ICTV Brands Inc. - FORM 10-K

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EXCEL - IDEA: XBRL DOCUMENT - ICTV Brands Inc.	Financial_Report.xls
EX-31.2 - EXHIBIT 31.2 - ICTV Brands Inc.	ex31_2.htm
EX-31.1 - EXHIBIT 31.1 - ICTV Brands Inc.	ex31_1.htm
EX-32 - EXHIBIT 32 - ICTV Brands Inc.	ex32.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2011

Commission File Number 0-49638

INTERNATIONAL COMMERCIAL TELEVISION INC.

(Name of Registrant as Specified in Its Charter)

Nevada		76-0621102
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

487 Devon Park Dr. Ste 212 Wayne, PA 19087

(Address of Principal Executive Offices) (Zip Code)

(206) 780-2921

(Registrant’s Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Exchange Act: NONE.

Securities registered under Section 12(g) of the Exchange Act: COMMON STOCK, PAR VALUE, $0.001

Indicate by checkmark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes x No

Indicate by checkmark if registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. o Yes x No

Indicate by checkmark 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 requirements for the past 90 days. o Yes x No

Indicate by checkmark 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 the 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. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12B-2 of the Exchange Act.

Larger Accelerated Filer o	Accelerated Filer o
Non-Accelerated Filer o	Small Reporting Company x

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12B-2 of the Securities Act). o Yes x No

The aggregate market value of the voting common stock held by non-affiliates on June 30, 2011 (the last business day of our most recently completed second fiscal quarter) was $1,750,776 using the closing price of $0.10 on June 30, 2011.

As of March 26, 2012, the registrant had issued and outstanding 20,227,756 shares of common stock.

Documents Incorporated by Reference: None.

INTERNATIONAL COMMERCIAL TELEVISION INC.

Index to

Annual Report on Form 10- K

For the Year Ended December 31, 2011

Part I		Page
Item 1.	Description of Business	3
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	12
Item 2.	Description of Property	12
Item 3.	Legal Proceedings	12
Item 4.	Mine Safety Disclosures	12

Part II
Item 5.	Market for Common Equity, Related Stockholder Matters and Issuer’s Purchases of Equity Securities	13
Item 6.	Selected Financial Data	14
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	14
Item 7A.	Market Risk Disclosures	18
Item 8	Financial Statements	18
Item 9	Changes in and Disagreements with Accountants on Auditing and Financial Disclosure	18
Item 9A	Controls and Procedures	18
Item 9B	Other Information	19

Part III
Item 10.	Directors, Executive Officers and Corporate Governance	20
Item 11.	Executive Compensation	21
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	21
Item 13.	Certain Relationships and Related Transactions and Director Independence	22
Item 14.	Principal Accountant Fees and Services	22

Part IV
Item 15.	Exhibits and Financial Statement Schedules	23

Index

Part I

FORWARD-LOOKING STATEMENTS

The matters discussed in this Form 10- K may contain “forward looking statements” (as such term is defined in the Private Securities Litigation Reform Act of 1995). These statements can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “intends,” “should,” or “anticipates” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. The safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, apply to forward-looking statements made by International Commercial Television Inc. (“ICTV”). You should not place undue reliance on forward-looking statements. Forward-looking statements involve risks and uncertainties. The actual results that ICTV achieves may differ materially from any forward-looking statements due to such risks and uncertainties. These forward-looking statements are based on current expectations, and ICTV assumes no obligation to update this information. Readers are urged to carefully review and consider the various disclosures made by ICTV in our reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect its business.

ITEM 1. DESCRIPTION OF BUSINESS

Overview

International Commercial Television, Inc. (“ICTV” or the “Company” or “we” or “us”) sells various consumer products via infomercials and through other channels. We produce long-form infomercials and short-form advertising spots and sell our proprietary brands of advertised products directly to our viewing audience. In addition, we sell products via televised shopping networks, the internet, and retail distribution channels.

The goal of our business plan is to create brand awareness through our infomercial and spot advertising so that these brands and their families of products may be sold in dedicated shelf-space areas by product category in traditional retail stores. We acquire the rights to our products that we market via licensing agreements, acquisition and in-house development. We currently sell these products domestically and internationally.

A short-form spot is a 30-second, 60-second, or 120-second commercial, while a long-form infomercial is a 28 1/2-minute direct response commercial. Short-form spots generally feature products that can be explained or demonstrated in two minutes or less, with a selling price of $29 or less. Long-form infomercials generally feature products with a selling price of $30 - $300 and are usually unique, with more benefits and features, and thus require a lengthier demonstration and explanation.

For the fiscal years ended December 31, 2011 and December 31, 2010, 58% and 49%, respectively, of our product sales were generated from products sold domestically.

Our international division represented 42% and 51% of our sales volume for the years ended December 31, 2011 and 2010, respectively. International revenues resulted primarily from the sale of products to international distributors who in turn marketed our products to their respective markets via direct response and retail marketing channels.

We are a Nevada corporation, and our headquarters are located at 487 Devon Park Drive, Suite 212, Wayne, PA 19087.

The ICTV Strategy

Many of our competitors who produce successful infomercials fail to capitalize on their success by associating the products featured in their infomercials with a particular brand. We think that there is a unique opportunity to do so. Our goal is to create several brands of products and to introduce our brands of products to the market by airing infomercials featuring one or a few anchor products for each particular brand. As our brands achieve recognition through the infomercial of the anchor product(s), we plan to sell the anchor product(s) and related families of products under those brands in traditional retail stores. Our objective is to have our brands of proprietary products sold in retail stores in dedicated shelf space areas by product category. We are currently developing the infrastructure we will need to develop our brands and to take families of products under those brands to the traditional retail environment.

Our Proposed Brands and Current Products

We continually seek to develop, acquire or obtain the license to consumer products that we believe can be distributed and marketed profitably, especially in the retail environment. Our success depends, in part, on our ability to market products that appeal to viewers and that can be easily associated with a particular brand. In order to succeed, we are also aware of the need to identify new products to supplement and possibly replace our existing product lines as they mature through product life cycles.

Index

Our product development and marketing department is the backbone of our Company. We put forth extensive effort to research and develop new products that are unique and that will be suitable both for direct response marketing in infomercials and for sale in traditional retail stores. Our development of new product ideas stems from a variety of sources, including inventors, trade shows, strategic alliances with manufacturing and consumer product companies, industry conferences, and the continuous review of new developments within targeted brand and product categories. In addition, we also receive unsolicited new product proposals from independent parties.

The Company also internally generates ideas for new products that it wishes to develop. If the Company has an idea for a product, it will present prototype specifications to one of its manufacturers to develop a prototype, and the Company will then evaluate the feasibility of selling the product through an infomercial.

When we evaluate a product for its suitability for an infomercial, we consider how appropriate it is for television demonstration and how consumers will perceive the value of the product. Part of our selection criteria for new products are as follows:

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Products must be unique, demonstrable, have mass-market appeal and generally be unavailable elsewhere in the marketplace. Benefits must be capable of being demonstrated visually, preferably with support from customer testimonials;

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Must support a minimum 5 times mark-up from landed cost while still representing good perceived value to the consumer;

Must have a unique “hook” to be able to catch the attention of the viewer - infomercials simply portray the consumer’s problem and the solution provided by the product and usually present a significant before and after state - the bigger the problem solved by the product, the greater the sales potential;

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Easily and effectively promoted through sustained television branding;

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Supports a margin sufficiently high enough to maintain profitability to us when sold through conventional retailers;

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Has high volume sales potential, to ensure retailer interest;

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Exhibits potential for “back-end” sales either through traditional retail or by company-run “auto ship” continuity programs - the more related products that are available for upsell/back-end campaigns, the wider the advantage in the infomercial marketplace;

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Should have the potential to be turned into a long-term retail item – a product can drive retail sales by capitalizing on awareness advertising that is created with a successful infomercial; and

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Must be relatively easy to ship.

Our primary product categories are health and beauty, diet and fitness, and leisure and toy products. These categories have performed well in Direct Response Television (“DRTV”) campaigns and they move smoothly to retail sales channels. Retail buyers seek out new and better products in these categories, especially branded products that have gained a high profile through television.

The following is a list of products we own or have certain rights to and that we are currently marketing or plan to market over the next twelve months.

Health and Beauty Products

The Health and Beauty category is a strong and proven DRTV category as products in this category demonstrate well on television with before and after clinicals, possess high profit margins, and are aimed at the highly motivated “Fountain of Youth” markets.

Derma WandTM

We have a worldwide exclusive license to sell the DermaWand, a skin care appliance that reduces fine lines and wrinkles and improves overall skin appearance. The price consumers pay for DermaWandTM varies from country to country, however, it generally ranges from approximately $90-$120. The DermaWand is sold and marketed with DermaVital skin care products which are offered with a monthly continuity program.

On March 3, 2010, ICTV terminated its agreement in which it granted exclusive distribution rights of the Derma WandTM to Allstar Marketing Group (“Allstar”) for all U.S. distribution channels with the exception of televised home shopping and beauty salons, with an effective date of March 13, 2010. After a “sell-off” period granted to Allstar that ended April 30, 2010, ICTV secured its rights back for complete U.S. distribution of the DermaWand. The $94,000 in non-refundable royalty advance was recognized as revenue upon the termination of the agreement.

On November 9, 2011, ICTV began airing a new Derma WandTM long-form infomercial. Through December 31, 2011, the new DermaWandTM infomercial aired 579 times on both national cable stations and throughout a variety of major and minor broadcast markets in the United States. The Company recognized approximately $128,000 of revenue relate to the new DermaWandTM infomercial during 2011. The infomercial has continued to run through March 2012, and it is the Company’s plan to continue airing it throughout the entire year.

Index

DermaVital Hydra Infusion Treatment

DermaVitalTM is a product that allows water to penetrate the skin's surface, thus re-hydrating the deeper layers. Medical experts, including dermatologists, agree that dehydration or lack of water is a major cause of skin problems. The problem is that the skin by itself is virtually waterproof and water cannot penetrate its resilient surface. This moisturizing formula has the ability to send water into the deeper layers of the skin where it is most needed. The result is a deeper moisturization that softens, cleanses and hydrates the skin in a way that enhances and supports the skin's own natural functions.

DermaVitalTM has been offered to DermaWand buyers through U.S. DRTV and Internet distribution channels as a monthly continuity program, and to HSN customers as an “add on” product to their DermaWand purchase.

Additional Products – Various Categories

Smart StacksTM

We acquired the rights to exclusively manufacture and market an innovative storage system known as “Smart StacksTM”. Since the long-form infomercial was first aired in October 1998, one million Smart StacksTM storage systems have been sold worldwide, of which 400,000 of those were sold on QVC in triple pack form.

In the fall of 2010, the Company did a DRTV media test of Smart Stacks. There were no sales of Smart StacksTM during 2011 and the Company has no immediate plans for selling this product.

Slender LiftTM

In November 2009, we acquired worldwide exclusive license to manufacture and sell the Slender LiftTM, a slimming garment system for women. In the spring of 2010, the Company did a DRTV media test of Slender LiftTM. In February 2012, we tested Slender LiftTMon a televised home shopping channel. The product sold at an introductory price of $24.95. The test consisted of one airing of approximately eight minutes and generated sales of approximately 200 units. Three additional airing are scheduled for early April 2012.

BetterBlocksTM

In April 2000 we acquired the exclusive, royalty-free worldwide license to manufacture market and distribute BetterBlocksTM, a patented plastic toy building system, under the Share and Option Purchase Agreement with The Better Blocks Trust, a shareholder. BetterBlocksTM has been sold mainly through DRTV, mail order catalogues, retail and the television shopping channel QVC.

The Company tested the BetterBlocksTM product line on televised shopping in the fall of 2009, and has continued to sell the product on the internet in 2011 and 2010. Revenue for BetterBlocksTM was approximately $6,000 and $300 during 2011 and 2010, respectively. The Company plans to continue selling BetterBlocksTM through the web during 2012 and plans to sell this product in conjunction with the promotion of the new line of BetterBlocksTM, Glo-B’sTM.

Glo-B’sTM

On March 14, 2012, the Company completed the execution of an agreement with Hutton Miller LLC for the production of one and two minute direct response television commercials to be aired on major US children’s cable channels, featuring Glo-B’sTM.

Glo-B’sTM is a toy building block system that bends, moves, shapes and curves. Solidly made of quality glow-in-the-dark neon colored plastic, the blocks glow in their respective colors. Glo-B’sTM are designed for children 3 + years and will connect with and enhance other popular building block sets. Recent years have seen the “construction toy” segment of the toy market in the USA on a sharp increase, with actual “building and doing” once again enjoying a resurgence of popularity with both children and parents alike.

The production agreement calls for “best efforts” completion of the TV spots by May 31, 2012 and the Company expects to begin testing the commercials on kids’ cable stations during the summer months, while children are home from school on summer vacation. If we achieve positive restuls from these tests, our goal will to be in a good position for a profitable DRTV, internet, and live television home shopping for a 2012 Christmas promotion, with a continued DRTV push through 2013. We plan to begin a progressive retail rollout beginning summer 2013, climaxing in an anticipated full Christmas retail placement later in that year.

Index

Strike N’ SetTM

In July 2010, we entered into an exclusive, royalty-free worldwide agreement to distribute Strike N’ SetTM, a patented fishing lure system manufactured by MBCT Global Ventures, LLC. As part of the agreement, ICTV was required to develop and produce at its own expense, 60-second, 120-second, and 15 minute infomercials. In January 2011, ICTV began production of these infomercials and in July 2011 ran a U.S. media test of the product. Revenue for Strike N Set was approximately $4,000 during 2011. The Company plans to continue selling Strike N SetTM through the web during 2012, in addition to re-testing two minute infomercial later this year.

Marketing, Sales, Production and Distribution

We use infomercials to build brand awareness and identity.

Infomercials are designed to motivate the viewer to purchase the product immediately (or in the case of lead-generation DRTV, to inquire about the product). As a result, where brand TV spots generally focus on one key benefit, infomercials give the viewer all the information they need to make a purchasing decision, including presenting multiple features and benefits, and providing price and quality comparisons. Most infomercials also include a special time-sensitive offer designed to induce immediate response.

Infomercials are characterized by benefit-driven copy, captivating demonstrations and attractive offers. A typical infomercial consists of two or three "pods" that each last from 6 -12 minutes. Each pod contains product and benefit information for consumers to make a decision on whether or not to purchase. The pod concludes with a call-to-action (CTA) during which the seller asks for the order.

More importantly, we feel that infomercials build brand awareness. Viewers of a long-form infomercial are exposed to the name and features of a particular brand and product for nearly thirty minutes. We think that this brand recognition will make it easier to market the featured product in the retail environment, because consumers who have seen our infomercials will already have been exposed to the brand. We expect other products within the featured product’s family to benefit from brand association in the retail environment. We believe this introduction of product family brands through infomercials will save much time, money and effort that we would otherwise have to spend on marketing if we were to introduce our products to traditional retail without airing the infomercials first.

We also think infomercials are an easy means by which to measure the success of our marketing efforts. We can measure how successful an infomercial is or will be by doing a media test. If the product performs well during test marketing, we can increase the media time for the infomercial. We can also target certain markets by buying media time in particular locations or cities. The products we sell via our infomercials may do well in some markets, but not in others. When orders are placed, we gather demographic information about the purchaser and use this information to determine our future target markets.

We contract with several independent companies to manufacture our products. In general, we place an order with the manufacturer and we pay the manufacturer cash upon shipment of the goods. In some instances, we provide the manufacturer with an advance payment to cover a portion of the manufacturers’ costs, and we pay the balance after the goods are shipped.

We contract with telemarketing firms to answer phones and capture orders for products sold through our infomercials. Our storage of inventory, customer service, order processing, and order shipping functions are performed by an outside third party contracted fulfillment company - Motivational Fulfillment in Chino, California.

We generally fulfill our orders within one to five days of the date customers order our products. If for some reason we are unable to fulfill an order within five days of the date of a customer’s order, then we provide the customer with a letter explaining the reason for the delay. The letter will also provide the customer with a revised shipping date not to exceed thirty days, and will offer the customer an option to either consent to the delay in shipping or to cancel their order and receive a prompt refund.

Infomercial Production

In the past, we have produced our infomercials with internal management resources, but we also have utilized independent production companies to produce our infomercials. We have relationships with several independent producers, and we contract out such functions as a way to keep our overhead to a minimum. We, along with the owner or inventor of the product (as the case may be) will always have input in the production process. Even when we out-source production, we utilize a company specialist to oversee all scripting, filming and editing of the infomercial, and we take great care to ensure that the infomercial is produced in such a way that it can easily be adapted to international markets.

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Media Testing

Once the infomercial is produced, we acquire a minimal amount of inventory and purchase $10,000-$20,000 worth of media time through one of our preferred direct response television specialist media agencies to test the infomercial in select target markets. The agencies generally have comprehensive records of the markets and time slots in which certain product categories have historically sold well. The agencies also have comprehensive tracking and analyzing programs to test and track the sales response in the markets where we air our infomercials. The agencies will provide us with a report showing the amount of revenue generated from the infomercial as a ratio to media dollars spent. For example, a 2.5:1 ratio means that for every $1.00 spent on media, $2.50 was generated in sales. We take this information, along with other things such as cost of goods, fulfillment charges, telemarketing costs, insurance, returns, credit card commissions and shipping costs and generate our own reports to assess the success of the infomercial in our target markets.

Product Rollout

If a positive result is achieved during media testing, we will begin to build up inventory of the product and “roll out” the infomercial on a wider scale by increasing media spending on a weekly basis until a point just before returns diminish. When we roll out infomercials, we generally begin with a media spend of $75,000-$100,000 per week for media time for a long-form infomercial and a minimum of $50,000 per week for a short-form infomercial or spot. We monitor results, payoffs and profitability of our infomercials on a daily basis and aim to be very cautious as to when and how we go about rolling out our infomercials.

In our experience, a “good average” infomercial, which we define as having a media ratio of 2.5:1, will have a life span of eight to twelve months and will, at its peak, sustain $150,000-$200,000 in media spending per week. A “hit” infomercial, which we define as having a media ratio of 4:1 or greater, will have a life span of 12 to 24 months, and at its peak, will sustain $600,000-$700,000 in media spending per week.

International Sales

The goal of our international division is to establish solid distribution relationships in each country where our products are marketed. By doing so, we can tailor our products and production for each individual region, and develop relationships with local experts and established companies that are intimate with the marketplace. When a product that was domestically sold in an infomercial is prepared for international distribution, the international infomercial operator will dub the infomercial, develop product literature in the appropriate foreign language and review the infomercial’s compliance with local laws. The international infomercial operator will then test the infomercial and roll it out on a larger scale if the test marketing is successful. We believe that many well-produced infomercials can produce profitable margins somewhere internationally, even if they have failed in the United States.

We do expect to continue to devote attention to the international market and to have our infomercials aired internationally through our strategic alliances that we have and will continue to develop throughout the world. We are working to leverage our line of products that we market internationally and test which shows sell best in each country and region.

Traditional Retail Sales

We aim to capitalize on the brand and product awareness we create through our infomercials by selling our proprietary brands of products and related families of products under those brands in dedicated shelf-space areas by product category in traditional retail stores. We believe that traditional retail sales are a logical step to take after we create brand and product awareness through our infomercials, because we will not have to incur any significant marketing costs and expenses that consumer product companies would otherwise have to incur when introducing their products to the traditional retail environment.

We are currently working toward creating the infrastructure that we will need in order to take our brands and products to the traditional retail environment. The objective of the DRTV strategy is to build brands that are attractive to our main target market - national retailers.

Other Direct Response Sales Methods

Once we have rolled out a product in an infomercial, we prepare to distribute the product via other direct response methods, such as mail order catalogs, direct mail, credit card statement inserts and live appearances on television home shopping channels such as HSN and QVC. We believe that this is an additional means by which to use the brand awareness we create in our infomercials, and to reach consumers who might not watch television. These other direct response methods also extend the time period during which each of our products can generate revenue.

Customer Service

We seek to provide our customers with quality customer service. We generally offer an unconditional 30-day money back return policy to purchasers of our products. Our policy is to investigate the cause of returns if returns begin to undermine our expectations for a product’s profitability.

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Competition

We compete directly with several established companies that generate sales from infomercials and direct response television, as well as small independent direct response television producers. Products similar to ours may be sold in department stores, pharmacies, general merchandise stores, magazines, newspapers, direct mail advertising, catalogs and over the internet. Many of our major competitors, who include Thane International Inc. and Guthy-Renker Corp., have substantially greater financial, marketing and other resources than us.

We expect that we will face additional competition from new market entrants and current competitors as they expand their direct marketing business models. The barriers to entry in the infomercial industry are fairly low, but there are many difficult hurdles for young entrants to overcome if they are to be successful in the long-term. To be competitive, we believe we must respond promptly and effectively to the challenges of technological change, evolving standards and our competitors’ innovations. We must also source successful products, create brand awareness and utilize good sales pitches for our products. We believe that although we have a limited operating history, we are strategically positioned to compete because of our management’s experience and strong relationships in the industry. In addition, we feel that associating our products with particular brands and focusing on the traditional retail environment, as we intend to do, will give us a competitive advantage over traditional infomercial companies who fail to capitalize on the consumer awareness they create via their infomercials.

Intellectual Property

Our success is dependent, in part, upon our proprietary rights to our primary products. The following consists of a description of our intellectual property rights.

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Trademarks

We have several registered trademarks for BetterBlocksTM in countries throughout the world. We have also registered trademarks in the United States for Derma WandTM, DermaVitalTM, Smart StacksTM, Slender LiftTM, BetterBlocksTM, Glo-B’sTM, and Strike N’ SetTM.

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Patents

We have patents for the toy building elements of BetterBlocksTM in several countries throughout the world. We also have the exclusive right to the use of the worldwide patent for DermaWandTM, as is necessary to manufacture, market and distribute DermaWandTM . In addition, we have the exclusive right to the use of the worldwide patent for the distribution of Strike N’ SetTM.

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Copyrights

We have copyright registrations for all versions of our infomercials for DermaWandTM and BetterBlocksTM.

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Registered Designs

We have registered designs for BetterBlocksTM in several countries throughout the world.

There can be no assurance that our current or future intellectual property rights, if any, will not be challenged, invalidated or circumvented, or that any rights granted under our intellectual property will provide competitive advantages to us. In addition, there can be no assurance that claims allowed on any future patents will be sufficiently broad to protect our products. The laws of some foreign countries may not protect our proprietary rights to the same extent as do the laws of the United States. We intend to enforce our proprietary rights through the use of licensing agreements and, when necessary, litigation. Although we believe the protection afforded by our patents, trademarks, copyrights and registered designs has value, rapidly changing technology and industry standards make our future success depend primarily on the innovative skills, expertise, and management abilities of our team rather than on patent and trademark protection.

Royalty Agreements

In April 2000, we assumed from R.J.M. Ventures Limited and Better Blocks International Limited, by virtue of the Share and Option Purchase Agreement we signed with The Better Blocks Trust, the obligation to pay royalties on the sales of the DermaWandTM under the following agreements:

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DermaWandTM

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Under a marketing and royalty agreement with the developer of DermaWandTM, we are obligated to pay them a royalty at a fixed rate per unit sold. The agreement is silent as to its duration.

Governmental Regulation

We are subject to regulation by a variety of federal, state and local agencies, including the Federal Trade Commission, the Federal Communications Commission, the Consumer Product Safety Commission and the FDA under the FDC Act. The government regulations to which we are subject vary depending on the types of products we manufacture and market. As we begin to market a broader variety of products and services, we may become subject to regulation by additional agencies.

We are also subject to the Federal Mail/Telephone Order Rule. Under the Mail/Telephone Order Rule, it is an unfair or deceptive act or practice for a seller to solicit any order for the sale of merchandise to be ordered by the buyer through the mail or by telephone unless, at the time of the solicitation, the seller has a reasonable basis to expect that it will be able to ship the ordered merchandise to the buyer within 30 days after the seller’s receipt of a properly completed order from the buyer. If the buyer uses credit to pay for the merchandise, the time period within which the seller must ship the merchandise to the buyer is extended to 50 days. Under the Mail/Telephone Order Rule, the seller, among other things, must provide the buyer with any revised shipping date. If the seller is unable to fulfill an order within 30 or 50 days, as the case may be, then the seller must provide the buyer an option either to consent to a delay in shipping or to cancel their order and receive a prompt refund.

There can be no assurance that new laws, rules, regulations or policies that may have an adverse effect on our operations will not be enacted or promulgated at a future date.

Employees

During the course of 2011 we employed a total of six employees, five full-time employees and one part-time employee. We consider our labor relations to be good. None of our employees are covered by a collective bargaining agreement.

Research and Development

Our research and development costs have consisted of efforts to discover and develop new products and the testing and development of direct-response advertising related to these products.

Available Information and Reports to Stockholders

We are subject to the information and periodic reporting requirements under Section 12(g) of the Securities Exchange Act and, accordingly, will file periodic reports, proxy statements and other information with the Securities and Exchange Commission. Any document we file may be read and copied at the Commission’s Public Reference Room located at 450 Fifth Street NW, Washington DC 20549. Please call the Commission at 1-800-SEC-0330 for further information about the public reference rooms. Our filings with the Commission are also available to the public from the Commission’s website at http://www.sec.gov.

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ITEM 1A. RISK FACTORS

Shareholders and prospective purchasers of our common stock should carefully consider the following risk factors in addition to the other information appearing in this Annual Report on Form 10-K.

There is no assurance that our strategy to leverage brand awareness created by our infomercials into the retail market will work, and the value of your investment may decline if we do not attain retail sales.

The goal of our business plan is to create brand awareness through infomercials so that we can use this brand awareness to sell our products under our brands in traditional retail stores in dedicated shelf-space areas. Our success will depend on our ability to associate our products with particular brands to create consumer awareness and to enter the traditional retail market. If our strategy to leverage brand awareness created by our infomercials into the retail market does not work and we do not attain retail sales, the value of your investment may decline.

If the response rates to our infomercials are lower than we predict, we may not achieve the customer base necessary to become or remain profitable, and the value of your investment may decrease.

Our revenue projections assume that a certain percentage of viewers who see our infomercials will purchase our products. If a lower percentage of these viewers purchase our products than we project, we will not achieve the customer base necessary to become or remain profitable, and the value of your investment may decrease.

If our infomercials are not successful, we will not be able to recoup significant advance expenditures spent on production and media times, and our business plan may fail.

Our business involves a number of risks inherent in operating a direct response television business. The production of infomercials and purchase of media time for television involves significant advance expenditures. A short-form infomercial generally costs around $15,000-$40,000 to produce, while production costs for a long-form infomercial are generally around $120,000-$180,000. We are dependent on the success of the infomercials we produce and the public’s continued acceptance of infomercials in general. If our infomercials do not generate consumer support and create brand awareness and we cannot recover the initial money we spend on production and media time, we will not be able to recoup the advance expenditures and may go out of business if new products and additional capital are not available.

We depend on key management and employees, the loss of whom may prevent us from implementing our business plan, limit our profitability and decrease the value of your stock.

We are dependent on the talent and resources of our key executives and employees. In particular, the success of our business depends to a great extent on Kelvin Claney, our Chief Executive Officer and a member of our Board of Directors. Mr. Claney has extensive experience in the infomercial industry, and his services are critical to our success. The market for persons with experience in the direct response television industry is very competitive, and there can be no guarantee that we will be able to retain the services of Mr. Claney. We have not obtained key man insurance with respect to Mr. Claney or any of our executive officers. The loss of Mr. Claney may prevent us from implementing our business plan, which may limit our profitability and decrease the value of your stock.

If we cannot protect our intellectual property rights, our operating results will suffer, and you could ultimately lose your investment.

We seek to protect our proprietary rights to our products through a combination of patents, trademarks, copyrights and design registrations. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or obtain and use information that we consider proprietary. Litigation may be necessary to enforce our intellectual property rights and to determine the validity and scope of the proprietary rights of others. Any litigation could result in substantial costs and diversion of management and other resources with no assurance of success and could seriously harm our business and operating results. Investors could lose their entire investment.

If we do not continue to source new products, our ability to compete will be undermined, and we may be unable to implement our business plan.

Our ability to compete in the direct marketing industry and to expand into the traditional retail environment depends to a great extent on our ability to develop or acquire new innovative products under particular brands and to complement these products with related families of products under those brands. If we do not source new products as our existing products mature through their product life cycles, or if we do not develop related families of products under our brands, we will not be able to implement our business plan, and the value of your investment may decrease.

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Our shares are classified as “penny stock,” which will make it more difficult to sell than exchange-traded stock.

Our securities are subject to the Securities and Exchange Commission rule that imposes special sales practice requirements upon broker-dealers that sell such securities to other than established customers or accredited investors. For purposes of the rule, the phrase “accredited investors” means, in general terms, institutions with assets exceeding $5,000,000 or individuals having a net worth in excess of $1,000,000 or having an annual income that exceeds $200,000 (or that, combined with a spouse’s income, exceeds $300,000). For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale. Consequently, the rule may affect the ability of purchasers of our securities to buy or sell in any market that may develop.

In addition, the Securities and Exchange Commission has adopted a number of rules to regulate “penny stocks”. A “penny stock” is any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6 and 15g-7 under the Securities and Exchange Act of 1934, as amended. The rules may further affect the ability of owners of our shares to sell their securities in any market that may develop for them. Shareholders should be aware that, according to the Securities and Exchange Commission Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:

●

control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;

●

manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;

●

“boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;

●

excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and

●

the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.

Our issuance of additional shares may have the effect of diluting the interest of shareholders.

Any additional issuances of common stock by us from our authorized but unissued shares may have the effect of diluting the percentage interest of existing shareholders. Out of our 100,000,000 authorized common shares, 81,942,244 shares, or approximately 82%, remain unissued at December 31, 2011. The board of directors has the power to issue such shares without shareholder approval. None of our 20,000,000 authorized preferred shares are issued. We fully intend to issue additional common shares or preferred shares in order to raise capital to fund our business operations and growth objectives.

The board of directors’ authority to set rights and preferences of preferred stock may prevent a change in control by shareholders of common stock.

Preferred shares may be issued in series from time to time with such designation, rights, preferences and limitations as our board of directors determines by resolution and without shareholder approval. This is an anti-takeover measure. The board of directors has exclusive discretion to issue preferred stock with rights that may trump those of common stock. The board of directors could use an issuance of preferred stock with dilutive or voting preferences to delay, defer or prevent common stockholders from initiating a change in control of the Company or reduce the rights of common stockholders to the net assets upon dissolution. Preferred stock issuances may also discourage takeover attempts that may offer premiums to holders of our common stock.

Concentration of ownership of management and directors may reduce the control by other shareholders over ICTV.

Our executive officers and directors own or exercise full or partial control over approximately 36.6% of our outstanding common stock. As a result, other investors in our common stock may not have much influence on corporate decision-making. In addition, the concentration of control over our common stock in the executive officers and directors could prevent a change in control of ICTV.

Our board of directors is staggered, which makes it more difficult for a stockholder to acquire control of the Company.

Our articles of incorporation and bylaws provide that our board of directors be divided into three classes, with one class being elected each year by the stockholders. This generally makes it more difficult for stockholders to replace a majority of directors and obtain control of the board.

Stockholders do not have the authority to call a special meeting, which discourages takeover attempts.

Our articles of incorporation permit only our board of directors to call a special meeting of the stockholders, thereby limiting the ability of stockholders to effect a change in control of the Company.

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We do not anticipate paying dividends to common stockholders in the foreseeable future, which makes investment in our stock speculative or risky.

We have not paid dividends on our common stock and do not anticipate paying dividends on our common stock in the foreseeable future. The board of directors has sole authority to declare dividends payable to our stockholders. The fact that we have not and do not plan to pay dividends indicates that we must use all of our funds generated by operations for reinvestment in our operating activities. Investors also must evaluate an investment in our Company solely on the basis of anticipated capital gains.

Limited liability of our executive officers and directors may discourage stockholders from bringing a lawsuit against them.

Our articles of incorporation and bylaws contain provisions that limit the liability of directors for monetary damages and provide for indemnification of officers and directors. These provisions may discourage stockholders from bringing a lawsuit against officers and directors for breaches of fiduciary duty and may also reduce the likelihood of derivative litigation against officers and directors even though such action, if successful, might otherwise have benefited the stockholders. In addition, a stockholder’s investment in our Company may be adversely affected to the extent that costs of settlement and damage awards against officers or directors are paid by us under the indemnification provisions of the articles of incorporation and bylaws. The impact on a stockholder’s investment in terms of the cost of defending a lawsuit may deter the stockholder from bringing suit against one of our officers or directors. We have been advised that the SEC takes the position that this provision does not affect the liability of any director under applicable federal and state securities laws.

We face risk related to late tax filings.

The Company has not filed its mandatory tax filings since inception. Management believes that the potential income tax liability to the Company is not significant since the Company reported significant losses for most years since inception. Moreover, to the best of management’s knowledge, the Company does not believe that not filing tax returns is a violation of any of its contractual covenants. The Company is working to become current with its mandatory tax filings and plans to do so during the 2012 fiscal year.

We have material weaknesses in our controls over financial reporting and the effectiveness of our disclosure controls and procedures.

Due in large part to our limited management personnel, we have identified material weaknesses in our financial reporting and disclosure controls and procedures, including an inadequate number of personnel with requisite expertise in the key functional areas of finance and accounting, an inadequate number of personnel to properly implement control procedures, insufficient written policies and procedures for accounting and financial reporting, and lack of an audit committee. While identified, these material weaknesses continue as of December 31, 2011.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None

ITEM 2. DESCRIPTION OF PROPERTY

PROPERTIES

Our executive offices are located in Wayne, Pennsylvania with a monthly lease payment of $2,692.

On February 1, 2011, we entered into a 6 month office leases in Bainbridge Island, WA, with a monthly lease payment of $650. The lease expired on August 1, 2011 and was not renewed.

We believe that our present facilities will be suitable for the operation of our business for the foreseeable future and should we need to expand, we expect that suitable additional space will be available on commercially reasonable terms, although no assurance can be made in this regard. Our property is adequately covered by insurance in the Wayne location.

ITEM 3. LEGAL PROCEEDINGS

We are not a party to any material pending legal proceeding or litigation and none of our property is the subject of a pending legal proceeding. Further, our officers and directors know of no material legal proceedings against us or our property contemplated by any entity including any governmental authority.

ITEM 4. MINE SAFTEY DISCLOSURES

Not applicable

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PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER’S PURCHASES OF EQUITY SECURITIES

MARKET FOR COMMON EQUITY

Our common stock is currently traded in the “OTC.BB,” which does not constitute an “established trading market”. The range of reported high and reported low bid prices per share for our common stock for each fiscal quarter within the last two fiscal years, as reported by Stockwatch is set forth below. These quotations reflect inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions.

Quarter ended	High		Low		Quarter ended	High		Low
	$		$			$		$
December 31, 2011		0.20		0.05	December 31, 2010		0.15		0.03
September 30, 2011		0.13		0.04	September 30, 2010		0.23		0.07
June 30, 2011		0.15		0.03	June 30, 2010		0.30		0.05
March 31, 2011		0.21		0.02	March 31, 2010		0.80		0.05

HOLDERS

As of March 26, 2012, there were 20,227,756 shares of common stock outstanding. We estimate these shares are held by approximately 300 shareholders of record.

DIVIDENDS

To date we have not paid any dividends on our common stock, and we do not expect to declare or pay any dividends on our common stock in the foreseeable future. Payment of any dividends will be dependent upon our future earnings, if any, our financial condition, and other factors the board of directors determines are relevant.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

In June 2001, our shareholders approved our 2001 Stock Option Plan (the “Plan”). The Plan is designed for selected employees, officers and directors to the Company and its subsidiaries, and is intended to advance the best interests of the Company by providing personnel who have substantial responsibility for the management and growth of the Company and its subsidiaries with additional incentive by increasing their proprietary interest in the success of the Company, thereby encouraging them to remain in the employ of the Company or its subsidiaries. The Plan is administered by the Board of Directors of the Company, and authorizes the issuance of stock options not to exceed a total of 3,000,000 shares. The terms of any awards under the Plan are determined by the Board of Directors, provided that no options may be granted at less than the fair market value of the stock as of the date of the grant. The Plan expired in February 2011. As of December 31, 2011, 1,650,000 options are outstanding under the Plan.

In December 2011, our Board of Directors approved our 2011 Incentive Stock Option Plan (the “2011 Plan”). The 2011 Plan will be submitted to our shareholders for approval in 2012. The 2011 Plan is designed for selected employees of the Company and its subsidiaries, and is intended to advance the best interests of the Company by providing personnel who have substantial responsibility for the management and growth of the Company and its subsidiaries with additional incentive by increasing their proprietary interest in the success of the Company, thereby encouraging them to remain in the employ of the Company or its subsidiaries. The 2011 Plan is administered by the Board of Directors of the Company, and authorizes the issuance of stock options not to exceed a total of 3,000,000 shares. The terms of any awards under the Plan are determined by the Board of Directors, provided that no options may be granted at less than the fair market value of the stock as of the date of the grant. As of December 31, 2011, zero options are outstanding under the 2011 Plan.

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The following table presents information as to the number of shares of our common stock which are authorized for issuance under the Plan as of December 31, 2011.

	(a)		(b)		(c)
Plan Category	Number of securities to be issued upon exercise of outstanding options		Weighted-average exercise price of outstanding options		Number of securities remaining available for future issuance under the Plan (excluding securities reflected in column (a))
Equity compensation plans approved by security holders		1,650,000	$	0.08		3,000,000
Equity compensation plans not approved by security holders		250,000	$	0.08		n/a
Total		1,900,000	$	0.08		3,000,000

ITEM 6. SELECTED FINANCIAL DATA

Not applicable

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the consolidated financial statements in Item 7. Certain statements contained in this report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include those discussed in the “Outlook: Issues and Uncertainties” section of this Form 10- K.

Overview

Although we currently sell products through infomercials, the goal of our business plan is to use the brand awareness we create in our infomercials so that we can sell the products featured in our infomercials, along with related families of products, under distinct brand names in traditional retail stores. Our goal is to have these families of products sold in the traditional retail environment in shelf-space dedicated to the product category. We are developing the infrastructure to create these brands of products so that we can implement our business plan.

Fluctuations in our revenue are driven by changes in our product mix. Revenues may vary substantially from period-to-period depending on our product line-up. A product that generates revenue in one quarter may not necessarily generate revenues in each quarter of a fiscal year for a variety of reasons, including, seasonal factors, number of infomercials run, the product’s stage in its life-cycle, the public’s general acceptance of the infomercial and other outside factors, such as the general state of the economy.

Just as fluctuations in our revenues are driven by changes in our product mix, our gross margins from period to period depend on our product mix. Our gross margins vary according to whether the products we are selling are primarily our own products or third-party products. As a general rule, the gross margins for our own products are considerably higher based on proportionately smaller cost of sales. For third-party products, our general experience is that our gross margins are lower, because we record as cost of sales the proportionately higher cost of acquiring the product from the manufacturer. Within each category (i.e., our own products versus third-party products), gross margins still tend to vary based on factors such as market price sensitivity and cost of production.

Many of our expenses for our own products are incurred up-front. Some of our up-front expenditures include infomercial production costs and purchases of media time. If our infomercials are successful, these up-front expenditures produce revenue as consumers purchase the products aired on the infomercials. We do not incur infomercial production costs and media time for our third-party products, because we merely act as the distributor for pre-produced infomercials. It is the responsibility of the international infomercial operators to whom we sell the third-party products to take the pre-produced infomercial, adapt it to their local standards and pay for media time.

Results of Operations

The following discussion compares operations for the fiscal year ended December 31, 2011, with the fiscal year ended December 31, 2010.

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Revenues

Net sales decreased $801,000 or 20.5% to approximately $3,102,000 in 2011 from approximately $3,903,000 in 2010, primarily as a result of decline in international sales. During 2011, international sales revenue for the DermaWandTM was approximately $1,299,000, as compared to approximately $2,005,000 in the prior year, a decrease of approximately $706,000. The decline in international sales can be attributed to the global recession, as well as the age of the DermaWandTM infomercial that was running internationally for the majority of 2011. With the production of the new infomercial, the Company is anticipating an increase in sales through international distributors during 2012.

In addition, during March 2010, the Company recognized approximately $94,000 of royalty income relating to the non-refundable royalty advance paid under the Allstar agreement. No revenue was recognized under the Allstar agreement in 2011.

One hundred percent of net sales were generated by the sale of our own products in 2011 and 2010.

Gross Margin

Gross margin percentage increased to approximately 49.5% in 2011 from approximately 46.1% in 2010. There are three factors that affect the increase in gross margin. The first factor is the decrease in International sales during 2011 of approximately $706,000 compared to 2010. DermaWandTM is sold wholesale internationally with an average price of approximately $21.

A second reason gross margin increased in 2011 was the transition of televised home shopping networks. In May 2011 the Company made the decision to move the televised home shopping sales of Derma Wand from Home Shopping Network (HSN) to ShopNBC, upon where a higher screen price for the DermaWand is offered on ShopNBC as compared to HSN. Finally, the sales generated from the new DermaWandTM infomercial have an average selling price of approximately $145, including shipping and handling. There were no infomercial sales of DermaWandTM during 2010.

In 2011, we generated approximately $1,534,000 in gross margin, compared to approximately $1,801,000 in 2010.

Operating Expenses

Total operating expenses decreased to approximately $2,020,000 in 2011, down from approximately $2,597,000 in 2010, a decrease of $577,000, or 22.2%. Management’s efforts to reduce the level of expenses over the past twelve months are one of the reasons for the decrease in operating expenses. A significant amount of the decrease in operating expenses, approximately $576,000, can be attributed to a decrease in payroll and severance expenses. In addition, the Company has decreased accounting expenses by approximately $198,000 and consulting expenses by approximately $139,000. In addition to the decrease, certain expenses increased due to the re-launching of the Derma Wand infomercial in November of 2011. Offsetting these decreases were increases in operating costs of approximately $161,000 in media expense, $136,000 in production expenses, and $32,000 in answering service expenses.

Net Loss

Our net loss for the year ended December 31, 2011 was approximately $485,900, compared to a 2010 net loss of approximately $796,000. The major reason for the decreased 2011 net loss was the increased profit margins the Company achieved with the higher selling price for Derma Wand on ShopNBC, combined with management’s efforts to reduce operating expenditures.

Liquidity and Capital Resources

At December 31, 2011, we had approximately $59,000 in cash and cash equivalents (including restricted cash), compared to approximately $161,000 at December 31, 2010. We incurred a negative cash flow from operations of approximately $353,000 in 2011, compared to a negative cash flow from operations of approximately $319,000 in 2010. In addition to the approximately $485,900 net loss, the Company’s cash flow from operations were impacted by an increase in inventory on hand of approximately $192,000, a decrease in accounts receivable of approximately $30,000, a decrease in prepaid expense and deposits of approximately $26,000, an increase in accounts payable of approximately $235,000, a decrease in severance payable of approximately $94,000, a decrease in deferred revenue of approximately $8,000, an increase in tax penalties payable of approximately $10,000, and depreciation expense of approximately $14,000.

The Company has a note payable to The Better Blocks Trust (“BB Trust”), a shareholder, in the amount of approximately $591,000. This loan is interest-free and has no specific terms of repayment.

On April 1, 2011, the Company issued 1,000,000 shares of common stock in a private placement at $0.10 for total consideration of $100,000.

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On May 16, 2011, the Company issued 250,000 shares of common stock in a private placement at $0.10 for total consideration of $250,000.

In December 2011, the Company entered into a note payable with a Canadian lender in the amount of approximately $98,000 (C$100,000). This loan accrues interest of prime plus 1%. Interest is paid monthly. Principal payments are to be paid in monthly installments of approximately $6,500 (C$6,667), beginning in March 2012. The loan permits payment in advance without penalty at any time. On January 24, 2012, the Company modified its loan with the Canadian lender. The note was modified and increased the outstanding balance to approximately $137,000 (C$140,000) as additional borrowings were made to the Company. In addition, the interest was modified to lender’s cost, plus two-percent interest and the note became convertible into shares of common stock at a fixed conversion rate of $0.196 (C$.20) per share. The Company considered this a modification of debt that was not substantive, thus no gain or loss was recorded upon modification. The amount of the beneficial conversion upon modification was deemed insignificant to the consolidated financial statements.

On February 17, 2012, the Board authorized the issuance of up to 2,500,000 shares of common stocks to be purchased at $0.15 per share through February 29, 2012. On February 29, 2012, the Board amended the resolution to authorize the issuance of up to 3,000,000 shares of common stock to be purchased at $0.15 per share through March 23, 2012. A total of 2,695,000 shares were purchased through March 23, 2012 for proceeds of $404,250. In addition, for every three shares of common stock purchased, the purchasers will receive one warrant to purchase common stock at $0.25 per share. The warrant will expire three years after its issuance date. The warrants have a weighted average fair value of $0.33. The fair value of the warrant has been estimated on the date of grant using a Black-Scholes Pricing Model. See Note 11.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company generated negative cash flows from operating activities during the year ended December 31, 2011, of approximately $353,000, and the Company, for the most part, has experienced recurring losses from operations. As of December 31, 2011, the Company had a negative working capital of approximately $1,043,000, compared to approximately $879,000 at December 31, 2010, and an accumulated deficit of approximately $6,704,000 as of December 31, 2011.

Although we currently sell our products primarily though infomercials, the goal of our business is to use the brand awareness we create in our infomercials to sell our products (along with additional line extensions) under distinct brand names in traditional retail stores. Our objective is to have these families of products sold in the traditional retail environment in shelf-space dedicated to the product category. We are developing the infrastructure to create these brands of products so that we can implement our business plan.

There is no guarantee that the Company will be successful in bringing our products into the traditional retail environment. If the Company is unsuccessful in achieving this goal, the Company will be required to raise additional capital to meet its working capital needs. If the Company is unsuccessful in completing additional financings, it will not be able to meet its working capital needs or execute its business plan. In such case the Company will assess all available alternatives including a sale of its assets or merger, the suspension of operations and possibly liquidation, auction, bankruptcy, or other measures. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements does not include any adjustment relating to the recoverability of the carrying amount of recorded assets or the amount of liabilities that might result should the Company be unable to continue as a going concern.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Securities and Exchange Commission (“SEC”) defines “critical accounting policies” as those that require application of management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Our significant accounting policies are described in Note 2 in the Notes to the Consolidated Financial Statements. Not all of these significant accounting policies require management to make difficult, subjective or complex judgments or estimates. However, the following policies could be deemed to be critical within the SEC definition.

Accounts receivable

Accounts receivable are recorded net of allowances for returns and doubtful accounts of approximately $13,000 and $7,000 for the years ended December 31, 2011 and 2010 respectively. The allowances are calculated based on historical customer returns and bad debts.

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In addition to reserves for returns on accounts receivable, an accrual is made against returns for product that have been sold to customer and had cash collections, while the customer still has the right to return the product. The amounts of these accruals included in accounts payable and accrued liabilities in our Consolidated Balance Sheets were approximately $42,000 and $9,000 at December 31, 2011 and 2010, respectively.

Inventories

Inventories consist primarily of products held for resale, and are valued at the lower of cost (first-in, first-out method) or market. The Company adjusts inventory for estimated obsolescence when necessary based upon demand and market conditions. The Company has recorded approximately $12,000 and $0 of inventory of consigned product as of December 31, 2011 and 2010, respectively, that has been shipped to customers under the 30-day free trial period for which the trial period has not expired and as such the customer has not accepted the product.

Revenue recognition

For our domestic direct response television sales generated by our infomercials, product sales revenue is recognized when the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collectability is reasonably assured. The Company’s revenues in the Consolidated Statement of Operations are net of sales taxes.

The Company offers a 30-day risk-free trial as one of its payment options. Revenue on the 30-day risk-free trial sales is not recognized until customer acceptance and collectability are assured which we determine to be when the trial period ends. If the risk-free trial expires without action by the customer, product is determined to be accepted by the customer and revenue is recorded. Revenue for items purchased without the 30-day free trial is recognized upon shipment of the product to the customer and collectability is assured.

The Company entered into an exclusive distribution agreement with Allstar Marketing (“Allstar”) in May 2009. As part of the agreement with Allstar, the Company received non-refundable royalty advances which were booked as deferred revenue until Allstar sold DermaWands. Allstar was required to provide ICTV with monthly royalty statements per the contract within 30 days of the end of each month. The Company recorded revenue in the month goods were sold per the Allstar royalty statements.

In March 2010, the Allstar agreement was terminated and the Company retained the exclusive distribution rights for the DermaWand. Upon termination of the contract, the Company recognized the remaining non-refundable royalty advances that were previously booked in deferred revenue. The Company recognized $0 and $94,000 in revenue related to the Allstar agreement for the years ended December 31, 2011 and 2010 respectively.

Revenue related to international wholesale customers is recorded at gross amounts with a corresponding charge to cost of sales.

The Company has a return policy whereby the customer can return any product received within 30 days of receipt for a full refund excluding shipping and handling. However, historically the Company has accepted returns past 30 days of receipt. The Company provides an allowance for returns based upon past experience. All significant returns for the years presented have been offset against gross sales.

Income taxes

In preparing our consolidated financial statements, we make estimates of our current tax exposure and temporary differences resulting from timing differences for reporting items for book and tax purposes. We recognize deferred taxes by the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for differences between the financial statement and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. In addition, valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. In consideration of our accumulated losses and lack of historical ability to generate taxable income to utilize our deferred tax assets, we have estimated that we will not be able to realize any benefit from our temporary differences and have recorded a full valuation allowance. If we become profitable in the future at levels which cause management to conclude that it is more likely than not that we will realize all or a portion of the net operating loss carry-forward, we would immediately record the estimated net realized value of the deferred tax asset at that time and would then provide for income taxes at a rate equal to our combined federal and state effective rates, which would be approximately 40% under current tax laws. Subsequent revisions to the estimated net realizable value of the deferred tax asset could cause our provision for income taxes to vary significantly from period to period.

The Company’s policy is to recognize interest and penalties related to tax matters in general and administrative expenses in the Consolidated Statements of Operations.

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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

ITEM 7A. MARKET RISK DISCLOSURES.

Not Applicable.

ITEM 8. FINANCIAL STATEMENTS

Financial statements are set forth on pages F-1 through F-19.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining adequate disclosure controls and procedures. Disclosure controls and procedures are those controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

We carried out an evaluation as of December 31, 2011, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as a result of the material weaknesses in internal control over financial reporting discussed below.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, 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 and includes those policies and procedures that:

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of our assets;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to 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.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2011. In making this assessment, management used the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our assessment, management believes that, as of December 31, 2011, our internal control over financing reporting was not effective due to the following material weaknesses:

Index

A lack of sufficient resources and an insufficient level of monitoring and oversight, which restricts the Company's ability to gather, analyze and report information relative to the financial statement assertions in a timely manner, including insufficient documentation and review of selection and application of generally accepted accounting principles.

The limited size of the accounting department makes it impracticable to achieve an appropriate segregation of duties.

There are no formal documented closing and reporting calendar and checklists.

There are no formal cash flow forecasts, business plans, and organizational structure documents to guide the employees in critical decision-making processes.

Documentation (and retention thereof) of certain transactions was not completed on a timely basis.

Income and sales tax filings have not been made timely.

Material weaknesses identified in the past have not been remediated.

Lack of an audit committee which results in ineffective oversight over the Company’s financial reporting and accounting.

Controls over the accounting for certain equity transactions were ineffective. This material weakness is attributed to lack of technical expertise with respect to the application of Accounting Standards Codification Topic 815-40 which deals with accounting for equity-based instruments that may require to be treated as derivative instruments.

A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis.

The material weaknesses listed above are weaknesses that were discovered during prior assessments and continued during the current year. Management is committed to improving its internal controls and will (1) continue to use third party specialists to address shortfalls in staffing and to assist the Company with accounting and finance responsibilities, (2) increase the frequency of independent reconciliations of significant accounts which will mitigate the lack of segregation of duties until there are sufficient personnel, (3) prepare and implement sufficient written policies and checklists for financial reporting and closing processes and (4) may consider appointing outside directors and audit committee members in the future. The Company cannot predict when it will be able to appropriately address such weaknesses. However, we believe that these measures, if effectively implemented and maintained, will remediate the material weaknesses discussed above.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the SEC that permit us to provide only management’s report in this annual report.

Changes in internal control over financial reporting

As described above, the Company’s management assessed the effectiveness of the Company’s internal control over financial reporting and identified material weakness in internal control over financial reporting as of December 31, 2011.

There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2011 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting. We are continuing to actively assess and evaluate our most critical business and accounting processes to identify further enhancements and improvement opportunities.

ITEM 9B. OTHER INFORMATION

None.

Index

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

The following table sets forth the name, age and position of each director and executive officer of ICTV. The directors serve staggered terms of one, two, or three years and until their successors are elected and qualified. Officers hold their positions at the pleasure of the board of directors, without prejudice to the terms of any employment agreement.

NAME	AGE	POSITION
Kelvin Claney	61	Chief Executive Officer, Secretary and Director
Richard Ransom	33	President and Chief Financial Officer
Stephen Jarvis	57	Director

Kelvin Claney –Chief Executive Officer, Secretary, Director

Kelvin Claney has served as a director of the Company since January 2001. Mr. Claney began working in the United States direct response business in 1989 as an independent contractor to National Media Corp., where he produced, sourced, and executive-produced various infomercial projects, including Euro Painter, HP9000, Auri polymer sealant and Color Cote 2000™, Dustmaster 2000, LeSnack, Iron Quick and Fatfree Express. Since 1992, Mr. Claney has served as President of R.J.M. Ventures, Inc., a television direct response marketing company, where he was responsible for such things as identifying projects the Company wants to become involved in, selecting production companies to produce infomercials and selecting media times to promote the infomercials. The creation of the Smart StacksTM infomercial, which is now owned by ICTV, was one of the projects Mr. Claney was responsible for as President of R.J.M. Ventures, Inc. He also created the infomercial for the children’s toy product known as BetterBlocksTM, which was then owned by The Better Blocks Trust.

Stephen Jarvis – Director

Stephen Jarvis has served as a director of the Company since December 17, 2009. Mr. Jarvis is the co-founder and President of Positive Response Vision, Inc., located in Manila, Philippines. Formed in 1996, Positive Response Vision is one of the largest infomercial-based direct response companies in Southeast Asia, and has approximately 400 employees. The company markets and distributes a vast range of products throughout the Philippines. As President, Mr. Jarvis is responsible for product sourcing and acquisition, inventory, finance control and design issues. Mr. Jarvis also produces infomercials in a private capacity, licensing them to Positive Response Vision and other international infomercial companies. Mr. Jarvis has been engaged in direct response marketing since 1983.

Richard Ransom – President and Chief Financial Officer

Richard Ransom joined ICTV in July of 2008 as the Company’s Controller, and was appointed as Chief Financial Officer on December 8, 2008. Mr. Ransom joined the Company with eight years of experience in financial management roles at Traffic.com, Hildebrandt International, and Grant Thornton. He is a graduate of Pennsylvania State University with a degree in Accounting, and received his MBA from Delaware Valley College in December, 2009. In August 2011, Mr. Ransom was promoted to President of ICTV.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Control persons, including all directors and executive officers, of our Company are required by Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to report to the SEC their transactions in, and beneficial ownership of, the Company's common stock, including any grants of options to purchase common stock. To the best of the Company's knowledge, the Company’s directors and executive officers timely filed all required reports with the SEC during the year ended December 31, 2011.

Audit Committee and Code of Ethics

We have not formally appointed an audit committee, and the entire Board of Directors (two persons) currently serves the function of an audit committee. Because of the small number of persons involved in management of the Company, we do not have an audit committee financial expert serving on our Board. We have not yet adopted a code of ethics applicable to our chief executive officer and chief financial officer, or persons performing those functions, because of the small number of persons involved in management of the Company.

Index

ITEM 11. EXECUTIVE COMPENSATION

Compensation of Named Executive Officers

The following table sets forth all compensation paid or earned for services rendered to ICTV in all capacities during the years ended December 31, 2011 and 2010, by our chief executive officer and president, chief operating officer, and chief financial officer (the "Named Officers"). No options or SAR grants were made to the Named Officers in 2011 or 2010, nor were any options or SAR’s exercised by the Named Officers.

Summary Compensation Table

Name And Principal Position	Year	Salary ($)		Bonus ($)
Kelvin Claney (Chief Executive Officer)	2011		180,000	nil
	2010		180,000	nil
Richard Ransom (President and Chief Financial Officer)	2011		125,000	nil
	2010		125,000	nil
Richard Scheiner (Chief Operating Officer)1	2011		0	nil
	2010		200,000	nil

1	Mr. Scheiner resigned as of October 29, 2010

Compensation of Directors

During 2011 and 2010, our directors received no compensation for their service as directors, although they did receive reimbursement for expenses. In February 2012, Stephen Jarvis, one of our directors was paid $5,000 for consulting work above and beyond his duties as a director.

Employment Contracts

We entered into an Employment Agreement with Kelvin Claney, our President and Chief Executive Officer, effective March 1, 2011. The Agreement provides, among other things, that if Mr. Claney’s employment is terminated without cause, he will be entitled to severance pay in a lump sum payment equal to one year of his base salary, health insurance reimbursement and automobile expenses allowance as in effect on the date of termination. Under the Employment Agreement, Mr. Claney will be considered terminated without cause if his substantive responsibilities are changed without his prior approval, or if all or substantially all of the assets of the Company are sold, or a controlling interest in the Company is sold, unless in connection with such a sale Mr. Claney’s Employment Agreement is assumed by the buyer or he is offered an employment contract for substantially the same responsibilities, for a term of at least one year, and at substantially the same compensation, terms and benefits as provided in the Employment Agreement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth, as of March 26, 2012 our outstanding common stock owned of record or beneficially by (1) each person who owned of record, or was known by us to own beneficially, more than 5% of our common stock, (2) each executive officer, (3) each director and (4) the shareholdings of all executive officers and directors as a group. As of March 26, 2012, we had 20,227,756 shares of common stock issued and outstanding.

Name	Number of Shares Owned		Percentage of Shares Owned
Kelvin Claney, President and Chief Executive Officer, Member of the Board of Directors (1)		7,100,493		35.1	%
The Better Blocks Trust, declared January 1, 1994 (2)		7,078,826		35.0	%

Stephen Jarvis, Member of the Board of Directors (3)		305,000		1.5	%
ALL EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP – 3 INDIVIDUALS		7,405,493		36.6	%

Index

Except as noted below, all shares are held of record and each record shareholder has sole voting and investment power.

(1)

Includes 7,078,826 shares owned by The Better Blocks Trust, of which Mr. Claney is a joint trustee. Mr. Claney disclaims beneficial ownership of the shares and options owned or controlled by The Better Blocks Trust beyond the extent of his pecuniary interest. Mr. Claney’s business address is 10245 Sunrise Place, NE , Bainbridge Island, Washington 98110.

(2)	The address for The Better Blocks Trust is 1 Kimberly Road, Epson, Auckland City, Auckland New Zealand, c/oBarry Stafford, Stafford Klaassen.

(3)	Mr. Jarvis’s business address is 320 J P Razal Street, Unit 301, 3rd Floor Aralco Bldg., Poblacion, Makati City 1210, Philippines.

There are no arrangements known to ICTV, the operation of which may result in a change of control of the Company.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The Company has received short-term advances from a shareholder. These advances amounted to approximately $40,000 and $2,500 during the years ended December 31, 2011 and 2010, respectively. The advances are offset by repayments which amounted to approximately $32,500 and $3,200 during the years ended December 31, 2011 and 2010, respectively. These advances are non-interest bearing and without specific terms of repayment. These advances are included in Accounts Payable – Related Parties on the accompanying consolidated balance sheets.

The Company has a note payable to the Better Blocks Trust, a major shareholder, in the amount of $590,723. This loan is interest-free and has no specific terms of repayment.

We have two directors. Under the definition of director independence found in NASD Rule 4200, Stephen Jarvis is our sole independent director.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit Fees

On August 18, 2010 the Company’s Board of Directors engaged EisnerAmper LLP to serve as the Company’s new independent registered public accounting firm, after it was notified on August 16, 2010 that Amper, Politziner and Mattia, LLP (“Amper”), an independent registered public accounting firm, would not be able to stand for re-appointment because it combined its practice on that date with that of Eisner LLP (“Eisner”) to form EisnerAmper LLP, an independent registered public accounting firm. The Company filed Form 8-K on August 18, 2010 acknowledging this change.

The aggregate fees billed to the Company for professional services rendered for the audit of the Company's annual financial statements, review of the Company's quarterly financial statements, and other services normally provided in connection with statutory and regulatory filings or engagements was approximately $97,500 in 2011 and approximately $89,250 in 2010. Approximately $68,250 and $21,000 were billed for services rendered from EisnerAmper, LLP and Amper, Politziner & Mattia, LLP, respectively during 2010.

Audit-Related Fees

There were no fees billed in each of the last two fiscal years for assurance and related services by our independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements, and are not reported above.

Tax Fees

There were no fees billed in each of the last two fiscal years for professional services rendered by our independent registered public accounting firm for tax compliance, tax advice, and tax planning.

All Other Fees

There were no other fees billed in each of the last two fiscal years for professional services rendered by our independent registered public accounting firm.

All fees for audit and non-audit services, and any material fees for other services, are approved in advance by the Chief Executive Officer and the Chief Financial Officer.

Index

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Financial Statements

Report of Independent Registered Public Accounting Firm		F-1
Consolidated Financial Statements:
Consolidated Balance Sheets		F-2
Consolidated Statements of Operations		F-3
Consolidated Statements of Shareholders’ Deficit		F-4
Consolidated Statements of Cash Flows		F-5
Notes to Consolidated Financial Statements		F-6

Exhibits

2 *	Share and Option Purchase Agreement

3.1 *

Amended and Restated Articles of Incorporation

3.2 *

Amended and Restated Bylaws

3.3 *

First Amendment to Amended and Restated Bylaws

10.1 *

2001 Stock Option Plan

10.2 *

Promissory Note by Moran Dome Exploration Inc. payable to the Trustees of the Better Blocks Trust, in the amount of $590,723.27

10.3 *

Extension of Promissory Note dated August 23, 2001, by and between the Trustees of the Better Blocks Trust and International Commercial Television Inc.

10.4 **

Second Extension of Promissory Note dated March 25, 2002, by and between the Trustees of the Better Blocks Trust and International Commercial Television Inc.

10.5 ***

Assignment of Trademark by Dimensional Marketing Concepts, Inc.

31.1****

Rule 13a-14(a)/15d-14(a) Certification – Chief Executive Officer

31.2****

Rule 13a-14(a)/15d-14(a) Certification – Chief Financial Officer

32****

Section 1350 Certifications

101.INS****

XBRL Instance Document

101.SCH****

XBRL Schema Document

101.CAL****

XBRL Calculation Linkbase Document

101.LAB****

XBRL Label Linkbase Document

101.PRE****

XBRL Presentation Linkbase Document

101.DEF****

XBRL Definition Linkbase Document

* Incorporated by reference from Form SB-2 filed with the Securities and Exchange Commission on October 3, 2001.

** Incorporated by reference from Post-Effective Amendment No. 1 to Form SB-2 filed with the Securities and Exchange Commission on April 12, 2002.

*** Incorporated by reference from Amendment No. 1 to Form SB-2 filed with the Securities and Exchange Commission on December 24, 2001.

**** Filed herewith

Index

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

			INTERNATIONAL COMMERCIAL TELEVISION INC.

Date:	March 30, 2012	By:	/s/ Kelvin Claney
			Name: Kelvin Claney
			Title: Chief Executive Officer and Director

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:	/s/ Kelvin Claney	Date:	March 30, 2012
	Name: Kelvin Claney
	Title: Chief Executive Officer and Director

By:	/s/ Richard Ransom	Date:	March 30, 2012
	Name: Richard Ransom
	Title: President and Chief Financial Officer, Principal Accounting Officer

By:	/s/ Stephen Jarvis	Date	March 30, 2012
	Name: Stephen Jarvis
	Title: Director

Index

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

International Commercial Television Inc. and Subsidiaries

Report of Independent Registered Public Accounting Firm for the years ended December 31, 2011 and 2010	F-1

Consolidated Balance Sheets as of December 31, 2011 and 2010	F-2

Consolidated Statements of Operations for the years ended December 31, 2011 and 2010	F-3

Consolidated Statements of Shareholders’ Deficit for the years ended December 31, 2011 and 2010	F-4

Consolidated Statements of Cash Flows for the years ended December 31, 2011 and 2010	F-5

Notes to the Consolidated Financial Statements	F-6

Index

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

International Commercial Television, Inc.

We have audited the accompanying consolidated balance sheets of International Commercial Television, Inc. and Subsidiary (collectively, the “Company”) as of December 31, 2011 and 2010, and the related consolidated statements of operations, shareholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2011. The financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly we express no such opinion. 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of International Commercial Television, Inc. and Subsidiary as of December 31, 2011 and 2010, and the consolidated results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company’s recurring losses from operations and negative cash flows from operations raise substantial doubt about its ability to continue as a going concern. Management’s plans considering these matters are also described in Note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/EisnerAmper, LLP

Edison, New Jersey

March 30, 2012

F-1

Index

INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2011 AND 2010

	2011		2010
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	53,337	$	158,482
Restricted cash		5,467		2,060
Accounts receivable, net of doubtful account reserves of $13,317 and $7,000, respectively		46,220		75,805
Inventories, net		718,450		526,821
Prepaid expenses and other current assets		20,559		46,674

Total current assets		844,033		809,842


Furniture and equipment		183,117		183,117
Less accumulated depreciation		162,868		148,776
Furniture and equipment, net		20,249		34,341

Total assets	$	864,282	$	844,183

LIABILITIES AND SHAREHOLDERS’ DEFICIT

CURRENT LIABILITIES:
Note payable – short term	$	65,363		$	-
Accounts payable and accrued liabilities		856,542			621,687
Accounts payable - related parties		38,359			30,859
Severance payable - short term		40,800			153,333
Deferred revenue		25,128			32,698
Tax penalties payable		270,000			260,000
Note payable to shareholder		590,723			590,723
Total current liabilities		1,886,915			1,689,300

Long-term severance payable		128,600			110,000
Long-term note payable		32,681			-
Total long-term liabilities		161,281			110,000

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ DEFICIT:
Preferred stock 20,000,000 shares authorized, no shares issued and outstanding		-			-

Common stock, $0.001 par value, 100,000,000 shares authorized, 18,057,756 and 15,547,179 shares issued and outstanding as of December 31, 2011 and December 31, 2010, respectively		7,959			5,448
Additional paid-in-capital		5,511,877			5,257,293
Accumulated deficit		(6,703,750	)		(6,217,858	)

Total shareholders’ deficit		(1,183,914	)		(955,117	)

Total liabilities and shareholders’ deficit	$	864,282		$	844,183

See accompanying notes to consolidated financial statements.

F-2

Index

INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

	2011			2010

NET SALES	$	3,102,041		$	3,903,219

COST OF SALES		1,567,876			2,102,448

GROSS PROFIT		1,534,165			1,800,771

OPERATING EXPENSES:

General and administrative		1,332,008			2,197,927
Selling and marketing		687,809			399,175

Total operating expenses		2,019,817			2,597,102

OPERATING LOSS		(485,652	)		(796,331	)

OTHER (EXPENSES) INCOME, NET:
Interest (expense) income, net		(240	)		418
Total other (expenses) income, net		(240	)		418

NET LOSS	$	(485,892	)	$	(795,913)

BASIC AND DILUTED NET LOSS PER SHARE	$	(0.03	)	$	(0.05)

See accompanying notes to consolidated financial statements.

F-3

Index

INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

	Common Stock					Additional
	$0.001 par value					Paid-In		Accumulated
	Shares		Amount			Capital		Deficit		Totals


Balance at January 1, 2010		14,505,912	$	4,407		$	5,126,763	$	(5,421,945)	$	(290,775)

Net loss		-		-			-		(795,913)		(795,913	)

Share based compensation		-		-			27,444		-		27,444

Exercise of warrants		1,041,267		1,041			103,086		-		104,127

Balance at December 31, 2010		15,547,179	$	5,448		$	5,257,293	$	(6,217,858)	$	(955,117	)

Net loss		-		-			-		(485,892)		(485,892)

Share based compensation		-			-		70,163		-		70,163

Shares issued as part of BBI acquisition		500,000		500			(500)		-		-

Exercise of warrants		168,649		169			16,696		-		16,865

Issuance of common stock		1,291,928		1,292			127,712		-		129,004

Issuance of common stock for consulting services		550,000		550			18,478		-		19,028

Issuance of warrants for consulting services		-		-			22,035		-		22,035

Balance at December 31, 2011		18,057,756	$	7,959		$	5,511,877	$	(6,703,750)	$	(1,183,914	)

See accompanying notes to consolidated financial statements.

F-4

Index

INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

	2011			2010

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(485,892	)	$	(795,913	)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
Depreciation		14,092			14,339
Bad debt expense		43,594			-
Stock based compensation		111,226			27,444
Change in assets and liabilities
Accounts receivable		(14,009	)		16,743
Inventories		(191,629	)		488,088
Prepaid expenses and other current assets		26,115			2,902
Accounts payable and accrued liabilities		234,855			(243,606	)
Severance payable		(93,933	)		263,333
Tax penalties		10,000			10,000
Deferred revenue		(7,570	)		(102,702	)
Net cash and cash equivalents used in operating activities		(353,151	)		(319,372	)


CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of warrants		16,865			104,127
Proceeds from issuance of common stock		129,004			-
Proceeds from note payable		98,044			-
Advances from related parties		40,000			2,524
Payments to related parties		(32,500	)		(3,232	)
Net cash and cash equivalents provided by financing activities		251,413			103,419

NET DECREASE IN CASH AND CASH EQUIVALENTS		(101,738	)		(215,953	)

CASH AND CASH EQUIVALENTS, beginning of the year		160,542			376,495

CASH AND CASH EQUIVALENTS, end of the year	$	58,804		$	160,542

See accompanying notes to consolidated financial statements.

F-5

Index

INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2011 and 2010

Note 1 - Organization, Business of the Company and Liquidity

Organization and Nature of Operations

International Commercial Television Inc., (the “Company” or “ICTV”) was organized under the laws of the State of Nevada on June 25, 1998.

Strategic Media Marketing Corp. (“SMM”), a wholly owned subsidiary, was incorporated in the Province of British Columbia on February 11, 2003 and has a December 31 fiscal year-end. Effective February 7, 2011, SMM offices were closed down and the subsidiary was dissolved. Operations performed by SMM are now being managed out of our office.

Effective February 17, 2011, the Company acquired 100% of the equity interest in Better Blocks International Limited (“BBI”), see Note 7.

The Company sells various consumer products. The products are primarily marketed and sold throughout the United States and internationally via infomercials. Although our companies are incorporated in Nevada and New Zealand, a substantial portion of operations are currently run from the Wayne, Pennsylvania office.

Liquidity and Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company generated negative cash flows from operating activities in the past fiscal year of approximately $353,000, and, for the most part, has experienced recurring losses from operations. The Company had negative working capital of approximately $1,043,000 and an accumulated deficit of approximately $6,704,000 as of December 31, 2011.

There is no guarantee that the Company will be successful in bringing our products into the traditional retail environment. If the Company is unsuccessful in achieving this goal, the Company will be required to raise additional capital to meet its working capital needs. If the Company is unsuccessful in completing additional financings, it will not be able to meet its working capital needs or execute its business plan. In such case the Company will assess all available alternatives including a sale of its assets or merger, the suspension of operations and possibly liquidation, auction, bankruptcy, or other measures. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability of the carrying amount of recorded assets or the amount of liabilities that might result should the Company be unable to continue as a going concern.

Note 2 - Summary of significant accounting policies

Principles of consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary BBI for the period February 17, 2011 through December 31, 2011 and SMM for the period January 1, 2011 through February 7, 2011 and for the year ended December 31, 2010. All significant inter-company transactions and balances have been eliminated.

F-6

Index

INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2011 and 2010

Note 2 - Summary of significant accounting policies (continued)

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles of the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Management believes that the estimates utilized in preparing its consolidated financial statements are reasonable and prudent. Actual results could differ from these estimates.

Concentration of credit risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, include cash and trade receivables. The Company maintains cash in bank accounts that, at times, may exceed federally insured limits. As of December 31, 2011, the Company did not exceed the federally insured limit in its investment savings. The Company has not experienced any losses and believes it is not exposed to any significant risks on its cash in bank accounts. As of December 31, 2011 and December 31, 2010, 39% and 4% of the Company’s accounts receivable were due from various individual customers to whom our products had been sold directly via Direct Response Television; the remaining 61% and 96% of the Company’s accounts receivable were due from two and three wholesale infomercial operators, respectively. Major customers are considered to be those who accounted for more than 10% of net sales. The aggregate accounts receivable balances for these two major customers at December 31, 2011 was approximately $33,000.

Fair value of financial instruments

Fair value estimates, assumptions and methods used to estimate fair value of the Company’s financial instruments are made in accordance with the requirements of ASC 825-10, “Disclosures about Fair Value of Financial Instruments.” The Company has used available information to derive its estimates. However, because these estimates are made as of a specific point in time, they are not necessarily indicative of amounts the Company could realize currently. The use of different assumptions or estimating methods may have a material effect on the estimated fair value amounts. The carrying values of financial instruments such as cash, accounts receivable, accounts payable, and accrued liabilities approximate their fair values due to the short settlement period for these instruments. It is not practicable to estimate the fair value of the Note Payable to Shareholder due to its related party nature.

Cash and cash equivalents

The Company considers all unrestricted highly liquid investments with an original maturity of three months or less to be cash equivalents.

Restricted Cash

Transfirst ePayment Services (“Transfirst”), ICTV’s credit card processing vendor for VISA and Mastercard transactions in the United States, maintains a reserve fund within our processing account to cover all fees, charges, and expenses due them, including those estimated for possible customer charge backs. These reserves are updated periodically by Transfirst and maintained for a rolling 180 days of activity. Based upon established levels of risk, this normally represents approximately 2% of transaction volume for the period, and is considered as “Restricted Cash”. At December 31, 2011 and 2010 the amount of Transfirst reserves were approximately $5,000 and $2,000, respectively.

Foreign currency transactions

Transactions entered into by the Company in currencies other than its local currency, are recorded in its local currency and any changes in currency exchange rates that occur from the initiation of a transaction until settled are recorded as foreign currency gains or losses in the Consolidated Statements of Operations.

F-7

Index

INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2011 and 2010

Note 2 - Summary of significant accounting policies (continued)

Accounts receivable

Accounts receivable are recorded net of allowances for returns and doubtful accounts of approximately $13,000 and $7,000 for the years ended December 31, 2011 and 2010, respectively. The allowances are calculated based on historical customer returns and bad debts.

Inventories

Inventories consist primarily of products held for resale, and are valued at the lower of cost (first-in, first-out method) or market. The Company adjusts inventory for estimated obsolescence when necessary based upon demand and market conditions. The Company has recorded approximately $12,000 and $0 in inventory of consigned product as of December 31, 2011 and 2010, respectively, that has been shipped to customers under the 30-day free trial period for which the trial period has not expired and as such the customer has not accepted the product.

Furniture and equipment

Furniture and equipment are carried at cost and depreciation is computed over the estimated useful lives of the individual assets ranging from 3 to 7 years. Depreciation is computed using the straight-line method. The related cost and accumulated depreciation of assets retired or otherwise disposed of are removed from the accounts and the resultant gain or loss is reflected in earnings. Maintenance and repairs are expensed currently while major renewals and betterments are capitalized.

Depreciation expense amounted to approximately $14,000 for each of the years ended December 31, 2011 and 2010.

Impairment of Long-Lived Assets

In accordance with ASC 360-10, “Accounting for the Impairment or Disposal of Long-Lived Assets”, long-lived assets are reviewed for impairment when circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future net cash flows estimated by the Company to be generated by such assets. If such assets are considered to be impaired, the impairment to be recognized is the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of by sale are recorded as held for sale at the lower of carrying value or estimated net realizable value. No impairment losses were identified or recorded in the fiscal years ended December 31, 2011 and 2010.

F-8

Index

INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2011 and 2010

Note 2 - Summary of significant accounting policies (continued)

Revenue recognition

In March 2010, the Allstar agreement was terminated and the Company retained the exclusive distribution rights for the Derma Wand. Upon termination of the contract, the Company recognized the remaining non-refundable royalty advances that were previously booked in deferred revenue. The Company recognized $0 and $94,000 in revenue related to the Allstar agreement in the years ended December 31, 2011 and 2010, respectively.

Revenue related to international wholesale customers is recorded at gross amounts with a corresponding charge to cost of sales upon shipment.

Shipping and handling

Amounts billed to customers for shipping and handling are included in revenue: shipping and handling revenue approximated $61,000 and $13,000 for the years ended December 31, 2011 and 2010, respectively. Shipping and handling costs are included in cost of sales. Shipping and handling costs approximated $233,000 and $227,000 for the years ended December 31, 2011 and 2010, respectively.

Research and development

Research and development costs are expensed as incurred and are included in selling and marketing expense in the accompanying consolidated financial statements. Research and development costs primarily consist of efforts to discover and develop new products and the testing and development of direct-response advertising related to these products.

Media and production costs

Media and production costs are expensed as incurred and are included in selling and marketing expense in the accompanying consolidated financial statements. The Company incurred approximately $172,000 and $11,000 in such costs for the years ended December 31, 2011 and 2010, respectively.

F-9

Index

INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2011 and 2010

Note 2 - Summary of significant accounting policies (continued)

Income taxes

The Company’s policy is to recognize interest and penalties related to tax matters in general and administrative expenses in the Consolidated Statements of Operations.

Stock options

In December 2011, our shareholders approved our 2011 Stock Option Plan (the “2011 Plan”). The 2011 Plan is designed for selected employees, officers, and directors to the Company and its subsidiaries, and is intended to advance the best interests of the Company by providing personnel who have substantial responsibility for the management and growth of the Company and its subsidiaries with additional incentive by increasing their proprietary interest in the success of the Company, thereby encouraging them to remain in the employ of the Company or its subsidiaries. The 2011 Plan is administered by the Board of Directors of the Company, and authorizes the issuance of stock options not to exceed a total of 3,000,000 shares. The terms of any awards under the Plan are determined by the Board of Directors, provided that no options may be granted at less than the fair market value of the stock as of the date of the grant. As of December 31, 2011, zero options are outstanding under the 2011 Plan.

The Company uses ASC (“Accounting Standards Codification”) Topic 718, “Share-Based Payments”, to account for stock-based compensation. The Company recognizes compensation expense in an amount equal to the fair value of share-based payments such as stock options granted to employees over the requisite vesting period of the awards. Stock options granted to non-employees are remeasured at each reporting period.

F-10

Index

INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2011 and 2010

Note 2 - Summary of significant accounting policies (continued)

Stock options (continued)

The following is a summary of stock options outstanding under the existing stock option plan for the years ended December 31, 2011 and 2010:

	Number of Shares						Weighted Average
	Employee		Non- Employee		Totals		Exercise Price

Balance, January 1, 2011		-		657,000		657,000	$	2.00
Granted		1,300,000		350,000		1,650,000		0.08
Exercised		-		-		-		-
Expired		-		(657,000)		(657,000)		(2.00)

Balance, December 31, 2011		1,300,000		350,000		1,650,000	$	0.08

	Number of Shares						Weighted Average
	Employee		Non- Employee		Totals		Exercise Price

Balance, January 1, 2010		-		817,000		817,000	$	1.68
Granted		-		-		-		-
Exercised		-		-		-		-
Expired		-		(160,000)		(160,000)		0.36

Balance, December 31, 2010		-		657,000		657,000	$	2.00

Of the stock options currently outstanding, zero options are currently vested and exercisable. The weighted average exercise price of these options was $0.08. These options expire in February 2021. The aggregate intrinsic value for options outstanding and exercisable at December 31, 2011 and 2010 was immaterial.

During the year ended December 31, 2011, 1,650,000 options were granted to employees and consultants. For the years ended December 31, 2011 and 2010, the Company recorded approximately $70,000 and $7,000 respectively in stock compensation expense related to vesting of options previously granted. Approximately $165,000 of total unrecognized compensation cost related to non-vested option grants that will be recognized over the remaining vesting period of approximately 2 years.

The following assumptions are used in the Black-Scholes option pricing model for the year ended December 31, 2011 to value the stock options outstanding:

	2011

Risk-free interest rate		1.92%-3.03	%
Expected dividend yield		0.00
Expected life	6.00 - 10.00 years
Expected volatility		313.16%-340.25	%
Weighted average grant date fair value		$ 0.14

F-11

Index

INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2011 and 2010

Note 2 - Summary of significant accounting policies (continued)

Stock options (continued)

During 2010, 250,000 options were granted to a consultant for services rendered. These options were issued outside the Company’s stock option plan. For the years ended December 31, 2011 and 2010, the Company recorded approximately zero and $20,000 in stock compensation expense. The exercise prices for the 150,000 and 100,000 options granted were $0.25 and $0.075 per share, respectively, and the options will be fully vested in approximately 2 years.

	2010

Risk-free interest rate		0.98	%
Expected dividend yield		0.00
Expected life	3.00 years
Expected volatility		442.25	%
Weighted average grant date fair value	$	0.08

Of the 250,000 stock options currently outstanding and issued in 2010 and 2011, as of December 31, 2011, 83,333 options are currently vested and exercisable. The weighted average exercise price of these options was $0.18. These options expire in December 2013. The aggregate intrinsic value for options outstanding and exercisable at December 31, 2011 and 2010 was immaterial.

The following is a summary of all stock options outstanding, and nonvested for the year ended December 31, 2011:

	Number of Shares
	Employee		Non- Employee		Totals		Weighted Average
							Exercise Price
		-
Balance, January 1, 2011 – nonvested		-		250,000	250,000	$	0.08
Granted		1,300,000		350,000	1,650,000		0.08
Vested		-		(83,333)	(83,333)		0.08
Forfeited		-		-	-		-

Balance, December 31, 2011 - nonvested		1,300,000		516,667	1,816,667	$	0.08

F-12

Index

INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2011 and 2010

Note 3 - Commitments and contingencies

Leases

As of December 31, 2011, the Company had an active lease related to the office space rented in Wayne, Pennsylvania. Total rent expense incurred during 2011 and 2010 totaled approximately $38,000 and $57,000, respectively. During the year ended December 31, 2011, the Company renewed its lease at the Wayne, Pennsylvania location with lower monthly rent payments, which now extends through March, 2013. The schedule below details the future financial obligations under the remaining two leases.

	2012		2013		2014		2015		2016		TOTAL OBLIGATION
Wayne - Corporate HQ	$	32,300	$	8,075	$	-	$	-	$	-	$	40,375

Total Lease Obligations	$	32,300	$	8,075	$	-	$	-	$	-	$	40,375

DermaWandTM

On October 15, 1999, Windowshoppe.com Limited (“WSL”) entered into an endorsement agreement with an individual for her appearance in a DermaWand infomercial. On July 11, 2001, the agreement was amended to include a royalty payment for each unit sold internationally, up to a maximum royalty payment for any one calendar quarter. Further, if the infomercial is aired in the United States, then the airing fee will revert back to the same flat rate per calendar quarter. The initial term of the agreement was five years starting October 15, 1999. The agreement automatically and continually renews for successive additional five-year terms unless R.J.M.Ventures (“RJML”) is in material default and is notified in writing at least thirty days prior to the end of the then current term that the individual intends to terminate the agreement. The Company assumed any and all responsibilities associated with the license and reconveyance agreements dated April 1, 2000 entered into by the Company and WSL and RJML. On January 5, 2001, WSL entered into an agreement with Omega 5. WSL shall have worldwide nonexclusive rights to manufacture, market and distribute DermaWandTM. In consideration of these rights, WSL shall pay a monthly payment for each unit sold of DermaWand depending on various scenarios as defined in the agreement. The agreement is silent as to its duration.

During 2007, the Company entered into an exclusive license agreement with Omega 5 wherein ICTV was assigned all of the trademarks and all of the patents and pending patents relating to the DermaWandTM and was granted exclusive license with respect to the commercial rights to the DermaWandTM. This agreement was amended and superseded on July 28, 2010. The geographical scope of the license granted is the entire world consisting of the United States of America and all of the rest of the world. The license remains exclusive to ICTV provided ICTV pays to Omega 5 a minimum annual payment of $250,000 in the initial 18 month term of the agreement and in each succeeding one-year period. If in any calendar year the payments made by the Company to Omega exceed the annual minimum of $250,000, then the amount in excess of the annual minimum or “rollover amount” will be credited towards the Company’s annual minimum for the immediately following calendar year only. If the Company fails to meet the minimum requirements as outlined in the agreement, it may be forced to assign the trademarks and patents back to Omega 5. After the initial term, the exclusive license granted shall renew automatically for a three year period, and thereafter automatically at three-year intervals.

The amount of expenses incurred for sales of the DermaWandTM were approximately $248,000 and $403,000 for the years ended December 31, 2011 and 2010, respectively.

Employment Agreement

Effective March 1, 2011, the Company entered into an employment agreement with the CEO of the Company. Under the terms of this agreement, the Company agrees that in consideration of services performed, the Company will pay an annual salary of $180,000, subject as appropriate to an adjustment to be approved by the Company’s Board of Directors on an annual basis. The CEO is also entitled to annual performance bonuses as determined appropriate by the Board of Directors, as well as employee is entitled to receive issuance of stock options and other employee benefits such as health insurance reimbursement; automobile allowance and other reimbursable expenses. The initial term of this employment agreement is five years and shall automatically renew for successive one year periods unless either party provides no less than 60 days prior written notice of their intent not to renew the agreement.

F-13

Index

Other matters

INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2011 and 2010

Note 3 - Commitments and contingencies (continued)

Product Liability Insurance

For certain products, the Company was (and is) listed as an additional insured party under the product manufacturers’ insurance policy. On February 20, 2007, the Company purchased its own liability insurance to cover all direct to consumer product sales in the US and worldwide, which expires on April 20, 2012. At present, management is not aware of any claims against the Company for any products sold.

Note 4 – Severance payable

In September 2010 the Company entered into a severance agreement with a former consultant. Under the severance agreement, the consultant will be paid $270,000 over a 27 month period in increments of $10,000 per month beginning in September 2010 and continuing through November 2012. The Company recorded the $270,000 as a General and Administrative expense in the three months ended September 30, 2010. In April 2011, the Company amended the aforementioned severance agreement. The amendment allows the Company to make monthly payments of $3,400 per month for a period of one year from April 2011 through March 2012. In March 2012, the Company amended the aforementioned severance agreement for a second time to continue the monthly payment amount of $3,400 through March 2016. The severance payable balance at December 31, 2011 and 2010 is $169,400 and $263,333, respectively of which $40,800 is current and $128,600 is long-term as of December 31, 2011.

In October 2010, the Company terminated the employment of its Chief Operating Officer and committed to paying a four month severance. The severance payable balance at December 31, 2011 and 2010 is $0 and $33,333, respectively.

Note 5 - Related party transactions

The Company has received short-term advances from a shareholder. These advances amounted to approximately $40,000 and $2,500 during the years ended December 31, 2011 and 2010, respectively. The advances are offset by payments which amounted to approximately $32,500 and $3,200 during the years ended December 31, 2011 and 2010, respectively. These advances are non-interest bearing and without specific terms of repayment. These advances are included in accounts payable – related parties, on the accompanying Consolidated Balance Sheets.

The Company has a note payable to a shareholder in the amount of $590,723. This loan is interest-free and has no specific terms of repayment.

F-14

Index

INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2011 and 2010

Note 6 – Notes payable

In December 2011, the Company entered into an unsecured note payable with a Canadian lender in the amount of approximately $98,000 (C$100,000). This loan accrues interest of prime (3.25% at December 31, 2011) plus 1%. Interest is paid monthly. Principal payments are to be paid in fifteen monthly installments of approximately $6,500 (C$6,667), beginning in March 2012. The loan permits payment in advance without penalty at any time. This note was subsequently amended in January 2012. See Note 11. The lender of this note is also one of the two persons that receive royalty payments on the DermaWand sales as noted in Note 3.

Note 7 - Capital transactions

In December 2007 we issued a total of 1,600,000 shares of our common stock and an equal number of warrants in a private placement of common stock and warrants. In the purchase agreement, the investors bought their stock at $2.20 per share, received warrants to purchase an equal number of shares at $3.00 per share, and were granted certain anti-dilution rights, which would essentially re-price their purchase if we later sold shares at a lower price. At our current stock price, the anti-dilution provisions essentially precluded our raising capital through sales of our stock.

As a result, the Company requested that the investors waive their anti-dilution rights. One of the requirements for us to obtain the requested waivers was to reduce the warrant exercise price to more closely reflect our current stock price. The result of our negotiations with the investors was a reduction in the warrant exercise price to $.10 per share for those warrants exercised promptly, and a reduction in the warrant exercise price to $.40 per share for most of the remaining warrants. In connection with this transaction, the Company issued 41,928 shares of common stock during the year ended December 31, 2011, in exchange for proceeds of approximately $4,000.

On November 5, 2010, the Company’s Board of Directors approved a resolution which modified the terms of the 1,600,000 warrants. The modified terms were (i) waiver of anti-dilution rights, (ii) modification of the exercise price of the warrants as defined in the agreement, and (iii) extension of expiration date to December 1, 2013.

The Company accounted for this change of warrants as a modification of the warrants during the year ended December 31, 2010. The modification of warrants, an equity instrument, resulted in a transfer of value to the holders of the instrument, thus as such this transfer of value has been characterized as a deemed dividend to shareholders. The Company valued the deemed dividend as the incremental fair value of modified warrants compared to the fair value of the old warrants immediately prior to modification. The weighted average grant date fair value of the warrants after modification was $0.05 per share. The fair value of the warrants prior to modification was insignificant, therefore a deemed dividend to the shareholder was recorded for approximately $77,000 to account for the incremental fair value of the warrant modification, which is reflected as an increase and corresponding decrease in additional paid in capital during the year ended December 31, 2010.

The following assumptions were used in determining the grant date fair value of the warrants:

	2010

Risk-free interest rate		0.60	%
Expected dividend yield		0.00
Expected life	3.00 years
Expected volatility		365.00	%

Through December 31, 2011, 1,209,916 warrants have been exercised for approximately $121,000. The remaining warrants of 390,084 are exercisable at prices between $0.10 and $3.00 per share and expire through December 1, 2013. For the year ended December 31, 2011 and 2010, 168,649 and 1,041,267 warrants have been exercised for total proceeds of approximately $17,000 and $104,000, respectively.

On February 17, 2011, the Company acquired from one of its shareholders 100% of its equity interest in Better Blocks International Limited (“BBI”), consisting primarily of intellectual properties in exchange for 500,000 shares of the Company’s common stock. This transaction is between entities under common control and accordingly the net asset acquired is recorded at zero, which is the carrying value of BBI and is recorded as a capital transaction.

F-15

Index

INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2011 and 2010

Note 7 - Capital transactions (continued)

On April 1, 2011, the Company issued 1,000,000 shares of common stock in a private placement at $0.10 for total consideration of $100,000.

On May 11, 2011, the Company issued 250,000 shares of common stock in a private placement at $0.10 for total consideration of $25,000.

On August 5, 2011, the Company entered into a three year corporate public relations consulting agreement. As part of the agreement, the consultants received compensation in the form of 500,000 shares of stock, 500,000 warrants with an exercise price of $0.10 that expire 14 months from the date of the agreement, and 1,000,000 warrants with an exercise price of $0.50 that expire 24 months from the date of the agreement. The 500,000 shares of common stock issued were valued at the fair market value of the stock on the date of grant. The Company recognized approximately $9,000 of stock based compensation expense for the year ended December 31, 2011 related to the issuance of these shares, and the Company has remaining unrecognized expense of approximately $56,000 which will be recognized over the next 31 months.

The Company used Black Scholes model to value the 1,500,000 warrants granted using the following assumptions:

Risk-free interest rate		0.11% - 0.28	%
Expected dividend yield		0.00
Expected life	1.33 – 2.00 years
Expected volatility		303.3% - 430.9	%
Exercise price		$ 0.10 - $0.50

The weighted average grant date fair value of these warrants was $0.06.

For the year ended December 31, 2011 the Company recorded approximately $9,600 of stock based compensation expense for the 500,000 warrants issued to the consultants. As of December 31, 2011, there was approximately $17,000 of total unrecognized compensation costs related to these warrant grants which will be recognized over the remaining 9 months.

For the year ended December 31, 2011 the Company recorded approximately $12,400 of stock based compensation expense for the 1,000,000 warrants issued to the consultants. As of December 31, 2011, there was approximately $47,000 of total unrecognized compensation costs related to these warrant grants which will be recognized over the remaining 19 months.

In November 2011, the Company issued a former consultant 50,000 shares of common stock for prior services rendered. The Company recognized $10,000 of share based compensation expense during 2011 in relation to this transaction based on the closing stock price on date of settlement.

Note 8 - Basic and diluted earnings per share

ASC 260, “Earnings Per Share” requires presentation of basic earnings per share and dilutive earnings per share.

The computation of basic earnings per share is computed by dividing earnings available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted earnings per share gives the effect to all dilutive potential common shares outstanding during the period. The computation of diluted earnings per share does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect. For the purposes of obtaining future capital to finance the Companies’ operations and to fund future expansion of the Companies’ Direct Response Television campaign certain shareholders are able to purchase additional stock with stock warrants attached to common stock issued. At December 31, 2011, there were 1,890,084 warrants outstanding and exercisable. The warrants are exercisable between $0.10 and $3.00 per share expiring through December 3, 2013. At December 31, 2011 there were 1,900,000 stock options outstanding and 83,333 were vested and exercisable at an exercise price of $0.08.

The following securities were not involved in the computation of diluted net loss per share as their effect would have been anti-dilutive:

	December 31
	2011		2010
Options to purchase common stock		1,900,000		907,000
Warrants to purchase common stock		1,890,084		558,733

F-16

Index

INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2011 and 2010

Note 8 - Basic and diluted earnings per share (continued)

The computations for basic and fully diluted earnings per share are as follows:

For the year ended December 31, 2011:	Income/(Loss) (Numerator)			Weighted Average Shares (Denominator)		Per Share Amount

Basic and diluted loss per share

Loss to common shareholders	$	(485,892	)		17,145,925	$	(0.03	)

For the year ended December 31, 2010:	Income/(Loss) (Numerator)		Weighted Average Shares (Denominator)		Per Share Amount

Basic and diluted loss per share

Loss to common shareholders	$	(795,913)		14,508,765	$	(0.05	)

Note 9 - Income taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company has provided a full valuation allowance on the net deferred tax asset because of uncertainty regarding its realization. This asset primarily consists of net operating losses. For the most part, the Company has experienced operating losses since inception. Therefore the Company has accumulated approximately $5,000,000 and $4,400,000 of net operating loss carryforwards for federal and state purposes, respectively, which expire twenty years from the time of incurrence for federal purposes. Expiration for the state net operating carryforwards may vary based on different state rules.

Significant components of the Company’s deferred tax assets (liabilities) are approximately as follows as of December 31, 2011 and 2010:

	2011		2010
Net operating loss	$	1,948,000	$	1,802,000
Accrued returns and allowances		21,000		4,000
Accumulated depreciation		(3,000)		(5,000)
Other		187,000		165,000
Total deferred tax assets	$	2,153,000	$	1,966,000
Valuation allowance		(2,153,000)		(1,966,000	)
Net deferred tax assets	$	-	$	-

A valuation allowance for all of our net deferred tax assets has been provided as we are unable to determine, at this time, that the generation of future taxable income against which the net operating loss (“NOL”) and carryforwards could be used can be predicted to be more likely than not. Net change to our valuation allowance for the year ended December 31, 2011 was an increase of $187,000.

F-17

Index

INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2011 and 2010

Note 9 - Income taxes (continued)

Due to the change in ownership provisions of the Internal Revenue Code, the availability of the Company’s net operating loss carry forwards may be subject to annual limitations against taxable income in future periods, which could substantially limit the eventual utilization of such carry forwards. The Company has not analyzed the historical or potential impact of its equity financings on beneficial ownership and therefore no determination has been made whether the net operating loss carry forward is subject to any Internal Revenue Code Section 382 limitation. To the extent there is a limitation, there would be a reduction in the deferred tax asset with an offsetting reduction in the valuation allowance.

Current United States Federal tax law limits the use of net operating loss carry forwards after there has been a substantial change in ownership, as defined in Internal Revenue code Section 382, during a three year period. The Company has not evaluated whether a change in ownership has occurred over the last three years. The Company’s use of net operating losses for United States and state tax purposes may be limited under the Internal Revenue Code if it is determined that a change in ownership has occurred.

The Company has not filed income tax returns since inception; therefore, the statute for all years remains open and any of these years could potentially be audited.

The Company’s policy is to recognize interest and penalties related to tax matters in general and administrative expenses in the Consolidated Statements of Operations. At December 31, 2011 and 2010, the Company had approximately $270,000 and $260,000, respectively accrued for various tax penalties.

A reconciliation between the Company’s effective tax rate and the federal statutory rate for the year ended December 31, 2011, is as follows:

	2011
Federal rate		34.00%
State tax rate		5.95%
Effect of permanent differences		(3.30)%
Effect of valuation allowance		(36.65)%
Effective tax rate		0.00%

F-18

Index

INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2011 and 2010

Note 10 - Segment reporting

The Company operates in one industry segment and is engaged in the selling of various consumer products primarily through direct marketing infomercials. The Company evaluates performance and allocates resources based on several factors, of which the primary financial measure is operating income by geographic area. Operating expenses are primarily prorated based on the relationship between domestic and international sales.

Information with respect to the Company’s operating income by geographic area is as follows:

	For the year ended December 31, 2011						For the year ended December 31, 2010
	Domestic		International		Totals		Domestic		International		Totals


NET SALES	$	1,802,921	$	1,299,120	$	3,102,041	$	1,898,174	$	2,005,045	$	3,903,219


COST OF SALES		966,811		601,065		1,567,876		1,290,420		812,028		2,102,448

Gross profit		836,110		698,055		1,534,165		607,754		1,193,017		1,800,771

Operating expenses:
General and administrative		1,207,424		124,584		1,332,008		1,979,754		218,173		2,197,927
Selling and marketing		634,586		53,223		687,809		339,496		59,679		399,175
Total operating expenses		1,842,010		177,807		2,019,817		2,319,250		277,852		2,597,102

Operating income (loss)	$	(1,005,900)	$	520,248	$	(485,652)	$	(1,711,496)	$	915,165	$	(796,331)

Selected balance sheet information by segment is presented in the following table as of December 31:

Total Assets	2011		2010
Domestic	$	834,965	$	810,252
International		29,317		33,931
Total Assets	$	864,282	$	844,183

F-19

Index

INTERNATIONAL COMMERCIAL TELEVISION INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2011 and 2010

Note 11 – Subsequent events

On January 24, 2012, the Company modified its loan with the Canadian lender. The note was modified and increased the outstanding balance to approximately $137,000 (C$140,000) as additional borrowings were made to the Company. In addition, the interest was modified to lender’s cost, plus two-percent interest and the note became convertible into shares of common stock at a fixed conversion rate of $0.196 (C$.20) per share. The Company considered this a modification of debt that was not substantive, thus no gain or loss was recorded upon modification. The amount of the beneficial conversion upon modification was deemed insignificant to the consolidated financial statements.

Risk-free interest rate		0.36 – 0.58	%
Expected dividend yield		0.00
Expected life	3.00 years
Expected volatility		410%-418	%
Exercise price	$	0.25

The fair value of the warrants will be recorded as an increase and corresponding decrease to additional paid-in capital.

F-20

ICTV Brands Inc. - FORM 10-K - March 30, 2012

Attached files

ICTV Brands Inc. Reports