
|
|
Non-
|
|
|
|
Exercise
|
|
Employee
|
|
Employee
|
|
Totals
|
|
Price
|
|
|
|
|
|
|
|
|
Balance, January 1, 2014
|
291,667
|
|
1,590,000
|
|
1,881,667
|
$
|
0.23
|
Granted during the period
|
100,000
|
|
510,000
|
|
610,000
|
|
0.63
|
Exercised during the period
|
-
|
|
(133,333)
|
|
(133,333)
|
|
0.15
|
|
|
|
|
|
|
|
|
Balance, June 30, 2014
|
391,667
|
|
1,966,667
|
|
2,358,334
|
$
|
0.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
Number of Shares
|
|
Average
|
|
|
|
Non-
|
|
|
|
Exercise
|
|
Employee
|
|
Employee
|
|
Totals
|
|
Price
|
|
|
|
|
|
|
|
|
Balance, January 1, 2013
|
150,000
|
|
1,650,000
|
|
1,800,000
|
$
|
0.20
|
Granted during the period
|
150,000
|
|
90,000
|
|
240,000
|
|
0.28
|
Exercised during the period
|
(33,333)
|
|
-
|
|
(33,333)
|
|
0.15
|
|
|
|
|
|
|
|
|
Balance, June 30, 2013
|
266,667
|
|
1,740,000
|
|
2,006,667
|
$
|
0.21
|
Of the stock options outstanding as of June 30, 2014 outside of the plan, 1,483,334 options are currently vested and exercisable. The weighted average exercise price of these options was $0.28. These options expire through May 2024. The aggregate intrinsic value for options outstanding and exercisable at June 30, 2014 and 2013 was approximately $456,000 and $368,000, respectively. The aggregate intrinsic value for options exercised during the six months ended June 30, 2014 was approximately $57,000.
15
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Unaudited)
Note 2 - Summary of significant accounting policies (continued)
Stock options (continued)
For the three and six months ended June 30, 2014 and 2013, the Company recorded approximately $270,000 and $159,000 and $347,000 and $134,000 of expense, respectively, in share based compensation related to vesting of options previously granted outside of the Stock Option Plans. At June 30, 2014, there was approximately $362,000 of total unrecognized compensation cost related to non-vested option grants outside the plan will be recognized over the remaining vesting period of approximately 3 years.
The following assumptions are used in the Black-Scholes option pricing model for the six months ended June 30, 2014 to value the stock options issued outside the plan:
|
|
|
|
|
2014
|
|
2013
|
Risk-free interest rate
|
0.85 2.73%
|
|
Risk-free interest rate
|
1.14 2.52%
|
Expected dividend yield
|
0.00
|
|
Expected dividend yield
|
0.00
|
Expected life
|
2.50 10.00 years
|
|
Expected life
|
5.00 10.00 years
|
Expected volatility
|
193 341%
|
|
Expected volatility
|
262 320%
|
Weighted average grant date fair value
|
$0.69
|
|
Weighted average grant date fair value
|
$0.27
|
The following is a summary of all stock options outstanding and nonvested for the six months ended June 30, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
Number of Shares
|
|
Average
|
|
|
|
Non-
|
|
|
|
Exercise
|
|
Employee
|
|
Employee
|
|
Totals
|
|
Price
|
|
|
|
|
|
|
|
|
Balance, January 1, 2014 nonvested
|
2,923,334
|
|
862,500
|
|
3,785,834
|
$
|
0.25
|
Granted
|
650,000
|
|
510,000
|
|
1,160,000
|
|
0.62
|
Vested
|
(991,666)
|
|
(755,833)
|
|
(1,747,499)
|
|
0.34
|
|
|
|
|
|
|
|
|
Balance June 30, 2014 - nonvested
|
2,581,668
|
|
616,667
|
|
3,198,335
|
$
|
0.40
|
For the six months ended June 30, 2014 and 2013, the Company recognized approximately $180,000 and $144,000, respectively, in share based compensation expense related to employee stock options and approximately $326,000 and $133,000, respectively, related to share based compensation expense related to non-employee stock based awards.
16
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Unaudited)
Note 3- Commitments and contingencies
Leases
As of June 30, 2014, the Company had an active lease related to the office space in Wayne, Pennsylvania. On February 6, 2013, the Company entered into an amended lease with the landlord of the Wayne office complex of its executive office. As of April 2013 the executive office moved into a larger space within the same complex. The amended lease is for three years, through April 1, 2016.
Rent expense incurred during the three and six months ended June 30, 2014 and 2013 totaled approximately $15,000 and $12,000 and $28,000 and $22,000, respectively. The schedule below details the future financial obligations under the remaining lease.
|
|
|
|
|
|
|
|
|
|
|
Remaining six months
2014
|
|
2015
|
|
2016
|
|
TOTAL OBLIGATION
|
Wayne - Corporate HQ
|
$
|
26,300
|
$
|
53,100
|
$
|
13,300
|
$
|
92,700
|
|
|
|
|
|
|
|
|
|
Total Lease Obligations
|
$
|
26,300
|
$
|
53,100
|
$
|
13,300
|
$
|
92,700
|
DermaWand
TM
On October 15, 1999, Windowshoppe.com Limited (WSL) entered into an endorsement agreement with an individual for her appearance in a DermaWand infomercial. On July 11, 2001, the agreement was amended to include a royalty payment for each unit sold internationally, up to a maximum royalty payment for any one calendar quarter. Further, if the infomercial is aired in the United States, then the airing fee will revert back to the same flat rate per calendar quarter. The initial term of the agreement was five years starting October 15, 1999. The agreement automatically and continually renews for successive additional five-year terms unless R.J.M.Ventures (RJML) is in material default and is notified in writing at least thirty days prior to the end of the then current term that the individual intends to terminate the agreement. The Company assumed any and all responsibilities associated with the license and reconveyance agreements dated April 1, 2000 entered into by the Company and WSL and RJML. On January 5, 2001, WSL entered into an agreement with Omega 5. WSL shall have worldwide nonexclusive rights to manufacture, market and distribute DermaWand
TM
. In consideration of these rights, WSL shall pay a monthly payment for each unit sold of DermaWand depending on various scenarios as defined in the agreement. The agreement is silent as to its duration.
During 2007, the Company entered into an exclusive license agreement with Omega 5 wherein ICTV was assigned all of the trademarks and all of the patents and pending patents relating to the DermaWand
TM
and was granted exclusive license with respect to the commercial rights to the DermaWand
TM
. This agreement was amended and superseded on July 28, 2010. The geographical scope of the license granted is the entire world consisting of the United States of America and all of the rest of the world. The license remains exclusive to ICTV provided ICTV pays to Omega 5 a minimum annual payment of $250,000 in the initial 18 month term of the agreement and in each succeeding one-year period. If in any calendar year the payments made by the Company to Omega exceed the annual minimum of $250,000, then the amount in excess of the annual minimum or rollover amount will be credited towards the Companys annual minimum for the immediately following calendar year only. If the Company fails to meet the minimum requirements as outlined in the agreement, it may be forced to assign the trademarks and patents back to Omega 5. After the initial term, the exclusive license granted shall renew automatically for a three year period, and thereafter automatically at three-year intervals. The Company met the minimum requirements in the year ended December 31, 2013 and is on target to meet this requirement in 2014.
17
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Unaudited)
Note 3- Commitments and contingencies (continued)
The amount of royalty expense incurred for sales of the DermaWand
TM
were approximately $327,000 and $261,000 and $537,000 and $552,000 for the three and six months ended June 30, 2014 and 2013, respectively.
Employment Agreement
Effective March 1, 2011, the Company entered into an employment agreement with the CEO of the Company. Under the terms of this agreement, the Company will pay an annual salary of $180,000, subject to review and, if appropriate, adjustment on an annual basis by the Companys Board of Directors. Effective January 1, 2014, this annual salary was increased to $275,000 and approved by the Board of Directors. The CEO is also entitled to annual performance bonuses as determined appropriate by the Board of Directors, and is entitled to receive stock options and other employee benefits such as health insurance reimbursement; automobile allowance and other reimbursable expenses. The initial term of this employment agreement is five years and automatically renews for successive one year periods unless either party provides not less than 60 days prior written notice of their intent not to renew the agreement. If the employment agreement is terminated by the Company without cause, the employee will be entitled to a severance payment equal to one years salary and benefits.
On April 17, 2012, the Company entered into an employment agreement with the President of the Company. Under the terms of this agreement, the Company will pay an annual salary of $125,000, subject to review and, if appropriate, adjustment on an annual basis by the Companys Board of Directors. Effective January 1, 2014, this annual salary was increased to $185,000 and approved by the Board of Directors. The President is also entitled to annual performance bonuses as determined appropriate by the Board of Directors, and is entitled to receive stock options and other employee benefits such as health insurance reimbursement; automobile allowance and other reimbursable expenses. The employment agreement will continue until terminated by either party in accordance with the terms of the agreement. If the employment agreement is terminated by the Company without cause, the employee will be entitled to a severance payment equal to one years salary and benefits.
On June 26, 2014, the Company entered into an employment agreement with the Chief Financial Officer of the Company. Under the terms of this agreement, the Company will pay an annual salary of $125,000, subject to review and, if appropriate, adjustment on an annual basis by the Companys Board of Directors. The Chief Financial Officer is also entitled to annual performance bonuses as determined appropriate by the Board of Directors, and is entitled to receive stock options and other employee benefits such as health insurance reimbursement; automobile allowance and other reimbursable expenses. The employment agreement will continue until terminated by either party in accordance with the terms of the agreement. If the employment agreement is terminated by the Company without cause, the employee will be entitled to a severance payment equal to one years salary and benefits.
Product Liability Insurance
For certain products, the Company was (and is) listed as an additional insured party under the product manufacturers insurance policy. The current policy had a scheduled expiration of April 20, 2014. The policy was renewed in April 2014 with a new scheduled expiration date of April 20, 2015. At present, management is not aware of any claims against the Company for any products sold.
Note 4 Severance payable
In September 2010 the Company entered into a severance agreement with a former consultant. Under the severance agreement, the consultant will be paid $270,000 over a 27 month period in increments of $10,000 per month beginning in September 2010 and continuing through November 2012. The Company recorded the $270,000 as a General and Administrative expense in the three months ended September 30, 2010. In April 2011, the Company amended the aforementioned severance agreement. The amendment allows the Company to make monthly payments of $3,400 per month for a period of one year from April 2011 through March 2012. In March 2012, the Company amended the aforementioned severance agreement for a second time to continue the monthly payment amount of $3,400 through March 2016. The severance payable balance was approximately $67,400 at June 30, 2014 and $87,800 at December 31, 2013, of which $40,800 is current and $26,600 is long-term as of June 30, 2014.
18
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Unaudited)
Note 5 - Related party transactions
The Company has a note payable to a shareholder in the original amount of $590,723. Prior to April 1, 2012, this loan was interest-free and had no specific terms of repayment. On April 1, 2012, the note payable was modified. The new terms include interest at the rate of four and three quarters percent (4.75%) per annum. Interest on the unpaid balance of the note is to be paid in arrears as of the end of each calendar quarter, with payment due on the first day of the month following the quarter as to which interest is being paid. The first payment of interest was due on January 1, 2013, for the three quarters beginning April 1, 2012 and ending on December 31, 2012. Interest payments of approximately $2,000 and $6,100 and $5,800 and $12,600 were paid during the three and six months ended June 30, 2014 and 2013, respectively.
On April 1, 2012, when this note was modified, a conversion option was added such that all or any part of this note may be converted into shares of common stock of the Company at any time, and from time to time, prior to payment, at a conversion price of $0.50 per share. Conversion is at the option of lender. Any amount not converted will continue to be payable in accordance with the terms of the note. The Company considered this a modification of debt that was not substantive, thus no gain or loss was recorded upon modification.
The principal balance of this note is due and payable in three equal payments on each of April 1, 2015, April 1, 2016, and April 1, 2017. This note may be prepaid in whole or in part at any time without penalty, and any prepayment shall be applied against the next principal payment due. Principal payments of $40,000 and $30,000 and $115,000 and $85,000 were made by the Company during the three and six months ended June 30, 2014 and 2013, respectively.
On February 5, 2014, the shareholder sold $50,000 of the note to an accredited investor, who then converted the $50,000 note into 100,000 shares of the Companys stock at the contractual conversion price of $.50 per share. Additionally, on March 18, 2014, the shareholder sold $75,000 of the note to an accredited investor, who then converted the $75,000 note into 150,000 shares of the Companys stock at the contractual conversion price of $.50 per share.
At June 30, 2014 and December 31, 2013, the balance outstanding was approximately $154,000 and $394,000, respectively.
Note 6 Notes payable
On July 2, 2014, the Company entered into a $500,000, one-year Credit Facility with JPMorgan Chase Bank, N.A with an expiration date of July 2, 2015. Interest on the Credit Facility is calculated as Adjusted One Month LIBOR Rate plus 2.50%. The facility is collateralized by a lien on the Companys assets and requires the Company to maintain prescribed levels of liquidity and EBITDA. An event of default, such as non-payment of amounts when due under the loan agreement or a breach of covenants, may accelerate the maturity date of the facility. The Company is in compliance with the covenants and has no current plans to utilize the Credit Facility, but will have access to the Credit Facility for working capital and other general corporate purposes as needed. There is no current amount outstanding as of the date of this filing.
19
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Unaudited)
Note 7 - Capital transactions
During the year ended December 31, 2011, the Company entered into a three year corporate public relations consulting agreement where the consultants received compensation in the form of 500,000 shares of stock, 500,000 warrants with an exercise price of $0.10 that expire 14 months from the date of the agreement, and 1,000,000 warrants with an exercise price of $0.50 that expire 24 months from the date of the agreement. On August 15, 2012, the Company entered into a settlement agreement with the consultants to terminate the consulting agreement. As part of the agreement, the consultants maintained the 500,000 shares of common stock previously issued and all warrants previously issued were terminated. In addition, the consultants received 250,000 new warrants with an exercise price of $0.10 that expire 3 years from the date of the agreement.
The 500,000 shares of common stock issued were originally valued at the fair market value of the stock on the date of grant. The total value of the stock was approximately $65,000 and the expense was being recognized over the consulting period. As noted in the previous paragraph, on August 15, 2012, the Company terminated the consulting agreement through a settlement agreement with these consultants and concurrently entered into a new consultant agreement with one of these consultants. Therefore, any unrecognized expense related to common stock and warrants issued was immediately recognized upon termination of services with the one consultant and expense related to the other consultant will be recognized over the remaining consulting term. The Company recognized approximately $3,000 and $5,000 and $5,000 and $11,000 of share based compensation expense for the three and six months ended June 30, 2014 and 2013, respectively related to the issuance of these shares, and the Company has remaining unrecognized expense of approximately $900, which will be recognized over the next month.
For the three and six months ended June 30, 2014 and 2013, the Company recorded approximately $4,600 and $4,600 and $9,200 and $9,200, respectively, of share based compensation expense for the 250,000 warrants issued to the consultants under the settlement agreement. The expense related to the consultant no longer performing services was recognized immediately during the year ended December 31, 2012. As of June 30, 2014, there was approximately $20,000 of total unrecognized expense over the next 13.5 months. On February 14, 2014, 125,000 warrants issued to one of the consultants were exercised for total consideration of $12,500.
As previously stated, on August 15, 2012, the Company entered into a three year corporate public relations consulting agreement with one of the previous consultants. As part of the agreement, the consultant will receive a monthly consulting fee of $4,000, a commission of $7.50 for each DermaWand
TM
sold plus 5% of the net revenue from other products sold on a third party website, and 125,000 additional warrants with an exercise price of $0.30 that expires 36 months from the date of the agreement. For three and six months ended June 30, 2014 and 2013, the Company recorded approximately $4,600 and $4,600 and $9,200 and $9,200, respectively, of share based compensation expense for the 125,000 warrants issued to the consultant under the new consulting agreement. As of June 30, 2014, there was approximately $20,000 of total unrecognized compensation costs related to these warrant grants which will be recognized over the remaining 13.5 months.
Due to the fact that any warrants issued to the consultant under the new consulting agreement are nonforfeitable, the 125,000 warrants with an exercise price of $0.10 and a fair value of $55,000, and the 125,000 warrants with an exercise price of $0.30 and a fair value of $55,000, which aggregated $110,000, were recorded in equity and were capitalized on the balance sheet in prepaid expenses and other current assets during 2012 and will be expensed over the consultant term. For the three and six months ended June 30, 2014 and 2013, approximately $9,200 and $9,200 and $18,400 and $18,400, respectively, was expensed and included in share based compensation expense in our accompanying consolidated financial statements. Approximately $40,000 is capitalized at June 30, 2014 and approximately $36,000 and $4,000 is reflected as current and non-current assets, respectively, in our accompanying condensed consolidated balance sheet.
20
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Unaudited)
Note 7 - Capital transactions (continued)
As of June 30, 2014, the following warrants were outstanding:
|
|
|
|
|
|
|
Holder
|
|
Warrants Outstanding
|
|
Exercise Price
|
|
Expiration Date
|
|
|
|
|
|
|
|
Shareholders in February 2012 private placement
|
|
395,000
|
$
|
0.25
|
|
February March 2015
|
Consultant
|
|
125,000
|
$
|
0.30
|
|
August 2015
|
|
|
|
|
|
|
|
Balance at June 30, 2014
|
|
520,000
|
$
|
0.25 - 0.30
|
|
|
On September 1, 2013, the Company entered into a one year investor relations consulting agreement, in which 150,000 shares of restricted stock were agreed to be issued to a consultant. Restricted stock awards provide that, during the applicable vesting periods, the shares awarded may not be sold or transferred by the participant. The fair market value was $0.45 and 37,500 shares vested as of the date of executed agreement. An additional 37,500 shares vested on December 31, 2013, and the remaining 75,000 shares vested on February 28, 2014. The award contains service conditions based on the consultants continued service for the Company. For the three and six months ended June 30, 2014, the Company recorded approximately $29,000 and $60,000 of share based compensation. As of June 30, 2014, there was approximately $20,000 of total unrecognized compensation costs related to this restricted stock grant which will be recognized over the remaining two months. At June 30, 2014 and December 31, 2013, the balance outstanding of expense related to shares that have vested was $20,000 and $32,500, respectively, and was included in prepaid expenses.
Note 8 - Basic and diluted earnings per share
ASC 260, Earnings Per Share requires presentation of basic earnings per share and dilutive earnings per share.
The computation of basic earnings per share is computed by dividing earnings available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted earnings per share gives the effect to all dilutive potential common shares outstanding during the period. The computation of diluted earnings per share does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect. For the purposes of obtaining future capital to finance the Companies operations and to fund future expansion of the Companies Direct Response Television campaign certain shareholders are able to purchase additional stock with stock warrants attached to common stock issued. At June 30, 2014 there were 520,000 warrants outstanding and exercisable. The warrants are exercisable between $0.25 and $0.30 per share expiring through August 2015. At June 30, 2014 there were approximately 6,098,336 stock options outstanding and 2,900,000 were vested and exercisable at an average exercise price of $0.29.
The following securities were not involved in the computation of diluted net income (loss) per share as their effect would have been anti-dilutive:
|
|
|
|
|
Three Months Ended
June 30,
|
|
2014
|
|
2013
|
Options to purchase common stock
|
1,850,000
|
|
2,735,000
|
Warrants to purchase common stock
|
-
|
|
515,084
|
21
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Unaudited)
Note 8 - Basic and diluted earnings per share (continued)
The number of shares of common stock used to calculate basic and diluted earnings per share for the six months ended June 30, 2014 and 2013 was determined as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
2014
|
|
June 30,
2013
|
|
June 30,
2014
|
|
June 30,
2013
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
23,163,316
|
|
21,706,087
|
|
22,860,959
|
|
21,360,600
|
Dilutive effect of outstanding stock options
|
|
2,070,556
|
|
1,306,975
|
|
-
|
|
1,116,423
|
Dilutive effect of outstanding warrants
|
|
374,607
|
|
448,561
|
|
-
|
|
359,894
|
Dilutive effect of convertible note payable
|
|
387,446
|
|
1,071,446
|
|
-
|
|
1,181,447
|
|
|
|
|
|
|
|
|
|
Weighted average dilutive shares outstanding
|
|
25,995,925
|
|
24,533,069
|
|
22,860,959
|
|
24,018,364
|
The computations for basic and fully diluted earnings per share are as follows:
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average
|
|
|
For the 3-months ended June 30, 2014:
|
|
Income
(Numerator)
|
|
Shares (Denominator)
|
|
Per Share Amount
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
|
|
|
|
Income to common shareholders
|
$
|
158,916
|
|
23,163,316
|
$
|
0.01
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
|
|
|
|
Income to common shareholders, including interest expense on convertible note payable of $2,060
|
$
|
160,976
|
|
25,995,925
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
For the 3-months ended June, 2013:
|
|
Income
(Numerator)
|
|
Shares (Denominator)
|
|
Per Share Amount
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
|
|
|
|
Income to common shareholders
|
$
|
648,909
|
|
21,706,087
|
$
|
0.03
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
|
|
|
|
Income to common shareholders, including interest expense on convertible note payable of $6,085
|
$
|
654,994
|
|
24,533,069
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average
|
|
|
For the 6-months ended June 30, 2014:
|
|
(Loss)
(Numerator)
|
|
Shares (Denominator)
|
|
Per Share Amount
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
|
|
|
|
|
|
Loss to common shareholders
|
$
|
(356,324)
|
|
22,860,959
|
$
|
(0.02)
|
22
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Unaudited)
Note 8 - Basic and diluted earnings per share (continued)
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
For the 6-months ended June 30, 2013:
|
|
Income
(Numerator)
|
|
Shares (Denominator)
|
|
Per Share Amount
|
|
|
|
|
|
|
|
Basic income per share
|
|
|
|
|
|
|
Income to common shareholders
|
$
|
1,817,468
|
|
21,360,600
|
$
|
0.09
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
|
|
|
|
Income to common shareholders, including interest expense on convertible notes payable of $12,924
|
$
|
1,830,392
|
|
24,018,364
|
$
|
0.08
|
Note 9 - Income taxes
The income tax expense (benefit) for the three and six months ended June 30, 2014 and 2013 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
Current
|
|
June 30,
2014
|
|
June 30,
2013
|
|
June 30,
2014
|
|
June 30,
2013
|
Federal
|
$
|
-
|
$
|
(231,000)
|
$
|
-
|
$
|
37,000
|
State
|
|
-
|
|
(57,000)
|
|
6,585
|
|
31,000
|
Total
|
$
|
-
|
$
|
(288,000)
|
$
|
6,585
|
$
|
68,000
|
The provision (benefit) for income tax is approximately $0 and ($288,000) for the three months ended June 30, 2014 and 2013, respectively, or 0% and (80%), respectively, of pre-tax income. The provision for income tax is approximately $7,000 and $68,000 for the six months ended June 30, 2014 and 2013, respectively, or 1.9% and 3.6%, respectively, of pre-tax income. The effective tax rates for 2014 and 2013 reflect provisions for current federal and state income taxes. As of June 30, 2014 and December 31, 2013, the Company had approximately $250,000 of gross federal net operating losses and approximately $400,000 of gross state net operating losses available. As of December 31, 2013, the Company completed its IRC Section 382 study and concluded that the availability of the Companys net operating loss carry forwards will not be subject to annual limitations against taxable income in future periods due to change in ownership rules. The Company has provided a full valuation allowance on the remaining net deferred asset as the Company does not have sufficient history of taxable income. During 2012, the Company filed income tax returns from inception, 1998, through 2011; therefore, the statute for all years remains open and any of these years could potentially be audited. The Company is current in all tax filings.
The Companys policy is to recognize interest and penalties related to tax matters in general and administrative expenses in the Condensed Consolidated Statements of Operations. The Company recorded zero interest and penalties for the three and six months ended June 30, 2014 and 2013. At June 30, 2014 and December 31, 2013 the Company has approximately $0 and $190,000, respectively, accrued for various tax penalties. The following is a summary of the activity in the penalties payable for the three months ended June 30, 2014. The accrual was reduced due to a resolution reached with the Internal Revenue Service and all final tax penalties and interest were made during the six months ended June 30, 2014.
|
|
|
Balance, January 1, 2014
|
$
|
190,000
|
Penalty payments
|
|
(104,000)
|
Reductions in reserve
|
|
(86,000)
|
Balance, June 30, 2014
|
$
|
-
|
23
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Unaudited)
Note 10 - Segment reporting
The Company operates in one industry segment and is engaged in the selling of various consumer products primarily through direct marketing infomercials and televised home shopping. The Company evaluates performance and allocates resources based on several factors, of which the primary financial measure is operating income (loss) by geographic area. Operating expenses are primarily prorated based on the relationship between domestic and international sales. International sales are sales directly to a third party international distributor. Domestic sales are DRTV sales sold directly to the consumer by the Company. Included in domestic sales is approximately $301,000 and $0 and $971,000 and $0 in DRTV sales in Canada for the three and six months ended June 30, 2014 and 2013, respectively.
For the three and six months ended June 30, 2014,
the Company reclassified a portion of royalties included in cost of sales and a portion of product testing costs included in selling and marketing costs from Domestic to International. Accordingly, the prior periods have been updated to reflect such reclassification.
Information with respect to the Companys operating income (loss) by geographic area is as follows:
|
|
|
|
|
|
|
|
For the three months ended June 30, 2014
|
For the three months ended June 30, 2013
|
|
Domestic
|
International
|
Totals
|
Domestic
|
International
|
Totals
|
|
|
|
|
|
|
|
NET SALES
|
$ 5,841,912
|
$ 1,975,148
|
$ 7,817,060
|
$ 9,207,549
|
$ 1,247,566
|
$ 10,455,115
|
|
|
|
|
|
|
|
COST OF SALES
|
1,411,775
|
1,042,532
|
2,454,307
|
2,257,713
|
686,266
|
2,943,979
|
Gross profit
|
4,430,137
|
932,616
|
5,362,753
|
6,949,836
|
561,300
|
7,511,136
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
General and administrative
|
1,800,621
|
73,870
|
1,874,491
|
1,962,704
|
58,161
|
2,020,865
|
Selling and marketing
|
3,294,322
|
33,498
|
3,327,820
|
5,105,693
|
17,435
|
5,123,128
|
Total operating expense
|
5,094,943
|
107,368
|
5,202,311
|
7,068,397
|
75,596
|
7,143,993
|
|
|
|
|
|
|
|
Operating income (loss)
|
$ (664,806)
|
$ 825,248
|
$ 160,442
|
$ (118,561)
|
$ 485,704
|
$ 367,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2014
|
For the six months ended June 30, 2013
|
|
Domestic
|
International
|
Totals
|
Domestic
|
International
|
Totals
|
|
|
|
|
|
|
|
NET SALES
|
$ 14,708,835
|
$ 2,930,725
|
$ 17,639,560
|
$20,615,117
|
$ 2,240,231
|
$ 22,855,348
|
|
|
|
|
|
|
|
COST OF SALES
|
3,506,416
|
1,527,523
|
5,033,939
|
5,204,919
|
1,245,917
|
6,450,836
|
Gross profit
|
11,202,419
|
1,403,202
|
12,605,621
|
15,410,198
|
994,314
|
16,404,512
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
General and administrative
|
3,672,510
|
150,287
|
3,822,797
|
3,846,304
|
109,154
|
3,955,458
|
Selling and marketing
|
9,032,982
|
94,686
|
9,127,668
|
10,524,052
|
26,815
|
10,550,867
|
Total operating expense
|
12,705,492
|
244,973
|
12,950,465
|
14,370,356
|
135,969
|
14,506,325
|
|
|
|
|
|
|
|
Operating income (loss)
|
$ (1,503,073)
|
$ 1,158,229
|
$ (344,844)
|
$ 1,039,842
|
$ 858,345
|
$ 1,898,187
|
24
INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Unaudited)
Note 10 - Segment reporting (continued)
Selected balance sheet information by segment is presented in the following table as of:
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
|
2014
|
|
2013
|
Domestic
|
$
|
5,422,081
|
$
|
4,765,746
|
International
|
|
12,340
|
|
6,240
|
Total Assets
|
$
|
5,434,421
|
$
|
4,771,986
|
Note 11 Subsequent events
On July 3, 2014, the Board of Directors of the Company recommended to the shareholders that the Companys Articles of Incorporation be amended to change the name of the Company to ICTV Brands, Inc. On July 16, 2014, the holders of a majority of the Companys outstanding stock approved the Amendment. The above actions are expected to become effective on August 20, 2014.
25
ITEM 2.