Delaware
|
13-3673965
|
State
or other jurisdiction of
|
(I.R.S.
Employer
|
corporation
or organization)
|
Identification
Number)
|
75
Adams Avenue, Hauppauge, New York
|
11788
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer x
|
Page
|
||
PART
I
|
Financial
Information
|
|
Item
1.
|
Financial
Statements & Notes
|
1-25
|
Item
2.
|
Managements
Discussion & Analysis of Financial Condition and Results of
Operations
|
26-37
|
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
37
|
Item
4.
|
Controls
and Procedures
|
38
|
PART
II
|
Other
Information Required in Report
|
|
Item
4
|
Submission
of Matters to a Vote of Security Holders
|
39
|
Item
6
|
Exhibits
|
40
|
Signatures
Page
|
41
|
|
Exhibits/Certifications
|
42-45
|
December
31,
|
June
30,
|
||||||
2006
|
2006
|
||||||
|
(Unaudited)
|
||||||
ASSETS
|
|||||||
CURRENT
ASSETS
|
|||||||
Cash
|
$
|
6,879
|
$
|
1,438
|
|||
Accounts
receivable, net
|
11,345
|
14,212
|
|||||
Inventories
|
9,807
|
8,706
|
|||||
Prepaid
expenses and other current assets
|
1,650
|
1,316
|
|||||
Deferred
tax assets
|
56
|
1,321
|
|||||
Total
Current Assets
|
29,737
|
26,993
|
|||||
Land,
building and equipment, net
|
30,664
|
29,069
|
|||||
Deferred
tax assets
|
7,069
|
4,849
|
|||||
Investment
in APR, LLC
|
1,023
|
1,023
|
|||||
Other
assets
|
604
|
933
|
|||||
TOTAL
ASSETS
|
$
|
69,097
|
$
|
62,867
|
December
31,
|
June
30,
|
||||||
2006
|
2006
|
||||||
|
(Unaudited)
|
||||||
CURRENT
LIABILITIES
|
|||||||
Current
maturities of long-term debt
|
$
|
1,808
|
$
|
1,686
|
|||
Accounts
payable, accrued expenses and other liabilities
|
13,235
|
12,650
|
|||||
Deferred
revenue
|
—
|
3,399
|
|||||
Total
Current Liabilities
|
15,043
|
17,735
|
|||||
OTHER
LIABILITIES
|
|||||||
Long-term
debt, less current maturities
|
13,797
|
13,952
|
|||||
Contract
termination liability
|
1,304
|
—
|
|||||
Other
liabilities
|
11
|
125
|
|||||
Total
Other Liabilities
|
15,112
|
14,077
|
|||||
TOTAL
LIABILITIES
|
30,155
|
31,812
|
|||||
COMMITMENTS
AND CONTINGENCIES
|
|||||||
Series
B-1 Redeemable Convertible Preferred Stock:
|
|||||||
15
shares authorized; issued and outstanding - 10 at December 31,
and June
30, 2006; liquidation preference of $10,000
|
8,155
|
8,225
|
|||||
Series
C-1 Redeemable Convertible Preferred Stock:
|
|||||||
10
shares authorized; issued and outstanding - 10 at December 31,
2006;
liquidation preference of $10,000
|
8,352
|
—
|
|||||
STOCKHOLDERS’
EQUITY
|
|||||||
Preferred
stocks, 10,000 shares authorized; issued and outstanding - 5,132
and
5,141, respectively; aggregate liquidation preference of $3,588
and
$4,291, respectively
|
51
|
51
|
|||||
Common
stock, $0.01 par value, 150,000 and 65,148 shares authorized and
issued,
respectively, at December 31, 2006, and 70,000 and 64,537 shares
authorized and issued, respectively, at June 30, 2006.
|
651
|
645
|
|||||
Additional
paid-in capital
|
28,126
|
24,196
|
|||||
Stock
subscription receivable
|
(34
|
)
|
(90
|
)
|
|||
Accumulated
other comprehensive income
|
83
|
98
|
|||||
Accumulated
deficit
|
(6,442
|
)
|
(2,070
|
)
|
|||
TOTAL
STOCKHOLDERS’ EQUITY
|
22,435
|
22,830
|
|||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
69,097
|
$
|
62,867
|
Three
Months Ended
December
31,
|
Six
Months Ended
December
31,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
SALES,
Net
|
$
|
17,479
|
$
|
16,213
|
$
|
40,305
|
$
|
30,760
|
|||||
|
|||||||||||||
COST
OF SALES
(including related-party rent expense of $140 and $242 for the
three and
six months ended December 31, 2006 and $102 and $204 for the three
and six
months ended December 31, 2005, respectively)
|
13,443
|
11,034
|
27,292
|
21,597
|
|||||||||
GROSS
PROFIT
|
4,036
|
5,179
|
13,013
|
9,163
|
|||||||||
|
|||||||||||||
OPERATING
EXPENSES
|
|||||||||||||
Selling,
general and administrative
|
3,156
|
2,201
|
5,794
|
4,639
|
|||||||||
Related
party rent
|
25
|
18
|
43
|
36
|
|||||||||
Research
and development
|
4,871
|
1,885
|
8,289
|
4,031
|
|||||||||
TOTAL
OPERATING EXPENSES
|
8,052
|
4,104
|
14,126
|
8,706
|
|||||||||
OPERATING
(LOSS) INCOME
|
(4,016
|
)
|
1,075
|
(1,113
|
)
|
457
|
|||||||
OTHER
EXPENSE
|
|||||||||||||
Contract
termination expense
|
(1,655
|
)
|
—
|
(1,655
|
)
|
—
|
|||||||
Interest
expense, net
|
(240
|
)
|
(99
|
)
|
(527
|
)
|
(190
|
)
|
|||||
Other
|
(121
|
)
|
(7
|
)
|
(121
|
)
|
(7
|
)
|
|||||
TOTAL
OTHER EXPENSE
|
(2,016
|
)
|
(106
|
)
|
(2,303
|
)
|
(197
|
)
|
|||||
(LOSS)
INCOME BEFORE INCOME TAXES
|
(6,032
|
)
|
969
|
(3,416
|
)
|
260
|
|||||||
(BENEFIT
FROM) PROVISION FOR INCOME TAXES
|
(1,908
|
)
|
360
|
(922
|
)
|
98
|
|||||||
NET
(LOSS) INCOME
|
(4,124
|
)
|
609
|
(2,494
|
)
|
162
|
|||||||
Series
C-1 preferred stock beneficial conversion feature
|
—
|
—
|
1,094
|
—
|
|||||||||
Preferred
stock dividends
|
453
|
67
|
742
|
90
|
|||||||||
NET
(LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
$
|
(4,577
|
)
|
$
|
542
|
$
|
(4,330
|
)
|
$
|
72
|
|||
EARNINGS
PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
|||||||||||||
Basic
(loss) earnings per share
|
$
|
(0.07
|
)
|
$
|
0.02
|
$
|
(0.07
|
)
|
$
|
0.00
|
|||
Diluted
(loss) earnings per share
|
$
|
(0.07
|
)
|
$
|
0.01
|
$
|
(0.07
|
)
|
$
|
0.00
|
|||
Basic
weighted average shares outstanding
|
65,063
|
32,464
|
64,892
|
32,464
|
|||||||||
Diluted
weighted average shares and equivalent shares outstanding
|
65,063
|
67,555
|
64,892
|
67,401
|
Accumulated
|
||||||||||||||||||||||||||||
Other
|
Retained
|
|||||||||||||||||||||||||||
Preferred
Stock
|
Common
Stock
|
Paid-In
|
Subscription
|
Comprehensive
|
Earnings
|
Stockholders’
|
||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Receivable
|
Income
|
(Deficit)
|
Equity
|
||||||||||||||||||||
BALANCE
-
July 1, 2006
|
5,141
|
$
|
51
|
64,537
|
$
|
645
|
$
|
24,196
|
$
|
(90
|
)
|
$
|
98
|
$
|
(2,070
|
)
|
$
|
22,830
|
||||||||||
Accrued
dividends - Series B-1
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(206
|
)
|
(206
|
)
|
|||||||||||||||||
Accrued
dividends - Series C-1
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(206
|
)
|
(206
|
)
|
|||||||||||||||||
Series
C-1 Preferred beneficial conversion feature
|
—
|
—
|
—
|
—
|
1,094
|
—
|
—
|
(1,094
|
)
|
—
|
||||||||||||||||||
Series
B-1 dividends paid with common stock
|
—
|
—
|
204
|
2
|
283
|
—
|
—
|
(207
|
)
|
78
|
||||||||||||||||||
Series
C-1 dividends paid with common stock
|
28
|
—
|
41
|
—
|
—
|
(41
|
)
|
—
|
||||||||||||||||||||
Dividends
declared - Series A-1
|
—
|
—
|
—
|
—
|
—
|
—
|
(124
|
)
|
(124
|
)
|
||||||||||||||||||
Shares
issued for options exercised
|
—
|
—
|
370
|
4
|
254
|
—
|
—
|
—
|
258
|
|||||||||||||||||||
Tax
benefit in connection with exercise of options
|
—
|
—
|
—
|
—
|
31
|
—
|
—
|
—
|
31
|
|||||||||||||||||||
Conversion
of Series A preferred stock
|
(7
|
)
|
—
|
7
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||
Conversion
of Series B preferred stock
|
(2
|
)
|
—
|
2
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||
Fair
value of warrants issued
|
—
|
—
|
—
|
—
|
1,641
|
—
|
—
|
—
|
1,641
|
|||||||||||||||||||
Stock
based compensation and modification expense
|
—
|
—
|
—
|
—
|
586
|
—
|
—
|
—
|
586
|
|||||||||||||||||||
Collections
on stock subscription receivable
|
—
|
—
|
—
|
—
|
—
|
56
|
—
|
—
|
56
|
|||||||||||||||||||
Change
in fair value of interest rate swap
|
—
|
—
|
—
|
—
|
—
|
—
|
(15
|
)
|
—
|
(15
|
)
|
|||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(2,494
|
)
|
(2,494
|
)
|
|||||||||||||||||
BALANCE
-
December 31, 2006
|
5,132
|
$
|
51
|
65,148
|
$
|
651
|
$
|
28,126
|
$
|
(34
|
)
|
$
|
83
|
$
|
(6,442
|
)
|
$
|
22,435
|
Three
Months Ended
December
31,
|
Six
Months Ended
December
31,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
NET
(LOSS) INCOME
|
$
|
(4,124
|
)
|
$
|
609
|
$
|
(2,494
|
)
|
$
|
162
|
|||
OTHER
COMPREHENSIVE INCOME
|
|||||||||||||
Change
in fair value of interest rate swap
|
(29
|
)
|
—
|
(15
|
)
|
—
|
|||||||
TOTAL
COMPREHENSIVEINCOME (LOSS)
|
$
|
(4,153
|
)
|
$
|
609
|
$
|
(2,509
|
)
|
$
|
162
|
Six
Months Ended
December
31,
|
|||||||
|
2006
|
2005
|
|||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|||||||
Net
(loss) income
|
$
|
(2,494
|
)
|
$
|
162
|
||
Adjustments
to reconcile net (loss) income to net
|
|||||||
cash
(used in) provided by operating activities:
|
|||||||
Bad
debt expense
|
55
|
11
|
|||||
Accreted
non-cash interest expense
|
21
|
—
|
|||||
Depreciation
and amortization
|
1,098
|
685
|
|||||
Vested
options expense
|
586
|
416
|
|||||
Contract
termination expense
|
1,655
|
—
|
|||||
Excess
tax benefit from exercise of stock options
|
(31
|
)
|
—
|
||||
Deferred
tax expense
|
(922
|
)
|
98
|
||||
Other
|
121
|
7
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
2,812
|
608
|
|||||
Inventories
|
(1,101
|
)
|
(403
|
)
|
|||
Prepaid
expenses and other current assets
|
(360
|
)
|
(323
|
)
|
|||
Accounts
payable, accrued expenses and other liabilities
|
(236
|
)
|
4,373
|
||||
Deferred
revenue
|
(3,399
|
)
|
1,637
|
||||
TOTAL
ADJUSTMENTS
|
299
|
7,109
|
|||||
NET
CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
|
(2,195
|
)
|
7,271
|
||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|||||||
Purchases
of building and equipment
|
(2,200
|
)
|
(4,589
|
)
|
|||
Deposits
and other long-term assets
|
(120
|
)
|
(111
|
)
|
|||
NET
CASH USED IN INVESTING ACTIVITIES
|
(2,320
|
)
|
(4,700
|
)
|
|||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|||||||
Proceeds
from sale of Series C-1 preferred stock and warrants, net
|
9,993
|
—
|
|||||
Expenditures
relating to sale of Series B-1 preferred stock and
warrants
|
(70
|
)
|
—
|
||||
Proceeds
from options exercised
|
258
|
—
|
|||||
Proceeds
from long-term debt
|
690
|
3,630
|
|||||
Payment
of Series A-1 dividends
|
(124
|
)
|
(165
|
)
|
|||
Collections
on stock subscription receivable
|
56
|
21
|
|||||
Excess
tax benefit from exercise of stock options
|
31
|
—
|
|||||
Repayments
of long-term debt
|
(878
|
)
|
(200
|
)
|
|||
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
9,956
|
3,286
|
|||||
NET
INCREASE IN CASH
|
5,441
|
5,857
|
|||||
CASH
-
Beginning
|
1,438
|
537
|
|||||
|
|||||||
CASH
-
Ending
|
$
|
6,879
|
$
|
6,394
|
Six
Months Ended
December
31,
|
|||||||
2006
|
2005
|
||||||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION
|
|||||||
Cash
paid during the periods for:
|
|||||||
Interest
|
$
|
636
|
$
|
160
|
|||
Income
taxes
|
$
|
—
|
$
|
—
|
|||
Non-Cash
Investing or Financing Transactions:
|
|||||||
Tax
benefit in connection with exercise of stock options
|
$
|
31
|
$
|
—
|
|||
Issuance
of common stock in exchange for subscription receivable
|
$
|
—
|
$
|
133
|
|||
Acquisition
of machinery and equipment in exchange for capital lease
payable
|
$
|
156
|
$
|
128
|
|||
|
|||||||
Reclassification
of equipment deposits to building and equipment
|
$
|
389
|
$
|
735
|
|||
Series
B-1 dividends paid with common stock
|
$
|
284
|
$
|
—
|
|||
Series
C-1 dividends paid with common stock
|
$
|
41
|
$
|
—
|
|||
Accrual
of Series B-1 dividends
|
$
|
206
|
$
|
—
|
|||
Accrual
of Series C-1 dividends
|
$
|
206
|
$
|
—
|
|||
Change
in fair value of interest rate swap
|
$
|
15
|
$
|
—
|
|||
|
|||||||
Declaration
of preferred dividends
|
$
|
—
|
$
|
124
|
|
Six
Months Ended
|
||||||
|
December
31,
|
||||||
|
2006
|
2005
|
|||||
Reserve
balance - beginning
|
$
|
2,315
|
$
|
425
|
|||
|
|||||||
Actual
chargebacks, discounts and other credits taken in the current period
(a)
|
(5,014
|
)
|
(1,695
|
)
|
|||
|
|||||||
Current
provision related to current period sales
|
5,267
|
3,177
|
|||||
Reserve
balance - ending
|
$
|
2,568
|
$
|
1,907
|
December
31,
|
June
30,
|
||||||
2006
|
2006
|
||||||
(Unaudited)
|
|||||||
Finished
goods
|
$
|
1,010
|
$
|
1,781
|
|||
Work
in process
|
4,268
|
3,685
|
|||||
Raw
materials
|
4,233
|
2,928
|
|||||
Packaging
materials
|
296
|
312
|
|||||
Total
|
$
|
9,807
|
$
|
8,706
|
December
31,
|
|
June
30,
|
|
Estimated
Useful
|
|
|||||
|
|
2006
|
|
2006
|
|
Lives
|
|
|||
|
|
(Unaudited)
|
|
|
|
|||||
Land
|
$
|
4,924
|
$
|
4,924
|
—
|
|||||
Building
|
12,460
|
12,460
|
39
Years
|
|||||||
Machinery
and equipment
|
14,242
|
12,657
|
5-7
Years
|
|||||||
Computer
equipment
|
891
|
151
|
5
Years
|
|||||||
Construction
in Progress
|
560
|
587
|
—
|
|||||||
Furniture
and fixtures
|
686
|
660
|
5
Years
|
|||||||
Leasehold
improvements
|
3,506
|
3,206
|
5-15
Years
|
|||||||
37,269
|
34,645
|
|||||||||
Less:
accumulated depreciation and amortization
|
6,605
|
5,576
|
||||||||
Land,
Building and Equipment, net
|
$
|
30,664
|
$
|
29,069
|
December
31,
|
June
30,
|
||||||
2006
|
2006
|
||||||
(Unaudited)
|
|||||||
Inventory
purchases
|
$
|
7,265
|
$
|
5,734
|
|||
Research
and development expenses
|
1,500
|
2,068
|
|||||
Other
|
4,470
|
4,848
|
|||||
Total
|
$
|
13,235
|
$
|
12,650
|
December
31,
2006
|
June
30,
2006
|
||||||
Revolving
credit facility
|
$
|
—
|
$
|
—
|
|||
Real
estate term loan
|
11,333
|
11,734
|
|||||
Machinery
and equipment term loans
|
4,086
|
3,833
|
|||||
Capital
leases
|
232
|
72
|
|||||
15,651
|
15,639
|
||||||
Less:
amount representing interest on capital leases
|
46
|
1
|
|||||
Total
long-term debt
|
15,605
|
15,638
|
|||||
Less:
current maturities
|
1,808
|
1,686
|
|||||
Long-term
debt, less current maturities
|
$
|
13,797
|
$
|
13,952
|
· |
$22,500
revolving credit facility (the
“facility”)
|
· |
$12,000
real estate term loan
|
· |
$
3,500 machinery and equipment (“M&E”) term
loan
|
· |
$
3,500 additional / future capital expenditure
facility
|
Three
Months Ended
December
31,
|
Six
Months Ended
December
31,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Numerator:
|
|||||||||||||
Net
(loss) income
|
$
|
(4,124
|
)
|
$
|
609
|
$
|
(2,494
|
)
|
$
|
162
|
|||
Less:
Preferred stock dividends
|
|||||||||||||
Series
A-1
|
(41
|
)
|
(41
|
)
|
(82
|
)
|
(83
|
)
|
|||||
Series
B-1
|
(206
|
)
|
—
|
(413
|
)
|
—
|
|||||||
Series
C-1
|
(206
|
)
|
—
|
(247
|
)
|
—
|
|||||||
Less:
Series C-1 beneficial conversion feature
|
—
|
—
|
(1,094
|
)
|
—
|
||||||||
Less:
Net income attributable to Series
K preferred stockholders
|
—
|
(26
|
)
|
—
|
(7
|
)
|
|||||||
Numerator
for basic EPS
|
(4,577
|
)
|
542
|
(4,330
|
)
|
72
|
|||||||
Effect
of dilutive securities:
|
|||||||||||||
Net
income attributable to Series K preferred
stockholders
|
—
|
26
|
—
|
7
|
|||||||||
Numerator
for diluted EPS
|
$
|
(4,577
|
)
|
$
|
568
|
$
|
(4,330
|
)
|
$
|
79
|
|||
Denominator:
|
|||||||||||||
Denominator
for basic EPS weighted average
shares outstanding
|
65,063
|
32,464
|
64,892
|
32,464
|
|||||||||
Effect
of dilutive securities:
|
|||||||||||||
Convertible
Series K preferred stock
|
—
|
31,374
|
—
|
31,374
|
|||||||||
Convertible
Series A, B, C, and J preferred
stocks
|
—
|
7
|
—
|
7
|
|||||||||
Stock
options
|
—
|
3,710
|
—
|
3,556
|
|||||||||
Denominator
for diluted EPS
|
65,063
|
67,555
|
64,892
|
67,401
|
|||||||||
Basic
EPS
|
$
|
(0.07
|
)
|
$
|
0.02
|
$
|
(0.07
|
)
|
$
|
0.00
|
|||
Diluted
EPS
|
$
|
(0.07
|
)
|
$
|
0.01
|
$
|
(0.07
|
)
|
$
|
0.00
|
Common
stock outstanding
|
65,148
|
|||
Stock
options outstanding
|
11,720
|
|||
Warrants
outstanding
|
4,564
|
|||
Common
stock issuable upon conversion of preferred stocks:
|
||||
Series
C
|
6
|
|||
Series
A-1 (maximum contingent conversion) (a)
|
4,855
|
|||
Series
B-1
|
6,520
|
|||
Series
C-1
|
6,520
|
|||
Total
(b)
|
99,333
|
(a) |
The
Series A-1 shares are convertible only if the Company reaches $150
million
in annual sales or upon a merger, consolidation, sale of assets or
similar
transaction.
|
(b) |
Assuming
no further issuance of equity instruments, or changes to the equity
structure of the Company, this total represents the maximum number
of
shares of common stock that could be outstanding through November
16, 2016
(the end of the current vesting and conversion
periods).
|
Shares
Issued
|
|
|
|
|
|
|||||
|
|
And
|
|
Par
Value
|
|
Liquidation
|
|
|||
Shares
Authorized
|
|
Outstanding
|
|
Per
Share
|
|
Preference
|
||||
15
|
10
|
$
|
100
|
$
|
10,000
|
|
Shares
Issued
|
|
|
|||||||
|
And
|
Par
Value
|
Liquidation
|
|||||||
Shares
Authorized
|
Outstanding
|
Per
Share
|
Preference
|
|||||||
10
|
10
|
$
|
100
|
$
|
10,000
|
Three
Months Ended
December
31,
|
Six
Months Ended
December
31,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Customer
“A”
|
10
|
%
|
13
|
%
|
17
|
%
|
13
|
%
|
|||||
Customer
“B”
|
16
|
%
|
17
|
%
|
15
|
%
|
*
|
||||||
Customer
“C”
|
13
|
%
|
*
|
14
|
%
|
*
|
|||||||
Customer
“D”
|
12
|
%
|
10
|
%
|
10
|
%
|
10
|
%
|
|||||
Customer
“E”
|
*
|
15
|
%
|
*
|
14
|
%
|
December
31,
2006
|
||||
Customer
“A”
|
$
|
1,406
|
||
Customer
“B”
|
$
|
1,697
|
||
Customer
“C”
|
$
|
2,035
|
||
Customer
“D”
|
$
|
574
|
||
Customer
“E”
|
$
|
1,172
|
Three
Month Periods Ended December
31,
|
|||||||||||||
2006
|
2005
|
||||||||||||
%
of
|
%
of
|
||||||||||||
Sales
|
Sales
|
Sales
|
Sales
|
||||||||||
Ibuprofen
|
$
|
8,551
|
48.9
|
$
|
8,906
|
54.9
|
|||||||
Allopurinol
& Atenolol
|
0
|
0
|
555
|
3.4
|
|||||||||
Naproxen
|
2,422
|
13.9
|
1,588
|
9.8
|
|||||||||
Female
hormone product
|
1,766
|
10.1
|
2,119
|
13.1
|
|||||||||
Bactrim®
|
4,556
|
26.1
|
1,480
|
9.1
|
|||||||||
Hydrocodone/Ibuprofen
|
104
|
0.6
|
1,079
|
6.7
|
|||||||||
All
Other Products
|
80
|
0.4
|
486
|
3.0
|
|||||||||
Total
|
$
|
17,479
|
100.
|
%
|
$
|
16,213
|
100.
|
%
|
Six
Month Periods Ended December 31,
|
|||||||||||||
2006
|
2005
|
||||||||||||
%
of
|
%
of
|
||||||||||||
Sales
|
Sales
|
Sales
|
Sales
|
||||||||||
Ibuprofen
|
$
|
17,173
|
42.6
|
$
|
16,678
|
54.2
|
|||||||
Allopurinol
& Atenolol
|
2
|
0
|
2,257
|
7.4
|
|||||||||
Naproxen
|
5,520
|
13.7
|
3,396
|
11.0
|
|||||||||
Female
hormone product
|
6,791
|
16.8
|
3,902
|
12.7
|
|||||||||
Bactrim®
|
9,304
|
23.1
|
1,915
|
6.2
|
|||||||||
Hydrocodone/Ibuprofen
|
1,031
|
2.6
|
1,664
|
5.4
|
|||||||||
All
Other Products
|
484
|
1.2
|
948
|
3.1
|
|||||||||
Total
|
$
|
40,305
|
100
|
%
|
$
|
30,760
|
100
|
%
|
· |
Net
sales of Ibuprofen decreased $355 or 4.0% from the three month period
ended December 31, 2005, due in part to supply chain issues which
arose
during the quarter. We believe the factors that caused the reductions
in
Ibuprofen have been addressed and corrected. Among other actions
taken, we
are currently attempting to secure an additional source of Ibuprofen,
as
well as ensure that our suppliers maintain adequate levels of inventory
sufficient to enable us to increase our overall production. We believe
sales of Ibuprofen should increase for the balance of this fiscal
year,
however, there can be no assurance that this will occur. However,
net
sales for the six month period ended December 31, 2006 increased
by $495
or 3% when compared to the six month period ended December 31, 2005,
due
largely in part to an expanded customer base.
|
· |
As
a result of our expanded marketing efforts which are focused on increasing
the number of major accounts, sales of Naproxen continued to increase.
Net
sales increased $834 or 52.5% when comparing the three month period
ended
December 31, 2006 amount of $2,422 to that of the three month period
ended
December 31, 2005 total of $1,588. During the six month period ended
December 31, 2006, net sales of Naproxen increased $2,124 or 63%
over the
same six month period of the prior fiscal year. We believe we will
be able
to maintain our current net sales volume for the remainder of the
current
fiscal year assuming static market conditions, but there can be no
assurance that this will occur.
|
· |
Net
sales of our female hormone products were $1,766, a decrease of $353
when
compared to net sales of $2,119 for the three month period ended
December
31, 2005. This decrease is due in part to two primary factors: (i)
supply
chain issues delayed certain of our product shipments until January,
2007
that should have been shipped in December, 2006; (ii) as a result
of
market conditions, on October 27, 2006, we amended our agreement
with
Centrix Pharmaceuticals, Inc., (“Centrix”). Commencing November 2006
Centrix has agreed to purchase over a twelve month period, 40% more
bottles than the initial year of our agreement at a discounted price
with
a provision for profit sharing. Under the amended agreement, we will
share net profits with Centrix as defined in the agreement,
equally. The amendment has a one year term, after which time the
original Centrix agreement shall again be in full force and effect.
Net
sales recognized of $6,791 during the six month period ended December
31,
2006 for these products is $2,889 or 74% greater than the $3,902
which we
recognized during the six month period ended December 31, 2005. The
most
significant factor contributing to this increase is that the number
of
units shipped during the current fiscal year to date period is greater
than that of the prior year. As a result of the amended agreement,
we
believe that net sales for the fiscal year ending June 30, 2007 are
likely
to exceed sales recorded during the fiscal year ended June 30, 2006,
however, there can be no assurance that this will occur.
|
· |
Affecting
our sales and gross profit in the six months ended December 31, 2006,
was
our ability to increase our market share over the prior year of
Sulfamethoxazole - Trimethoprim in two strengths 400mg / 80mg commonly
referred to as generic Bactrim® and 800mg / 160mg or commonly referred to
as Bactrim-DS®, (both,“Bactrim”). Sales increased $3,076 from $1,480
during the three month period ended December 31, 2005 to $4,556 recognized
during the three month period ended December 31, 2006 primarily as
a
result of two significant factors: (i) our entering into sales and
marketing arrangements with two major wholesalers which include net
profit
sharing arrangements; and (ii) favorable pricing conditions in the
market.
Net sales reported during the six month period ended December 31,
2006 for
these products is $9,304, compared to $1,915 reported during the
six month
period ended December 31, 2005, resulting in an increase of $7,389
or
386%. We initially launched this product in October, 2005, and, therefore,
part of the year to date increase is attributable to the fact that
we did
not begin selling Bactrim at the beginning of the year. We had
difficulties during the quarter ended December 31, 2006 in obtaining
quantities of a key ingredient for these products, from our foreign
supplier which limited our ability to further increase net sales
of this
product. We believe we have addressed and corrected our supply chain
issues for this raw material.
|
· |
On
October 3, 2006, we entered into a termination and release agreement
(the
“Termination Agreement”) with Watson terminating the Manufacturing and
Supply Agreement dated as of October 14, 2003 pursuant to which we
manufactured and supplied and Watson distributed and sold generic
Vicoprofen® (7.5 mg hydrocodone bitartrate/200 mg ibuprofen) tablets.
As
a result of the Termination Agreement we obtained all rights to market
this product. We recorded net sales of only $104 for the three month
period ended December 31, 2006 compared to $1,079 for the same period
in
2005. Net sales of this product for the six month period ended December
31, 2006 of $1,031 is down from $1,664 which we recognized during
the six
month period ended December 31, 2005. While not a material factor
affecting our net sales recognized during the current quarter, market
prices for these products has significantly decreased, which will
likely
affect our net sales and gross margins at least until the end of
our
fiscal year or when market conditions may
change.
|
· |
We
no longer manufacture Allopurinol and Atenolol.
|
· |
$22,500
revolving credit facility
|
· |
$12,000
real estate term loan
|
· |
$
3,500 machinery and equipment (“M&E”) term
loan
|
· |
$
3,500 additional / future capital expenditure
facility
|