SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal Year Ended November 30, 2009
Commission File Number 001-31643
CCA INDUSTRIES, INC.
(Exact Name of Registrant as specified in Charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
04-2795439
(I.R.S. Employer
Identification No.)
200 Murray Hill Parkway, East Rutherford, New Jersey 07073
(Address of principal executive offices, including zip code)
(201) 330-1400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
Class A Common Stock, par value $.01 per share
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
(cid:0)
(cid:2)
No
Yes
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
(cid:0)
(cid:2)
Exchange Act. Yes
No
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 requirement for the past 90 days. Yes
. No
(cid:0)
(cid:2)
.
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 during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
No
(cid:0)
(cid:2)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
(cid:0)
.
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. (Check one):
(cid:0)
(cid:0)
(cid:0)
(cid:2)
Large accelerated filer
Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
(cid:0)
(cid:2)
.
No
The aggregate market value of the voting stock held by non-affiliates of the Registrant (i.e., by persons other than officers and
directors of the Registrant), at the closing sales price $3.05 on May 29, 2009, was as follows:
Class of Voting Stock
Market Value
5,514,866 shares; Common Stock, $.01 par value
$16,820,341
On February 25, 2010 there was an aggregate of 7,054,442 shares of Common Stock and Class A Common Stock of the
Registrant outstanding.
Form 10-K
Item No.
1. Business
2. Properties
CROSS REFERENCE SHEET
Headings in this Form
10-K for Year Ended
November 30, 2009
Business
Property
3. Legal Proceedings
Legal Proceedings
4. Submission of Matters to a Vote of Security Holders
Submission of Matters to a Vote of Security Holders
5. Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities
Market for the Company’s Common Stock and Related
Shareholder Matters
6. Selected Financial Data
Selected Financial Data
7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
7A. Quantitative and Qualitative Disclosures about
Quantitative and Qualitative Disclosures about Market Risk
Market Risk
8. Financial Statements and Supplementary Data
Financial Statements and Supplementary Data
9. Changes In and Dis-agreements With Accountants On
Accounting and Financial Disclosure
Changes In and Dis-agreements With Accountants On
Accounting and Financial Disclosure
9A. Controls and Procedures
Controls and Procedures
10. Directors, Executive Officers and Corporate
Directors and Executive Officers of the Registrant
Governance
- i -
Form 10-K
Item No.
Headings in this Form
10-K for Year Ended
November 30, 2009
11. Executive Compensation
Executive Compensation
12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
Security Ownership of Certain Beneficial Owners and
Management and Related Shareholder Matters
13. Certain Relationships and Related Transactions, and
Certain Relationships and Related Transactions
Director Independence
14. Principal Accounting Fees and Services
Principal Accountant Fees and Services
15. Exhibits, Financial Statements Schedules
Exhibits, Financial Statements, Schedules, and Reports on Form
8-K
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TABLE OF CONTENTS
Page
Item
PART I
1. Business
2. Property
3. Legal Proceedings
4. Submission of Matters to a Vote of Security Holders
PART II
5. Market for the Company’s Common Stock and Related Shareholder Matters
6. Selected Financial Data
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
7A. Quantitative and Qualitative Disclosure About Market Risk
8. Financial Statements and Supplementary Data
9. Changes In and Disagreements with Accountants On Accounting and Financial Disclosure
9A. Controls and Procedures
PART III
10. Directors and Executive Officers of the Registrant
11. Executive Compensation
12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
13. Certain Relationships and Related Transactions
14. Principal Accountant Fees and Services
PART IV
15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
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6
7
7
8
10
11
25
25
26
26
28
30
37
39
39
41
Item 1. BUSINESS
Cautionary Statements Regarding Forward-Looking Statements
PART I
This annual report contains forward-looking statements based upon current expectations of management that involve risks
and uncertainty. Actual risks could differ materially from those anticipated. Additional risks and uncertainties not presently
known may possibly impair business operations. If any of these risks actually occur, the business, financial conditions and
operating results could be materially adversely affected. The cautionary statements made in this Annual Report on Form 10K
should be read as being applicable to all forward-looking statements whenever they appear in this Annual Report.
(a) General
CCA INDUSTRIES, INC. (hereinafter, “CCA” or the “Company”) was incorporated in Delaware in 1983.
The Company operates in one industry segment, in what may be generally described as the health-and-beauty aids business,
selling numerous products in several health-and-beauty aids and cosmeceutical categories. All of the Company’s products are
manufactured by contract manufacturers, pursuant to the Company’s specifications and formulations.
The Company owns registered trademarks, or exclusive licenses to use registered trademarks, that identify its products by
brand-name. Under most of the brand names, the Company markets several different but categorically-related products. The
principal brand and trademark names include “Plus+White” (oral health-care products), “Sudden Change” (skin-care products),
“Nutra Nail” and “Power Gel” (nail treatments), “Bikini Zone” (pre and after-shave products), “Mega — T” Green Tea (dietary
products), “Mega — T” chewing gum (anti-oxidant dietary product), “Hair Off” (depilatories), “IPR” (foot-care products),
“Solar Sense” (sun-care products), “Wash ‘N Curl” (shampoos), “Cherry Vanilla” and other Vanilla fragrances (perfumes), Pain
Bust*R II (topical analgesic) and “Scar Zone” (scar diminishing cream).
All Company products are marketed and sold to major drug, food chains, mass merchandisers and wholesale beauty aids
distributors throughout the United States. In addition, certain of the Company’s products are sold internationally, through
distributors or directly.
The Company recognizes sales at the time its products are shipped to customers. However, while sales are not formally
subject to any contract contingency, returns are accepted if it is in the best interests of the Company’s relationship with the
customer. The Company thus estimates ‘unit returns’ based upon a review of the market’s recent-historical acceptance of subject
products as well as current market-expectations, and equates its reserves for estimated returns based on the historical returns as a
percentage of sales in the five preceding months, adjusting for returns that can be put back into inventory, and a specific reserve
based on customer circumstances, (See Revenue Recognition in Note 2 of the Financial Statements). Of course, there can be no
precise going-forward assurance in respect to return rates and gross margins, and in the event of a significant increase in the rate
of returns, the circumstance could have a materially adverse affect upon the Company’s operations.
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The Company’s net sales in fiscal 2009 were $ 57,001,999. Gross profits were $35,151,424. International sales accounted
for approximately 5.6 % of sales. The Company had a net profit of $3,431,644 for fiscal 2009. Net worth at November 30, 2009
was $ 30,219,848.
Including the principal members of management (see Directors and Executive Officers), the Company, at November 30,
2009, had 140 sales, administrative, creative, accounting, receiving, and warehouse personnel in its employ.
(b) Manufacturing and Shipping
The Company creates and/or oversees formulations, chooses colors and mixtures, and arranges with independent
contractors for the manufacture of its products pursuant to Company specifications. Manufacturing and component-supply
arrangements are maintained with various manufacturers and suppliers. All orders and other product shipments are delivered
from the Company’s own warehouse facilities, which results in more effective inventory control, more efficient shipping
procedures, and the realization of related economies.
(c) Marketing
The Company markets its products to major drug, food and mass-merchandise retail chains, warehouse clubs and leading
wholesalers, through an in-house sales force of employees and independent sales representatives throughout the United States,
and through distributors internationally.
The Company sells its products to approximately 420 accounts, most of which have numerous outlets. Approximately
40,000 stores carry at least one Company product (SKU).
During the fiscal year ended November 30, 2009, the Company’s largest customers were Wal-Mart (approximately 36% of
net sales), Walgreens (approximately 14%), CVS (approximately 7%), Rite Aid (approximately 6%), and Dolgencorp
(approximately 4%). The loss of any of these principal customers, or substantial reduction of sales revenues realized from their
business, could materially and negatively affect the Company’s earnings.
Most of the Company’s products are not particularly susceptible to seasonal-sales fluctuation. However, sales of depilatory,
sun-care and diet-aids products customarily peak in the spring and summer months, while fragrance-product sales customarily
peak in the Fall and Winter months.
- 2 -
The Company employs brand managers who are responsible for the marketing of CCA’s brands. These managers work with
the Company’s in-house advertising and art departments to create media advertising, packaging and point — of — purchase
displays.
The Company primarily utilizes local and national television advertisements to promote its leading brands. On occasion,
print and radio advertisements are engaged. In addition, and more-or-less continuously, store-centered product promotions are
co-operatively undertaken with customers.
Each of the Company’s brand-name products is intended to attract a particular demographic segment of the consumer
market, and advertising campaigns are directed to the respective market-segments.
The Company’s in-house advertising department is responsible for the selection of its media advertising. Placement is
accomplished either directly or through media-service companies.
(d) “Wholly-Owned” Products
The majority of the Company’s sales revenues are from sales of the Company’s “wholly-owned” product lines (i.e.,
products sold under trademark names owned by the Company, and not subject to any other party’s interest or license), which
include principally “Plus+White”, “Sudden Change”, “Wash ‘N Curl”, “Bikini Zone”, “Mega -T”, “Cherry Vanilla”, and “Scar
Zone”.
(e) All Products
The Company’s gross sales net of returns by category percentage were: Dietary Supplements 42%; Skin Care 28%; Oral
Care 16%; Nail Care 10%; Fragrance 3%, Analgesic 1%; and Hair Care and Miscellaneous 0%.
(f) License-Agreements Products
i. Alleghany Pharmacal
In 1986, the Company entered into a license agreement with Alleghany Pharmacal Corporation (the “Alleghany Pharmacal
License”). The Alleghany Pharmacal License agreement provides that if, and when, in the aggregate, $9,000,000 in royalties had
been paid thereunder, the royalty-rate for those products ‘charged’ at 6% would be reduced to 1%. The Company paid an
aggregate of $9,000,000 in royalties to Allegheny as of April 2003. Commencing May 1, 2003, the license royalty was reduced
to 1%. The Company incurred royalties totaling $96,769 to Alleghany Pharmacal for the fiscal year ended November 30, 2009.
- 3 -
ii. Solar Sense, Inc.
CCA commenced the marketing of its sun-care products line following a May 1998 License Agreement with Solar Sense,
Inc. (the “Solar Sense License”), pursuant to which it acquired the exclusive right to use the trademark names “Solar Sense” and
“Kids Sense” and the exclusive right to market mark-associated products. The Solar Sense License requires the Company to pay
a royalty of 5% on net sales of said licensed products until $1 million total royalties are paid, at which time the royalty rate will
be reduced to 1% for a period of twenty-five years. The Company incurred royalties of $38,607 to Solar Sense, Inc. for the fiscal
year ended November 30, 2009.
iii. The Nail Consultants Ltd.
In October of 1999, the Company entered into a License Agreement with The Nail Consultants, Ltd. for the use of an
activator invented in connection with a method for applying a protective covering to fingernails. The Company’s License
Agreement with The Nail Consultants, Ltd. is for the use of the method and its composition in a new product kit packaged and
marketed by CCA under its own name, “Nutra Nail Power Gel”. The Company is required to pay a royalty of 5% of net sales of
all products sold under the license, by the Company. The Company incurred royalties totaling $7,280 to The Nail Consultants,
Ltd. for the fiscal year ended November 30, 2009.
iv. Dr. Stephen Hsu — Green Tea
Stephen Hsu, PhD., research faculty member of the Medical College of Georgia, entered into an agreement with the
Company on February 26, 2004, to create green tea skin care products based on his years of research related to the various uses
of green tea anti-oxidants for skin care problems. Dr. Hsu is entitled to a commission of 3% on the net factory sales of all of the
Company’s products using the green tea serum created exclusively for the Company. The Company incurred commissions
totaling $80,832 to Dr. Hsu for the fiscal year ended November 30, 2009.
v. Tea-Guard Inc.
On May 18, 2004, the Company entered into a license agreement with Tea-Guard, Inc. to manufacture and distribute Mega
-T Green Tea chewing gum and Mega -T Green Tea mints. The license agreement required the Company to pay a royalty of 6%
of net sales for the products sold under the license agreement. The license agreement was amended on March 31, 2009, granting
the Company a non-exclusive license, with no minimum royalty required. The royalty rate of 6% of net sales will remain
unchanged during the term, including any renewal terms, of the amended license agreement. The Company commenced sales of
the Mega -T Green Tea Chewing Gum in July 2004. The Company incurred royalties to Tea-Guard, Inc. totaling $36,586 for the
fiscal year ended November 30, 2009.
- 4 -
vi. Continental Quest Corp.
Effective November 3, 2008, the Company entered into an agreement with Continental Quest Corp., to purchase certain
United States trademarks and inventory relating to the Pain Bust*R II business for $285,106 paid at closing. In addition, the
Company agreed to pay a royalty equal to 2% of net sales of all Pain Bust*R II products, which are topical analgesics, until an
aggregate royalty of $1,250,000 is paid, at which time the royalty payments will cease. The Company incurred royalties to
Continental Quest Corp. totaling $12,301 for the fiscal year ended November 30, 2009.
vii. Joann Bradvica
On March 22, 2002, the Company entered into an agreement with Joann Bradvica, granting the Company an exclusive
license to manufacture and sell an Earlobe Patch Support for Earrings. The agreement provided for a royalty of 10% of net sales
of the licensed product. A new agreement was entered into and effective on June 8, 2009 at the same royalty rate, and provides
for a minimum royalty of $40,000 for annual periods beginning July 1, 2009 in order to maintain the license. The Company
incurred royalties of $37,392 to Joann Bradvica for the fiscal year ended November 30, 2009.
viii. LaRosa Innovations, LLC
On March 14, 2009, the Company entered into an agreement with LaRosa Innovation, LLC, granting the Company an
exclusive license to manufacture and sell Instant Arm Lifts and Instant Thigh Lifts. The agreement provides for a royalty of 5%
of net sales until the Licensor receives $5,000,000 in aggregate royalties, at which time the royalty rate shall be reduced to 1% of
net sales. The license agreement provides for a minimum royalty of $150,000 for the first eighteen month period of the
agreement, and $150,000 per year thereafter in order to maintain the license. The Company incurred royalties of $21,026 to
LaRosa Innovations, LLC for the fiscal year ended November 30, 2009, representing a portion of the initial eighteen-month
minimum royalty period.
ix. Other Licenses
The Company is not party to any other license agreement that is currently material to its operations.
(g) Trademarks
The Company’s own trademarks and licensed-use trademarks serve to identify its products and proprietary interests. The
Company considers these marks to be valuable assets. However, there can be no assurance, as a practical matter, that trademark
registration results in marketplace advantages, or that the presumptive rights acquired by registration will necessarily and
precisely protect the presumed exclusivity and asset value of the marks.
- 5 -
(h) Competition
The market for cosmetics and perfumes, and health-and-beauty aids products in general, including patent medicines, is
characterized by vigorous competition among producers, many of whom have substantially greater financial, technological and
marketing resources than the Company. Major competitors such as Revlon, L’Oreal, Colgate, Coty, Unilever, and Procter &
Gamble have Fortune 500 status, and the broadest-based public recognition of their products. Moreover, a substantial number of
other health-and-beauty aids manufacturers and distributors may also have greater resources than the Company.
(i) Government Regulation
All of the products that the Company markets are subject or potentially subject to particular regulation by government
agencies, such as the U.S. Food and Drug Administration, the Federal Trade Commission, and various state and/or local
regulatory bodies. In the event that any future regulations were to require new approval for any in-the-market products, or should
require approval for any planned product, the Company would attempt to obtain the necessary approval and/or license, assuming
reasonable and sufficient market expectations for the subject product. However, there can be no assurance, in the absence of
particular circumstances that Company efforts in respect of any future regulatory requirements would result in approvals and
issuance of licenses. Moreover, if such license-requirement circumstances should arise, delays inherent in any application-and-
approval process, as well as any refusal to approve, could have a material adverse affect upon existing operations (i.e. concerning
in-the-market products) or planned operations.
Item 2. PROPERTY
The principal executive offices of the Company are located at 200 Murray Hill Parkway, East Rutherford, New Jersey.
Under a net lease, the Company occupies approximately 58,625 square feet of space. Approximately 43,598 square feet in such
premises is used for warehousing and 15,027 square feet for offices. The annual rental is $390,835, with an annual CPI increase
not cumulatively exceeding 15% in any consecutive five year period. The lease expires on May 31, 2012 with a renewal option
at fair market value for an additional five years. The lease requires the Company to pay for additional expenses, Common Area
Maintenance (“CAM”), which includes real estate taxes, common area expense, utility expense, repair and maintenance expense
and insurance expense. For the year ended November 30, 2009, CAM was estimated at $150,000.
On September 26, 2007, the Company entered into an additional lease for warehouse space with Ninth Avenue Equities
Co., Inc. for four and a half years commencing November 1, 2007. The premises comprise 16,438 square feet of space. The
Company is obligated to pay maintenance which includes but is not limited to real estate taxes and all other common area
expenses. The annual rental is $123,285. For the year ended November 30, 2009, CAM was $29,988.
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Item 3. LEGAL PROCEEDINGS
On September 30, 2009 the Company was served with a class action suit Denise Wally v. CCA Industries, Inc. The claim,
which did not specify any damages, was filed in the Superior Court, State of California, County of Los Angeles, alleging false
and misleading claims about the Company’s weight loss dietary supplement products sold in California in violation of the
California Business and Professional Code. The Company believes that the allegations are without any merit and intends to
vigorously defend the case. However, there can be no assurance that our position will be upheld.
There is no other significant litigation presently outstanding against the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 24, 2009, the Company held its annual meeting of shareholders. The actions taken, and the voting resulting
thereupon, were as follows:
(1) David Edell, Ira W. Berman, Jack Polak and Stanley Kreitman were elected as directors by the holders of the Class A
Common stock. The Class A Common Stock shareholders have the right to elect four members of the Board of
Directors. No proxy was solicited therefore, whereas Messrs. Berman and Edell own 100% of the Class A Common
stock, and they proposed themselves, Mr. Polak and Mr. Kreitman.
(2) As proposed by Management, Dunnan Edell, James P. Mastrian and Robert Lage were elected as directors by the
holders of the Common stock.
(3) The Board of Director’s appointment of KGS LLP as the Company’s independent registered public accounting firm
for the fiscal year ending November 30, 2009 was approved.
The Company has not submitted any matter to a vote of security holders since the 2009 Annual Meeting.
- 7 -
PART II
Item 5. MARKET FOR THE COMPANY’S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company’s Common Stock is traded on the New York Stock Exchange Amex under the symbol “CAW”.
The range of high and low sales prices of the Common Stock during each quarter of its 2009, 2008 and 2007 fiscal years
were as follows:
Quarter Ended
February 28/29
May 31
August 31
November 30
2009
$2.55 - $4.24
$2.05 - $3.40
$2.74 - $4.20
$5.50 - $3.81
2008
$9.90 - $8.91
$9.65 - $8.53
$8.85 - $6.35
$6.40 - $3.60
2007
$12.12 - $11.06
$ 12.04 - $9.03
$ 10.60 - $8.94
$ 10.25 - $9.20
The high and low prices for the Company’s Common Stock, on February 2, 2010 were $5.40 to $5.39 per share.
As of November 30, 2009, there were approximately 138 individual shareholders of record of the Company’s common
stock. There are a substantial number of shares held of record in various street and depository trust accounts, which represent
approximately 1,000 additional shareholders.
The dividend policy is at the discretion of the Board of Directors and will depend on numerous factors, including earnings,
financial requirements and general business conditions.
On December 28, 2006, the Board of Directors declared a $0.07 per share dividend for the first quarter ended February 28,
2007. The dividend was paid to all shareholders of record as of February 1, 2007 and paid on March 1, 2007. On April 12, 2007,
the Board of Directors declared a $0.07 per share dividend for the second quarter ended May 31, 2007. The dividend was paid to
all shareholders of record as of May 1, 2007 and paid on June 1, 2007. On June 22, 2007, the Board of Directors declared a $0.07
per share dividend for the third quarter ended August 31, 2007. The dividend was paid to all shareholders of record as of
August 1, 2007 and paid on September 1, 2007. On September 26, 2007, the Board of Directors declared a $0.09 dividend for the
fourth quarter ended November 30, 2007. The dividend was paid to all shareholders of record as of November 1, 2007 and paid
on December 1, 2007.
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On December 5, 2007, the Board of Directors declared a $0.10 per share dividend for the first quarter ending February 29,
2008. The dividend was paid to all shareholders of record as of February 1, 2008, and was paid on March 1, 2008. On
February 25, 2008, the board of directors declared an $0.11 per share dividend for the second quarter ending May 31, 2008. The
dividend was paid to all shareholders of record as of May 1, 2008, and paid on June 1, 2008. On July 7, 2008, the board of
directors declared an $0.11 per share dividend for the third quarter ending August 31, 2008. The dividend was paid to all
shareholders of record as of August 1, 2008, and paid on September 1, 2008. On October 13, 2008, the board of directors
declared a $0.11 per share dividend for the fourth quarter ending November 30, 2008. The dividend was paid to all shareholders
of record as of November 1, 2008, and paid on December 1, 2008.
On January 28, 2009, the board of directors declared a $0.11 per share dividend for the 1st quarter ending February 28,
2009. The dividend was payable to all shareholders of record as of February 3, 2009 and was paid on March 3, 2009. On April 8,
2009 the board of directors declared a $0.07 per share dividend for the second quarter of 2009. The dividend was payable to all
shareholders of record as of May 1, 2009 and was paid on June 1, 2009. On June 29, 2009, the board of directors declared a
$0.07 dividend for the third quarter of 2009. The dividend was payable to all shareholders of record as of August 3, 2009 and
was paid on September 3, 2009. On October 12, 2009, the board of directors declared a $0.07 dividend for the fourth quarter of
2009. The dividend was payable to all shareholders of record as of November 2, 2009 and was paid on December 2, 2009.
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Item 6. SELECTED FINANCIAL DATA
Statement of Income
Sales, Net (1)
Other income
Costs and Expenses (1)
Income before provision for
Income Taxes
Net Income
Earnings Per Share:
Basic
Diluted
Weighted Average Number of Shares
2009
Year Ended November 30,
2007
2006
2008
2005
$ 57,001,999
$ 56,741,133
670,165
716,813
52,062,040
54,991,547
$ 59,832,157
1,045,710
51,283,141
$ 63,302,220
797,803
55,183,378
$ 61,181,344
572,909
54,646,715
5,610,124
$ 3,431,644
2,466,399
$ 1,412,886
9,594,726
$ 5,537,795
8,916,645
$ 5,604,251
7,107,528
$ 3,785,502
$
$
0.49
0.49
$
$
0.20
0.20
$
$
0.79
0.78
$
$
0.80
0.79
$
$
0.53
0.52
Outstanding — Basic
7,054,442
7,054,442
7,029,611
7,034,276
7,145,297
Weighted Average Number of Shares
Outstanding — Diluted
7,054,442
7,061,646
7,058,889
7,133,332
7,317,994
Balance Sheet Data:
Working Capital
Total Assets
2009
$ 25,973,568
39,789,203
2008
$ 23,836,264
39,345,861
As At November 30,
2007
$ 24,922,016
39,903,876
2006
$ 22,295,983
36,516,571
2005
$ 18,602,107
35,309,308
Total Liabilities
Total Shareholders’ Equity
9,569,355
30,219,848
11,091,982
28,253,879
9,153,558
30,750,318
9,131,780
27,284,791
9,309,652
25,999,656
Cash Dividends Declared per
Common Share
$
0.32
$
0.43
$
0.30
$
0.24
$
0.16
(1) Certain additional promotional expenses were re-classified during 2006 from an expense to a reduction of net sales. In order
to have an accurate comparison, the same expenses were re-classified accordingly for the year ended November 30, 2005.
The reclassification did not affect the net income for that year.
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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with our financial statements and the notes to those statements and
other financial information appearing elsewhere in this report.
Except for historical information contained herein, this “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Act of 1934, including without limitation, statements regarding our expectations, beliefs, intentions
or future strategies. These statements involve known and unknown risks and uncertainties that may cause actual results or
outcomes to be materially different from any future results, performances or achievements expressed or implied by such forward-
looking statements, and statements which explicitly describe such issues. All forward-looking statements included in this
document are based on information available to us on the date hereof, and we assume no obligation to update any forward-
looking statements. Investors are urged to consider any statement labeled with the terms “believes,” “expects,” “intends” or
“anticipates” to be uncertain and forward-looking.
Overview
Net Income for the year ended November 30, 2009 was $3,431,644, an increase of $2,018,758 or 142.9% over the net
income of $1,412,886 for the year ended November 30, 2008. Earnings per share, fully diluted were $0.49 for the year ended
November 30, 2009 as compared to $0.20 for the year ended November 30, 2008. The Company had net cash provided by
operations of $3,905,182 for the year ended November 30, 2009 versus $3,229,899 for the year ended November 30, 2008.
Comprehensive income was $4,223,391 for fiscal 2009 as opposed to $536,972 for fiscal 2008. The Company had current assets
of $35,443,441 and current liabilities of $9,469,873 at November 30, 2009. Retained earnings increased to $28,094,783 at
November 30, 2009 from $26,920,561 at November 30, 2008. There was no change in the number of outstanding shares at
November 30, 2009 as compared to November 30, 2008.
Comparison of Results for Fiscal Years 2009 and 2008
For the year ended November 30, 2009, the Company had revenues of $57,672,164, and net income of $3,431,644, after a
provision of $2,178,480 for taxes. For the year ended November 30, 2008, the Company had revenues of $57,457,946, and net
income of $1,412,886, after a provision of $1,053,513 for taxes. Other income declined $46,648, primarily due to lower interest
rates, partially offset by higher dividend income and realized gains on the sales of investments. Fully diluted earnings per share
for fiscal 2009 were $0.49 as compared to $0.20 for fiscal 2008.
- 11 -
The Company’s net sales increased to $57,001,999 for the fiscal year ended November 30, 2009 from $56,741,133 for the
fiscal year ended November 30, 2008. Gross sales were higher primarily in the diet and fragrance categories, and lower primarily
in the oral care category. Sales returns and allowances were 11.6% of gross sales for fiscal 2009 versus 11.4% in fiscal 2008. In
2008 the Company had $321,070 of returns, primarily in the first three quarters of fiscal 2008, due to the discontinuance of
Pound-X, a dietary supplement launched in the fourth quarter of 2006. Sales returns and allowances were higher in 2009 in part
due to the Company’s continued expanded use of coupons. The coupon expense, charged against sales allowances, increased to
$1,346,737 in fiscal 2009 from $884,161 in fiscal 2008. The Company, on an ongoing basis, has returns of products that have
been phased out and replaced by new items as part of its marketing plan. Gross profit margins increased slightly to 61.7% in
fiscal 2009 from 61.6% in fiscal 2008. The Company continually works to control its manufacturing costs.
In accordance with Generally Accepted Accounting Principles (“GAAP”), the Company reclassified certain advertising and
promotional expenditures as a reduction of sales rather than report them as expenses, which has no affect on the net income. This
reclassification is the adoption by the Company of ASC Topic 605-10-S99, “Revenue Recognition” (previously reported as EITF
01-9) as more fully described in Note 2 (“Sales Incentives”), of the consolidated financial statements for fiscal 2009. The
reclassification reflects a reduction in sales for the fiscal years ended November 30, 2009 and 2008 by $4,889,941 and
$4,557,507 respectively, an increase in the net sales reduction of $332,434.
The Company’s net sales, by category were: Dietary Supplements $24,243,598 or 42%, Skin Care $15,807,074 or 28%,
Oral Care $8,859,354 or 16%, Nail Care $5,529,822 or 10%, Fragrance $1,938,084 or 3%, Analgesic $617,554 or 1%, and Hair
Care and Miscellaneous $6,513 or 0%.
Income before taxes was $5,610,124 for fiscal 2009 as compared to $2,466,399 for fiscal 2008, an increase of $3,143,725.
The increase was due to a reduction of expenses in both media and selling, general and administrative costs. For fiscal 2009,
advertising, cooperative and promotional expenses were $9,667,446 as compared to $10,466,740 for fiscal 2008, or an expense
decrease of $799,294. Advertising expenses were 17.0% of net sales for fiscal 2009 versus 18.4% for fiscal 2008. Included in
advertising expense is media advertising, which decreased to $6,641,461 in fiscal 2009 from $8,051,849 in fiscal 2008. The
Company increased its cooperative advertising in fiscal 2009, however a large portion of the increase in expense was offset by a
decrease in the use of advertising in newspaper inserts.
Cost of goods remained stable despite increases in resin prices during fiscal 2009. Selling, general and administrative
expenses decreased to $20,037,352 in fiscal 2009 from $22,122,849 in fiscal 2008. The decrease was primarily due to lower
freight out costs as a result of the decrease in fuel costs and renegotiation of some carrier rates, decreased selling expenses, lower
personnel costs and decreased donations of the Company’s inventory.
Shipping costs to the Company’s customers, reported as part of selling, general and administrative costs, decreased in fiscal
2009 by $556,051 from fiscal 2008. Shipping costs as a percentage of gross sales decreased to 4.0% in fiscal 2009 from 4.9% of
gross sales in fiscal 2008. This was due to lower fuel costs during fiscal 2009, and a renegotiation of rates with some of the
Company’s carriers. The Company also had a decrease in personnel costs and other costs because of management’s cost control
initiatives. The Company significantly decreased its donations of inventory during fiscal 2009, resulting in an expense that was
$392,805 lower then fiscal 2008. Donations of inventory can result in an increased tax benefit, the unused portion of which
creates a deferred tax benefit that may be utilized in future periods.
- 12 -
The effective tax rate for fiscal 2009 was 38.8% of income before tax as compared to 42.7% for fiscal 2008. The United
States Internal Revenue Service completed an examination of the Company’s U.S. tax return for fiscal 2006. As a result of that
examination, the Company received a refund of $94,195 in federal taxes for the 2006 fiscal year. The audit adjustments resulted
in refunds from amended state tax returns for 2006 of $28,145, and an additional $196,335 in refunds from federal and state
amended returns for fiscal 2007. The refunds resulted in the decreased effective tax rate for fiscal 2009. The State of New Jersey,
Department of The Treasury, Division of Taxation is currently examining state income and sales tax returns filed for the fiscal
years 2004 — 2008. As of February 25, 2010, no adjustments have been proposed. No other state has notified the Company of
its intent to conduct an examination of tax returns filed in their jurisdictions. The Company had $747,668 of officer salaries
during fiscal 2009 that were not deductible for tax purposes in calculating the income tax provision. As of November 30, 2009,
the Company has unrealized losses on its investments of $314,428, which would have a tax benefit of $125,457. This tax benefit
has been reduced by a valuation allowance of $85,557. The valuation allowance is based on an estimate of the losses, which if
realized, could not be utilized to offset any corresponding capital gains. The tax benefit of the unrealized losses, net of valuation
allowances, is $39,900 as of November 30, 2009.
Comprehensive income increased to $4,223,391 for the year ended November 30, 2009 from $536,972 for the year ended
November 30, 2008. This reflects the increase in the Company’s net income together with other comprehensive income, net of
income tax benefits, of $791,747. The tax benefit of the unrealized losses, net of valuation allowances, is $39,900 as of
November 30, 2009. The other comprehensive income is as a result of the increase in the market value of the Company’s
investments. Further information regarding the Company’s investments can be found in Note 6 of the consolidated financial
statements.
Comparison of Results for Fiscal Years 2008 and 2007
For the year ended November 30, 2008, the Company had revenues of $57,457,946, and net income of $1,412,886, after a
provision of $1,053,513 for taxes. For the year ended November 30, 2007, the Company had revenues of $60,877,867, and net
income of $5,537,795, after a provision of $4,056,931 for taxes. Fully diluted earnings per share for fiscal 2008 were $0.20 as
compared to $0.78 for fiscal 2007. As noted in Note 15 of the consolidated financial statements, earnings in fiscal 2007 were
impacted by the recording of $717,850 of transaction expenses related to the proposed acquisition of the Company by Dubilier
and Company. Other income decreased from $1,045,710 for fiscal 2007 to $716,813 in fiscal 2008, primarily due to the decrease
in interest rates.
- 13 -
The Company’s net sales decreased to $56,741,133 for the fiscal year ended November 30, 2008 from $59,832,157 for the
fiscal year ended November 30, 2007. Net sales reflected an adjustment after reclassifying certain advertising expenses from
selling expense to a reduction of net sales, which does not affect net income, and is more fully described in the notes to the
consolidated financial statements. During fiscal 2008, the amount of advertising expenses that were classified as a reduction of
net sales was $4,557,507, versus $5,184,112 in fiscal 2007, reflecting a decrease in the net sales reduction of $626,605. Gross
sales were lower primarily in the oral care and fragrance categories. Sales returns and allowances were 11.6% of gross sales for
fiscal 2008 versus 9.6% in fiscal 2007. Sales returns were higher primarily due to a primary customer’s integration of a retail
store chain that it had acquired into its operations that resulted in some store closings. The Company also had $321,070 of
returns, primarily in the first three quarters of fiscal 2008, from the unsuccessful launch of Pound-X, a dietary supplement
launched in the fourth quarter of 2006. In addition, the Company expanded its use of coupons resulting in an expense increase of
$387,517 that was charged against sales allowances. The Company continually has returns of products that have been phased out
and replaced by new items as part of its marketing plan. Gross profit margins declined to 61.6% in fiscal 2008 from 63.6% in
fiscal 2007. The change in the gross profit margin was primarily due to the higher returns and sales allowances in fiscal 2008. In
addition, due to the significantly higher fuel costs in 2008, there was an increase in the cost of goods including delivery charges.
In accordance with GAAP (generally accepted accounting principles), the Company reclassified certain advertising and
promotional expenditures as a reduction of sales rather than report them as expenses, which has no affect on the net income. This
reclassification is the adoption by the Company of ASC Topic 605-10-S99, “Revenue Recognition” (previously reported as EITF
01-9) as more fully described in Note 2 (“Sales Incentives”), of the consolidated financial statements for fiscal 2008. The
reclassification reflects a reduction in sales for the fiscal years ended November 30, 2008 and 2007 by $4,557,507 and
$5,184,112 respectively.
The Company’s net sales, by category were: Dietary Supplement $18,531,613 or 33%, Skin Care $16,623,447 or 29%, Oral
Care $13,944,877 or 25%, Nail Care $5,816,461 or 10%, Fragrance $1,532,679 or 3%, and Hair Care and Miscellaneous
$292,056 or 0%.
Income before taxes was $2,466,399 for fiscal 2008 as compared to $9,594,726 for fiscal 2007, a decrease of $7,128,327.
The decrease was primarily due to a $3,684,860 increase in media and co-operative advertising in fiscal 2008 versus fiscal 2007.
In addition, for the reasons as previously noted, fiscal 2008 returns and allowances were higher by $1,106,135 as compared to
fiscal 2007. Other income declined $328,897, primarily due to lower interest rates. Cost of goods increased as a result of the
increased fuel costs, including delivery charges of raw materials and components and higher testing costs. Due to the
significantly increased fuel charges in 2008, the cost of freight-out increased from 4.1% of gross sales in fiscal 2007 to 4.9% of
gross sales in fiscal 2008. In an effort to attract new customers, the Company increased its use of advertising in newspaper
inserts. Expenses were also higher due to increased donations of inventory in fiscal 2008; however that also resulted in an
increased tax benefit which offset the higher expense and created a deferred tax benefit that will be utilized in future periods.
- 14 -
For fiscal 2008, advertising, cooperative and promotional expenses were $10,466,740 as compared to $6,956,407 for fiscal
2007, or an expense increase of $3,510,333. Advertising expenses were 18.4% of net sales for fiscal 2008 versus 11.6% for fiscal
2007. The increase in advertising expense was due to the Company supporting a new leading diet product.
Selling, general and administrative expenses increased to $22,122,849 in fiscal 2008 from $21,266,327 in fiscal 2007. The
increase was primarily due to higher freight out costs as a result of the significant increase in fuel costs, increased selling
expenses, and higher donations of inventory as earlier noted.
The effective tax rate for fiscal 2008 was 42.7% of income before tax as compared to 42.3% for fiscal 2007. The slight
increase in the tax rate was due to the timing of certain tax deductions in fiscal 2008 versus 2007, which resulted in a $321,855
increase in deferred tax assets.
Liquidity and Capital Resources
As of November 30, 2009, the Company had working capital of $25,973,568 as compared to $23,836,264 at November 30,
2008. The ratio of total current assets to current liabilities is 3.7 to 1 as compared to a ratio of 3.2 to 1 for the prior year.
Stockholders’ equity increased to $30,219,848 in fiscal 2009 from $28,253,879 in fiscal 2008. The increase was due to increases
in retained earnings and lower unrealized losses on marketable securities. Retained earnings increased to $28,094,783 at
November 30, 2009 from $26,920,561 at November 30, 2008. The increase was due to earnings of $3,431,644 during fiscal
2009, less dividends declared of $2,257,421. Unrealized losses on marketable securities were $274,528 at November 30, 2009 as
compared to unrealized losses of $1,066,275 at November 30, 2008. Unrealized gains or losses reflect the difference between the
cost and market price of the Company’s marketable securities as of the date of the financial statements, net of any tax expense or
benefit. See Note 6 of the consolidated financial statements for further information regarding the Company’s marketable
securities. The Company did not purchase any treasury stock during fiscal 2009. There were no common or preferred stock
shares issued during fiscal 2009.
The Company’s cash position and short-term investments at November 30, 2009 were $17,480,472, versus $15,583,056 as
at November 30, 2008. Non-current or long term investments were $2,900,035 at November 30, 2009 versus $2,945,740 at
November 30, 2008. At November 30, 2009, the Company had long and short-term triple A investments and cash of $20,380,507
as compared to $18,528,796 as of November 30, 2008. The Company paid cash dividends during fiscal 2009 in the amount of
$2,539,599, including the dividends declared at the end of fiscal 2008 but not paid until fiscal 2009 of $775,988 and $1,763,611
in dividends declared and paid for fiscal 2009. As of November 30, 2009, there were dividends declared but not paid of
$493,811. The investment securities the Company purchased are all classified as “Available for Sale Securities”, and are reported
at fair market value as of November 30, 2009, with the resultant unrealized gains or losses reported as a separate component of
shareholders’ equity. Due to the current securities market conditions, the Company cannot ascertain the risk of any future change
in market value. Our investments are spread among many different obligors and municipalities to decrease the risk due to any
specific concentrations.
- 15 -
The Company’s investment in property and equipment consisted mostly of computer hardware and software, racking for
our warehouse facilities, leasehold improvements and furniture to accommodate our personnel in addition to tools and dies used
in the manufacturing process.
Accounts receivable as of November 30, 2009 and 2008 were $7,613,273 and $8,230,716 respectively. The gross accounts
receivable was $144,341 higher as of November 30, 2009 versus November 30, 2008, however the net receivables decreased due
to an increase in the reserve for returns and allowances. Accounts receivable allowances and reserves increased in the aggregate
by $761,785 at November 30, 2009 as compared to November 30, 2008. The reserves were higher as of November 30, 2009 due
to additional provisions for the Company’s Instant Lift product, an account that filed for bankruptcy protection and markdown
allowances given to certain accounts.
The allowance for doubtful accounts is a combination of specific and general reserve amounts relating to accounts
receivable. The general reserve is calculated based on historical percentages applied to aged accounts receivable and the specific
reserve is established and revised based on individual customer circumstances. This allowance decreased to $131,223 as of
November 30, 2009 from $154,290 as of November 30, 2008.
The reserve for returns and allowances is based on the historical returns as a percentage of sales in the five preceding
months, adjusting for returns that can be put back into inventory, and a specific reserve based on customer circumstances. This
allowance increased to $2,660,469 as of November 30, 2009 from $2,112,426 as of November 30, 2008. Of this amount,
allowances and reserves in the amount of $1,206,878, which are anticipated to be deducted from future invoices, are included in
accrued liabilities. The increase in the reserve for returns and allowances is due in part to the timing of the Company’s sales and
a reserve in the amount of $82,362 for an account that filed for bankruptcy. This amount, including the reserve, would be
included in accounts receivable until a final order is entered by the bankruptcy court at which time the amount will be charged
against the allowance for doubtful accounts. Also included in the reserve is a provision of $293,845 for the Company’s Instant
Lift product which was launched during fiscal 2009.
Inventories were $8,327,277 and $7,932,798, as of November 30, 2009 and 2008 respectively. The Company increased the
amount of inventory on hand in order to accommodate its customer’s needs for just in time inventory shipments. Inventory was
also increased due to promotional sales that were shipped in December 2009. The reserve for inventory obsolescence is based on
a detailed analysis of inventory movement. The inventory obsolescence reserve was increased to $760,001 as of November 30,
2009 from $578,941 as of November 30, 2008. The increase in the reserve was primarily for the Company’s Instant Lift
Products.
The amount of deferred income tax reflected as a current asset increased to $1,193,745 as of November 30, 2009 from
$973,732 as of November 30, 2008. The increase of deferred tax credits was mainly as a result of the increased reserves for
returns and inventory obsolescence. The increase was partially offset by a reduction in the accrual for unused vacation pay and a
reduction in charitable contributions that could not be deducted in the current tax year and were carried forward. Also included is
a deferred income tax benefit of $39,900 as a result of the unrealized losses on the Company’s marketable securities. This
amount is also reflected as an offset against unrealized losses in the equity section of the balance sheet. The Company anticipates
that these amounts will be deductible in future tax years. The amount of non-current deferred tax decreased to $0 as of
November 30, 2009 from $143,419 as of November 30, 2008. The decrease was due to a portion of the charitable contributions
for which the benefit was estimated to be beyond the 2009 fiscal year, and thus had been classified as a long term asset at
November 30, 2008. However, the Company anticipates that the carry forward amount as of November 30, 2009 will be utilized
in fiscal 2010, and accordingly has classified the entire carry forward amount as a current deferred tax asset.
- 16 -
Current liabilities are $9,469,873 and $11,016,196, as of November 30, 2009 and 2008 respectively. Current liabilities at
November 30, 2009 consisted of accounts payable, accrued liabilities, short-term capital lease obligations, income taxes payable
and dividends payable.
As of November 30, 2009, there was $1,845,583 of open cooperative advertising commitments, of which $1,313,903 is
from 2009, $203,395 is from 2008, $292,726 is from 2007 and $35,559 is from 2006. The Company’s total cooperative
advertising commitment increased slightly to $6,271,303 in fiscal 2009 from $6,264,562 in fiscal 2008. Cooperative advertising
is advertising that is run by the retailers in which the Company shares in part of the cost. If it becomes apparent that this
cooperative advertising was not utilized, the unclaimed cooperative advertising will be offset against the expense during the
fiscal year in which it is determined that it did not run. This procedure is consistent with the prior year’s methodology with
regard to the accrual of unsupported cooperative advertising commitments.
The Company’s long term obligations are for a portion of its capitalized leases, which is for certain office and warehouse
equipment and deferred tax liabilities.
The Company generated cash flow of $3,905,182 from operating activities during fiscal 2009, as compared to $3,229,899 in
fiscal 2008. The increase in operating cash flow was mainly due to the increase in net income, decrease in prepaid income taxes
and accounts receivable, partially offset by an increase in inventory and a decrease in accounts payable. Net cash provided by
investing activities was $967,783 during fiscal 2009, generated by the excess of the proceeds from the sale of some of the
Company’s investments less securities purchased and the acquisition of equipment. The acquisition of equipment was mainly for
the improvement of the Company’s computer systems. The Company’s cash balance increased by $2,275,670 during fiscal 2009,
net of $2,539,599 in dividends paid to the shareholders.
Inventory, Seasonality, Inflation and General Economic Factors
The Company attempts to keep its inventory for its product at levels that will enable shipment against orders within a three-
week period. However, certain components must be inventoried well in advance of actual orders because of time-to-acquire
circumstances. For the most part, purchases are based upon anticipated quarterly requirements, which are projected based upon
sales indications received by the sales and marketing departments, and general business factors. All of the Company’s contract
manufactured products and components are purchased from non-affiliated entities. Warehousing is provided at Company
facilities, and all products are shipped from the Company’s warehouse facilities.
- 17 -
The Company’s products are not particularly seasonal, but sales of its sun-care, depilatory and diet-aid products usually
peak during the spring and summer seasons, and perfume sales usually peak in fall and winter. The Company does not have a
product that can be identified as a ‘Christmas item’.
The Company plans to continue to promote its sales through an advertising program consisting of a combination of media
and co-op advertising. We continue to invest money into research and development to build our core products to become leaders
in their respective categories. We are trying to decrease the amount of “on hand” inventory we stock; however to better service
our customers we often find it difficult to reduce our “safety stock”. We continue to evaluate our sales staff and to try to attract
aggressive salespeople to increase the distribution of our current product line. We are also continuing to look for additional
businesses or product lines which we think will help the Company to grow and are also reviewing possible acquisitions or any
other offers which we feel will enhance shareholders’ value.
Because our products are sold to retail stores (throughout the United States and, in small part, abroad), sales are particularly
affected by general economic conditions. Accordingly, any adverse change in the economic climate can have an adverse impact
on the Company’s sales and financial condition. The Company does not believe that inflation or other general economic
circumstances that would further negatively affect operations can be predicted at present, but if such circumstances should occur,
they could have material and negative impact on the Company’s net sales and revenues, unless the Company was able to pass
along related cost increases to its customers. On January 21, 2009, the Company filed Form 8-K with the United States Securities
and Exchange Commission advising that Wal-mart had informed the Company that starting in March 2009, due to the slowdown
in the economy, it will only carry the leading brands in their oral care sections and therefore will no longer be purchasing the
Company’s Plus+White oral care products brand. In 2009, the Company’s net sales of Plus+White to Wal-Mart totaled
approximately $1.2 million versus approximately $6 million during fiscal 2008.
- 18 -
Contractual Obligations
The following table sets forth the contractual obligations as of November 30, 2009. Such obligations include the current
lease for the Company’s premises, written employment contracts and License Agreements.
Leases on Premises (1)
Royalty Expense (2)
Employment Contracts (3)
Capital Lease Obligations
Open Purchase Orders
Total Contractual Obligations
Less than
1 Year
$
694,120
152,500
2,234,533
53,233
3,441,971
$ 6,576,357
1-3 Years
$ 1,041,180
570,000
3,556,928
20,929
—
$ 5,189,037
$
3-5 Years
—
570,000
2,741,205
—
—
$ 3,311,205
More than
5 years
$
$
—
190,000
—
—
—
190,000
(1) The major lease is a net lease requiring a yearly rental of $390,835 plus Common Area Maintenance “CAM”. See
Section Part I, Item 2. The rental provided above is the base rental and estimated CAM. CAM for future years is estimated
at $150,000. The lease has an annual CPI adjustment, not to cumulatively exceed 15% in any consecutive five year period.
The lease expires on May 31, 2012 with a renewal option for an additional five years. On September 26, 2007, the
Company entered into a warehouse lease with Ninth Avenue Equities Co., Inc. to lease 16,438 square feet of space known
as Unit B located at Murray Hill Industrial Center in East Rutherford, New Jersey for a four and a half year period. The
annual rental is $123,285 plus CPI adjustments, real estate taxes and common area maintenance expenses. CAM is
estimated at $30,000 per year for future years. The figures for both leases above do not include adjustments for future CPI.
(2) See Section Part I, Item 1(f). The Company is not required to pay any royalty in excess of realized sales if the Company
chooses not to continue under the license. The figures set forth above reflect estimates of the royalty expense anticipated
minimum requirements to maintain the licenses under the various contracts for the licensed products based on fiscal 2009
sales. The more than 5 years column only reflects one year of minimum payments; the payments can continue in perpetuity
in order to maintain the license. Royalty expense noted includes Joann Bradvica and LaRosa Innovations, LLC.
(3) The Company had executed Employment Contracts on December 1, 1993, with its CEO, David Edell, and its Chairman of
the Board, Ira W. Berman. The contracts for both are exactly the same. The contracts expire on December 31, 2010. The
contracts provide for a base salary which commenced in 1994 in the amount of $300,000 (plus a bonus of 20% of the base
salary), with a year-to-year CPI or 6% increase, plus 2.5% of the Company’s pre-tax income plus depreciation and
amortization plus certain fringe benefits including the cost of certain life insurance, auto expenses, and health insurance.
The 2.5% measure in the bonus provision of the Edell/Berman contracts was amended on November 3, 1998 so as to
calculate it against earnings before income taxes, plus depreciation, amortization and expenditures for media and
cooperative advertising in excess of $8,000,000. On May 24, 2001, the contract was amended increasing the base salary
then in effect by $100,000 per annum. The contracts also provide that at the end of the term or upon retirement,
Edell/Berman shall be retained by the Company as consultants at the consideration equal to 50% of the prior year’s salary
and bonus for a five year period. The figures above include only the base salaries for the five years (plus the portion of the
bonus equal to 20% of the base salary), an adjustment for CPI, and without estimating the 2.5% bonus provision, as that
bonus is contingent upon future earnings, and also including most of the payments that would be due as consulting
payments upon expiration or retirement (the portion based on the 2.5% bonus provision is not calculated into the consulting
payment estimate). On June 1, 2001, the Company added a provision to the Contracts stating that in the event of death
within the employment and consulting periods, the Company would be obligated for two successive years to pay the
executive’s estate an amount equal to the annual base salary and bonus.
- 19 -
David Edell’s sons, Dunnan Edell and Drew Edell have five-year employment contracts in the amounts of $270,000 and
$200,000 respectively, which expired on November 30, 2007 (See Item 11, Summary Compensation Table). In July 2003,
Dunnan Edell’s salary was increased to $300,000 and in January 2004, Drew Edell’s salary was increased to $225,000. In
fiscal 2005, Drew Edell’s salary was increased to $250,000. Dunnan Edell is a director and during fiscal 2003 was
appointed President of the Company and Chief Operating Officer. Drew Edell is the Vice President of Research and
Product Development.
On February 10, 2006, the Board of Directors extended the employment contracts for Dunnan Edell and Drew Edell to
December 31, 2010. On May 17, 2007, the employment contracts for Dunnan Edell and Drew Edell were amended by the
Board of Directors, extending the contracts to November 30, 2012, and increasing Dunnan Edell’s base salary to $350,000
and Drew Edell’s base salary to $275,000.
Recent Accounting Pronouncements
In December 2007, the Financial Accounting Standards Board (“FASB”) amended certain provisions of Accounting
Standard Codification (“ASC”) Topic 805, “Business Combinations” (previously reported as SFAS No. 141R, “Business
Combinations”). This amendment changes accounting for acquisitions that close beginning in 2009 in a number of areas
including the treatment of contingent consideration, contingencies, acquisition costs, in-process research & development and
restructuring costs. More transactions and events will qualify as business combinations and will be accounted for at fair value
under the new standard. This amendment promotes greater use of fair values in financial reporting. In addition, under Topic 805,
changes in deferred tax asset valuation allowances and acquired income tax uncertainties in a business combination after the
measurement period will impact income tax expense. Some of the changes will introduce more volatility into earnings. Topic
805 became effective for fiscal years beginning on or after December 15, 2008. Topic 805 will have an impact on accounting for
any business acquired after the effective date of this pronouncement.
In December 2007, the FASB issued ASC Topic 810, “Consolidation” (previously reported as SFAS 160, “Noncontrolling
Interests in Consolidated Financial Statements”). Topic 810 will change the accounting and reporting for minority interests,
which will be recharacterized as noncontrolling interests (“NCI”) and classified as a component of equity. This new
consolidation method will significantly change the accounting for transactions with minority interest holders. Topic 810 became
effective for fiscal years beginning after December 15, 2008. Topic 810 will have an impact on the presentation and disclosure of
the noncontrolling interests of any non-wholly owned business acquired in the future.
- 20 -
In April 2008, the FASB amended certain provisions of ASC Topic 350, “Intangibles-Goodwill and Other”, (previously
reported as FASB Staff Position No. 142-3). Topic 350 amends the factors that must be considered in developing renewal or
extension assumptions used to determine the useful life over which to amortize the cost of a recognized intangible. It further
requires an entity to consider its own assumptions about renewal or extension of the term of the arrangement, consistent with its
expected use of the asset, and is an attempt to improve consistency between the useful life of a recognized intangible asset and
the period of expected cash flows used to measure the fair value of the asset. Topic 350 became effective for fiscal years
beginning after December 15, 2008, and the guidance for determining the useful life of a recognized intangible asset must be
applied prospectively to intangible assets acquired after the effective date. Topic 350 will not have a significant impact on the
Company’s results of operations, financial condition or liquidity.
In April 2009, the SEC issued Staff Accounting Bulletin No. 111 (“SAB No. 111”). SAB No. 111 amends Topic 5.M. in
regard to other than temporary impairment of certain investments in debt and equity securities. SAB No. 111 confirms the
establishment of the “other than temporary” category of investment impairment. The adoption of SAB No. 111 became effective
upon issuance and did not have any material impact on the Company’s financial position or results of operation.
In April 2009, the FASB issued an amendment to ASC Topic 825, “Financial Instruments” (previously reported as FASB
Staff Position No. FAS 107-1 and APB 28-1, “Disclosures about Fair Value of Financial Instruments”). The amendment requires
disclosure of the fair value of financial instruments for interim reporting periods of publicly traded companies as well as in
annual financial statements. The amendment to Topic 825 became effective for interim reporting periods ending after June 15,
2009. The adoption of this topic had no impact on the Company’s financial position or results of operation.
In April 2009, the FASB issued additional guidance under ASC Topic 820, “Fair Value Measurements and
Disclosures” (previously reported as FASB Staff Position No. FAS 157-4). Topic 820 provides additional guidance for
estimating the fair value of an asset or liability when the volume and level of activity for the asset or liability have significantly
decreased, and identifying circumstances in which a transaction may not be orderly. The adoption of this topic became effective
for all interim and annual reporting periods ending after June 15, 2009. The adoption of the additional guidance provided by
Topic 820 did not have any material impact on the Company’s financial position or results of operation.
In April 2009, the FASB issued an amendment to ASC Topic 320, “Investments — Debt and Equity” (previously reported
as FASB Staff Position No. 115-2 and 124-2) which amends the guidance in regard to other-than-temporary impairments on debt
and equity securities in the financial statements. Topic 320 also requires additional disclosures in the financial statements that
enable users to understand the types of debt and equity securities held, including those investments in an unrealized loss position
for which an other-than-temporary impairment has or has not been recognized. The adoption of the amendment to Topic 320
became effective for all interim and annual reporting periods ending after June 15, 2009. The adoption of this amended topic did
not have any material impact on the Company’s financial position or results of operation.
- 21 -
In May 2009, the FASB issued ASC Topic 855, “Subsequent Events” (previously reported as SFAS No. 165, “Subsequent
Events”). The statement establishes general standards of accounting for and disclosure of events that occur after the balance
sheet date but before financial statements are issued. Topic 855 became effective June 15, 2009 for all subsequent reporting
periods. The adoption of Topic 855 did not have any material impact on the Company’s financial position or results of operation.
In June 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-01, “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles” (previously SFAS No. 168, “The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles”). This update identifies the
sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally accepted accounting principles (“GAAP”) in the United
States. This update is effective for financial statements issued for interim and annual periods ending after September 15, 2009.
The adoption of ASU 2009-01 did not have any material impact on the Company’s financial position or results of operation.
In August 2009, the FASB issued ASU 2009-05, which is an update to Topic 820, “Fair Value Measurements and
Disclosures”. The update provides clarification in regard to the estimation of the fair value of a liability. In addition, it also
clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for
the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are
required are Level 1 fair value measurements. This update became effective for all interim and annual reporting periods ending
after August 31, 2009. The adoption of ASU 2009-05 did not have a material impact on the Company’s financial position or
results of operation.
In January 2010, the FASB issued ASU 2010-06, which is an update to Topic 820, “Fair Value Measurement and
Disclosures”. This update establishes further disclosure requirements regarding transfers in and out of levels 1 and 2, and activity
in level 3 fair value measurements. The update also provides clarification as to the level of disaggregation for each class of assets
and liabilities, requires disclosures about inputs and valuation techniques, and also includes conforming amendments to the
guidance on employers’ disclosures about postretirement benefit plan assets. ASU 2010-06 will be effective for all interim and
annual reporting periods beginning after December 15, 2010. ASU 2010-06 is not expected to have a material impact on the
Company’s financial position or results of operation.
Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted
would have a material effect on the accompanying financial statements.
- 22 -
Cautionary Statements Regarding Forward-Looking Statements
This annual report contains forward-looking statements based upon current expectations of management that involve risks
and uncertainty. Actual risks could differ materially from those anticipated. Additional risks and uncertainties not presently
known may possibly impair business operations. If any of these risks actually occur, the business, financial conditions and
operating results could be materially adversely affected. The cautionary statements made in this Annual Report on Form 10K
should be read as being applicable to all forward-looking statements whenever they appear in this Annual Report.
Concentration of Risk
The Company relies on mass merchandisers and major food and drug chains for the sales of its products. The loss of any
one of those accounts could have a substantive negative impact upon our financial operations. All of the Company’s products
have independent competition and must be able to compete in order to maintain our position on the retail merchandisers’ shelves.
{See Business - General, Item 1(c) i Marketing.}
The Company does not manufacture any of its products. All of the products are manufactured for the Company by
independent contract manufacturers. There can be no assurance that the failure of a supplier to deliver the products ordered by
the Company, when requested, will not cause burdensome delays in the Company’s shipments to accounts. The Company does
constantly seek alternative suppliers should a major supplier fail to deliver as contracted. A failure of the Company to ship as
ordered by its accounts could cause penalties and/or cancellations of our customers’ orders.
There is No Assurance That The Business Will Continue to Operate Profitably.
In fiscal 2009, net sales were $57,001,999. Net income was $3,431,644. There is no assurance that all of the Company’s
products will be successful. During 2009 consumer confidence was at a record low which had a general impact on the industry
and retail sales.
Competition in the Cosmetic, Health and Beauty Aid Industry is Highly Competitive.
Reference is made to “Business ‘Sub-section’ of Competition.”
CLASS A Shareholders Retain Control of Board of Directors.
See “Voting” in the Proxy Statement dated May 15, 2009. Class A Shareholders, David Edell, CEO and Ira W. Berman,
Chairman of the Board of Directors, have the right to elect four members to the Board of Directors. Common stockholders have
the right to elect three members to the Board of Directors.
- 23 -
Future Success Depends on Continued Success of the Company’s Current Products and New Product Development.
The Company is not financially as strong as the major companies against whom it competes. The ability to successfully
introduce new niche products and increase the growth and profitability of its current and new niche brand products will affect the
business and prospects of the future of the Company and it relies upon the creativity and marketing skills of management.
On September 30, 2009 the Company was served with a class action suit Denise Wally v. CCA Industries, Inc. The claim,
which did not specify any damages, was filed in the Superior Court, State of California, County of Los Angeles, alleging false
and misleading claims about the Company’s weight loss dietary supplement products sold in California in violation of the
California Business and Professional Code. The Company believes that the allegations are without any merit and intends to
vigorously defend the case. However, there can be no assurance that our position will be upheld.
All of the Company’s product must be in compliance with all FDA and states regulations and all products which are being
manufactured for the Company by outside suppliers must conform to the FDA’s Good Manufacturing Practices requirements. It
is the Company’s responsibility to ascertain that the suppliers do conform.
The Company Relies On A Few Large Customers For A Significant Portion Of Its Sales.
In fiscal 2009, Wal-Mart Stores Inc. represented approximately 36% of the Company’s total revenues. The Company’s ten
largest customers accounted for 79% of the Company’s total revenues. The Company has no agreement with any of its customers
to stock its products. The Company’s business would suffer materially if it lost Wal-Mart Stores, Inc. The loss of any of the
Company’s 10 top customers could have an adverse effect on the Company’s financial results. On January 21, 2009, the
Company filed Form 8-K with the United States Securities and Exchange Commission that Wal-Mart had advised the Company,
that starting sometime in March, it would not be carrying the Company’s oral care product brand. In 2009, the Company’s net
sales of Plus+White to Wal-Mart totaled approximately $1.2 million versus approximately $6 million during fiscal 2008.
The Company’s Dietary Supplement Business Could Be Adversely Affected By Unfavorable Scientific Studies Or
Negative Press.
The Company’s dietary supplement, Mega -T (Green Tea), to some extent is dependent on consumers’ perceptions, and the
benefit and integrity of the dietary supplement business. Any safety alert on any dietary supplement for weight loss may
negatively affect the consumers’ perceptions of the product category. Please see the Litigation section for information regarding
the class action suit Denise Wally v. CCA Industries, Inc.
- 24 -
The Price of the Company’s Stock May Be Volatile
The Company’s stock could fluctuate substantially. There is a limited float of shares tradable. There are factors beyond the
Company’s control, including but not limited to variations in the Company’s operating revenues and profits, the timing of
advertising commitments, the volatility of small cap stock in general, general stock market conditions, and quarter to quarter
variations.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company’s financial statements (See Item 15) record the Company’s investments under the “mark to market” method
(i.e., at date-of-statement market value). The investments are, categorically listed, in “Common Stock”, “Mutual Funds”, “Other
Equity”, “Preferred Stock”, “Government Obligations” and “Corporate Obligations” (which, primarily, are intended to be held to
maturity). $233,001 of the Company’s $12,536,138 portfolio of investments ( as at Nov. 30, 2009) is invested in the ”Common
Stock” and “Other Equity” category, and $2,064,208 are invested in Preferred Stock holdings. The Company does not take
positions or engage in transactions in risk-sensitive market instruments in any substantial degree, nor as defined by SEC rules
and instructions, however due to current securities market conditions, the Company cannot ascertain the risk of any future
change in the market value of its’ investments.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements are listed under Item 15 in this Form 10-K. The following financial data is a summary of the
quarterly results of operations (unaudited) during and for the years ended November 30, 2009 and 2008:
Fiscal 2009
Net Sales
Total Revenue
Cost of Products Sold
Gross Profit
Net Income
Earnings Per Share:
Basic
Diluted
Feb. 28
May 31
Aug. 31
Nov. 30
Three Months Ended
$ 14,758,850
14,944,466
$ 14,609,686
14,748,329
$ 15,139,754
15,344,595
$ 12,493,709
12,634,774
5,616,212
9,142,638
5,527,838
9,081,848
5,616,335
9,523,419
5,090,190
7,403,519
694,136
$ 1,599,346
$ 1,013,796
0.10
0.10
$
$
0.23
0.23
$
$
0.14
0.14
$
$
$
124,366
0.02
0.02
$
$
$
- 25 -
Three Months Ended
Fiscal 2008
Net Sales
Total Revenue
Cost of Products Sold
Gross Profit
Net Income
Earnings Per Share:
Basic
Diluted
Feb. 29
May 31
Aug. 31
Nov. 30
$ 13,639,145
13,871,040
$ 17,258,060
17,389,985
$ 13,939,214
14,148,729
$ 11,904,714
12,048,192
4,893,262
8,745,883
343,683
0.05
0.05
$
$
$
$
$
$
6,335,298
10,922,762
5,252,704
8,686,510
5,287,878
6,616,836
790,692
$ 1,101,420
$
(822,909)
0.11
0.11
$
$
0.16
0.16
$
$
(0.12)
(0.12)
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
The Company did not change its accountants within the twenty-four months prior to the date of the most recent financial
statements (nor since), and had no reported disagreement with its accountants on any matter of accounting principles or practices.
Item 9A. CONTROLS AND PROCEDURES
Under Section 404 of the Sarbanes-Oxley Act of 2002, The Company’s fiscal 2009 annual report is required to be
accompanied by a “Section 404 Formal Report” by management on the effectiveness of internal controls over financial reporting.
The Company has engaged the services of CBIZ Risk & Advisory Services, LLC to assist in the development and
implementation of procedures to determine and test the effectiveness of the Company’s internal controls over financial reporting.
The filing of the Company’s November 30, 2010 annual report must contain an opinion by the Company’s independent
registered public accounting firm on the effectiveness of the Company’s internal controls. The Company’s officers are
continually working to evaluate and confirm that the Company’s data processing software systems and other procedures are
effective and that the information created by the Company’s systems adequately confirm the validity of the information upon
which the Company relies.
The Company continually takes a thorough review of the effectiveness of its internal controls and procedures, including
financial reporting. It is working to strengthen all of its procedures wherever necessary.
Management’s Report on Internal Control Over Financial Reporting
Under Section 404 of the Sarbanes-Oxley Act of 2002, our management, including our Chief Executive Officer and Chief
Financial Officer, are required to assess the effectiveness of the Company’s internal control over financial reporting as of
November 30, 2009 and report, based on that assessment, whether the Company’s internal controls over financial reporting are
effective.
- 26 -
Management of the Company is responsible for establishing and maintaining adequate internal controls over financial
reporting, as defined in Rules 13a-15f or 15d-15f under the Securities Exchange Act of 1934. The Company’s internal control
over reporting is designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that
could have a material effect on the financial statements.
Internal control over reporting, because of its inherent limitations, may not prevent or detect misstatements. Projections of
any evaluation of effectiveness for future periods are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s management has assessed the effectiveness of its internal control over financial reporting as of
November 30, 2009 using the criteria as set forth in Internal Control – Integrated Framework by the Committee of Sponsoring
Organizations of the Treadway Commission. The Company’s assessment included documenting, evaluating and testing of the
design and operating effectiveness of its internal control over financial reporting. Management of the Company has reviewed the
results with the Audit Committee of the Board of Directors.
Based on the Company’s assessment, management has concluded that, as of November 30, 2009, the Company’s internal
control over financial reporting was effective.
/s/ DAVID EDELL
David Edell, Chief Executive Officer
/s/ STEPHEN A. HEIT
Stephen A. Heit, Chief Financial Officer
- 27 -
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
PART III
We have a code of ethics that applies to the Chairman of the Board, Directors, Officers and Employees, including our Chief
Executive Officer and Chief Financial Officer. You can find our code of ethics in Exhibit 14.
The Executive Officers and Directors of the Company are as follows:
POSITION
YEAR OF FIRST
COMPANY SERVICE
NAME
David Edell
Ira W. Berman
Dunnan Edell
Stephen Heit
Drew Edell
John Bingman
Stanley Kreitman
Jack Polak
Robert Lage
Seth Hamot
Chief Executive Officer, Director
Chairman of the Board of Directors,
Secretary, Executive Vice President
President, Chief Operating Officer and
Director
Executive Vice President and Chief
Financial Officer
Executive Vice President- Product
Development and Production
Vice President and Treasurer
Director
Director
Director
Director (Retired June 24, 2009)
1983
1983
1984
2005
1983
1986
1996
1983
2003
2007
2009
James Mastrian
Director
David Edell, age 77, is a director, and the Company’s Chief Executive Officer. Prior to his association with the Company,
he was a marketing and financial consultant; and, by 1983, he had extensive experience in the health and beauty aids field as an
executive director and/or officer of Hazel Bishop, Lanolin Plus and Vitamin Corporation of America. In 1954, David Edell
received a Bachelor of Arts degree from Syracuse University.
- 28 -
Ira W. Berman, age 78, is the Company’s Executive Vice President and Corporate Secretary. He is also Chairman of the
Board of Directors. Mr. Berman is an attorney who has been engaged in the practice of law since 1955. He received a Bachelor
of Arts Degree (1953) and Bachelor of Law Degree (1955) from Cornell University, and is a member of the American Bar
Association.
Dunnan Edell is the 54 year-old son of David Edell. He is a graduate of George Washington University. He has been a
director since 1994, and in fiscal 2003, he was promoted to position of President of the Company and Chief Operating Officer.
He joined the Company in 1984 and was appointed Divisional Vice-President in 1986. He was employed by Alleghany
Pharmacal Corporation from 1982 to 1984 and by Hazel Bishop from 1977 to 1981.
Stephen Heit, age 55 joined CCA in May 2005 as Executive Vice President – Operations, and was appointed Chief
Financial Officer in March 2006. Prior to that he was Vice President – Business Strategies for Del Laboratories, Inc., a consumer
products company that was listed on the American stock exchange, from 2003 to 2005. Mr. Heit served as President of AM
Cosmetics, Inc. from 2001 to 2003, as Chief Financial Officer from 1998 to 2003, and Corporate Secretary to the Board of
Directors from 1999 to 2003. From 1986 to 1997 he was the Chief Financial Officer of Pavion Limited, and also served on the
Board of Directors. He also served as a Director of Loeb House, Inc., a non-profit organization serving mentally handicapped
adults from 1987 to 1995, and Director of Nyack Hospital Foundation from 1993 to 1995. He received a Bachelor of Science
from Dominican College in 1976, with additional graduate work in Professional Accounting at Fordham University from 1976 –
1978, and is a MBA Candidate at the University of Connecticut Graduate Business School.
Drew Edell, the 52 year-old son of David Edell, is a graduate of Pratt Institute, where he received a Bachelor’s degree in
Industrial Design. He joined the Company in 1983, and in 1985, he was appointed Vice President of Product Development and
Production.
John Bingman, age 58, received a Bachelor of Science degree from Farleigh Dickenson University in 1973. He worked as a
Certified Public Accountant who practiced with the New Jersey accounting firm of Zarrow, Zarrow & Klein from 1976 to 1986.
Jack Polak, age 97, has been a private investment consultant and a banker since April 1982. He is a certified Dutch Tax
Consultant and a member of The Netherlands Federation of Certified Tax Consultants. He was knighted on his 80th birthday by
Queen Beatrix of the Netherlands for his untiring efforts on behalf of the Anne Frank Center USA for which he is still actively
working as the “Chairman-Emeritus.” On May 23, 2004, Hofstra University in Long Island, NY awarded him with an honorary
doctorate in humane letters.
Stanley Kreitman, age 77 has been Vice Chairman of Manhattan Associates an equity investment firm since 1994. He is a
director of Medallion Financial Corp. (NASDAQ), Capital Lease Financial Corp. (NYSE), KSW Corp., Geneva Mortgage Corp.,
and Century Bank. He also serves as Chairman of the New York City Board of Corrections, Nassau County Crime Stoppers, and
serves on the board of the Police Athletic League. From 1975 to 1993 he was President of United States Banknote Corp.
(NYSE) a securities printer.
- 29 -
Robert Lage, age 73, is a retired CPA. He became a director in fiscal 2003. He was a partner at Pricewaterhouse Coopers
Management Consulting Service prior to his retirement in 1997. He has been engaged in the practice of public accounting and
management consulting since 1959. He received a BBA from Bernard Baruch College of the City University of New York in
1958.
James P. Mastrian, age 66, retired from the Rite Aid Corp. in August 2008. He was the special advisor to the Chairman and
Chief Executive Officer. Prior to that, he was the Chief Operating Officer of Rite Aid Corp. from October 2005 to August 2007.
He had been Senior Executive Vice President, Marketing, Logistics and Pharmacy Services from November 2002 to October
2005, and was Senior Executive Vice President, Marketing and Logistics of Rite Aid from October 2000 until November 2002.
Prior to that he was Executive Vice President, Marketing from November 1999 to October 2000. Mr. Mastrian was also
Executive Vice President, Category Management of Rite Aid from July 1998 to November 1999. Mr. Mastrian was Senior
Executive Vice President, Merchandising and Marketing of OfficeMax, Inc. from June 1997 to July 1998 and Executive Vice
President, Marketing of Revco D.S., Inc. from July 1994 to June 1997, and served in other positions from September 1990.
Mr. Mastrian also serves on the National Board of the Boys Hope Girls Hope, an international educational and residential
program for academically capable abused, neglected and abandoned children. Mr. Mastrian received a B.S. Pharmacy from the
University of Pittsburgh in 1965.
Committees of the Board of Directors
The Board of Directors has established three committees. The audit committee is comprised of Robert Lage, who serves as
its’ Chairman, Stanley Kreitman, and Jack Polak. Robert Lage, Chairman of the Committee, qualifies as a “financial expert” as
defined by the United States Securities and Exchange Commission in Instruction 1 to proposed Item 309 of Regulation S-K,
which is set forth in the SEC Release No. 34-46701 dated October 22, 2003. Robert Lage, Stanley Kreitman, and Jack Polak are
“independent” as that term is used in Section 10(m)(3) of the Exchange Act. The compensation committee is comprised of
Stanley Kreitman, Jack Polak, James P. Mastrian and Robert Lage. Each member of the compensation committee is
“independent”. The investment committee is comprised of Ira Berman, Stanley Kreitman and Jack Polak.
Item 11. EXECUTIVE COMPENSATION
i. Summary Compensation Table
The following table summarizes compensation earned in the 2009, 2008 and 2007 fiscal years by the Chief Executive
Officer and Chief Financial Officer (the “Named Officers”), the three most highly compensated executive officers other than the
Named Officers, and the non-executive officer who would be among the three most highly compensated employees of the
Company other than the Named Officers.
- 30 -
Name and
Principal
Position
David Edell,
Chief Executive Officer
Long-Term Compensation
Number
of Shares
Covered Other
All
Other
Annual by Stock Long-Term
Annual Compensation Compen- Options Compen-
Year
Salary
Bonus(1)
sation(2) Granted(3)
sation
2009 $ 878,354
812,700
2008
794,173
2007
$ 513,328 $ 43,652
43,639
44,155
422,285
532,807
Ira W. Berman,
Secretary and Executive Vice President
2009 $ 878,354
812,700
2008
794,173
2007
$ 513,328 $ 45,552
45,443
40,699
422,285
532,807
Dunnan Edell,
President, Chief Operating Officer
2009 $ 350,000 $ 96,000 $ 17,909
16,632
2008
11,060
2007
96,000
120,000
343,269
355,962
Stephen Heit,
Executive Vice President,
Chief Financial Officer
2009 $ 250,000
234,615
2008
229,327
2007
$ 35,000 $ 10,370
9,093
8,081
24,000
30,000
Drew Edell,
Executive Vice President
Product Development & Production
2009 $ 275,000
269,711
2008
279,904
2007
$ 48,000 $ 12,620
11,442
10,008
48,000
60,000
Jon Denis,
Senior Executive
Vice President – Sales
2009 $ 325,000 $ 15,000 $ 13,252
10,578
2008
10,235
2007
318,750
331,250
6,250
50,000
- 31 -
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
0 (4)
0 (4)
0 (4)
0 (4)
0 (4)
0 (4)
0
0
0
0
0
0
0
0
0
0
0
0
(1) Bonus amounts represents amounts earned in each respective fiscal year, not necessarily paid in each year.
(2) Includes the personal-use value of Company-leased automobiles, the value of Company-provided life insurance, and health
insurance that is made available to all employees. The Employment Agreement of Edell/Berman provides that they may
receive an additional reimbursement for a complete physical examination and reimbursement of up to $5,000 of medical
expenses for each employment or consulting period. The Company also pays for a life insurance policy owned by
Edell/Berman, with a face value of $750,000 for each policy, as per their respective Employment Agreements.
(3) Information in respect of stock option plans appears below in the sub-topic, Employment Contracts/Executive
Compensation Program. For information in regard to stock appreciation rights, refer to Note 9 of the financial statements.
(4) The employment of Edell/Berman provides that in the event of death within the employment and consulting periods, the
Company is obligated for two successive years to pay the executive’s estate an amount equal to the annual base salary and
bonus.
ii. Fiscal 2009 Option Grants and Option Exercises, Year-End Option Valuation, Option Repricing
On September 27, 2007, the Company granted stock appreciation rights for 10,000 shares to its Executive Vice President of
Sales, at $9.40 per share, which was the price of the stock on the day of the grant. The stock appreciation rights granted did not
vest until two years after the grant date and expire five years after the grant date. Upon exercise, the value would be computed by
the difference in the share price of the stock on the date of grant ($9.40) and the price on the exercise date. The stock
appreciation rights would be exercisable to purchase the Company’s common stock at the price of the stock on the date of
exercise.
There were no stock options granted or options exercised during fiscal 2009. All outstanding options expired during fiscal
2009.
iii. Compensation of Directors and Committees of the Board
Director
Stanley Kreitman
Robert Lage
James Mastrian
Jack Polak
Seth Hamot (Retired June 24, 2009)
Total
- 32 -
$
Year Ended
Nov. 30, 2009
15,000
45,000
7,500
15,000
7,500
$
90,000
Each outside director was paid $2,500 for a conference call meeting and $5,000 per meeting for attendance of board
meetings in fiscal 2009 (without additional compensation for committee meetings, other than as noted below). The full Board of
Directors met four times in fiscal 2009, for an aggregate compensation of $60,000, not including Mr. Lage’s additional
compensation of $30,000 as chairman of the audit committee. No stock options were awarded.
iv. Executive Compensation Principles — Compensation Committee
The Company’s Executive Compensation Program is based on guiding principles designed to align executive compensation
with Company values and objectives, business strategy, management initiatives, and financial performance. In applying these
principles the Compensation Committee of the Board of Directors, comprised of Stanley Kreitman, Jack Polak, James P.
Mastrian and Robert Lage, has established a program to:
Reward executives for long-term strategic management and the enhancement of shareholder value.
Integrate compensation programs with both the Company’s annual and long-term strategic planning.
Support a performance-oriented environment that rewards performance not only with respect to Company goals but also
Company performance as compared to industry performance levels.
The Compensation Committee has a charter, which was published with the proxy statement for the 2009 annual meeting of
shareholders. Compensation, including annual bonus amounts, for the executive officers named in the Summary Compensation
Table (other than David Edell and Ira Berman, whose compensation and bonus are determined in accordance with their
employment agreement) are recommended by David Edell, Chief Executive Officer, and approved by the Compensation
Committee.
v. Employment Contracts/Compensation Program
The total compensation program consists of both cash and equity based compensation. The Compensation Committee (the
“Committee”) determines the level of salary and bonuses, if any, for key executive officers of the Company. The Committee
determines the salary or salary range based upon competitive norms. Actual salary changes are based upon performance, and
bonuses were awarded by the Committee in consideration of the employee’s performance during the 2009 fiscal year.
The Company has executed Employment Contracts with its CEO, David Edell, and its Chairman of the Board, Ira W.
Berman. The contracts for both are exactly the same. The contracts expire on December 31, 2010. The contracts provide for a
base salary which commenced in 1994 in the amount of $300,000 (plus a bonus of 20% of the base salary), with a year-to-year
CPI or 6% increase, plus 2.5% of the Company’s pre-tax income plus depreciation and amortization. The 2.5% measure in the
bonus provision of the Edell/Berman contracts was amended on November 3, 1998 so as to calculate it against income before
income taxes, plus depreciation, amortization and expenditures for media and cooperative advertising in excess of $8,000,000.
On May 24, 2001, the contract was amended increasing the base salary then in effect by $100,000 per annum (See Item 11,
Summary Compensation Table). The contracts also provide that at the end of the term or upon retirement, Edell/Berman shall be
retained by the Company as consultants at the consideration equal to 50% of the prior year’s salary and bonus for a five year
period. The contracts also provide that in the event of the death of Edell/Berman within the employment and consulting periods,
the Company is obligated for two successive years to pay the executive’s estate an amount equal to the annual base salary and
bonus. The Company, per the Employment Agreement, pays for life insurance policies owned by Edell/Berman with a face value
of $750,000 each. Edell/Berman are entitled to have the Company pay for a complete physical examination and reimbursement
of up to $5,000 of medical expenses during each benefit year.
- 33 -
David Edell’s sons, Dunnan Edell and Drew Edell have five-year employment contracts in the amounts of $270,000 and
$200,000 respectively, which were to expire on November 30, 2007. On February 10, 2006, the Board of Directors extended the
contracts for Dunnan Edell and Drew Edell to December 31, 2010. Dunnan Edell is a director and President of the Company.
Drew Edell is the Vice President of Product Development and Production. On July 1 2003, Dunnan Edell’s salary was increased
to $300,000, and on January 5, 2004, Drew Edell’s salary was increased to $225,000 and in 2005, it was increased to $250,000.
On May 17, 2007, the employment contracts for Dunnan Edell and Drew Edell were extended to November 30, 2012 (See
Item 11, Summary Compensation Table). Dunnan Edell’s salary was increased to $350,000 and Drew Edell’s salary was
increased to $275,000.
vi. Stock Option Plans
Long-term incentives are provided through the issuance of stock options.
The 1984 Stock Option Plan covered 1,500,000 shares of its Common Stock, and the 1986 Stock Option Plan covered
1,500,000 shares of its Common Stock. On July 9, 2003, the Company’s Stock Option Plan was approved by the shareholders
authorizing the issuance of options to issue up to 1,000,000 shares.
The Company’s 2003 Stock Option Plan covers 1,000,000 shares of its Common Stock.
The 2003 Option Plan provides (as had the 1984, 1986 and the 1994 plans) for the granting of two (2) types of options:
“Incentive Stock Options” and “Nonqualified Stock Options”. The Incentive Stock Options (but not the Nonqualified Stock
Options) are intended to qualify as “Incentive Stock Options” as defined in Section 422(a) of The Internal Revenue Code. The
Plans are not qualified under Section 401(a) of the Code, nor subject to the provisions of the Employee Retirement Income
Security Act of 1974.
Options may be granted under the Options Plans to employees (including officers and directors who are also employees)
and consultants of the Company provided, however, that Incentive Stock Options may not be granted to any non-employee
director or consultant.
Option Plans are administered and interpreted by the Board of Directors. (Where issuance to a Board member is under
consideration, that member must abstain.) The Board has the power, subject to plan provisions, to determine the persons to
whom and the dates on which options will be granted, the number of shares subject to each option, the time or times during the
term of each when options may be exercised, and other terms. The Board has the power to delegate administration to a
Committee of not less than two (2) Board members, each of whom must be disinterested within the meaning of Rule 16b-3 under
the Securities Exchange Act, and ineligible to participate in the option plan or in any other stock purchase, option or appreciation
right under plan of the Company or any affiliate. Members of the Board receive no compensation for their services in connection
with the administration of option plans.
- 34 -
Option Plans permit the exercise of options for cash, other property acceptable to the Board or pursuant to a deferred
payment arrangement. The 1994 Plan specifically authorizes that payment may be made for stock issuable upon exercise by
tender of Common Stock of the Company; and the Executive Committee is authorized to make loans to option exercisers, other
than officers, to finance optionee tax-consequences in respect of option exercise, but such loans must be personally guaranteed
and secured by the issued stock.
The maximum term of each option is ten (10) years. No option granted is transferable by the optionee other than upon
death.
On June 15, 2005, the shareholders approved an amended and Restated Stock Option Plan amending the 2003 Stock Option
Plan.
The Plan provides that the stock option committee may make awards in the form of (a) incentive stock options, (b) non-
qualified stock options, (c) stock appreciation rights, (d) restricted stock, and (e) performance shares.
One new award was made by the committee in fiscal 2007 (See Executive Compensation in Fiscal 2007 Option Grants).
Under the plans, options will terminate three (3) months after the optionee ceases to be employed by the Company or a
parent or subsidiary of the Company unless (i) the termination of employment is due to such person’s permanent and total
disability, in which case the option may, but need not, provide that it may be exercised at any time within one (1) year of such
termination (to the extent the option was vested at the time of such termination); or (ii) the optionee dies while employed by the
Company or a parent or subsidiary of the Company or within three (3) months after termination of such employment, in which
case the option may, but need not provide that it may be exercised (to the extent the option was vested at the time of the
optionee’s death) within eighteen (18) months of the optionee’s death by the person or persons to whom the rights under such
option pass by will or by the laws of descent or distribution; or (iii) the option by its terms specifically provides otherwise.
The exercise price of all nonqualified stock options must be at least equal to 85% of the fair market value of the underlying
stock on the date of grant. The exercise price of all Incentive Stock Options must be at least equal to the fair market value of the
underlying stock on the date of grant. The aggregate fair market value of stock of the Company (determined at the date of the
option grant) for which any employee may be granted Incentive Stock Options in any calendar year may not exceed $100,000,
plus certain carryover allowances. The exercise price of an Incentive Stock Option granted to any participant who owns stock
possessing more than ten (10%) of the voting rights of the Company’s outstanding capital stock must be at least 110% of the fair
market value on the date of grant. As of November 30, 2009, there were no outstanding stock options.
- 35 -
The Company has adopted Stock Appreciation Rights incentives and Restricted Stock grants in the 2005 Amended Stock
Option Plan. No such grants were issued in fiscal 2009. All of the terms and conditions of the Plan were included in the June 15,
2005 Proxy, which Plan was approved by the shareholders at the annual meeting. The Proxy was incorporated by reference to the
10K Annual Report for fiscal 2005.
vii. Performance Graph
Set forth below is a line graph comparing cumulative total shareholder return on the Company’s Common Stock, with the
cumulative total return of companies in the Dow Jones US Index and the cumulative total return of Dow Jones’s Personal
Products Index.
CCA Industries — ASE
- 36 -
Copyrights 2009 Dow Jones & Company. All rights reserved.
11/04
11/05
11/06
11/07
11/08
11/09
CCA Industries, Inc.
Dow Jones US
Dow Jones US Personal Products
100.00
100.00
100.00
76.38
110.01
110.34
110.30
125.86
132.32
94.93
135.82
157.92
37.89
83.35
121.95
47.81
106.41
162.95
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
SHAREHOLDER MATTERS
The following table sets forth certain information regarding the beneficial ownership of the Company’s Common Stock
and/or Class A Common Stock as of November 30, 2009 by (i) all those known by the Company to be owners of more than five
percent of the outstanding shares of Common Stock or Class A Common Stock; (ii) each officer and director; and (iii) all officers
and directors as a group.
Unless otherwise indicated, each of the shareholders has sole voting and investment power with respect to the shares owned
(subject to community property laws, where applicable), and is beneficial owner of them.
Name and Address
David Edell
c/o CCA Industries, Inc.
200 Murray Hill Parkway
East Rutherford, NJ 07073
Ira W. Berman
c/o CCA Industries, Inc.
Stanley Kreitman
c/o CCA Industries, Inc.
Robert Lage
c/o CCA Industries, Inc.
James P. Mastrian
c/o CCA Industries, Inc.
Jack Polak
c/o CCA Industries, Inc.
Number of
Shares Owned (1):
Common
Stock
Class A (2)
Ownership, As A
Percentage of
All Shares Out-
Standing/Assuming
“Option
Shares”(1) Option Share Exercise (1)
146,609
484,615
—
—
—
—
—
—
160,533
483,087
—
—
—
—
15,000
—
—
53,254
- 37 -
8.9%
9.1%
0.2%
0.0%
0.0%
0.8%
Name and Address
Dunnan Edell
c/o CCA Industries, Inc.
Drew Edell
c/o CCA Industries, Inc.
John Bingman
c/o CCA Industries, Inc.
Stephen A. Heit c/o CCA Industries, Inc.
Number of
Shares Owned (1):
Common
“Option
Ownership, As A
Percentage of
All Shares Out-
Standing/Assuming
Stock
Class A (2) Shares”(1) Option Share Exercise (1)
97,158
98,108
—
1,212
—
—
—
—
—
—
—
—
—
1.4%
1.4%
0.0%
0.0%
21.8%
All Officers and Directors as a group (10 persons)
571,874
967,702
(1) The number of “Option Shares” represents the number of shares that could be purchased by, and upon exercise of
unexercised options, exercisable within 90 days; and the percentage ownership figure denominated “Assuming Option
Share Exercise” assumes, per person, that unexercised options have been exercised and, thus, that subject shares have been
purchased and are actually owned. In turn, the “assumed” percentage ownership figure is measured, for each owner, as if
each had exercised such options, and purchased subject ‘option shares,’ and thus increased total shares actually outstanding,
but that no other option owner had ‘exercised and purchased’.
(2) David Edell and Ira Berman own 100% of the outstanding shares of Class A Common Stock. Messrs. David Edell, Dunnan
Edell, and Ira Berman are officers and directors. Messrs. Stephen Heit, John Bingman and Drew Edell are officers.
Messrs. Lage, Mastrian, Kreitman and Polak are independent, outside directors.
There were no other shareholders who owned more than five percent of the outstanding Common Stock or Class A
Common Stock of the Company.
- 38 -
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company did not purchase any shares of common stock from officers, directors or affiliates in fiscal 2009.
During fiscal 2009, several related parties provided services to the Company, which were deemed immaterial to the
financial statements.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
KGS LLP (“KGS”) served as the Company’s independent registered public accounting firm for 2009 and 2008. The
services performed by KGS in this capacity included conducting an audit in accordance with generally accepted auditing
standards of, and expressing an opinion on, the Company’s consolidated financial statements.
Audit Fees
KGS’s fees for professional services rendered in connection with the audit and review of Forms 10-K and all other SEC
regulatory filings were $340,000 for the 2009 fiscal year and $379,000 for the 2008 fiscal year. The Company has paid and is
current on all billed fees.
Audit Related Fees
Audit related fees billed in Fiscal 2009 and 2008 by KGS were $4,000 and $46,000 respectively. Audit related fees consist
primarily of fees billed for professional services rendered by KGS for accounting consultations and readiness consultations for
Section 404 of the Sarbanes Oxley Act of 2002.
Tax Fees
KGS’s fees for professional services rendered in connection with Federal and State tax return preparation and other tax
matters for the 2009 and 2008 fiscal years were $55,000 and $51,000, respectively.
All Other Fees
All other fees of $0 and $0 billed in Fiscal years 2009 and 2008, respectively, represent fees for miscellaneous services
other than those described above.
- 39 -
Engagements Subject to Approval
Under its charter, the Audit Committee must pre-approve all subsequent engagements of our independent registered public
accounting firm unless an exception to such pre-approval exists under the Securities Exchange Act of 1934 or the rules of the
Securities and Exchange Commission. Each year, the independent registered public accounting firm’s retention to audit our
financial statements, including the associated fee, is approved by the committee before the filing of the preceding year’s annual
report on form 10-K. At the beginning of the fiscal year, the Audit Committee will evaluate other known potential engagements
of the independent registered public accounting firm, including the scope of the work proposed to be performed and the proposed
fees, and approve or reject each service, taking into account whether the services are permissible under applicable law and the
possible impact of each non-audit service on the independent registered public accounting firm’s independence from
management. At each subsequent committee meeting, the committee will receive updates on the services actually provided by
the independent registered public accounting firm, and management may present additional services for approval. The committee
has delegated to the Chairman of the committee the authority to evaluate and approve engagements on behalf of the committee in
the event that a need arises for pre-approval between committee meetings. If the Chairman so approves any such engagements,
he will report that approval to the full committee at the next committee meeting.
- 40 -
PART IV
Item 15. EXHIBITS, FINANCIAL STATEMENTS,
SCHEDULES AND REPORTS ON FORM 8-K
Financial Statements:
Table of Contents, Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets as of
November 30, 2009 and 2008, Consolidated Statements of Income for the years ended November 30, 2009, 2008 and 2007,
Consolidated Statements of Comprehensive Income, Consolidated Statements of Shareholders’ Equity for the years ended
November 30, 2009, 2008 and 2007, Consolidated Statements of Cash Flows for the years ended November 30, 2009, 2008
and 2007, Notes to Consolidated Financial Statements.
Financial Statement Supplementary Information:
Schedule II: Valuation Accounts; Years Ended Nov. 30, 2009, 2008 and 2007.
Exhibits: All Exhibits are incorporated by reference.
(1)
(3)
The Indenture (and the Promissory note exhibited therewith) defining the rights of former shareholders who tendered
Common Stock to the Company for its $2 per share, five- year, 6% debenture, is incorporated by reference to the filing of
such documents with the Schedule TO filed with the SEC, on June 5, 2001.
The Company’s Articles of Incorporation and Amendments thereof, and its By-Laws, are incorporated by reference to
their filing with the Form 10-K/A filed April 5, 1995. (Exhibit pages 000001-23).
(10.1) The Following Material Contracts are incorporated by reference to their filing with the Form 10-K/A filed April 5, 1995:
Amended and Restated Employment Agreements of 1994, with David Edell and Ira Berman; License Agreement made
February 12, 1986 with Alleghany Pharmacal Corporation.
(10.2) The February 1999 Amendments to the Amended and Restated Employment Agreements of David Edell and Ira Berman
(1994) are incorporated by reference to the 1998 10-K. (Exhibit pages 00001-00002). The May 29, 2001 Amended and
Restated Employment Agreements of David Edell and Ira Berman are incorporated by reference herein.
- 41 -
Previously filed as an exhibit to and incorporated by reference from the indicated report filed with the Securities and
Exchange Commission:
(1) The Company’s 2003 Stock Option Plan was filed with the 2003 Proxy and is incorporated by reference to this 10K.
(2) The Company’s 2005 Amended and Restated Stock Option Plan and the 2005 Proxy are incorporated by reference
herein.
(3) Form 8K, filed on January 21, 2009, is incorporated by reference to this 10K.
The following reports were filed with the Securities and Exchange Commission during the three months ended
November 30, 2009:
(1) Form 8-K, filed on October 2, 2009, announcing that the Company was served on September 30, 2009 with a class
action suit, Denise Wally vs. CCA Industries, Inc . The claim, which did not specify any damages, was filed in the
Superior Court, State of California, County of Los Angeles, and Central Civil West, alleging false and misleading
claims about one of our products sold in California, that violated the California Business and Professional Code.
(2) Form 10-Q, filed on October 14, 2009, for the quarter ended August 31, 2009.
(11)
Statement re Per Share Earnings (included in Item 15, Financial Statements)
(14)
Code of Ethics for Chief Executive Officer and Senior Financial Officers are referenced
(31.1) Certification of Chief Executive Officer pursuant to Rule 13a-14(a) included herein
(31.2) Certification of Chief Financial Officer pursuant to Rule 13a-14(a) included herein
(32.1) Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350 included herein
(32.2) Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350 included herein
Shareholders may obtain a copy of any exhibit not filed herewith by writing to CCA Industries, Inc., 200 Murray Hill
Parkway, East Rutherford, New Jersey 07073. Moreover, exhibits may be inspected and copied at prescribed rates at the
Commission’s public reference facilities at Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C. 20549; Jacob K. Javits
Federal Building, 26 Federal Plaza, New York, New York 10278; and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials may also be obtained by mail at prescribed rates from the
Public Reference Branch of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and one is available at the
Commission’s Internet website (http://www.sec.gov).
- 42 -
Pursuant to the requirements of Section 13 or 15(A) of the Securities Exchange Act of 1934, the Registrant has duly caused
this Annual Report to be signed on its behalf by the undersigned thereunto duly authorized.
SIGNATURES
CCA INDUSTRIES, INC.
By: /s/ DUNNAN EDELL
DUNNAN EDELL, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the
following persons in the capacities and on the dates indicated.
Signature
/s/ DAVID EDELL
DAVID EDELL
/s/ IRA BERMAN
IRA W. BERMAN
/s/ DUNNAN EDELL
DUNNAN EDELL
/s/ STEPHEN HEIT
STEPHEN HEIT
/s/ DREW EDELL
DREW EDELL
/s/ STANLEY KREITMAN
STANLEY KREITMAN
/s/ ROBERT LAGE
ROBERT LAGE
/s/ JACK POLAK
JACK POLAK
/s/ JAMES P. MASTRIAN
JAMES P. MASTRIAN
Title
Date
Chief Executive Officer, Director
February 25, 2010
Chairman of the Board of Directors,
Executive Vice President, Secretary
February 25, 2010
President, Chief Operating Officer, Director
February 25, 2010
Executive Vice President,
Chief Financial Officer
Executive Vice President,
Research & Development
Director
Director
Director
Director
- 43 -
February 25, 2010
February 25, 2010
February 25, 2010
February 25, 2010
February 25, 2010
February 25, 2010
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
- 44 -
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
CONTENTS
FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF INCOME
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTARY INFORMATION
SCHEDULE II — VALUATION ACCOUNTS
SIGNATURES
- 45 -
46
47-48
49
50
51
52
53-84
85
43
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
CCA Industries, Inc.
East Rutherford, New Jersey
We have audited the consolidated balance sheets of CCA Industries, Inc. and Subsidiaries as of November 30, 2009 and
2008, and the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of
the three fiscal years in the period ended November 30, 2009. These consolidated financial statements are the responsibility of
the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
consolidated financial position of CCA Industries, Inc. and Subsidiaries as of November 30, 2009 and 2008, and the consolidated
results of their operations and their cash flows for each of the three fiscal years in the period ended November 30, 2009, in
conformity with accounting principles generally accepted in the United States of America.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The
schedule titled “Schedule II — Valuation and Qualifying Accounts” is presented for purposes of additional analysis and is not a
required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
/s/ KGS LLP
February 25, 2010
Jericho, New York
- 46 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
Current Assets
Cash and cash equivalents
Short-term investments and marketable securities (Notes 2 and 6)
Accounts receivable, net of allowances of $1,584,814 and $823,029, respectively
Inventories, net of reserve for inventory obsolescence of $760,001 and $578,941,
respectively (Notes 2 and 3)
Prepaid expenses and sundry receivables
Prepaid and refundable income taxes (Note 8)
Deferred income taxes (Note 8)
Total Current Assets
NOVEMBER 30,
2009
2008
$
7,844,369
9,636,103
7,613,273
$
5,568,699
10,014,357
8,230,716
8,327,277
739,139
89,535
1,193,745
7,932,798
578,000
1,554,158
973,732
35,443,441
34,852,460
Property and equipment, net of accumulated depreciation and amortization
(Notes 2 and 4)
682,921
611,226
Intangible assets, net of accumulated amortization (Notes 2 and 5)
697,506
727,716
Other assets
Marketable securities (Notes 2 and 6)
Deferred income taxes (Note 8)
Other
Total Other Assets
Total Assets
See Notes to Consolidated Financial Statements.
- 47 -
2,900,035
—
65,300
2,945,740
143,419
65,300
2,965,335
3,154,459
$ 39,789,203
$ 39,345,861
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued liabilities (Note 10)
Capitalized lease obligations
Income taxes payable (Note 8)
Dividends payable (Note 12)
Total Current Liabilities
Deferred income tax liability (Note 8)
Capitalized lease obligations — long term
Total Liabilities
Commitments and Contingencies (Note 12)
Shareholders’ Equity
Preferred stock, $1.00 par; authorized 20,000,000 shares; none issued
Common stock, $.01 par; authorized 15,000,000 shares; issued and outstanding
6,086,740 and 6,086,740 shares, respectively
Class A common stock, $.01 par; authorized 5,000,000 shares; issued and outstanding
967,702 and 967,702 shares, respectively
Additional paid-in capital
Retained earnings
Unrealized (losses) on marketable securities (Note 2)
Total Shareholders’ Equity
NOVEMBER 30,
2009
2008
$
8,775,676
53,233
147,153
493,811
$ 10,182,510
57,697
—
775,989
9,469,873
11,016,196
76,929
22,553
—
75,786
9,569,355
11,091,982
—
—
60,867
60,867
9,677
2,329,049
28,094,783
(274,528)
9,677
2,329,049
26,920,561
(1,066,275)
30,219,848
28,253,879
Total Liabilities and Shareholders’ Equity
$ 39,789,203
$ 39,345,861
See Notes to Consolidated Financial Statements.
- 48 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Revenues
Sales of health and beauty aid products, net
Other income
Costs and Expenses
Cost of sales
Selling, general and administrative expenses
Advertising, cooperative and promotions
Research and development
(Benefit from) provision for doubtful accounts
Interest expense
Transaction Costs
Total Costs and Expenses
Years Ended November 30,
2008
2009
2007
$ 57,001,999
670,165
57,672,164
$ 56,741,133
716,813
57,457,946
$ 59,832,157
1,045,710
60,877,867
21,850,575
20,037,352
9,667,446
499,636
(4,901)
11,932
52,062,040
21,769,142
22,122,849
10,466,740
603,486
12,886
16,444
54,991,547
21,760,406
21,266,327
6,956,407
574,900
(21,839)
29,090
50,565,291
—
—
717,850
52,062,040
54,991,547
51,283,141
Income before Provision for Income Taxes
5,610,124
2,466,399
9,594,726
Provision for income taxes
2,178,480
1,053,513
4,056,931
Net Income
$ 3,431,644
$ 1,412,886
$ 5,537,795
Weighted Average Shares Outstanding
Basic
Diluted
Earnings Per Common Share (Note 2):
Basic
Diluted
See Notes to Consolidated Financial Statements.
7,054,442
7,054,442
7,054,442
7,061,646
7,029,611
7,058,889
$
$
0.49
0.49
$
$
0.20
0.20
$
$
0.79
0.78
- 49 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended November 30,
2008
2009
2007
Net Income
$ 3,431,644
$ 1,412,886
$ 5,537,795
Other Comprehensive Income (Loss)
Unrealized holding gain (loss) on investments, net of tax*
(Note 6, Note 8)
Comprehensive Income
791,747
(875,914)
(63,228)
$ 4,223,391
$
536,972
$ 5,474,567
*
Unrealized holding gain is net of a deferred tax benefit from unrealized losses of $39,900
See Notes to Consolidated Financial Statements.
- 50 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED NOVEMBER 30, 2009, 2008 AND 2007
COMMON STOCK
SHARES AMOUNT CAPITAL EARNINGS SECURITIES
RETAINED MARKETABLE SHAREHOLDERS’
EQUITY
ADDITIONAL
PAID IN
UNREALIZED
GAIN (LOSS)
ON
TOTAL
Balance — December 1, 2006 7,002,353 $
Issuance of common stock
Net income for the year
Dividends declared
Unrealized (loss) on
52,089
—
—
70,023 $
521
—
—
2,329,570 $ 25,112,331 $
(521)
—
— 5,537,795
— (2,109,040)
(127,133) $
—
—
—
27,384,791
—
5,537,795
(2,109,040)
marketable securities
Balance — November 30,
2007
Net Income for the year
Dividends declared
Unrealized (loss) on
marketable securities
Balance — November 30,
2008
Net Income for the year
Dividends declared
Unrealized gain on
marketable securities, net
of tax
Balance — November 30,
—
—
—
—
(63,228)
(63,228)
7,054,442
—
—
70,544
—
—
2,329,049 28,541,086
— 1,412,886
— (3,033,411)
(190,361)
—
—
30,750,318
1,412,886
(3,033,411)
—
—
—
—
(875,914)
(875,914)
7,054,442
—
—
70,544
2,329,049
26,920,561
—
—
— 3,431,644
— (2,257,422)
(1,066,275)
—
—
28,253,879
3,431,644
(2,257,422)
—
—
—
—
791,747
791,747
2009
7,054,442 $
70,544 $
2,329,049 $ 28,094,783 $
(274,528) $
30,219,848
See Notes to Consolidated Financial Statements.
- 51 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended November 30,
2008*
2007
2009
Cash Flows from Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
(Gain) on sale of securities
Loss on write off of fixed assets
Loss on sale or impairment of intangible assets
Decrease (increase) in deferred income taxes
Decrease (increase)in accounts receivable
(Increase) in inventory
(Increase) decrease in prepaid expenses and sundry receivables
Decrease (increase) in prepaid and refundable income taxes
(Increase) in other assets
(Decrease) increase in accounts payable and accrued liabilities
Increase (decrease) in income taxes payable
$ 3,431,644
$ 1,412,886
$ 5,537,795
252,998
(113,272)
3,262
23,548
40,235
617,444
(394,479)
(161,139)
1,464,623
—
(1,406,835)
147,153
246,165
(88,096)
—
1,332
(321,855)
888,463
(75,476)
52,893
(714,465)
—
1,828,052
—
257,555
(60,697)
—
21,745
410,116
(1,930,982)
(1,507,309)
53,982
(839,693)
(17,800)
250,033
(413,869)
Net Cash Provided by Operating Activities
3,905,182
3,229,899
1,760,876
Cash Flows from Investing Activities:
Acquisition of property and equipment
Acquisition of intangible assets
Purchase of available for sale securities
Proceeds from sale of available for sales securities
(321,293)
—
(20,239,331)
21,528,407
(289,533)
(250,000)
(25,382,587)
24,440,000
(260,453)
(522)
(14,824,908)
17,605,791
Net Cash Provided by (Used in) Investing Activities
967,783
(1,482,120)
2,519,908
Cash Flows from Financing Activities:
Increase in capital lease obligation
Payments for capital lease obligation
Dividends paid
—
(57,696)
(2,539,599)
20,814
(51,532)
(2,892,322)
80,036
(38,352)
(1,965,111)
Net Cash (Used in) Financing Activities
(2,597,295)
(2,923,040)
(1,923,427)
Net Increase (Decrease) In Cash and Cash Equivalents
2,275,670
(1,175,261)
2,357,357
Cash and Cash Equivalents at Beginning of Year
5,568,699
6,743,960
4,385,340
Cash and Cash Equivalents at End of Year
$ 7,844,369
$ 5,568,699
$ 6,743,960
Supplemental Disclosures of Cash
Flow Information
Cash paid during the year for:
Interest
Income taxes
Supplemental Disclosure of Non-Cash
Information:
Dividends declared and accrued
*
Reclassified for comparative purposes.
See Notes to Consolidated Financial Statements.
- 52 -
$
11,932
667,945
$
16,444
2,086,300
$
29,090
4,882,361
$
493,811
$
775,989
$
634,900
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION AND DESCRIPTION OF BUSINESS
CCA Industries, Inc. (“CCA”) was incorporated in the State of Delaware on March 25, 1983.
CCA manufactures and distributes health and beauty aid products.
CCA has several wholly-owned subsidiaries, CCA Cosmetics, Inc., CCA Labs, Inc., and Berdell, Inc, all of which are
currently inactive. CCA has two active wholly-owned subsidiaries, CCA Online Industries, Inc., and CCA IND., S.A. DE
C.V., a Variable Capital Corporation organized pursuant to the laws of Mexico.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts of CCA and its wholly-owned subsidiaries (collectively the
“Company”). All significant inter-company accounts and transactions have been eliminated.
Estimates and Assumptions:
The consolidated financial statements include the use of estimates, which management believes are reasonable. The process
of preparing financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”), requires
management to make estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accounting
estimates and assumptions are those that management considers to be most critical to the financial statements because they
inherently involve significant judgment and uncertainties. All of these estimates and assumptions reflect management’s best
judgment about current economic and market conditions and their effects on the information available as of the date of the
consolidated financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.
Other Comprehensive Income:
Total comprehensive income includes changes in equity that are excluded from the consolidated statements of income and
are recorded directly into a separate section of consolidated statements of comprehensive income. The Company’s
accumulated other comprehensive income shown on the consolidated balance sheets consist of unrealized gains and losses
on investment holdings, net of tax.
Short-Term Investments and Marketable Securities:
Short-term investments and marketable securities consist of certificates of deposits, corporate and government bonds and
equity securities. The Company has classified its investments as Available-for-Sale securities. Accordingly, such
investments are reported at fair market value, with the resultant unrealized gains and losses reported as a separate
component of shareholders’ equity. Fair value for Available-for-Sale securities is determined by reference to quoted market
prices or other relevant information.
- 53 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounts Receivable
Accounts receivable consist of trade receivables recorded at original invoice amount, less an estimated allowance for
uncollectible amounts. The accounts receivable balance is further reduced by allowances for cooperative advertising and
reserves for returns which are anticipated to be taken as credits against the balances as of November 30th. The allowances
and reserves which are anticipated to be deducted from future invoices are included in accrued liabilities. Trade credit is
generally extended on a short term basis; thus trade receivables do not bear interest, although a finance charge may be
applied to receivables that are past due. Trade receivables are periodically evaluated for collectability based on past credit
history with customers and their current financial condition. Changes in the estimated collectability of trade receivables are
recorded in the results of operations for the period in which the estimate is revised. Trade receivables that are deemed
uncollectible are offset against the allowance for uncollectible accounts. The Company generally does not require collateral
for trade receivables.
Cash and Cash Equivalents:
For purposes of the statement of cash flows, the Company considers all highly liquid instruments purchased with an original
maturity of less than three months to be cash equivalents.
Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or market.
Product returns are recorded in inventory when they are received at the lower of their original cost or market, as
appropriate. Obsolete inventory is written off and its value is removed from inventory at the time its obsolescence is
determined.
Property and Equipment and Depreciation and Amortization
Property and equipment are stated at cost. The Company charges to expense repairs and maintenance items, while major
improvements and betterments are capitalized.
- 54 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment and Depreciation and Amortization (Continued)
When the Company sells or otherwise disposes of property and equipment items, the cost and related accumulated
depreciation are removed from the respective accounts
and any gain or loss is included in earnings.
Depreciation and amortization are provided on the straight-line method over the following estimated useful lives or lease
terms of the assets:
Machinery and equipment
Furniture and fixtures
Tools, dies and masters
Transportation equipment
Leasehold improvements
Intangible Assets:
5-7 Years
3-10 Years
3 Years
5 Years
Remaining life of the lease
(ranging from 1-9 years)
Intangible assets are stated at cost. Patents are amortized on the straight-line method over a period of 17 years. Such
intangible assets are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts
may not be recoverable.
Web Site Costs:
Certain costs incurred in creating the graphics and content of the Company’s web site have been capitalized in accordance
with the Accounting Standards Codification (“ASC”) Topic 350, “Intangible — Goodwill and Other” (previously reported
as SFAS 142), issued by the Financial Accounting Standards Board (“FASB”). The Company has determined that these
costs will be amortized over a two year period. Web site design and conceptual costs are expensed as incurred.
Financial Instruments:
The carrying value of assets and liabilities considered financial instruments approximate their respective fair value.
Income Taxes:
Income tax expense includes federal and state taxes currently payable and deferred taxes arising from temporary differences
between income for financial reporting and income tax purposes.
- 55 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Tax Credits:
Tax credits, when present, are accounted for using the flow-through method as a reduction of income taxes in the years
utilized.
Earnings Per Common Share:
Basic earnings per share is calculated in accordance with ASC Topic 260, “Earnings Per Share” (previously reported as
SFAS 128), which requires using the average number of shares of common stock outstanding during the year. Diluted
earnings per share is computed on the basis of the average number of common shares outstanding plus the effect of any
outstanding stock options using the “treasury stock method” and convertible debentures using the “if-converted” method.
Common stock equivalents consist of stock options.
Revenue Recognition:
The Company recognizes sales upon shipment of merchandise. Net sales comprise gross revenues less expected returns,
trade discounts, customer allowances and various sales incentives. Although no legal right of return exists between the
customer and the Company, returns are accepted if it is in the best interests of the Company’s relationship with the
customer. The Company, therefore, records a reserve for returns based on the historical returns as a percentage of sales in
the five preceding months, adjusting for returns that can be put back into inventory, and a specific reserve based on
customer circumstances. Those returns which are anticipated to be taken as credits against the balances as of
November 30th are offset against the accounts receivable. The reserves which are anticipated to be deducted from future
invoices are included in accrued liabilities.
Sales Incentives
In accordance with ASC Topic 605-10-S99, “Revenue Recognition” (previously reported as EITF 01-9), the Company has
accounted sales incentives offered to customers by charging them directly to sales as opposed to advertising and
promotional expense. Had ASC Topic 605-10-S99 not been adopted, net sales for the years ended November 2009, 2008
and 2007 would have been $61,891,940, $61,298,640, and $65,016,269 respectively.
Advertising Costs:
The Company’s policy is to charge advertising costs to expense as incurred. Advertising, cooperative and promotional
expense for the years ended November 30, 2009, 2008 and 2007 were $9,667,446, $10,466,740 and $6,956,407,
respectively.
- 56 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Shipping Costs:
The Company charges shipping cost to selling, general and administrative expense as incurred. For the years ended
November 30, 2009, 2008 and 2007, included in selling, general and administrative expenses are shipping costs amounting
to $2,821,315, $3,377,366 and $2,962,754, respectively.
Research and Development Costs:
The Company’s policy is to charge research and development costs to expense as incurred. Research and development costs
for the years ended November 30, 2009, 2008 and 2007 were $499,636, $603,486 and $574,900, respectively.
Stock Options:
In December 2004, the FASB issued ASC Topic 718, “Stock Compensation” (previously reported as Statement of Financial
Accounting Standards (“SFAS”) No. 123R, “Accounting for Share-Based Compensation”). ASC Topic 718 requires stock
grants to employees to be recognized in the income statement based on their fair values.
Reclassifications
Certain prior years amounts have been reclassified to conform with the current years presentation.
Recent Accounting Pronouncements
In December 2007, the FASB amended certain provisions of Accounting Standard Codification (“ASC”) Topic 805,
“Business Combinations” (previously reported as SFAS No. 141R, “Business Combinations”). This amendment changes
accounting for acquisitions that close beginning in 2009 in a number of areas including the treatment of contingent
consideration, contingencies, acquisition costs, in-process research & development and restructuring costs. More
transactions and events will qualify as business combinations and will be accounted for at fair value under the new
standard. This amendment promotes greater use of fair values in financial reporting. In addition, under Topic 805, changes
in deferred tax asset valuation allowances and acquired income tax uncertainties in a business combination after the
measurement period will impact income tax expense. Some of the changes will introduce more volatility into earnings.
Topic 805 became effective for fiscal years beginning on or after December 15, 2008. Topic 805 will have an impact on
accounting for any business acquired after the effective date of this pronouncement.
- 57 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements (Continued)
In December 2007, the FASB issued ASC Topic 810, “Consolidation” (previously reported as SFAS 160, “Noncontrolling
Interests in Consolidated Financial Statements”). Topic 810 will change the accounting and reporting for minority interests,
which will be recharacterized as noncontrolling interests (“NCI”) and classified as a component of equity. This new
consolidation method will significantly change the accounting for transactions with minority interest holders. Topic 810
became effective for fiscal years beginning after December 15, 2008. Topic 810 will have an impact on the presentation and
disclosure of the noncontrolling interests of any non-wholly owned business acquired in the future.
In April 2008, the FASB amended certain provisions of ASC Topic 350, “Intangibles-Goodwill and Other” (previously
reported as FASB Staff Position No. 142-3). Topic 350 amends the factors that must be considered in developing renewal
or extension assumptions used to determine the useful life over which to amortize the cost of a recognized intangible. It
further requires an entity to consider its own assumptions about renewal or extension of the term of the arrangement,
consistent with its expected use of the asset, and is an attempt to improve consistency between the useful life of a
recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset. Topic 350
became effective for fiscal years beginning after December 15, 2008, and the guidance for determining the useful life of a
recognized intangible asset must be applied prospectively to intangible assets acquired after the effective date. Topic 350 is
not expected to have a significant impact on the Company’s results of operations, financial condition or liquidity.
In June 2008, FASB issued ASC Topic 260, “Earnings Per Share” (previously known as FSP Emerging Issues Task Force
No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating
Securities”). Topic 260 provides that unvested share-based payment awards which contain rights to receive nonforfeitable
dividends (whether paid or unpaid) are participating securities, and should be included in the two- class method of
computing earnings per share. Topic 260 became effective for fiscal years beginning after December 15, 2008, and interim
periods within those years, and did not have a significant impact on the Company’s results of operations, financial condition
or liquidity.
In April 2009, the SEC issued Staff Accounting Bulletin No. 111 (“SAB No. 111”). SAB No. 111 amends Topic 5.M. in
regard to other than temporary impairment of certain investments in debt and equity securities. SAB No. 111 confirms the
establishment of the “other than temporary” category of investment impairment. The adoption of SAB No. 111 became
effective upon issuance and did not have any material impact on the Company’s financial position or results of operation.
- 58 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements (Continued)
In April 2009, the FASB issued an amendment to ASC Topic 825, “Financial Instruments” (previously reported as FASB
Staff Position No. FAS 107-1 and APB 28-1, “Disclosures about Fair Value of Financial Instruments”). The amendment
requires disclosure of the fair value of financial instruments for interim reporting periods of
publicly traded companies as well as in annual financial statements. The amendment to Topic 825 became effective for
interim reporting periods ending after June 15, 2009. The adoption of this topic had no impact on the Company’s financial
position or results of operation.
In April 2009, the FASB issued additional guidance under ASC Topic 820, “Fair Value Measurements and
Disclosures” (previously reported as FASB Staff Position No. FAS 157-4). Topic 820 provides additional guidance for
estimating the fair value of an asset or liability when the volume and level of activity for the asset or liability have
significantly decreased, and identifying circumstances in which a transaction may not be orderly. The adoption of this topic
became effective for all interim and annual reporting periods ending after June 15, 2009. The adoption of the additional
guidance provided by Topic 820 did not have any material impact on the Company’s financial position or results of
operation.
In April 2009, the FASB issued an amendment to ASC Topic 320, “Investments — Debt and Equity” (previously reported
as FASB Staff Position No. 115-2 and 124-2) which amends the guidance in regard to other-than-temporary impairments on
debt and equity securities in the financial statements. Topic 320 also requires additional disclosures in the financial
statements that enable users to understand the types of debt and equity securities held, including those investments in an
unrealized loss position for which an other-than-temporary impairment has or has not been recognized. The adoption of the
amendment to Topic 320 became effective for all interim and annual reporting periods ending after June 15, 2009. The
adoption of this amended topic did not have any material impact on the Company’s financial position or results of
operation.
In May 2009, the FASB issued ASC Topic 855, “Subsequent Events” (previously reported as SFAS No. 165, “Subsequent
Events”). The statement is to establish general standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued. Topic 855 became effective June 15, 2009 for all subsequent
reporting periods. The adoption of Topic 855 did not have any material impact on the Company’s financial position or
results of operation.
- 59 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements (Continued)
In June 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-01, “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles” (previously SFAS No. 168, “The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles”). This update
identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of
financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting
principles (“GAAP”) in the United States. This update is effective for financial statements issued for interim and annual
periods ending after September 15, 2009. The adoption of ASU 2009-01 did not have any material impact on the
Company’s financial position or results of operation.
In August 2009, the FASB issued ASU 2009-05, which is an update to Topic 820, “Fair Value Measurements and
Disclosures”. The update provides clarification in regard to the estimation of the fair value of a liability. In addition, it also
clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price
for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset
are required are Level 1 fair value measurements. This update became effective for all interim and annual reporting periods
ending after August 31, 2009. The adoption of ASU 2009-05 did not have a material impact on the Company’s financial
position or results of operation.
In January 2010, the FASB issued ASU 2010-06, which is an update to Topic 820, “Fair Value Measurement and
Disclosures”. This update establishes further disclosure requirements regarding transfers in and out of levels 1 and 2, and
activity in level 3 fair value measurements. The update also provides clarification as to the level of disaggregation for each
class of assets and liabilities, requires disclosures about inputs and valuation techniques, and also includes conforming
amendments to the guidance on employers’ disclosures about postretirement benefit plan assets. ASU 2010-06 will be
effective for all interim and annual reporting periods beginning after December 15, 2010. ASU 2010-06 is not expected to
have a material impact on the Company’s financial position or results of operation.
Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted
would have a material effect on the accompanying financial statements.
- 60 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 — INVENTORIES
At November 30, 2009 and 2008, inventories consist of the following:
Raw materials
Finished goods
2009
2008
$ 5,246,185
3,081,092
$ 8,327,277
$ 4,880,267
3,052,531
$ 7,932,798
At November 30, 2009 and 2008, the Company had a reserve for obsolete inventory of $760,001 and $578,941,
respectively.
NOTE 4 — PROPERTY AND EQUIPMENT
At November 30, 2009 and 2008, property and equipment consisted of the following
Machinery and equipment
Office furniture and equipment
Transportation equipment
Tools, dies, and masters
Capitalized lease obligations
Web Site
Leasehold improvements
Less: Accumulated depreciation and amortization
Property and Equipment — Net
2009
2008
$
217,323
953,208
—
335,716
263,067
20,000
402,785
2,192,099
$
190,308
813,819
10,918
360,701
263,067
20,000
357,582
2,016,395
1,509,178
1,405,169
$
682,921
$
611,226
Depreciation expense for the years ended November 30, 2009, 2008, and 2007 amounted to $246,337, $239,504, and
$250,307, respectively.
- 61 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 — INTANGIBLE ASSETS
Intangible assets consist of Company owned trademarks and patents for ten product lines covering twenty-four countries.
The cost and accumulated amortization at November 30, 2009 and 2008 are as follows:
Trademarks and patents
Less: Accumulated amortization
Intangible Assets — Net
2009
856,005
158,499
697,506
$
$
2008
886,608
158,892
727,716
$
$
Patents are amortized on a straight-line basis over their legal life of 17 years and trademarks are adjusted to realizable value
for each quarterly reporting period. During 2009, $23,548 (including $7,054 of accumulated amortization) of intangibles
were deemed to be impaired and written off. Amortization expense for the years ended November 30, 2009, 2008 and 2007
amounted to $6,661, $6,661 and $7,248, respectively. Estimated amortization expense for November 30, 2010, 2011, 2012,
2013 and 2014 is $2,185, $2,185, $2,185, $2,163 and $2,122 respectively.
NOTE 6 — SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES
Short-term investments and marketable securities, which consist of stock and various corporate and government
obligations, are stated at market value. The Company has classified its investments as Available-for-Sale securities and
considers as current assets those investments which will mature or are likely to be sold in the next fiscal year. The
remaining investments are considered non-current assets. The cost and market values of the investments at November 30,
2009 and November 30, 2008 are as follows:
Current:
Guaranteed bank
Certificates of deposit
Corporate obligations
Government obligations (including mortgage backed
securities)
Preferred stock
Common Stock
Mutual funds
Other equity
Total
Non-Current:
Guaranteed bank
Certificates of deposit
Corporate obligations
Government obligations
Preferred stock
Total
November 30,
2009
November 30,
2008
COST
MARKET
COST
MARKET
$
942,000
598,370
$
944,910
607,189
$ 3,366,000
200,000
$ 3,366,000
197,714
7,494,318
250,000
189,552
215,274
70,206
7,497,900
187,720
196,873
165,383
36,128
6,200,029
50,000
51,648
215,274
70,206
6,248,363
21,640
44,628
114,582
21,430
9,759,720
9,636,103
10,153,157
10,014,357
816,000
200,000
—
2,074,845
3,090,845
818,250
205,297
—
1,876,488
2,900,035
—
598,370
500,000
2,774,845
3,873,215
—
577,334
460,000
1,908,406
2,945,740
Total
$ 12,850,565
$ 12,536,138
$ 14,026,372
$ 12,960,097
- 62 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 — SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
The market value at November 30, 2009 was $12,536,138 as compared to $12,960,097 at November 30, 2008. The gross
unrealized gains and (losses) were $35,640 and $(350,068) for November 30, 2009 and $48,841 and $(1,115,116) for
November 30, 2008. The cost and market values of the investments at November 30, 2009 were as follows:
COL. A
COL. B
COL. C
COL. D
Name of Issuer and
Title of Each Issue
Maturity
Date
Interest
Rate
CERTIFICATES OF DEPOSITS
Number of
Units-
Principal
Amount of
Bonds and
Notes
COL. E
Amount at
Which Each
Portfolio of
Market Value of
Each Issue
at Balance
Sheet Date
Equity Security
Issue and Each
Other Security
Issue Carried in
Balance Sheet
Cost of
Each Issue
American Express Bank
Bank of the Cascades
Beal Bank TX
Capmark Bank
Citi Bank — UT
Discover Bank — DE
Doral Bank Catano
GE Capital
GE Money Bank
Keybank Nat’l Assoc
Sallie Mae
Signature Bank
Southern B&T
Westernbank PR CTF
5/13/11
12/21/09
02/17/10
04/29/11
04/29/11
04/29/11
04/22/10
02/16/10
07/25/11
04/29/11
05/13/11
11/19/10
12/23/09
04/22/10
2.050%
1.650
0.800
2.350
2.250
2.300
4.250
0.700
1.750
2.050
2.350
2.180
1.600
4.250
96,000
200,000
96,000
96,000
96,000
96,000
100,000
96,000
240,000
96,000
96,000
250,000
100,000
100,000
$
96,000
200,000
96,000
96,000
96,000
96,000
100,000
96,000
240,000
96,000
96,000
250,000
100,000
100,000
$
96,758 $
200,132
96,042
96,804
96,670
96,737
101,322
96,020
238,051
96,401
96,828
250,000
100,070
101,322
96,758
200,132
96,042
96,804
96,670
96,737
101,322
96,020
238,051
96,401
96,828
250,000
100,070
101,322
1,758,000
1,763,157
1,763,157
- 63 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 — SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
COL. A
COL. B
COL. C
Name of Issuer and
Title of Each Issue
Maturity
Date
Interest
Rate
Number of
Units-
Principal
Amount of
Bonds and
Notes
Cost of
Each Issue
COL. D
COL. E
Amount at
Which Each
Portfolio of
Equity Security
Market Value
Issue and Each
of Each Issue Other Security
Issue Carried in
at Balance
Sheet Date Balance Sheet
CORPORATE OBLIGATIONS:
Caterpillar Fin Service Corp
Merrill Lynch & Co
Morgan Stanley
Toyota Motor
05/15/11
08/04/10
01/15/10
04/28/10
3.900%
4.790
4.000
2.850
200,000
200,000
200,000
200,000
200,000
199,614
199,106
199,650
205,302
204,552
200,658
201,978
205,302
204,552
200,658
201,978
798,370
812,490
812,490
GOVERNMENT
OBLIGATIONS:
NJ ST HGR ED
US Treasury Bill
US Treasury Bill
US Treasury Bill
12/01/40
12/17/09
02/11/10
05/13/10
0.000
0.000
0.000
0.000
500,000
1,000,000
3,000,000
3,000,000
500,000
997,192
2,999,568
2,997,557
500,000
999,970
2,999,820
2,998,110
500,000
999,970
2,999,820
2,998,110
7,494,317
7,497,900
7,497,900
- 64 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 — SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
Name of Issuer and
Title of Each Issue
Preferred Stock:
Maturity
Date
Interest
Rate
Amount at
Which Each
Portfolio of
Market Value
Equity Security
Issue and Each
of Each Issue Other Security
Issue Carried in
Balance Sheet
at Balance
Sheet Date
Cost of
Each Issue
Number
of Units-
Principal
Amount of
Bonds and
Notes
Bank of America Ser H
Bank of America
Deutsche Bank Capital TR V
General Electric Cap Corp
JP Morgan Chase
MetLife Floater
Morgan Stanley Cap Tr
RBS Capital Funding
Wells Fargo Cap Tr VIII
05/01/13
05/28/13
06/30/18
11/15/32
06/15/33
06/15/10
07/15/33
07/03/08
08/01/33
8.200
8.625
8.050
6.100
5.875
4.000
5.750
5.900
5.625
20,000
20,000
20,000
8,800
2,000
8,000
4,000
2,000
8,000
500,000
500,000
500,000
224,845
50,000
200,000
100,000
50,000
200,000
440,000
452,200
491,800
211,728
43,120
167,200
75,800
20,520
161,840
440,000
452,200
491,800
211,728
43,120
167,200
75,800
20,520
161,840
2,324,845
2,064,208
2,064,208
- 65 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 — SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
COL. A
COL. B
COL. C
COL. D
Number of
Units-Principal
Maturity Interest
Date Rate
Amount of
Bonds and
Notes
Cost of Each
Issue
Market Value of
Each Issue at
Balance
Sheet Date
COL. E
Amount at
Which
Each Portfolio
of Equity
Security
Issue and Each
Other Security
Issue Carried in
Balance Sheet
Name of Issuer and
Title of Each Issue
Common Stock:
Consolidate Edison Inc.
DTE Energy Company
Verizon Communications
Mutual Funds:
Dreyfus Premier Ltd High
Income
Other Equity Investments:
2,000
1,200
2,000
76,381
51,648
61,523
85,820
48,132
62,920
85,820
48,132
62,920
189,552
196,872
196,872
16,296.314
215,275
165,383
165,383
PIMCO Floating Rate Strategy
2,900
70,206
36,128
36,128
Totals
$ 12,850,565
$
12,536,138 $
12,536,138
- 66 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 — SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
During the years ended November 30, 2009, 2008 and 2007, available-for-sale securities were liquidated and proceeds
amounting to $21,528,407, $24,440,000 and $17,605,791 were received, with resultant realized gains totaling $113,272,
$88,096, and $60,697, respectively. Cost of available-for-sale securities includes unamortized premium or discount.
The Company had, at November 30, 2009, an auction rate bond issued by the New Jersey State Higher Education
Assistance Authority (“NJHE”). The bond was recorded as a non-current marketable security. The NJHE bond has an
original par value of $500,000, a maturity date of December 1, 2040, a rating of AA by S&P, and has been placed on
negative watch. Fitch Ratings had withdrawn their rating. The current interest rate is 0.578% as set on January 5, 2010.
Beginning in February 2008, more shares for sale were submitted in the regularly scheduled auctions for the NJHE auction
rate bonds than there were offers to buy. This meant that these auctions “failed to clear” and that many or all auction bond
holders who wanted to sell their shares in these auctions were unable to do so. The Company was notified by Wells Fargo
Securities, LLC on February 11, 2010 that they will be repurchasing the NJHE bond from the Company at the original par
value (See Note 16, Subsequent Events for further information). The Company had recognized a temporary impairment
charge of $40,000 against the $500,000 par value of the bond in fiscal 2008. The Company recognized an additional
impairment charge of $60,000 in the second quarter of 2009, for a total impairment charge of $100,000. Due to the
notification by Wells Fargo Investments of its intent to repurchase the NJHE bond, the Company believes that there is no
impairment as of November 30, 2009 and accordingly has reversed the impairment charges previously recognized.
The Company adopted ASC Topic 820, “Fair Value Measurements and Disclosures” (previously reported as SFAS
No. 157, Fair Value Measurements) as of December 1, 2007, which expands disclosures about investments that are
measured and reported at fair market value. ASC Topic 820 established a fair value hierarchy that prioritizes the inputs to
valuation techniques utilized to measure fair value into three broad levels as follows:
Level 1 — Quoted market prices in active markets for the identical asset or liability that the reporting entity has ability to
access at measurement date.
Level 2 — Quoted market prices for identical or similar assets or liabilities in markets that are not active, and where fair
value is determined through the use of models or other valuation methodologies.
Level 3 — Unobserved inputs for the asset or liability. Fair value is determined by the reporting entity’s own assumptions
utilizing the best information available, and includes situations where there is little market activity for the investment.
- 67 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 — SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
Description
Bank Certificates of Deposit
Corporate obligations
Government Obligations
Preferred Stock
Common Stock
Mutual Funds
Other Equity
Total
Description
Bank Certificates of Deposit
Corporate obligations
Government Obligations
Preferred Stock
Common Stock
Mutual Funds
Other Equity
Total
Quoted Market
Price in Active Observable
Significant
Other
November 30,
2009
1,763,157
$
$
812,490
7,497,900
2,064,208
196,872
165,383
36,128
Markets
(Level 1)
—
—
6,997,900
2,064,208
196,872
165,383
—
Inputs
(Level 2)
$ 1,763,157
812,490
500,000
—
—
—
36,128
$ 12,536,138
$
9,424,363
$ 3,111,775
Quoted
Market Price
in Active
Markets
(Level 1)
$
—
—
5,999,745
1,930,046
44,628
114,582
—
Significant
Other
Observable
Inputs
(Level 2)
$ 3,366,000
1,023,666
460,000
—
—
—
21,430
$
November 30,
2008
3,366,000
1,023,666
6,459,745
1,930,046
44,628
114,582
21,430
$ 12,960,097
$ 8,089,001
$ 4,871,096
- 68 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 — SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
The following table discloses a reconciliation of the NJHE bond Level 2 investment at measured fair value during the year
ended November 30, 2009:
Beginning Balance as of December 1, 2008
Unrealized (loss) as of May 31, 2009
Ending Balance as of May 31, 2009
Unrealized gain as of November 30, 2009
Ending Balance as of November 30, 2009
$
$
460,000
(60,000)
400,000
100,000
500,000
There was no realized income or loss from the Level 2 NJHE bond investment during the fiscal year ended November 30,
2009.
NOTE 7 — LINE OF CREDIT
The Company had a $20,000,000 unsecured line of credit which expired on August 31, 2009. The Company elected not to
renew the line of credit. The unsecured line was subject to certain financial covenants. The Company had never utilized the
line of credit, and as of August 31, 2009 and November 30, 2008, there was no outstanding balance.
NOTE 8 — INCOME TAXES
CCA and its subsidiaries file a consolidated federal income tax return.
The Company previously adopted the provisions of ASC Subtopic 740-10-25, “Uncertain Tax Positions” (previously
reported as FIN No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109’’).
Management believes that there were no unrecognized tax benefits, or tax positions that would result in uncertainty
regarding the deductions taken, as of November 30, 2009 and November 30, 2008. ASC Subtopic 740-10-25 prescribes a
recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions
taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-
not to be sustained upon examination by taxing authorities. There were no penalties or related interest for the fiscal year to
date ended November 30, 2009 or for the fiscal year ended November 30, 2008.
- 69 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 — INCOME TAXES (Continued)
The United States Internal Revenue Service completed in 2009 an examination of the Company’s U.S. tax return for fiscal
2006. As a result of that examination, the Company received a refund of $94,195 in federal taxes for the 2006 fiscal year.
The audit adjustments resulted in refunds from amended state tax returns in 2006 of $28,145, and an additional $196,335 in
refunds from federal and state amended returns for fiscal 2007. The refunds resulted in the decreased effective tax rate for
fiscal 2009. The State of New Jersey, Department of The Treasury, Division of Taxation is currently examining state
income and sales tax returns filed for the fiscal years 2004 - 2008. As of February 25, 2010, no adjustments have been
proposed. No other state has notified the Company of its intent to conduct an examination of tax returns filed in their
jurisdictions. The Company had $747,668 of officer salaries during fiscal 2009 that were not deductible for tax purposes in
calculating the income tax provision. As of November 30, 2009, the Company has unrealized losses on its investments of
$314,428, which would have a tax benefit of $125,457. This tax benefit has been reduced by a valuation allowance of
$85,557. The valuation allowance is based on an estimate of the losses, which if realized, could not be utilized to offset any
corresponding capital gains. The tax benefit of the unrealized losses, if realized, net of valuation allowances, is $39,900 as
of November 30, 2009.
At November 30, 2009 and 2008, respectively, the Company has temporary differences arising from the following:
Type
Depreciation
Unrealized loss on investments
Reserve for bad debts
Reserve for returns
Reserve for obsolete inventory
Vacation accrual
Charitable Contributions
Section 263A costs
Deferred income tax
Valuation allowance
Net deferred income tax
November 30, 2009
Deferred
Tax
Classified As
Short-Term
Asset
Long- Term
(Liability)
Amount
$
(192,804)
314,428
131,223
$
1,453,591
760,001
276,161
9,569
261,298
$
(76,929)
125,457
52,358
579,983
303,240
110,188
3,818
104,258
$
—
125,457
52,358
579,983
303,240
110,188
3,818
104,258
1,202,373
(85,557)
$ 1,116,816
1,279,302
(85,557)
$ 1,193,745
$
$
- 70 -
(76,929)
—
—
—
—
—
—
—
(76,929)
—
(76,929)
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 — INCOME TAXES (Continued)
Type
Amount
November 30, 2008
Deferred
Tax
Classified As
Short-Term
Long-Term
Asset (Liability)
Depreciation
Reserve for bad debts
Reserve for returns
Reserve for obsolete inventory
Vacation accrual
Charitable Contributions
Section 263A costs
Net deferred income tax
$
$
$
74,244
154,290
668,738
578,941
501,096
572,568
250,000
29,623
61,562
266,827
230,997
199,937
228,455
97,750
$
—
61,562
266,827
230,997
199,937
114,659
97,750
29,623
—
—
—
—
113,796
—
$ 1,117,151
$
973,732
$
143,419
Income tax expense (benefit) is made up of the following components:
Current tax expense
Deferred tax expense
Current tax expense
Deferred tax (benefit)
Current tax expense
Deferred tax expense
Federal
$ 1,613,144
30,981
$ 1,644,125
November 30, 2009
State & Local
525,101
$
9,254
534,355
$
Total
$ 2,138,245
40,235
$ 2,178,480
Federal
$ 1,030,348
(241,116)
789,232
$
November 30, 2008
State & Local
345,020
$
(80,739)
264,281
$
Total
$ 1,375,368
(321,855)
$ 1,053,513
Federal
$ 2,823,468
317,523
$ 3,140,991
November 30, 2007
State & Local
823,347
$
92,593
915,940
$
Total
$ 3,646,815
410,116
$ 4,056,931
- 71 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 — INCOME TAXES (Continued)
Prepaid and refundable income taxes are made up of the following components:
November 30, 2009
November 30, 2008
Income tax payable is made up of the following components:
Federal
State & Local
Total
$
—
$ 1,020,948
$
$
89,535
$
89,535
533,210
$ 1,554,158
Federal
State & Local
Total
November 30, 2009
$
61,303
$
85,850
$
147,153
- 72 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 — INCOME TAXES (Continued)
A reconciliation of income tax expense computed at the statutory rate to income tax expense at the effective rate for each of
the three years ended November 30, 2009, 2008 and 2007 is as follows:
2009
Percent
Of Pretax
Income
Amount
2008
Percent
Of Pretax
Income
2007
Percent
Of Pretax
Income
Amount
Amount
$1,907,442
34.00% $ 838,576
34.00%
$3,262,207
34.00%
Income tax expense at federal
statutory rate
Increases (decreases) in taxes
resulting from:
State income taxes, net of
federal income tax benefit
320,899
5.72
141,078
5.72
548,512
5.72
Non-deductible expenses and
other adjustments
Income tax expense at effective
rate
(49,861)
(0.89)
73,859
2.99
246,212
2.56
$2,178,480
38.83% $1,053,513
42.71%
$4,056,931
42.28%
- 73 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 — STOCK-BASED COMPENSATION
On January 1, 2006, the Company adopted ASC Topic 718, “Stock Compensation” which requires an entity to recognize
the grant-date fair value of stock options and other equity-based compensation issued to employees in the financial
statements. Accordingly, the Company applied the provisions of ASC Topic 718 to all awards granted subsequent to
December 31, 2005 and will apply the provisions to the extent that these awards are subsequently modified, repurchased or
cancelled. ASC Topic 718 requires that the Company provide pro forma information regarding net earnings as if
compensation cost for the Company’s stock-based awards had been determined in accordance with the fair value prescribed
therein.
On September 27, 2007, the Company granted stock appreciation rights for 10,000 shares to its Executive Vice President of
Sales, at $9.40 per share, which was the price of the stock on the day of the grant. The stock appreciation rights granted do
not vest until two years after the grant date and expire five years after the grant date. Upon exercise, the option value would
be paid through the issuance of Company stock. The Company had no charge against earnings in fiscal 2008 or 2009, and
anticipates no charges in fiscal 2010 based on the current market value of the stock. The amounts for future years can
change, as the valuation of the fair value, as required by ASC Topic 718, involves factors such as the Company’s dividend
yield, interest rates, and share price volatility, all of which are subject to change. The Company has made its estimate of
fiscal 2010 year charges against earnings based on those factors as of November 30, 2009.
The following summarizes stock option activity for the two years ended November 30, 2009 and 2008:
Number of
Shares
Weighted Average
exercise price of
Outstanding Options
Weighted Average
Remaining Life
Intrinsic
Value
Outstanding December 1, 2007
Granted
Exercised
Forfeited
Outstanding November 30, 2008
Granted
Exercised
Forfeited
$
126,000
—
—
—
126,000
—
—
126,000
Outstanding November 30, 2009
— $
8.00
—
—
—
8.00
—
—
8.00
—
1.35
—
—
—
1.35
—
—
—
—
—
—
—
—
—
—
—
—
- 74 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 — ACCRUED EXPENSES AND OTHER ACCOUNTS PAYABLE
The following items which exceeded 5% of total current liabilities are included in accounts payable and accrued liabilities
as of:
Coop advertising
Accrued returns
Accrued bonuses
Media
*
Did not exceed 5% of total current liabilities at November 30, 2008.
- 75 -
November 30, (In Thousands)
2009
2008
$
$
1,218
1,207
482
548
3,455
$
$
849
1,443
—*
1,326
3,618
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 — OTHER INCOME
Other income was comprised of the following:
Interest income
Dividend income
Realized gain on sale of
Securities
Royalty income
Miscellaneous
NOTE 12 — COMMITMENTS AND CONTINGENCIES
Leases
2009
November 30,
2008
2007
$
$
211,644
158,973
113,272
151,768
34,508
670,165
$
$
340,795
94,775
$
755,569
33,697
88,096
169,482
23,665
716,813
60,697
125,158
70,589
$ 1,045,710
The Company currently occupies approximately 58,625 square feet of space used for warehousing and corporate offices.
The annual rental for this space is $390,835, with a CPI increase not to exceed 15% in any consecutive five year period.
The lease requires the Company to pay for additional expenses “Expense Rent” (Common Area Maintenance “CAM”),
which includes real estate taxes, common area expense, utility expense, repair and maintenance expense and insurance
expense. CAM was estimated at $150,000 for the fiscal year ended November 30, 2009. The lease expires on May 31, 2012
with a renewal option for an additional five years.
On September 26, 2007 the Company entered into an additional lease for warehouse space at 99 Murray Hill Parkway, East
Rutherford, New Jersey for a term commencing November 1, 2007 and ending on May 31, 2012. The premise comprises
16,438 square feet of space to be used for warehousing and storage. The annual rent is $123,285. The lease requires the
Company to pay for additional expenses “Expense Rent” (Common Area Maintenance “CAM), which includes real estate
taxes, common area expense, certain utility expense, repair and maintenance expense and insurance expense. For the fiscal
year ended November 30, 2009, CAM was $29,988.
Rent expense for the years ended November 30, 2009, 2008 and 2007 was $618,311, $671,708 and $704,050, respectively.
- 76 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 — COMMITMENTS AND CONTINGENCIES (Continued)
Leases (Continued)
In addition, the Company has entered into various property and equipment operating leases with expiration dates ranging
through November 2011.
Future commitments under non cancelable operating lease agreements having a remaining term in excess of one year for
each of the next five (5) years and in the aggregate are as follows:
Year Ending
November 30,
2010
2011
2012
2013
2014
Royalty Agreements
694,120
694,120
374,060
—
—
In 1986, the Company entered into a license agreement with Alleghany Pharmacal Corporation (the “Alleghany Pharmacal
License”). The Alleghany Pharmacal License agreement provided that when, in the aggregate, $9,000,000 in royalties have
been paid thereunder, the royalty rate for those products originally “charged” at 6% will be reduced to 1%. The Company
paid an aggregate of $9,000,000 in royalties to Alleghany as of April 2003. Commencing May 1, 2004, the license royalty
was reduced to 1%. The royalties incurred to Alleghany-Pharmacal under the license were $96,769 for the fiscal year ended
November 30, 2009.
In May of 1998, the Company entered into a License Agreement with Solar Sense, Inc. for the marketing of sun care
products under trademark names. The Company’s License Agreement with Solar Sense, Inc. is for the exclusive use of the
trademark names “Solar Sense” and “Kids Sense”, in connection with the commercial exploitation of sun care products.
The Solar Sense License requires the Company to pay a royalty of 5% on net sales of said licensed products until $1 million
total royalties are paid, at which time the royalty rate will be reduced to 1% for a period of twenty-five years. The royalty
incurred to Solar Sense, Inc. under the License Agreement was $38,607 for the fiscal year ended November 30, 2009.
In October of 1999, the Company entered into a License Agreement with The Nail Consultants, Ltd. for the use of an
activator invented in connection with a method for applying a protective covering to fingernails. The Company’s License
Agreement with The Nail Consultants, Ltd. is for the exclusive use of the method and its composition in a new product kit
packaged and marketed by CCA under its own name, “Nutra Nail Power Gel”. The Company pays a royalty of 5% of net
sales of all licensed product sold. Royalties incurred to The Nail Consultants, Ltd. under the License Agreement were
$7,280 for the fiscal year ended November 30, 2009.
- 77 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 — COMMITMENTS AND CONTINGENCIES (Continued)
Royalty Agreements (Continued)
On February 26, 2004, the Company entered into an agreement with Dr. Stephen Hsu. PhD. to create green tea skin care
products. Dr. Hsu is entitled to a commission of 3% of the net factory sales of all of the Company’s products using the
green tea serum created exclusively for the Company by Dr. Hsu. The Company incurred commissions of $80,832 to
Dr. Hsu for the fiscal year ended November 30, 2009.
On May 18, 2004, The Company entered into a license agreement with Tea-Guard, Inc. to manufacture and distribute Mega
-T Green Tea chewing gum and Mega -T Green Tea mints. The Company pays a royalty of 6% of net sales of all products
sold under the license agreement. The license agreement was amended on March 31, 2009, granting the Company a non-
exclusive license, with no minimum royalty required. The royalty rate of 6% of net sales will remain unchanged during the
term, including any term renewals, of the amended license agreement. The Company incurred royalties of $36,586 to Tea-
Guard, Inc. for the fiscal year ended November 30, 2009.
Effective November 3, 2008, the Company entered into an agreement with Continental Quest Corp., to purchase certain
trademarks and inventory relating to the Pain Bust R business for $285,106 paid at closing. In addition, the Company
agreed to pay a royalty equal to 2% of net sales of all Pain Bust R products, which are topical analgesics, until an aggregate
royalty of $1,250,000 is paid, at which time the royalty payments will cease. The Company incurred royalties of $12,301 to
Continental Quest Corp. for the fiscal year ended November 30, 2009.
On March 22, 2002, the Company entered into an agreement with Joann Bradvica, granting the Company an exclusive
license to manufacture and sell an Earlobe Patch Support for Earrings. The agreement provided for a royalty of 10% of net
sales of the licensed product. A new agreement was entered into and effective on June 8, 2009 at the same royalty rate, and
provides for a minimum royalty of $40,000 for annual periods beginning July 1, 2009 in order to maintain the license. The
Company incurred royalties of $37,392 to Joann Bradvica for the fiscal year ended November 30, 2009.
On March 14, 2009, the Company entered into an agreement with LaRosa Innovation, LLC, granting the Company an
exclusive license to manufacture and sell Instant Arm Lifts and Instant Thigh Lifts. The agreement provides for a royalty of
5% of net sales until the Licensor receives $5,000,000 in aggregate royalties, at which time the royalty rate shall be reduced
to 1% of net sales. The license agreement provides for a minimum royalty of $150,000 for the first eighteen month period
of the agreement, and $150,000 per year thereafter in order to maintain the license. The Company incurred royalties of
$21,026 to LaRosa Innovations, LLC for the fiscal year ended November 30, 2009, representing a portion of the initial
eighteen-month minimum royalty period.
- 78 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 — COMMITMENTS AND CONTINGENCIES (Continued)
Royalty Agreements (Continued)
The Company is not party to any other license agreement that is currently material to its operations.
Total royalty costs expensed by licensor for each fiscal year are as follows:
Summary
Licensor
A
B
C
D
E
F
H
I
K
L
M
N
O
P
2009
2008
2007
$
$
38,607
96,769
37,392
—
—
—
36,586
7,280
80,832
223
(572)
12,301
461
21,026
$
56,051
82,541
17,695
—
2
—
44,866
37,071
240,215
4,815
5,876
508
—
—
39,290
91,662
18,020
5,692
511
3,570
196,683
33,283
195,839
50,216
—
—
—
—
Employment Contracts
The Company has executed Employment Contracts with its Chief Executive Officer and its Chairman of the Board. The
contracts for both are exactly the same. The contracts expire on December 31, 2010. The contracts provide for a base salary
which commenced in 1994 in the amount of $300,000, with a year-to-year CPI or 6% plus 2.5% of the Company’s pre-tax
income plus depreciation and amortization, plus 20% of the base salary for the fiscal year plus fringes. The “2.5% measure”
in the bonus provision of the two contracts was amended on November 3, 1998 so as to calculate it against income before
income taxes, plus depreciation, amortization and expenditures for media and cooperative advertising in excess of
$8,000,000. On May 24, 2001, the contract was amended increasing the base salary then in effect by $100,000 per annum.
Upon expiration of the employment contracts, the agreement provides that the executives will serve as consultants to the
Company for an additional five years. For the consulting services provided, the executives will be paid fifty percent (50%)
of their annual base salary plus bonus. The Employment Contracts also provide that upon the death of the Chief Executive
Officer and its Chairman of the Board within the employment or consulting period, the Company is obligated for two
successive years to pay their respective estate an amount equal to their total compensation at that time.
- 79 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 — COMMITMENTS AND CONTINGENCIES (Continued)
Employment Contracts (Continued)
David Edell’s sons, Dunnan Edell and Drew Edell had five year employment contracts in the amounts of $270,000 and
$200,000 respectively, which were to expire on November 2007. On February 10, 2006, the Board of Directors extended
the contracts for Dunnan Edell and Drew Edell to December 31, 2010. Dunnan Edell is a director and President of the
Company. Drew Edell is the Vice President of Product Development and Production. On July 1, 2003, Dunnan Edell’s
salary was increased to $300,000, and on January 5, 2004 Drew Edell’s salary was increased to $225,000 and in 2005, it
was increased to $250,000. On May 17, 2007 the Board of Directors amended the contracts for Dunnan Edell and Drew
Edell, extending the contracts to November 30, 2012, and increasing the base salary to $350,000 and $275,000 respectively.
Collective Bargaining Agreement
On July 8, 2008, the Company signed a new collective bargaining agreement with Local 108, L.I.U. of N.A., AFL-CIO
with similar provisions of the one that expired on January 1, 2008. The new agreement is effective January 1, 2008. Other
than standard wage, holiday, vacation and sick day provisions, the agreement calls for CCA to contribute to the Recycling
and General Industrial Union Local 108 Welfare Fund (“Welfare Fund”) certain benefits costs. The Welfare Fund will be
providing medical, dental and life insurance for the Company’s employees covered under the collective bargaining
agreement. Previously, the Company provided the covered employees medical, dental and life insurance benefits directly.
The new collective bargaining agreement is in effect through December 31, 2010. This agreement pertains to 31% of the
CCA labor force.
Litigation
On September 30, 2009 the Company was served with a class action suit Denise Wally v. CCA Industries, Inc. The claim,
which did not specify any damages, was filed in the Superior Court, State of California, County of Los Angeles, alleging
false and misleading claims about the Company’s weight loss dietary supplement product sold in California in violation of
the California Business and Professional Code. The Company believes that the allegations are without any merit and
intends to vigorously defend the case. However, there can be no assurance that the Company’s position will be upheld.
There is no other significant litigation presently outstanding against the Company.
- 80 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 — COMMITMENTS AND CONTINGENCIES (Continued)
Dividends and Capital Transactions
On December 5, 2007, the board of directors declared a $0.10 per share dividend for the first quarter ending February 29,
2008. The dividend was payable to all shareholders of record as of February 1, 2008, and was paid on March 1, 2008. On
February 25, 2008, the board of directors declared an $0.11 per share dividend for the second quarter ending May 31, 2008.
The dividend was payable to all shareholders of record as of May 1, 2008, and was paid on June 1, 2008. On July 7, 2008,
the board of directors declared an $0.11 per share dividend for the third quarter ending August 31, 2008. The dividend was
payable to all shareholders of record as of August 1, 2008, and was paid on September 1, 2008. On October 13, 2008, the
board of directors declared a $0.11 per share dividend for the fourth quarter ending November 30, 2008. The dividend was
payable to all shareholders of record as of November 1, 2008 and was paid on December 1, 2008.
On January 28, 2009, the board of directors declared a $0.11 per share dividend for the 1st quarter ending February 28,
2009. The dividend was payable to all shareholders of record as of February 3, 2009 and was paid on March 3, 2009. On
April 8, 2009 the board of directors declared a $0.07 per share dividend for the second quarter of 2009. The dividend was
payable to all shareholders of record as of May 1, 2009 and was paid on June 1, 2009. On June 29, 2009, the board of
directors declared a $0.07 dividend for the third quarter of 2009. The dividend was payable to all shareholders of record as
of August 3, 2009 and was paid on September 3, 2009. On October 12, 2009, the board of directors declared a $0.07
dividend for the fourth quarter of 2009. The dividend was payable to all shareholders of record as of November 2, 2009 and
was paid on December 2, 2009.
NOTE 13 — 401 (K) PLAN
The Company has adopted a 401(K) Profit Sharing Plan that covers all employees with over one year of service and
attained age 21. Employees may make salary reduction contributions up to twenty-five percent of compensation not to
exceed the federal government limits. The Plan allows for the Company to make discretionary contributions. For all Fiscal
periods to date, the Company did not make any contributions.
NOTE 14 — CONCENTRATION OF RISK
Most of the Company’s products are sold to major drug and food chains merchandisers, and wholesale beauty-aids
distributors throughout the United States and Canada.
- 81 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 — CONCENTRATION OF RISK (Continued)
During the years ended November 30, 2009, 2008 and 2007, certain customers each accounted for more than 5% of the
Company’s net sales, as follows:
Customer
Walmart
Walgreen
Rite Aid
CVS
McLanes
Foreign Sales
*
under 5%
For the Year Ended November 30,
2008
2009
2007
36%
14%
6%
7%
*
5.6%
44%
10%
5%
7%
*
4%
40%
8%
8%
6%
5%
3%
The loss of any one of these customers could have a material adverse affect on the Company’s earnings and financial
position.
During the years November 30, 2009, 2008 and 2007, certain products within the Company’s product lines accounted for
more than 10% of the Company’s net sales as follows:
Category
Dietary Supplement
Skin Care
Oral Care
Nail Care
For the Year Ended November 30,
2008
2009
2007
42%
28%
16%
10%
33%
29%
25%
10%
31%
29%
25%
11%
The Company maintains cash balances at several banks. Accounts at each institution are insured by the Federal Deposit
Insurance Corporation for the full balance under the Temporary Liquidity Guarantee Program. In addition, the Company
maintains accounts with several brokerage firms. The accounts contain cash and securities. Balances are insured up to
$500,000 (with a limit of $100,000 for cash) by the Securities Investor Protection Corporation (SIPC). Each brokerage firm
has substantial insurance beyond the $500,000 SIPC limit.
- 82 -
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 — TRANSACTION EXPENSES
On November 1, 2006 the Company entered into a letter of intent with Dubilier and Company relating to a proposed
acquisition of the Company by Dubilier. A copy of the letter of intent was included as an exhibit to the Company’s 8K filed
Report with the Securities and Exchange Commission on November 2, 2006. On April 2, 2007, the Company received an
opinion from an investment banking company that from a financial point of view, the proposed transaction was fair to all
shareholders. On April 10, 2007 the Company was advised by Dubilier that it was unable to obtain its financing, despite the
fact that the Company had met all of its financial requirements of earnings before income tax, depreciation, and
amortization, as well as net working capital. The board of directors terminated all negotiations with Dubilier. For the year
ended November 30, 2007, costs associated with the proposed acquisition amounted to $717,850, and are included as
transaction costs in the statement of income.
NOTE 16 — SUBSEQUENT EVENTS
On December 21, 2009, the Board of Directors declared a $0.07 per share dividend for the first quarter of 2010 to all
shareholders of record as of February 1, 2010 and payable on March 1, 2010.
On February 11, 2010, the Company received a letter from Wells Fargo Securities, LLC, informing the Company that they
will be repurchasing the New Jersey Higher Education Bond auction rate security from the Company for the par value of
$500,000 pursuant to a settlement agreement between Wells Fargo Securities LLC and the California Attorney General.
On February 24, 2010, the Board of Directors declared a $0.07 per share dividend for the second quarter of 2010 to all
shareholders of record as of May 3, 2010 and payable on June 3, 2010.
The Company has evaluated subsequent events that occurred during the period of November 30, 2009 through February 25,
2010, the date that these financial statements were available to be issued. Except as disclosed above, management
concluded that no other events required potential adjustment to, or disclosure in these consolidated financial statements.
- 83 -
NOTE 17 — EARNINGS PER SHARE
Basic earnings per share is calculated using the average number of common shares outstanding. Diluted earnings per share
is computed on the basis of the average number of common shares outstanding plus the effect of outstanding stock options
using the “treasury stock method”.
Year Ended November 30,
2008
2009
2007
Net income available for common shareholders
$ 3,431,644
$ 1,412,886
$ 5,537,795
Weighted average common shares outstanding- Basic
7,054,442
7,054,442
7,029,611
Net effect of dilutive stock options
—
7,204
29,278
Weighted average common shares and common shares equivalents —
Diluted
Basic earnings per share
Diluted earnings per share
7,054,442
7,061,646
7,058,889
$
$
0.49
0.49
$
$
0.20
0.20
$
$
0.79
0.78
- 84 -
SCHEDULE II
CCA INDUSTRIES, INC. AND SUBSIDIARIES
VALUATION ACCOUNTS
YEARS ENDED NOVEMBER 30, 2009, 2008 AND 2007
COL. A
Description
Year Ended November 30, 2009:
Allowance for doubtful accounts
Reserve for returns and allowances
Reserve of inventory obsolescence
Year Ended November 30, 2008:
Allowance for doubtful accounts
Reserve for returns and allowances
Reserve of inventory obsolescence
Year Ended November 30, 2007:
Allowance for doubtful accounts
$
$
$
$
$
$
$
COL. B
Balance at
Beginning
Of Year
COL. C
Additions
Charged To
Costs and
Expenses
COL. D
COL. E
Deductions
Balance
At End
Of Year
154,291
668,738
$
(23,068)
3,518,949
$
—
2,734,096
$
131,223
1,453,591
823,029
$ 3,495,881
$ 2,734,096
$ 1,584,814
357,593
$
760,001
578,941
141,607
732,696
$
$
538,653
12,684
2,118,592
$
$
—
2,182,550
874,303
$ 2,131,276
$ 2,182,550
604,746
$
173,715
$
199,520
$
$
$
154,291
668,738
823,029
578,941
185,779
$
(42,544)
$
1,628
$
141,607
Reserve for returns and allowances
840,418
6,039,823
6,147,545
732,696
Reserve of inventory obsolescence
$
777,715
$
62,827
$
235,796
$ 1,026,197
$ 5,997,279
$ 6,149,173
$
$
874,303
604,746
- 85 -
Exhibit 31.1
CERTIFICATION
I, David Edell, certify that:
1
2
3
I have reviewed this annual report on Form 10-K of CCA Industries, Inc.;
To the best of 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;
To the best of 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.
4
The Registrant’s other certifying officer, Stephen A. Heit, 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)) for the Registrant and have:
a)
b)
c)
d)
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;
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;
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
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 affect, the Registrant’s internal control over
financial reporting; and
5.
The Registrant’s other certifying officer, Stephen A. Heit, and I have disclosed, based on our most recent evaluation of
internal controls 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.
Date: February 25, 2010
/s/ DAVID EDELL
David Edell
Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, Stephen A. Heit, certify that:
1.
2.
3.
I have reviewed this annual report on Form 10-K of CCA Industries, Inc.;
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;
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.
4.
The Registrant’s other certifying officer, David Edell, 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)) for the Registrant and have:
a.
b.
c.
d.
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;
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;
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
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 affect, the Registrant’s internal control over
financial reporting; and
5.
The Registrant’s other certifying officer, David Edell, and I have disclosed, based on our most recent evaluation of internal
controls 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.
Date: February 25, 2010
/s/ STEPHEN A. HEIT
Stephen A. Heit
Chief Financial Officer
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of CCA Industries, Inc. (the “Registrant”) on Form 10-K for the annual period ended
November 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David Edell,
Chief Executive Officer of the Registrant, certify, in accordance with 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1)
The Report, to which this certification is attached, fully complies with the requirements of section 13(a) of the
Securities Exchange Action of 1934; and
2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Registrant.
Date: February 25, 2010
/s/ DAVID EDELL
David Edell
Chief Executive Officer
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of CCA Industries, Inc. (the “Registrant”) on Form 10-K for the annual period ended
November 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen A. Heit,
Chief Financial Officer of the Registrant, certify, in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report, to which this certification is attached, fully complies with the requirements of section 13(a) of the
Securities Exchange Action of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Registrant.
Date: February 25, 2010
/s/ STEPHEN A. HEIT
Stephen A. Heit
Chief Financial Officer