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Share Name | Share Symbol | Market | Type |
---|---|---|---|
CCA Industries Inc (PK) | USOTC:CAWW | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.08 | -8.60% | 0.85 | 0.75 | 0.85 | 0.85 | 0.85 | 0.85 | 1,000 | 21:00:00 |
ý
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
|
04-2795439
|
(State or other jurisdiction of
incorporation or organization)
|
|
(IRS Employer
Identification No.)
|
Large accelerated filer
|
|
[ ]
|
|
Accelerated filer
|
|
[ ]
|
Non-accelerated filer
|
|
[ ] (Do not check if a smaller reporting company)
|
|
Smaller reporting company
|
|
[X]
|
|
|
|
|
Emerging growth company
|
|
[ ]
|
|
|
|
Page
Number
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
2018 |
|
November 30,
2017 |
||||
ASSETS
|
|
(Unaudited)
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
463,952
|
|
|
$
|
140,243
|
|
Accounts receivable, net of allowances of $790,855 and $540,361, respectively
|
|
2,617,810
|
|
|
2,585,517
|
|
||
Inventories, net
|
|
3,342,070
|
|
|
1,878,831
|
|
||
Prepaid expenses and sundry receivables
|
|
815,573
|
|
|
642,000
|
|
||
Prepaid and refundable income taxes
|
|
27,784
|
|
|
38,153
|
|
||
Total Current Assets
|
|
7,267,189
|
|
|
5,284,744
|
|
||
|
|
|
|
|
||||
Property and equipment, net of accumulated depreciation
|
|
95,030
|
|
|
140,929
|
|
||
Intangible assets, net of accumulated amortization
|
|
436,670
|
|
|
432,320
|
|
||
Deferred financing fees, net of accumulated amortization
|
|
175,002
|
|
|
133,322
|
|
||
Deferred income taxes
|
|
6,498,480
|
|
|
9,502,319
|
|
||
Other
|
|
436,745
|
|
|
436,825
|
|
||
Total Assets
|
|
$
|
14,909,116
|
|
|
$
|
15,930,459
|
|
|
|
|
|
|
||||
LIABILITIES AND SHAREHOLDER'S EQUITY
|
|
|
|
|
||||
Current Liabilities:
|
|
|
|
|
||||
Accounts payable and accrued liabilities
|
|
$
|
4,750,784
|
|
|
$
|
3,617,543
|
|
Income tax payable
|
|
950
|
|
|
—
|
|
||
Line of credit
|
|
619,679
|
|
|
2,016,355
|
|
||
Note payable - current portion
|
|
375,000
|
|
|
—
|
|
||
Total Current Liabilities
|
|
5,746,413
|
|
|
5,633,898
|
|
||
|
|
|
|
|
||||
Long term accrued liabilities
|
|
244,864
|
|
|
220,509
|
|
||
Notes payable
|
|
937,500
|
|
|
—
|
|
||
Long term - other
|
|
168,859
|
|
|
168,859
|
|
||
Total Liabilities
|
|
7,097,636
|
|
|
6,023,266
|
|
||
|
|
|
|
|
||||
Shareholders' Equity:
|
|
|
|
|
|
|
||
Preferred stock, $1.00 par, authorized 20,000,000 none issued
|
|
—
|
|
|
—
|
|
||
Common stock, $.01 par, authorized 15,000,000 shares, issued and outstanding 6,488,982 and 6,038,982 shares, respectively
|
|
64,890
|
|
|
60,390
|
|
||
Class A common stock, $.01 par, authorized 5,000,000 shares, issued and outstanding 967,702 and 967,702 shares, respectively
|
|
9,677
|
|
|
9,677
|
|
||
Additional paid-in capital
|
|
6,004,001
|
|
|
4,387,543
|
|
||
Retained earnings
|
|
1,732,912
|
|
|
5,449,583
|
|
||
Total Shareholders' Equity
|
|
7,811,480
|
|
|
9,907,193
|
|
||
Total Liabilities and Shareholders' Equity
|
|
$
|
14,909,116
|
|
|
$
|
15,930,459
|
|
|
|
Three Months Ended August 31,
|
|
Nine Months Ended August 31,
|
|
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
||||||||
Sales of health and beauty aid products - net
|
|
$
|
4,222,906
|
|
|
$
|
5,329,753
|
|
|
$
|
12,440,242
|
|
|
$
|
15,706,666
|
|
|
Other income
|
|
1,926
|
|
|
4,615
|
|
|
8,254
|
|
|
12,762
|
|
|
||||
Total Revenues
|
|
4,224,832
|
|
|
5,334,368
|
|
|
12,448,496
|
|
|
15,719,428
|
|
|
||||
Costs and Expenses:
|
|
|
|
|
|
|
|
|
|
||||||||
Cost of sales
|
|
1,489,281
|
|
|
1,989,572
|
|
|
4,997,545
|
|
|
6,043,406
|
|
|
||||
Selling, general and administrative expenses
|
|
2,097,625
|
|
|
1,720,693
|
|
|
6,020,567
|
|
|
5,404,245
|
|
|
||||
Advertising, cooperative and promotional expenses
|
|
816,117
|
|
|
738,635
|
|
|
1,671,605
|
|
|
1,681,999
|
|
|
||||
Research and development
|
|
16,426
|
|
|
16,811
|
|
|
45,819
|
|
|
44,143
|
|
|
||||
Bad debt (recovery) expense
|
|
(7,974
|
)
|
|
4,812
|
|
|
8,739
|
|
|
(5,843
|
)
|
|
||||
Interest expense
|
|
86,707
|
|
|
131,346
|
|
|
391,422
|
|
|
405,584
|
|
|
||||
Total Costs and Expenses
|
|
4,498,182
|
|
|
4,601,869
|
|
|
13,135,697
|
|
|
13,573,534
|
|
|
||||
(Loss) Income before (benefit from) provision for income taxes
|
|
(273,350
|
)
|
|
732,499
|
|
|
(687,201
|
)
|
|
2,145,894
|
|
|
||||
(Benefit from) Provision for income taxes
|
|
(69,678
|
)
|
|
354,816
|
|
|
3,029,451
|
|
|
882,910
|
|
|
||||
Net (Loss) Income
|
|
$
|
(203,672
|
)
|
|
$
|
377,683
|
|
|
$
|
(3,716,652
|
)
|
|
$
|
1,262,984
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
(Loss) Earnings per Share:
|
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
|
|
|
|
|
|
|
|
||||||||
(Loss) Income
|
|
$
|
(0.03
|
)
|
|
$
|
0.05
|
|
|
$
|
(0.51
|
)
|
|
$
|
0.18
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
||||||||
(Loss) Income
|
|
$
|
(0.03
|
)
|
|
$
|
0.05
|
|
|
$
|
(0.51
|
)
|
|
$
|
0.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Weighted Average Common Shares Outstanding
|
|
|
|
|
|
|
|
||||||||||
Basic
|
|
7,456,684
|
|
|
7,006,684
|
|
|
7,348,290
|
|
|
7,006,684
|
|
|
||||
Diluted
|
|
7,456,684
|
|
|
7,165,027
|
|
|
7,348,290
|
|
|
7,006,684
|
|
|
|
Nine Months Ended August 31,
|
||||||
|
2018
|
|
2017
|
||||
Cash Flows from Operating Activities:
|
|
|
|
||||
Net (Loss) Income
|
$
|
(3,716,652
|
)
|
|
$
|
1,262,984
|
|
Adjustments to reconcile net income to cash (used in) provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
38,685
|
|
|
66,592
|
|
||
Change in allowance for bad debts
|
8,739
|
|
|
(5,843
|
)
|
||
Loss on write off of fixed assets
|
32,823
|
|
|
—
|
|
||
Deferred financing fees amortization
|
88,320
|
|
|
94,699
|
|
||
Stock-based compensation
|
194,458
|
|
|
126,863
|
|
||
Deferred income taxes
|
3,003,838
|
|
|
816,846
|
|
||
Change in Operating Assets & Liabilities:
|
|
|
|
||||
(Increase) in accounts receivable
|
(41,033
|
)
|
|
(1,503,021
|
)
|
||
(Increase) Decrease in inventory
|
(1,463,238
|
)
|
|
170,838
|
|
||
(Increase) in prepaid expenses and other receivables
|
(173,573
|
)
|
|
(179,999
|
)
|
||
Decrease (increase) in prepaid income and refundable income tax
|
10,368
|
|
|
(22,366
|
)
|
||
Decrease in other assets
|
80
|
|
|
—
|
|
||
Increase (Decrease) in accounts payable and accrued liabilities
|
1,157,596
|
|
|
(624,013
|
)
|
||
Increase (Decrease) in income tax payable
|
950
|
|
|
(20,000
|
)
|
||
Net Cash (Used) Provided by Operating Activities
|
(858,639
|
)
|
|
183,580
|
|
||
Cash Flows from Investing Activities:
|
|
|
|
||||
Acquisition of plant and equipment
|
(25,586
|
)
|
|
(39,507
|
)
|
||
Purchase of intangible assets
|
(4,390
|
)
|
|
—
|
|
||
Net Cash (Used) by Investing Activities
|
(29,976
|
)
|
|
(39,507
|
)
|
||
Cash Flows from Financing Activities:
|
|
|
|
||||
Payment on line of credit, net
|
(1,396,676
|
)
|
|
(113,585
|
)
|
||
Proceeds from notes payable, net
|
1,312,500
|
|
|
—
|
|
||
Proceeds from exercise of warrant
|
1,426,500
|
|
|
—
|
|
||
Payment of deferred financing fees
|
(130,000
|
)
|
|
—
|
|
||
Payments for capital lease obligations
|
—
|
|
|
(2,753
|
)
|
||
Net Cash Provided (Used) by Financing Activities
|
1,212,324
|
|
|
(116,338
|
)
|
||
Net Increase in Cash and Cash Equivalents
|
323,709
|
|
|
27,735
|
|
||
Cash and Cash Equivalents at Beginning of Period
|
140,243
|
|
|
309,280
|
|
||
Cash and Cash Equivalents at End of Period
|
$
|
463,952
|
|
|
$
|
337,015
|
|
Supplemental Disclosures of Cash Flow Information:
|
|
|
|
||||
|
|
|
|
||||
Cash paid during the period for:
|
|
|
|
||||
Interest
|
$
|
391,422
|
|
|
$
|
405,584
|
|
Income taxes
|
$
|
11,153
|
|
|
$
|
108,413
|
|
Computer equipment
|
5 -7 Years
|
Furniture and fixtures
|
3-10 Years
|
Tools, dies and masters
|
3 Years
|
Leasehold improvements
|
Remaining life of the lease (2 years, 4 months)
|
|
|
August 31,
2018 |
|
November 30,
2017 |
||||
Raw materials
|
|
$
|
230,832
|
|
|
$
|
231,558
|
|
Finished goods
|
|
3,111,238
|
|
|
1,647,273
|
|
||
|
|
$
|
3,342,070
|
|
|
$
|
1,878,831
|
|
|
|
August 31,
2018 |
|
November 30,
2017 |
||||
Furniture and equipment
|
|
$
|
132,228
|
|
|
$
|
163,062
|
|
Tools, dies and masters
|
|
128,861
|
|
|
127,361
|
|
||
Capitalized lease obligations
|
|
—
|
|
|
15,286
|
|
||
Leasehold improvements
|
|
2,932
|
|
|
—
|
|
||
|
|
$
|
264,021
|
|
|
$
|
305,709
|
|
Less: Accumulated depreciation
|
|
168,991
|
|
|
164,780
|
|
||
Property and Equipment—Net
|
|
$
|
95,030
|
|
|
$
|
140,929
|
|
|
|
August 31,
2018 |
|
November 30,
2017 |
||||
Patents and trademarks
|
|
$
|
583,327
|
|
|
$
|
578,937
|
|
Less: Accumulated amortization
|
|
146,657
|
|
|
146,617
|
|
||
Intangible Assets - Net
|
|
$
|
436,670
|
|
|
$
|
432,320
|
|
|
August 31,
2018 |
|
November 30,
2017 |
||||
Co-operative advertising
|
$
|
933,477
|
|
|
$
|
1,122,904
|
|
Accrued bonuses *
|
$
|
—
|
|
|
$
|
400,166
|
|
|
August 31,
2018 |
|
November 30,
2017 |
||||
Sub-lease rent differential
|
$
|
197,975
|
|
|
$
|
220,509
|
|
|
|
Three Months Ended August 31,
|
|
Nine Months Ended August 31,
|
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Royalty income
|
|
$
|
1,926
|
|
|
$
|
3,000
|
|
|
$
|
8,254
|
|
|
$
|
9,000
|
|
Miscellaneous
|
|
—
|
|
|
1,615
|
|
|
—
|
|
|
3,762
|
|
||||
Total Other Income
|
|
$
|
1,926
|
|
|
$
|
4,615
|
|
|
$
|
8,254
|
|
|
$
|
12,762
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
August 31, 2018
|
|
|
August 31, 2017
|
|
|
August 31, 2018
|
|
|
August 31, 2017
|
|
||||
Company Contributions
|
$
|
9,950
|
|
|
$
|
8,925
|
|
|
$
|
36,541
|
|
|
$
|
16,568
|
|
|
Previous Rate
|
New Rate
|
||
Federal rate
|
34.00
|
%
|
21.00
|
%
|
State rate, net of federal tax benefit
|
2.45
|
%
|
3.13
|
%
|
Total
|
36.45
|
%
|
24.13
|
%
|
|
|
August 31, 2018
|
|
November 30, 2017
|
||||||||||||
Type
|
|
Amount
|
|
Deferred Tax
|
|
Amount
|
|
Deferred Tax
|
||||||||
Depreciation
|
|
$
|
(468,017
|
)
|
|
$
|
(112,925
|
)
|
|
$
|
(378,580
|
)
|
|
$
|
(137,992
|
)
|
Reserve for bad debts
|
|
15,368
|
|
|
3,708
|
|
|
6,629
|
|
|
2,416
|
|
||||
Reserve for returns
|
|
619,185
|
|
|
149,399
|
|
|
246,513
|
|
|
89,854
|
|
||||
Accrued returns
|
|
110,436
|
|
|
26,646
|
|
|
109,646
|
|
|
39,966
|
|
||||
Reserve for obsolete inventory
|
|
135,164
|
|
|
32,613
|
|
|
158,269
|
|
|
57,689
|
|
||||
Vacation accrual
|
|
52,233
|
|
|
12,603
|
|
|
70,856
|
|
|
25,827
|
|
||||
Alternative minimum tax carry forward
|
|
—
|
|
|
103,040
|
|
|
—
|
|
|
122,360
|
|
||||
Research and development tax credit
|
|
—
|
|
|
65,175
|
|
|
—
|
|
|
—
|
|
||||
Deferred Compensation
|
|
491,382
|
|
|
118,563
|
|
|
487,061
|
|
|
177,534
|
|
||||
Bonus obligation unpaid
|
|
—
|
|
|
—
|
|
|
400,166
|
|
|
145,861
|
|
||||
Charitable contributions
|
|
242,650
|
|
|
58,548
|
|
|
305,633
|
|
|
111,403
|
|
||||
Section 263A costs
|
|
208,120
|
|
|
50,216
|
|
|
48,317
|
|
|
17,612
|
|
||||
Loss carry forward
|
|
24,789,723
|
|
|
5,990,894
|
|
|
24,279,259
|
|
|
8,849,789
|
|
||||
Net deferred tax asset
|
|
$
|
26,196,244
|
|
|
$
|
6,498,480
|
|
|
$
|
25,733,769
|
|
|
$
|
9,502,319
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
August 31, 2018
|
|
August 31, 2017
|
|
August 31, 2018
|
|
August 31, 2017
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Current tax - Federal
|
$
|
—
|
|
|
$
|
43,875
|
|
|
$
|
—
|
|
|
$
|
59,875
|
|
Current tax - State & Local
|
595
|
|
|
312
|
|
|
5,944
|
|
|
6,189
|
|
||||
Deferred tax
|
(70,273
|
)
|
|
310,629
|
|
|
3,023,507
|
|
|
816,846
|
|
||||
Total Income Tax (Benefit) Expense
|
$
|
(69,678
|
)
|
|
$
|
354,816
|
|
|
$
|
3,029,451
|
|
|
$
|
882,910
|
|
Prepaid and refundable income taxes
|
|
Federal
|
|
State &
Local |
|
Total
|
||||||
August 31, 2018
|
|
$
|
20,335
|
|
|
$
|
7,449
|
|
|
$
|
27,784
|
|
November 30, 2017
|
|
$
|
1,015
|
|
|
$
|
37,138
|
|
|
$
|
38,153
|
|
Income Taxes Payable
|
|
Federal
|
|
State &
Local |
|
Total
|
||||||
August 31, 2018
|
|
$
|
—
|
|
|
$
|
950
|
|
|
$
|
950
|
|
|
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||
|
|
August 31, 2018
|
|
August 31, 2017
|
||||||||||
|
|
Amount
|
|
Percent of Pretax Income
|
|
Amount
|
|
Percent of Pretax Income
|
||||||
Provision for income taxes at federal statutory rate
|
|
$
|
(57,404
|
)
|
|
21.00
|
%
|
|
$
|
249,050
|
|
|
34.00
|
%
|
Changes in provision for income taxes resulting from:
|
|
|
|
|
|
|
|
|
||||||
State income taxes, net of federal income tax benefit
|
|
(8,556
|
)
|
|
3.13
|
%
|
|
21,242
|
|
|
2.90
|
%
|
||
Non-deductible expenses and other adjustments
|
|
(3,718
|
)
|
|
1.36
|
%
|
|
84,524
|
|
|
11.54
|
%
|
||
(Benefit from) Provision for income taxes at effective rate
|
|
$
|
(69,678
|
)
|
|
25.49
|
%
|
|
$
|
354,816
|
|
|
48.44
|
%
|
|
|
Nine Months Ended
|
|
Nine Months Ended
|
||||||||||
|
|
August 31, 2018
|
|
August 31, 2017
|
||||||||||
|
|
Amount
|
|
Percent of Pretax Income
|
|
Amount
|
|
Percent of Pretax Income
|
||||||
Provision for (benefit from) income taxes at federal statutory rate
|
|
$
|
(144,312
|
)
|
|
21.00
|
%
|
|
$
|
729,604
|
|
|
34.00
|
%
|
Increases in taxes resulting from:
|
|
|
|
|
|
|
|
|
|
|
||||
State income taxes, net of federal income tax benefit
|
|
(21,509
|
)
|
|
3.13
|
%
|
|
62,231
|
|
|
2.90
|
%
|
||
Change in tax rate related to future deferred tax benefits
|
|
3,150,147
|
|
|
(458.40
|
)%
|
|
—
|
|
|
—
|
%
|
||
Non-deductible expenses and other adjustments
|
|
45,125
|
|
|
(6.57
|
)%
|
|
91,075
|
|
|
4.24
|
%
|
||
Provision for income taxes at effective rate
|
|
$
|
3,029,451
|
|
|
(440.84
|
)%
|
|
$
|
882,910
|
|
|
41.14
|
%
|
|
Assumptions:
|
||||||
Option Grant Date
|
Risk-free Interest Rate
|
Dividend Yield
|
Stock Volatility
|
Option Term (years)
|
|||
June 20, 2018
|
2.80
|
%
|
—
|
%
|
37.14
|
%
|
10
|
June 20, 2018
|
2.36
|
%
|
—
|
%
|
37.14
|
%
|
5
|
January 4, 2018
|
1.82
|
%
|
—
|
%
|
37.63
|
%
|
10
|
|
Number of Options
|
Weighted-Average Exercise Price
|
Weighted-Average Remaining Term (years)
|
Aggregate Intrinsic Value
|
||||
Outstanding at November 30, 2016
|
564,000
|
|
$
|
3.25
|
|
5.8
|
—
|
|
Granted
|
307,500
|
|
$
|
3.30
|
|
|
|
|
Exercised
|
—
|
|
|
|
|
|||
Canceled or Forfeited
|
—
|
|
|
|
|
|||
Outstanding at November 30, 2017
|
871,500
|
|
$
|
3.27
|
|
6.0
|
—
|
|
Granted
|
7,500
|
|
$
|
3.15
|
|
|
|
|
Exercised
|
—
|
|
|
|
|
|||
Canceled or Forfeited
|
82,500
|
|
$
|
3.35
|
|
|
|
|
Outstanding at February 28, 2018
|
796,500
|
|
$
|
3.26
|
|
6.0
|
—
|
|
Granted
|
—
|
|
|
|
|
|||
Exercised
|
—
|
|
|
|
|
|||
Canceled or Forfeited
|
—
|
|
|
|
|
|||
Outstanding at May 31, 2018
|
796,500
|
|
$
|
3.26
|
|
5.8
|
—
|
|
Granted
|
420,000
|
|
$
|
2.85
|
|
|
|
|
Exercised
|
—
|
|
|
|
|
|||
Canceled or Forfeited
|
20,000
|
|
$
|
3.30
|
|
|
|
|
Outstanding at August 31, 2018
|
1,196,500
|
|
$
|
3.09
|
|
7.3
|
—
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
August 31, 2018
|
|
August 31, 2017
|
|
August 31, 2018
|
|
August 31, 2017
|
||||||||
Net (loss) income available for common shareholders
|
$
|
(203,672
|
)
|
|
$
|
377,683
|
|
|
$
|
(3,716,652
|
)
|
|
$
|
1,262,984
|
|
Weighted average common shares outstanding-Basic
|
7,456,684
|
|
|
7,006,684
|
|
|
7,348,290
|
|
|
7,006,684
|
|
||||
Net effect of dilutive stock options and warrants
|
—
|
|
|
158,343
|
|
|
—
|
|
|
—
|
|
||||
Weighted average common shares and common shares equivalents—Diluted
|
7,456,684
|
|
|
7,165,027
|
|
|
7,348,290
|
|
|
7,006,684
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Earnings per Share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
|
|
|
|
|
|
||||||||
(Loss) Earnings per Share
|
$
|
(0.03
|
)
|
|
$
|
0.05
|
|
|
$
|
(0.51
|
)
|
|
$
|
0.18
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted
|
|
|
|
|
|
|
|
||||||||
(Loss) Earnings per Share
|
$
|
(0.03
|
)
|
|
$
|
0.05
|
|
|
$
|
(0.51
|
)
|
|
$
|
0.18
|
|
▪
|
The first nine months of fiscal 2018 was impacted by an additional accounts receivable reserve of $479,052 due to a dispute with an international customer. This additional reserve was recorded as a reduction of net sales in the second quarter. The Company does not believe that it will recover the accounts receivable in dispute.
|
▪
|
Due to changes in the tax law that were enacted effective January 1, 2018, the Company's tax rate decreased from 36.45% to 24.13% resulting in the Company revaluing its deferred tax assets. The change in the tax rate resulted in the Company recording an additional tax expense of $3,150,146 in the first quarter of fiscal
2018
. This tax expense is a non-cash item and will not have any effect on the Company's current cash flow.
|
▪
|
The Company moved its master broker sales representation to Advantage Sales and Marketing ("Advantage"), effective January 15, 2018. The Company believes that this change will allow the Company in the 2019 fiscal year to regain distribution that was lost over the past four years and lead to better implementation of its co-operative advertising programs with retailers. However, the move did result in decreased order fulfillment during the month of January 2018. Order fulfillment went back to normal levels as of March 1, 2018.
|
▪
|
In conjunction with the move to Advantage, the Company also moved its warehousing operations from Geodis Contract Logistics (formerly OHL) to Casestack, Inc., effective January 15, 2018. The Geodis warehouse was located in Plainfield, Indiana. The Casestack, Inc. warehouse is located outside of Scranton, Pennsylvania. Due to a shift in the mix of customers, shipping costs managed by Casestack have increased substantially as compared to fiscal 2017.
|
▪
|
Additional charges during the first quarter of fiscal
2018
due to moving its offices to a smaller facility in December 2017 and sub-leasing the old facility.
|
▪
|
Entering into a new credit agreement with PNC Bank, National Association on February 5, 2018, and paying off the balance of the Revolving Loan with CNH resulting in a write-off of $112,277, which was the balance of deferred financing fees incurred with the CNH facility and $55,000 for termination charges.
|
|
|
Three Months Ended August 31,
|
||||||||||||
|
|
2018
|
|
2017
|
||||||||||
Category
|
|
Net Sales
|
|
%TTL
|
|
Net Sales
|
|
%TTL
|
||||||
Skin Care
|
|
$
|
2,799,268
|
|
|
66.3
|
%
|
|
$
|
2,644,554
|
|
|
49.6
|
%
|
Oral Care
|
|
1,372,270
|
|
|
32.5
|
%
|
|
1,628,216
|
|
|
30.5
|
%
|
||
Miscellaneous
|
|
45,051
|
|
|
1.1
|
%
|
|
283,996
|
|
|
5.3
|
%
|
||
Nail Care
|
|
5,332
|
|
|
0.1
|
%
|
|
(50,618
|
)
|
|
(0.9
|
)%
|
||
Analgesic
|
|
—
|
|
|
—
|
%
|
|
3,629
|
|
|
0.1
|
%
|
||
Fragrance
|
|
985
|
|
|
—
|
%
|
|
819,976
|
|
|
15.4
|
%
|
||
Total Net Sales
|
|
$
|
4,222,906
|
|
|
100
|
%
|
|
$
|
5,329,753
|
|
|
100.0
|
%
|
•
|
Net sales of skin care products
increased
$154,714
for the
three months ended August 31, 2018
, as compared to the same period in
2017
.
|
•
|
Net sales of oral care products
decreased
$255,946
for the
three months ended August 31, 2018
as compared to the same period in fiscal
2017
. Net sales were lower due to decreased retail distribution of the Company's toothpaste products.
|
•
|
The Company has begun to re-launch its Nutra-Nail nail core products.
|
•
|
Net sales of the Company’s fragrance products decreased $
818,991
for the
three months ended August 31
, 2018 , as compared to the same period in fiscal 2017. The Company had a dispute with an international customer who was the sole purchaser of the fragrance products. The dispute caused the Company to record an additional accounts receivable reserve of $479,052, which resulted in a reduction of net sales. In addition, the Company did not record any sales of fragrance products with the international customer in the second or third quarter of fiscal 2018. The customer has placed an order for fragrance products that will ship in the fourth quarter of fiscal 2018. Payment for the order has been secured by a letter of credit from the customer with the Company as beneficiary.
|
|
|
Three Months Ended August 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Sales of health and beauty aid products - Net
|
|
$
|
4,222,906
|
|
|
$
|
5,329,753
|
|
Cost of Sales
|
|
1,489,281
|
|
|
1,989,572
|
|
||
Gross Margin
|
|
$
|
2,733,625
|
|
|
$
|
3,340,181
|
|
|
|
64.7
|
%
|
|
62.7
|
%
|
|
|
Nine Months Ended August 31,
|
||||||||||||
|
|
2018
|
|
2017
|
||||||||||
Category
|
|
Net Sales
|
|
%TTL
|
|
Net Sales
|
|
%TTL
|
||||||
Skin Care
|
|
$
|
7,942,155
|
|
|
63.8
|
%
|
|
$
|
7,998,691
|
|
|
50.9
|
%
|
Oral Care
|
|
4,309,791
|
|
|
34.6
|
%
|
|
5,840,844
|
|
|
37.2
|
%
|
||
Miscellaneous
|
|
197,177
|
|
|
1.6
|
%
|
|
624,665
|
|
|
4.0
|
%
|
||
Nail Care
|
|
(26,868
|
)
|
|
(0.1
|
)%
|
|
74,927
|
|
|
0.5
|
%
|
||
Fragrance
|
|
17,987
|
|
|
0.1
|
%
|
|
1,167,539
|
|
|
7.4
|
%
|
||
Total Net Sales
|
|
$
|
12,440,242
|
|
|
100
|
%
|
|
$
|
15,706,666
|
|
|
100.0
|
%
|
•
|
Net sales of skin care products decreased
$56,536
for the
nine months ended August 31, 2018
, as compared to the same period in fiscal
2017
primarily due to the Company discontinuing the Solar Sense brand, which was the Company's sun care product.
|
•
|
Net sales of oral care products decreased
$1,531,053
for the
nine months ended August 31, 2018
, as compared to the same period in fiscal
2017
due to decreased distribution at retail of its toothpaste products.
|
•
|
Net sales of nail care products
decreased
$101,795
for the
nine months ended August 31, 2018
, as compared to the same period in fiscal
2017
. The Company began its re-launch of its Nutra-Nail core products in the third quarter of fiscal 2018.
|
•
|
Net sales of the Company’s fragrance products decreased $
1,149,552
for the
nine months ended August 31, 2018
, as compared to the same period in fiscal
2017
. The Company had a dispute with an international customer who was the sole purchases of the fragrance products. The dispute caused the Company to record an additional accounts receivable reserve of $479,052 in the second quarter of fiscal
2018
, which resulted in a reduction of net sales. In addition, the Company did not record any sales of fragrance products with the international customer in the second or third quarter of fiscal 2018. The customer has placed an order for fragrance products that will ship in the fourth quarter of fiscal 2018. Payment for the order has been secured by a letter of credit from the customer with the Company as beneficiary.
|
|
|
Nine Months Ended August 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Sales of health and beauty aid products - Net
|
|
$
|
12,440,242
|
|
|
$
|
15,706,666
|
|
Cost of Sales
|
|
4,997,545
|
|
|
6,043,406
|
|
||
Gross Margin
|
|
$
|
7,442,697
|
|
|
$
|
9,663,260
|
|
|
|
59.8
|
%
|
|
61.5
|
%
|
•
|
Rent costs increased approximately $84,991 in the
nine months ended August 31, 2018
as compared to the same period in fiscal
2017
. Rent costs increased due to the move of the Company's offices from 65 Challenger Road, Ridgefield Park, New Jersey to smaller offices at 1099 Wall Street West, Lyndhurst, New Jersey. The Ridgefield Park office was sub-let. The move and sub-let resulted in the following charges:
|
◦
|
An expense of $94,992 for the difference between the rent due under the Ridgefield Park office master lease and the sub-let, over the course of the balance of the lease term. Accounting rules require this to be accrued at the time of the sub-let, and then amortized over the remaining life of the lease.
|
◦
|
Real estate commissions of $24,420 for the sub-lease of the Ridgefield Park office.
|
•
|
Personnel costs increased approximately $117,114 in the
nine months ended August 31, 2018
as compared to the same period in fiscal 2017 due to the addition of sales and marketing positions. In addition, the Company had increased expense of $67,595 for stock options issued to employees and directors, and increased director fees of $86,475.
|
•
|
Freight out expense increased approximately $248,840 in the
nine months ended August 31, 2018
as compared to the same period in fiscal 2017. The increase was due to less consolidation savings as a result of a change in the mix of customers. The Company is working to decrease its freight out expense.
|
•
|
Moving costs of $47,905 to move the finished goods inventory from the Company's former outsourced warehouse in Plainfield, Indiana to the current warehouse in Scranton, Pennsylvania.
|
•
|
A loss of
$3,716,652
in the first nine months of fiscal 2018 as compared to income of
$1,262,984
for the same period in fiscal 2017.
|
•
|
There was a decrease in deferred tax assets of
$3,003,838
, most of which was recorded as an additional tax expense in the first quarter of fiscal 2018. This expense did not affect the cash balance.
|
•
|
There was an increase in accounts receivable of
$41,033
which utilized cash provided during the nine months of fiscal 2018 as compared to an increase in accounts receivable of
$1,503,021
during the nine months of fiscal 2017. The increase in accounts receivable was in the normal course of business and due to the increase in gross sales and receivable during the preceding months.
|
•
|
There was an increase in inventory of
$1,463,238
, utilizing cash, in the first nine months of fiscal 2018 as compared to a decrease in inventory of
$170,838
during the same period in fiscal 2017. The Company increased inventory to bring in new products that will be introduced in future quarters.
|
•
|
Accounts payable and accrued liabilities increased
$1,157,596
during the first three quarters of fiscal 2018, providing cash, as compared to a decrease of
$624,013
during the first three quarters of fiscal 2017. The increase in accounts payable and accrued liabilities was in the ordinary course of business and mainly consists of media invoices. The media invoices will be paid in the fourth quarter of fiscal 2018.
|
•
|
Pre-paid expenses and other receivables increased
$173,573
during the first nine months of fiscal 2018. The increase was due to a hold back of amounts owed to the Company as of
August 31, 2018
from Emerson that are being held until January 15, 2020 to pay for any potential customer charge backs.
|
•
|
Cash flow generated or used by operating activities
|
•
|
Inability to receive favorable credit terms from the Company's vendors
|
•
|
Large product returns from customers which are deducted from cash remittances
|
Item 6.
|
EXHIBITS
|
•
|
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
|
•
|
have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
|
•
|
may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
|
•
|
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
|
10.1
|
|
|
|
|
|
31.1
|
|
|
|
|
|
31.2
|
|
|
|
|
|
32.1
|
|
|
|
|
|
32.2
|
|
|
|
|
|
101.Def
|
|
Definition Linkbase Document
|
|
|
|
101.Pre
|
|
Presentation Linkbase Document
|
|
|
|
101.Lab
|
|
Labels Linkbase Document
|
|
|
|
101.Cal
|
|
Calculation Linkbase Document
|
|
|
|
101.Sch
|
|
Schema Document
|
|
|
|
101.Ins
|
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Instance Document -
the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
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CCA INDUSTRIES, INC.
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By:
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/s/ STEPHEN A. HEIT
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Stephen A. Heit
Chief Financial Officer and Chief Accounting Officer, and duly authorized signatory on behalf of Registrant
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1 Year CCA Industries (PK) Chart |
1 Month CCA Industries (PK) Chart |
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