Quarterly report pursuant to Section 13 or 15(d)

Discontinued Operations

v2.4.0.8
Discontinued Operations
 9 Months Ended
Aug. 31, 2014
Discontinued Operations and Disposal Groups [Abstract]  
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS
The Company discontinued the Gel Perfect color nail polish business effective as of May 31, 2014. The Gel Perfect brand had declining sales in fiscal 2013 and fiscal 2014 to date. Net sales for the nine months ended August 31, 2014 were $(2,340,938). The negative net sales were due to the large amount of returns received during the period. In addition, the Company has recorded a reserve for returns of $1,957,011 as of May 31, 2014 based on the liability with its retail customers for potential returns or mark down agreements. The expense as a result of recording the reserve for returns is reflected as a reduction of net sales. As of August 31, 2014, $1,618,123 of the specific reserve for returns has not been utilized.
During the third quarter of fiscal 2014 the Company discontinued its operations of the Mega-T brand of weight loss and dietary supplement business and on August 26, 2014, the Company entered into an asset purchase agreement (“Asset Purchase Agreement”) with Mega-T, LLC (“LLC”), an entity formed by Casla Partners Capital Fund I, LP for the sale of inventory, trademarks and other intellectual property rights related to the Mega-T brand. Under the Asset Purchase Agreement, the Company sold its inventory consisting of finished goods, work-in-process, raw materials and packaging supplies, as well as the related trademarks, domain names and goodwill of the Mega-T brand with a total value of $2,053,934 to LLC. In consideration of the sale, LLC assumed all of the liabilities related to returns, co-operative advertising and contract markdowns that occurred prior to the transaction date but have not yet been deducted by the retailers up to a maximum liability of $2,250,000. LLC also assumed liabilities for all outstanding purchase orders as long as it receives the inventory from the vendors and any obligations that arise subsequent to the transaction date that related to LLC’s operations of the Mega-T business. The Company is responsible for paying the vendors for any inventory received by the Company prior to the transaction date. The Company decided to sell the Mega-T brand in order to focus its resources behinds its five remaining core brands.
The following table summarizes those components of the statement of operations for discontinued for the three months ended August 31, 2014 and 2013 :
 
Three Months Ended August 31,
 
Three Months Ended August 31,
 
2014
 
 
2013
 
 
Mega
GP
Total
 
Mega
GP
Total
Net Sales
$
1,069,946

$
385,028

$
1,454,974

 
$
2,175,033

$
382,894

$
2,557,927

 
 
 
 
 
 
 
 
Income before Provision for
 
 
 
 
 
 
 
  Income Taxes
1,514,597

(118,934
)
1,395,663

 
687,414

(484,195
)
203,219

 
 
 
 
 
 
 
 
Provision for Income Tax
551,769

(43,328
)
508,441

 
225,997

(159,186
)
66,811

 
 
 
 
 
 
 
 
Net Income (Loss)
$
962,828

$
(75,606
)
$
887,222

 
$
461,417

$
(325,009
)
$
136,408

 
 
 
 
 
 
 
 
Earnings (loss) per Share:
 
 
 
 
 
 
 
      Basic
$
0.14

$
(0.01
)
$
0.13

 
$
0.07

$
(0.05
)
$
0.02

      Diluted
$
0.14

$
(0.01
)
$
0.13

 
$
0.07

$
(0.05
)
$
0.02

 
 
 
 
 
 
 
 
Weighted average shares outstanding
 
 
 
 
 
 
 
Basic
7,006,684

7,006,684

7,006,684

 
7,035,235

7,035,235

7,035,235

Diluted
7,006,684

7,006,684

7,006,684

 
7,035,235

7,035,235

7,035,235


The following table summarizes those components of the statement of operations for discontinued for the nine months ended August 31, 2014 and 2013 :

 
Nine Months Ended August 31,
 
Nine Months Ended August 31,
 
2014
 
 
2013
 
 
Mega
GP
Total
 
Mega
GP
Total
Net Sales
$
250,140

$
(2,340,938
)
$
(2,090,798
)
 
$
6,054,286

$
3,442,119

$
9,496,405

 
 
 
 
 
 
 
 
Income before Provision for
 
 
 
 
 
 
 
  Income Taxes
(1,458,009
)
(4,473,440
)
(5,931,449
)
 
2,003,989

(957,118
)
1,046,871

 
 
 
 
 
 
 
 
Provision for Income Tax
(535,981
)
(1,644,487
)
(2,180,468
)
 
714,144

(341,080
)
373,064

 
 
 
 
 
 
 
 
Net (Loss) Income
$
(922,028
)
$
(2,828,953
)
$
(3,750,981
)
 
$
1,289,845

$
(616,038
)
$
673,807

 
 
 
 
 
 
 
 
Earnings (loss) per Share:
 
 
 
 
 
 
 
      Basic
$
(0.13
)
$
(0.40
)
$
(0.54
)
 
$
0.18

$
(0.09
)
$
0.09

      Diluted
$
(0.13
)
$
(0.40
)
$
(0.54
)
 
$
0.18

$
(0.09
)
$
0.09

 
 
 
 
 
 
 
 
Weighted average shares outstanding
 
 
 
 
 
 
 
Basic
7,006,684

7,006,684

7,006,684

 
7,047,993

7,047,993

7,047,993

Diluted
7,006,684

7,006,684

7,006,684

 
7,047,993

7,047,993

7,047,993