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ID PERFUMES, INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.(Edgar Glimpses Via Acquire Media NewsEdge) Cautionary Note about Forward-Looking Statements Forward-Looking Statements We caution that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this Quarterly Report on Form 10-Q or made by our management involve risks and uncertainties and are subject to change based on various important factors, many of which may be beyond our control. Accordingly, our future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. You can identify these statements as those that may predict, forecast, indicate or imply future results, performance or advancements and by forward-looking words such as "believe," "anticipate," "expect," "estimate," "predict," "intend," "plan," "project," "will," "will be," "will continue," "will result," "could," "may," "might" or any variations of such words or other words with similar meanings. Forward-looking statements address, among other things, our expectations, our growth strategies, including our plans to expand our perfume line and distribution channels, increase profit margins and return on invested capital, projections of our future profitability, results of operations, capital expenditures or our financial condition or other "forward-looking" information and includes statements about revenues, earnings, spending, margins, liquidity, inventory, private label products, our actions, plans or strategies. We are including this cautionary statement in this report to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf, of us. Important factors that may cause actual results to differ from projections include, for example: - the success or failure of management's efforts to implement the Registrant's plan of operation; - the ability of the Registrant to fund its operating expenses; - the ability of the Registrant to compete with other companies that have a similar plan of operation; - the effect of changing economic conditions impacting our plan of operation; - the ability of the Registrant to meet the other risks as may be described in future filings with the SEC. The following factors, among others, in some cases have affected and in the future could affect our financial performance and actual results and could cause actual results for fiscal 2013 and beyond to differ materially from those expressed or implied in any forward-looking statements included in this report or otherwise made by our management: the intense competition in the sporting goods industry and actions by our competitors; our inability to manage our growth, open new stores on a timely basis and expand successfully in new and existing markets; the availability of retail store sites on terms acceptable to us; the cost of real estate and other items related to our stores; our ability to access adequate capital; changes in consumer demand; risks relating to product liability claims and the availability of sufficient insurance coverage relating to those claims; our relationships with our suppliers, distributors or manufacturers and their ability to provide us with sufficient quantities of products; any serious disruption at our distribution or return facilities; the seasonality of our business; the potential impact of natural disasters or national and international security concerns on us or the retail environment; risks related to the economic impact or the effect on the U.S. retail environment relating to instability and conflict in the Middle East or elsewhere; risks relating to the regulation of the products we sell, risks associated with relying on foreign sources of production; risks relating to implementation of new management information systems; factors associated with our pursuit of strategic acquisitions; risks and uncertainties associated with assimilating acquired companies; risks associated with our exclusive brand offerings; the loss of our key executives, our ability to meet our labor needs; changes in general economic and business conditions and in the specialty retail or sporting goods industry in particular; our ability to repay or make the cash payments under our senior convertible notes; changes in our business strategies; any factor described under Part II-Item 1A Risk Factors in our Form 10-Q filings and other factors discussed in other reports or filings filed by us with the Securities and Exchange Commission. 24-------------------------------------------------------------------------------- TABLE OF CONTENTS In addition, we operate in a highly competitive and rapidly changing environment; therefore, new risk factors can arise, and it is not possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on our business or the extent to which any individual risk factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. We do not assume any obligation and do not intend to update any forward-looking statements except as may be required by securities laws. Our Business We manufacture, distribute, market, promote, and sell perfumes and related products licensed through celebrities. Our objective is to develop and launch quality fragrances utilizing nationally recognized celebrities to endorse our product offerings. In furtherance thereof we have signed exclusive licensing agreements with Selena Gomez and Adam Levine and intend to market their fragrance under the "ID" company name. Copies of these agreements were filed as exhibits to our Registration Statement filed on Form 10 with the Securities and Exchange Commission on April 30, 2013. 25-------------------------------------------------------------------------------- TABLE OF CONTENTS Our marketing efforts focus principally on promoting the quality, value and benefits of our products. Each of our licensed fragrances are distinctively positioned, have a single image. We may expand our operations through the creation of fragrance family extensions. Our goal is to create a new family of fragrances for each of our licensed brands. We may introduce seasonal brands as well. Selena Gomez We launched the Selena Gomez fragrance in May 2012 with a national exclusive roll-out in more than 700 Macy stores throughout the country. We believe that this product launch is an important step in creating brand awareness, reach new customers and increase brand exposure. Adam Levine We launched Adam Levine's debut fragrance for men and women in February 2013. The initial launch event was combined with a range of events including a group of Adam Levine Personal Appearances to promote, build awareness, and stimulate sales for the brand globally. We partnered with Commonwealth Projects to develop a proprietary "POP-UP" installation in the center of Los Angeles, California for one (1) week. Competition The fragrance industry is highly competitive and can change rapidly due to consumer preferences and industry trends. Competition in this industry is based on brand strength, pricing and assortment of products, in store presence and visibility, innovation, perceived value, product availability, order fulfillment, service to the customer, promotional activities, advertising, special events, new product introductions, e-commerce and mobile commerce initiatives, and other activities. Production and Supply for our fragrance lines The launch of a new fragrance line involves input from many different sources, from perfume designers to glass makers. Contract manufacturers receive raw materials and components on our behalf, and conduct basic fill and assembly activities to convert materials into finished sellable items to be used to fulfill customer orders. In addition, these manufacturers may handle distribution services for warehousing, order processing, and customer service. Product Liability Like other retailers, distributors and manufacturers, we face an inherent risk of exposure to product liability or product recall claims. We carry an umbrella product liability policy. In the event that we do not have adequate insurance, product liabilities relating to defective products could have a material adverse effect on our operations and financial conditions. Employees As of March 31, 2013 we had 21 full time and one part time employees. 26-------------------------------------------------------------------------------- TABLE OF CONTENTS Critical Accounting Policies and Estimates Discussion of Critical Accounting Policies We make estimates and assumptions in the preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations. These accounting policies generally require management's most difficult and subjective judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We do not have an independent Board of Directors. Our sole board member serves as our chief executive officer. As such, our chief executive officer must make both managerial and operational decisions on behalf of the Board of Directors. Revenue Recognition We sell our products to department stores, perfumeries, specialty retailers, mass-market retailers and domestic and international wholesalers and distributors. Sales of such products are denominated in U.S. dollars. We recognize revenues when merchandise is shipped and the risk of loss passes to the customer. Net sales are comprised of gross revenues less returns, trade discounts and allowances. Accounts Receivable Accounts receivable represent payments due to the Company for previously recognized net sales, reduced by allowances for sales returns and doubtful accounts. Accounts receivable balances are written-off against the allowance for doubtful accounts when they become uncollectible. Recoveries of accounts receivable previously recorded against the allowance are recorded in the statement of income when received. We generally grant credit based upon our analysis of the customer's financial position as well as previously established buying patterns. Sales Returns Generally, we permit our retail customers to return their unsold products if properly requested, authorized and approved. We regularly review and revise, as deemed necessary, our estimate of reserves for future sales returns based primarily upon historic trends and relevant current data including information provided by retailers regarding their inventory levels. In addition, as necessary, specific accruals may be established for significant future known or anticipated events. The types of known or anticipated events that we have considered, and will continue to consider, include, but are not limited to, the financial condition of our customers, store closings by retailers, changes in the retail environment and our decision to continue to support new and existing products. We record estimated reserves for sales returns as a reduction of sales, cost of sales and accounts receivable. Returned products are recorded as inventories and are valued based upon estimated realizable value. The physical condition and marketability of returned products are the major factors we consider in estimating realizable value. Actual returns, as well as estimated realizable values of returned products, may differ significantly, either favorably or unfavorably, from our estimates, if factors such as economic conditions, inventory levels or competitive conditions differ from our expectations. Promotional Allowance We have various performance-based arrangements with certain retailers. These arrangements primarily allow customers to take deductions against amounts owed to us for product purchases. The costs that our Company incurs for performance-based arrangements are netted against revenues on our Company's statement of income. Estimated accruals for promotions and advertising programs are recorded in the period in which the related revenue is recognized. We review and revise the estimated accruals for the projected costs for these promotions. Actual costs incurred may differ significantly, either favorably or unfavorably, from estimates if factors such as the level and success of the retailers' programs or other conditions differ from our expectations. 27-------------------------------------------------------------------------------- TABLE OF CONTENTS Inventory Inventory is stated at the lower of cost or market value. Cost is principally determined by the average cost method. We record adjustments to the cost of inventory based upon our sales forecast and the physical condition of the inventories. These adjustments are estimates, which could vary significantly, either favorably or unfavorably, from actual requirements if future economic conditions or competitive conditions differ from our expectations. Equipment and Other Long-Lived Assets Equipment, primarily consisting of molds, is recorded at cost and is depreciated on a straight-line basis over the estimated useful lives of such assets. Changes in circumstances such as technological advances, changes to our business model or changes in our capital spending strategy can result in the actual useful lives differing from our estimates. In those cases where we determine that the useful life of equipment should be shortened, we would depreciate the net book value in excess of the salvage value, over its revised remaining useful life, thereby increasing depreciation expense. Factors such as changes in the planned use of equipment, or market acceptance of products, could result in shortened useful lives. Income taxes The Company accounts for income taxes using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in its financial statements or tax returns. The net deferred tax assets assume sufficient future earnings for their realization, as well as the continued application of currently anticipated tax rates. Included in net deferred tax assets is a valuation allowance for deferred tax assets, where management believes it is more-likely-than-not that the deferred tax assets will not be realized in the relevant jurisdiction. If the Company determines that a deferred tax asset will not be realizable, an adjustment to the deferred tax asset will result in a reduction of net earnings at that time. In addition, the Company follows the provisions of uncertain tax positions as addressed in ASC topic 740-10-65-1. Derivative Instruments The Company evaluates its convertible debt, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 810-10-05-4 of the FASB Accounting Standards Codification and paragraph 815-40-25 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the Statement of Operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date. Results of Operations Three Months Ended March 31, 2013 compared to March 31, 2012 The following table sets forth the percentage relationship net sales to costs of sales for each of our reporting lines in our statements of operations. This table should be read in conjunction with the following discussion and with our condensed financial statements, including the related notes. For the Three Months Ended March 31, March 31, 2013 2012 Sales $ 553,976 319,233 Cost of sales $ 438,420 226,877 Gross margin 115,556 92,356 Gross margin as a percentage of sales 20.9 % 28.9 % Revenues. Total revenues for the three months ended March 31, 2013 increased $234,743 or 74% as compared to the three months ended March 31, 2012, primarily due to the February 2013 launch of our Adam Levine fragrance line. Such increase was net of $414,000 of sales returns for the three months ended March 31, 2013. There were no returns for the three months ended March 31, 2012. 28-------------------------------------------------------------------------------- TABLE OF CONTENTS Gross Profit. Our gross profit as a percentage of sales for the three months ended March 31, 2013 decreased 8% as compared to the three months ended March 31, 2012. This decrease is primarily due to product returns and some one-time costs relating to the February 2013 launch of Adam Levine. The Company incurred costs in the first quarter of 2013 and did not incur similar costs in the first quarter of 2012. Sales for the first quarter of 2012 consisted of raw materials to related parties and did not include all costs associated with fragrance development as the Company had not yet launched a fragrance line in the first quarter of 2012. In the three months ended March 31, 2013, sales were substantially to department stores, perfumeries, specialty retailers, mass-market retailers, domestic and international wholesalers and distributors which resulted in higher gross margins, but were decreased as a result of product returns. In addition, our sales in the first quarter of 2013 and 2012 included $268,000 and $319,000 of sales to related parties. In 2013, we expect continued increases in our international sales, primarily in Canada and the United Kingdom, as well as increases in domestic sales resulting from new product launches for existing celebrities. We have an agreement with a vendor to provide for order fulfillment, warehouse, logistic and administrative services for our fragrance products. In accordance with the agreement, the vendor is also entitled to fees, as defined, based on volume of customers' orders processed, per unit costs, hourly rates incurred by this vendor. The agreement is one year with renewal options. In the event we do not renew our agreement and enter in new agreement with less favorable terms, our gross margins would decrease. Costs relating to gift with purchase (GWP) promotions are reflected in Selling, General and Administrative expenses and aggregated $61,000 for the three months ended March 31, 2013. Accordingly, our gross margin may not be comparable to other companies, which may include these expenses as a component of cost of sales. Had this amount been included in cost of sales, our gross margins would be reduced by 10.4% in 2013. There were no GWP costs for the quarter ended March 31, 2012. Selling, general and administrative expenses - During the second half of 2011, the Company entered the fragrance business, and began to sign licensing, manufacturing and distribution agreements for fragrance products relating to a celebrity artist that it had signed to a five year license. During 2012, the Company began to sell its products to department stores, perfumeries, specialty retailers, mass-market retailers, domestic and international wholesalers and distributors. Sales growth in 2012 was due in great part to the launch and rollout of the fragrance products relating to Selena Gomez. During February 2013, the Company launched the Adam Levine fragrance line. The related Selling, General and Administrative expenses are discussed below for the three months ended March 31: 2013 2012 Professional fees $ 297,246 $ 304,228 Royalties 208,333 - Advertising and Promotion 923,011 102,757 Management fee - 202,538 Payroll 641,139 4,497 Other 352,546 25,523 $ 2,422,275 $ 639,543 Professional fees - These expenses are primarily related to the Company hiring contractors/consultants and outside accountants and legal professionals to enable the Company to meet the filing requirements for the filing of Form 10. We are in the process of hiring internal accountants and expect our professional fees relating to contractors/consultants to decrease in the second quarter of 2013, while we expect our payroll to increase to a lesser degree. Additionally, the Company expects to incur additional legal fees throughout 2013 relating to our current litigation. 29-------------------------------------------------------------------------------- TABLE OF CONTENTS Royalties - Royalty expense includes the amortization and/or accrual of royalties pursuant to our fragrance licensing agreements. The Company is required to pay a minimum royalty, whether or not any product sales are made. Advertising - The Company is required to spend minimum amounts for advertising based upon sales volume. These costs include promotional items, mailings, launch events, costs relating to gift with purchase promotions, department store models and domestic coop advertising expenses. Our annual advertising costs generally commence with each product launch. As a result, if our product launch occurs during the year, we would expect to incur more launch and advertising costs during the first few months following the product launch. The product launch for Adam Levine occurred in February 2013, and accordingly we had proportionately higher advertising costs following this launch. During the first quarter of 2013, the Company incurred $41,000 and $882,000 in advertising and promotion expenses for Selena Gomez and Adam Levine, respectively, for a total advertising and promotion expense of $923,000. During the first quarter of 2012, the Company incurred $103,000 in advertising and promotion expenses for Selena Gomez. The Company is currently in compliance with minimum advertising requirements at March 31, 2013. Payroll - Payroll includes compensation for marketing, sales, administration and executive personal and increased as a result of the product launch in 2013. We plan on internalizing many of the accounting related contractor/consultant expenses that are included in professional fees, during the second quarter of 2013, and expect an increase to our corporate payroll. Other - Included in other are two of our largest expenses, consisting of rent and insurance. While we do not expect an increase in these expenses, there is no certainty that our insurance related expense will not significantly increase. As we launch and roll out fragrances for new celebrities, our variable costs such as royalties, advertising and payroll are expected to increase. Interest expense - Interest was incurred substantially to the Company's chairman CEO principal shareholder and family members. Interest expense essentially the same in comparing the first quarter of 2013 to the first quarter of 2012 due to the timing of new loans and the addition of interest free loans. Net loss from continuing operation - As a result of the factors described above, the Company reported a net loss from continuing operations of $2.4 million in the first quarter of 2013 compared to net loss of $601,000 in the first quarter of 2012. The increase in our net loss from continuing operations is primarily due to the Company entering the fragrance business in the fourth quarter of 2011, which included significant advertising and promotion costs beginning in April 2012, and has incurred substantial amounts in setting up an infrastructure along with our inability to achieve a successful level of revenues to cover our selling, general and administrative expenses. Such costs were not significant for the quarter ended March 31, 2012. Discontinued Operations - Through September 30, 2011, the Company primarily owned and operated retail stores in several states which sold active beach and rugged sportswear. The Company began closing stores at unprofitable locations in 2009 and continued to do so through 2011. In this connection, on September 30, 2011, the Company formally decided to discontinue its retail store operations that sold active sportswear, and to close, abandon, dispose or sell its assets relating to its retail operations. The Company decided to dispose of its retail stores because it incurred significant operating losses and was unable to sustain a viable business model for the past six years. Retail sales, reported in discontinued operations, aggregated $28,000 in the first quarter of 2012. Net loss reported in discontinued operations aggregated a loss of $200,000 in the first quarter of 2012. This is attributable to the Company completing the disposition of its retail business during 2012. The Company does not anticipate any additional discontinued operations amounts during 2013. Two stores that were disposed in 2011, whose leases were terminated by the landlord, are currently leased by the landlord to a former employee. Management, and based on the opinion of counsel, believe that the Company is not obligated for any lease payments beyond the termination dates, nor obligated to return the lease incentives or lease concessions previously given to the Company in prior years, which aggregates $12.6 million. In the event the Company would have to pay such amount, the payment would have a material impact on the Company's liquidity, capital resources and results of operations. Earnings per share - We compute basic and diluted loss per common share by dividing the losses applicable to common stock by the weighted average number of common shares outstanding. Currently our basic and fully diluted EPS calculations are the same because any increase in the number of dilutive shares would be anti-dilutive due to our net loss. 30-------------------------------------------------------------------------------- TABLE OF CONTENTS Liquidity and Capital Resources Our auditors have issued a going concern opinion on our audited financial statements for the years ended December 31, 2012 as we have experienced recurring losses and negative cash flows from operations. In addition, we have a net capital deficiency. These matters raise substantial doubt about our ability to continue as a going concern. We had a working capital deficiency of $13.5 million and $11.1 million as of March 31, 2013 and December 31, 2012, respectively. The increase in our working capital deficiency was primarily related to the Company's entry into the perfume business. As a result of our second brand licensing agreement, the Company anticipates it will require approximately $1.5 million to $2.1 million of sales per month to maintain its operations. Our principal funding requirements are for inventory purchases, advertising expenses, paying down accounts payable and debt. These capital requirements generally have been satisfied through cash flows from operations, the issuance of common stock and notes payable to affiliates and related parties. Our liquidity is impacted by a number of factors, including sales levels, proceeds from the sale of our factored accounts receivables to LSQ Funding Group, Inc., our Factor, the amount of credit that our vendors extend to us, customer deposits and our borrowing capacity from Company's chairman CEO principal shareholder and family members and affiliated companies owned and/or controlled by our Company's chairman CEO and principal shareholder. As of March 31, 2013, our loan payable totaled $230,000 and our related party and stockholder notes payable totaled $3,247,823 with interest rates from zero to 12%. The terms of repayment of these loans ranged from 30 days to 3 years. Substantially, all loans payable and related party and stockholder notes are in default and shown as current as of March 31, 2013 and December 31, 2012. See note 6 "Loan payable and stockholder notes" and note 7 "Note payable related party" for further discussion. Due to affiliate of $691,300 has no terms of repayment and is shown as current. Our accounts receivable were $285,187 at March 31, 2013. Our customers are generally given terms of payment within 30 days. Our purchases from related parties generally have no terms and are repaid when funds are available. Cash provided by (used in) operating activities of ($1 million) primarily represents income (loss) before depreciation and non-cash charges and is after changes in working capital. Cash provided by (used in) operating activities were inventory ($.9 million), accounts payable $.4 million, accrued liabilities $.4 million, and customer deposits $1.6 million. Working capital is significantly impacted by changes in accounts receivable, inventory, accounts payable and accrued liabilities and customer deposits. The Company's shortage of cash results in increases in accounts payable and accrued liabilities resulting from the Company's ability to extend its vendor terms to provide a significant portion of our liquidity. The Company's cash position was positively impacted by customer deposits. The increase in our inventory is needed to support our expected sales growth primarily resulting from our licensing activities. All sales are invoiced in U.S dollars and all customer payments are received in U.S. dollars. The Company does not engage in hedging transactions and believes that it is not subject to foreign currency related risks. Net cash used in investing activities increased by $.1 million and was primarily represents the purchases of molds which are used for product development. These purchases vary based on the number of new products we are developing each year. Our business is not capital intensive as we do own any manufacturing facilities and as such we have no material commitments for capital expenditures. Net cash from financing activities was $800,000. Such increase in cash reflects repayment of advances from affiliated company of $357,000 and proceeds from the issuance of common stock of $60,000 over net borrowings from related parties and stockholders of $64,000 and proceeds from the issuance of convertible debenture of ($500,000) and borrowings from a related company of ($570,000). We have no available short-term lines of credit or any long term borrowing arrangements with any financial institution and as such we are dependent of related party borrowings, the issuance of stock, and other financial debt sources to provide cash for our financing activities. Our cash position was $34,000 and $316,000 at March 31, 2013 and December 31, 2012, respectively. 31-------------------------------------------------------------------------------- TABLE OF CONTENTS Plan of Operation We were not able to generate any significant cash flow to fund our current operations. However, we believe that our current business model will sustain us for the next twelve months. Currently, we are seeking additional outside funding to keep the business operational; however there is no assurance additional debt or capital will be available to us on acceptable terms. We believe our entrance into the perfume business in the third quarter of 2011, and entering into distribution agreements will establish viable distribution channels for our fragrance products. Management believes that the actions taken may provide an opportunity to improve liquidity and profitability. However, if we were to expand operations through acquisitions, new licensing arrangements or both, we may need to obtain additional debt or equity financing. Further, we are implementing a cash conservation strategy wherever possible including active COO involvement in substantially all contracts and purchase decisions, negotiating payment terms with vendors, and reducing our use of consulting services. For instance, we replaced a contract manufacturer/distributer with one that provides more favorable payment terms. However, our ability to continue to effectively improve our terms with vendors, raise cash through equity or debt financing with third parties will be difficult in the current credit environment. There are no assurances that any equity offering and/or debt financing will be successful or sufficient to meet our cash requirements or that our cash conservation strategy will be successful. Even if we were able to obtain debt or equity financing, the terms of such financing may be very unfavorable to us. Further, any sale of newly issued debt or equity securities could result in additional dilution to our current stockholders. OFF-BALANCE SHEET ARRANGEMENTS As of March 31, 2013, we have guaranteed the repayment of a $1.2 million borrowing of Gigantic Parfums, LLC, a company under common control. The loan provides for monthly payments of interest only at 20%, and the loan balance is due in 2016. In the event the loan is prepaid, the maximum amount of total repayment including interest could aggregate $2.4 million as of March 31, 2013. The Company secured substantially all of its assets for this loan. We have not recorded any liabilities associated with the aforementioned guaranty as of March 31, 2013 or December 31, 2012. Gigantic is current on its loan payments as of March 31, 2013. Dividends Holders of common stock are entitled to receive such dividends as the board of directors may from time to time declare out of funds legally available for the payment of dividends. No cash dividends have been paid on our common stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. |