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)
|
PART
I
|
Financial
Information
|
Page
|
Item
1.
|
Financial
Statements & Notes
|
1-38
|
Item
2.
|
Managements
Discussion & Analysis of
Financial
Condition and Results of Operations
|
39-55
|
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
55
|
Item
4.
|
Controls
and Procedures
|
56
|
PART
II
|
Other
Information Required in Report
|
|
Item
1.
|
Legal
Proceedings
|
57
|
Item6.
Exhibits
|
59
|
|
Signatures
Page
|
60
|
|
Exhibits/Certifications
|
61-64
|
December
31,
|
June
30,
|
||||||
2007
|
2007
|
||||||
CURRENT
ASSETS
|
(Unaudited)
|
||||||
Cash
|
$
|
41
|
$
|
72
|
|||
Accounts
receivable, net
|
13,718
|
12,945
|
|||||
Inventories,
net
|
12,256
|
17,295
|
|||||
Prepaid
expenses and other current assets
|
1,361
|
1,794
|
|||||
Deferred
tax assets
|
--
|
21
|
|||||
Total
Current Assets
|
27,376
|
32,127
|
|||||
Land,
building and equipment, net
|
35,099
|
34,498
|
|||||
Deferred
tax assets
|
--
|
5,954
|
|||||
Investment
in APR, LLC
|
1,023
|
1,023
|
|||||
Other
assets
|
837
|
772
|
|||||
TOTAL
ASSETS
|
$
|
64,335
|
$
|
74,374
|
December
31,
|
June
30,
|
||||||
2007
|
2007
|
||||||
(Unaudited)
|
|||||||
CURRENT
LIABILITIES
|
|||||||
Current
maturities of long-term debt
|
$
|
30,681
|
$
|
12,057
|
|||
Accounts
payable, accrued expenses and other liabilities
|
13,330
|
18,542
|
|||||
Total
Current Liabilities
|
44,011
|
30,599
|
|||||
OTHER
LIABILITIES
|
|||||||
Long-term
debt, less current maturities
|
7,790
|
14,488
|
|||||
Contract
termination liability
|
903
|
1,356
|
|||||
Other
liabilities
|
417
|
5
|
|||||
Total
Other Liabilities
|
9,110
|
15,849
|
|||||
TOTAL
LIABILITIES
|
53,121
|
46,448
|
|||||
COMMITMENTS
AND CONTINGENCIES
|
|||||||
Series
B-1 Redeemable Convertible Preferred Stock:
15
shares authorized; issued and outstanding - 10 at December 31,
2007
and
June 30, 2007; liquidation preference of $10,000
|
8,155
|
8,155
|
|||||
Series
C-1 Redeemable Convertible Preferred Stock:
10
shares authorized; issued and outstanding - 10 at
December
31, 2007 and June 30, 2007; liquidation preference of
$10,000
|
8,352
|
8,352
|
|||||
STOCKHOLDERS’
(DEFICIT) EQUITY
|
|||||||
Preferred
stocks, 10,000 shares authorized; issued and
outstanding
- 5,132 at December 31, 2007 and June 30, 2007;
aggregate
liquidation preference of $3,588 at December 31, 2007
and
June 30, 2007.
|
51
|
51
|
|||||
Common
stock, $0.01 par value, 150,000 shares authorized; shares issued
-
66,738
and 65,886 respectively.
|
667
|
659
|
|||||
Additional
paid-in capital
|
34,339
|
29,530
|
|||||
Accumulated
other comprehensive (loss) income
|
(380
|
)
|
10
|
||||
Accumulated
deficit
|
(39,970
|
)
|
(18,831
|
)
|
|||
TOTAL
STOCKHOLDERS’ (DEFICIT) EQUITY
|
(5,293
|
)
|
11,419
|
||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
|
$
|
64,335
|
$
|
74,374
|
Three
Months Ended
December
31,
|
Six
Months Ended
December
31,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
SALES,
Net
|
$
|
16,214
|
$
|
17,479
|
$
|
33,929
|
$
|
40,305
|
|||||
COST
OF SALES
(including related party rent expense of $165 and $330 for the three
and
six months ended December 31, 2007 and $140 and $242 for the three
and six
months ended December 31, 2006, respectively)
|
13,945
|
13,443
|
30,584
|
27,292
|
|||||||||
GROSS
PROFIT
|
2,269
|
4,036
|
3,345
|
13,013
|
|||||||||
OPERATING
EXPENSES
|
|||||||||||||
Selling,
general and administrative
|
3,303
|
3,156
|
7,075
|
5,794
|
|||||||||
Related
party rent
|
--
|
25
|
--
|
43
|
|||||||||
Research
and development
|
2,903
|
4,871
|
6,361
|
8,289
|
|||||||||
TOTAL
OPERATING EXPENSES
|
6,206
|
8,052
|
13,436
|
14,126
|
|||||||||
OPERATING
LOSS
|
(3,937
|
)
|
(4,016
|
)
|
(10,091
|
)
|
(1,113
|
)
|
|||||
OTHER
EXPENSES
|
|||||||||||||
Contract
termination expense
|
--
|
1,655
|
--
|
1,655
|
|||||||||
Interest
expense, net
|
984
|
240
|
1,727
|
527
|
|||||||||
Other
|
--
|
121
|
--
|
121
|
|||||||||
TOTAL
OTHER EXPENSE
|
984
|
2,016
|
1,727
|
2,303
|
|||||||||
LOSS
BEFORE INCOME TAXES
|
(4,921
|
)
|
(6,032
|
)
|
(11,818
|
)
|
(3,416
|
)
|
|||||
PROVISION
FOR (BENEFIT FROM) INCOME TAXES
|
5,976
|
(1,908
|
)
|
5,976
|
(922
|
)
|
|||||||
NET
LOSS
|
(10,897
|
)
|
(4,124
|
)
|
(17,794
|
)
|
(2,494
|
)
|
|||||
Preferred
stock beneficial conversion feature
|
--
|
--
|
--
|
1,094
|
|||||||||
Deemed
dividend upon modification of warrants exercise price and preferred
stock
exchange
|
3,345
|
--
|
3,345
|
--
|
|||||||||
Preferred
stock dividends
|
41
|
453
|
82
|
742
|
|||||||||
NET
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
$
|
(14,283
|
)
|
$
|
(4,577
|
)
|
$
|
(21,221
|
)
|
$
|
(4,330
|
)
|
|
LOSS
PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
|||||||||||||
Basic
and diluted loss per share
|
$
|
(0.21
|
)
|
$
|
(0.07
|
)
|
$
|
(0.32
|
)
|
$
|
(0.07
|
)
|
|
Basic
and diluted weighted average shares and equivalent shares
outstanding
|
66,738
|
65,063
|
66,467
|
64,892
|
Preferred
Stock
|
Common
Stock
|
Additional
Paid-In
Capital
|
Accumulated
Other
Compre-hensive
(Loss) Income
|
Accumulated
Deficit
|
Total
Stock-
Holders
Equity (Deficit
|
||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
||||||||||||||||||||||
BALANCE
- June 30, 2007
|
5,132
|
$
|
51
|
65,886
|
$
|
659
|
$
|
29,530
|
$
|
10
|
$
|
(18,831
|
)
|
$
|
11,419
|
||||||||||
Shares
issued for options and warrants exercised
|
556
|
6
|
(1
|
)
|
5
|
||||||||||||||||||||
Series
B-1 dividends paid with common stock
|
148
|
1
|
205
|
206
|
|||||||||||||||||||||
Series
C-1 dividends paid with common stock
|
148
|
1
|
205
|
206
|
|||||||||||||||||||||
Stock
based compensation and modification expense
|
575
|
575
|
|||||||||||||||||||||||
Warrants
to be issued in connection with STAR convertible debt
issuance
|
480
|
480
|
|||||||||||||||||||||||
Deemed
dividend from Series B-1 warrants exercise price
modification
|
158
|
(158
|
)
|
--
|
|||||||||||||||||||||
Deemed
dividend from Series C-1 warrants exercise price
modification
|
157
|
(157
|
)
|
--
|
|||||||||||||||||||||
Deemed
dividend on Series B-1 exchange for Series D-1
|
1,515
|
(1,515
|
)
|
--
|
|||||||||||||||||||||
Deemed
dividend on Series C-1 exchange for Series D-1
|
1,515
|
(1,515
|
)
|
--
|
|||||||||||||||||||||
Change
in fair value of interest rate swap
|
(390
|
)
|
(390
|
)
|
|||||||||||||||||||||
Net
loss
|
(17,794
|
)
|
(17,794
|
)
|
|||||||||||||||||||||
BALANCE
- December 31, 2007
|
5,132
|
$
|
51
|
66,738
|
$
|
667
|
$
|
34,339
|
($380
|
)
|
($39,970
|
)
|
($5,293
|
)
|
Three
Months Ended
December
31,
|
Six
Months Ended
December
31,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
NET
LOSS
|
$
|
(10,897
|
)
|
$
|
(4,124
|
)
|
$
|
(17,794
|
)
|
$
|
(2,494
|
)
|
|
OTHER
COMPREHENSIVE LOSS
|
|||||||||||||
Change
in fair value of interest rate swap
|
(172
|
)
|
(29
|
)
|
(390
|
)
|
(15
|
)
|
|||||
TOTAL
COMPREHENSIVE LOSS
|
$
|
(11,069
|
)
|
$
|
(4,153
|
)
|
$
|
(18,184
|
)
|
$
|
(2,509
|
)
|
Six
Months Ended
|
|||||||
December
31,
|
|||||||
|
2007
|
2006
|
|||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|||||||
Net
loss from operations
|
$
|
(17,794
|
)
|
$
|
(2,494
|
)
|
|
Adjustments
to reconcile net loss to net cash (used in) provided by operating
activities:
|
|||||||
Bad
debt expense
|
--
|
55
|
|||||
Accreted
non-cash interest expense
|
94
|
21
|
|||||
Depreciation
and amortization
|
1,818
|
1,029
|
|||||
Contract
termination expense
|
--
|
1,655
|
|||||
Amortization
of deferred financing fees
|
79
|
69
|
|||||
Stock
based compensation expense
|
575
|
586
|
|||||
Deferred
tax expense (benefit)
|
5,976
|
(922
|
)
|
||||
Excess
tax benefit from exercise of stock options
|
--
|
(31
|
)
|
||||
Write-down
of inventory
|
1,205
|
--
|
|||||
Other
|
--
|
121
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
(773
|
)
|
2,812
|
||||
Inventories
|
3,834
|
(1,101
|
)
|
||||
Prepaid
expenses and other current assets
|
433
|
(360
|
)
|
||||
Accounts
payable, accrued expenses and other liabilities
|
(5,282
|
)
|
(236
|
)
|
|||
Deferred
revenue
|
--
|
(3,399
|
)
|
||||
Total
adjustments
|
7,959
|
299
|
|||||
NET
CASH USED IN OPERATING ACTIVITIES
|
(9,835
|
)
|
(2,195
|
)
|
|||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|||||||
Purchases
of machinery and equipment, net
|
(2,058
|
)
|
(2,200
|
)
|
|||
Deposits
and other long-term assets
|
(22
|
)
|
(120
|
)
|
|||
NET
CASH USED IN INVESTING ACTIVITIES
|
(2,080
|
)
|
(2,320
|
)
|
|||
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
|
5
|
258
|
|||||
Proceeds
from long-term debt
|
8,000
|
690
|
|||||
Payment
of Series A-1 dividends
|
--
|
(124
|
)
|
||||
Excess
tax benefit from exercise of stock options
|
--
|
31
|
|||||
Collections
on stock subscription receivable
|
--
|
56
|
|||||
Proceeds
from line of credit, net
|
5,277
|
--
|
|||||
Repayments
of long-term debt
|
(1,115
|
)
|
(878
|
)
|
|||
Payment
of deferred financing and other costs
|
(283
|
)
|
--
|
||||
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
11,884
|
9,956
|
|||||
NET
(DECREASE) INCREASE IN CASH
|
(31
|
)
|
5,441
|
||||
CASH
-
Beginning
|
72
|
1,438
|
|||||
CASH
-
Ending
|
$
|
41
|
$
|
6,879
|
Six
Months Ended
|
|||||||
December
31,
|
|||||||
2007
|
2006
|
||||||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION
|
|||||||
Cash
paid during the periods for:
|
|||||||
Interest
|
$
|
1,464
|
$
|
636
|
|||
|
|||||||
Non-Cash
Investing or Financing Transactions:
|
|||||||
Tax
Benefit in connection with exercise of stock options
|
$
|
--
|
$
|
31
|
|||
Acquisition
of machinery and equipment in exchange for capital lease
payable
|
$
|
212
|
$
|
156
|
|||
Reclassification
of equipment deposits to building and equipment
|
$
|
150
|
$
|
389
|
|||
Series
B-1 dividends paid with common stock
|
$
|
206
|
$
|
284
|
|||
Series
C-1 dividends paid with common stock
|
$
|
206
|
$
|
41
|
|||
Accrual
of Series B-1 dividends
|
$
|
--
|
$
|
206
|
|||
Accrual
of Series C-1 dividends
|
$
|
--
|
$
|
206
|
|||
Change
in fair value of interest rate swap
|
$
|
(390
|
)
|
$
|
15
|
·
|
Identifying
alternative financing sources for the Company’s real estate, machinery and
equipment, and working capital finance.
|
·
|
Reducing
payroll and headcount by approximately
20%
|
·
|
Increasing
revenue through the launch of new products, identifying new customers,
and
expanding relationships with existing
customers
|
·
|
Substantially
reducing research and development activities
|
Six
Months Ended
|
|||||||
December
31,
|
|||||||
2007
|
2006
|
||||||
Reserve
balance - beginning
|
$
|
4,865
|
$
|
2,315
|
|||
Actual
chargebacks, discounts and other
|
|||||||
credits
taken in the current period (a)
|
(11,381
|
)
|
(5,014
|
)
|
|||
Current
provision related to current period sales
|
11,210
|
5,267
|
|||||
Reserve
balance - ending
|
$
|
4,694
|
$
|
2,568
|
(a)
|
Actual
chargebacks, discounts and other credits are determined based upon
the
customer’s application of amounts taken against the accounts receivable
balance.
|
December
31,
|
June
30,
|
||||||
2007
|
2007
|
||||||
(Unaudited)
|
|||||||
Finished
goods
|
$
|
3,074
|
$
|
3,085
|
|||
Work
in process
|
4,715
|
7,260
|
|||||
Raw
materials
|
3,896
|
6,286
|
|||||
Packaging
materials
|
776
|
664
|
|||||
Total
|
$
|
12,461
|
$
|
17,295
|
|||
Less:
Reserve for obsolescence
|
(205
|
)
|
--
|
||||
Total
|
$
|
12,256
|
$
|
17,295
|
December
31,
|
June
30,
|
||||||
2007
|
2007
|
||||||
(Unaudited)
|
|||||||
Land
|
$
|
4,924
|
$
|
4,924
|
|||
Building
|
12,460
|
12,460
|
|||||
Machinery
and equipment
|
18,021
|
16,881
|
|||||
Computer
equipment
|
2,700
|
2,065
|
|||||
Construction
in Progress
|
36
|
186
|
|||||
Furniture
and fixtures
|
1,003
|
953
|
|||||
Leasehold
improvements
|
5,130
|
4,386
|
|||||
44,274
|
41,855
|
||||||
Less:
accumulated depreciation and amortization
|
9,175
|
7,357
|
|||||
Land,
Building and Equipment, net
|
$
|
35,099
|
$
|
34,498
|
December
31,
|
June
30,
|
||||||
2007
|
2007
|
||||||
(Unaudited)
|
|||||||
Inventory
purchases
|
$
|
5,730
|
$
|
9,525
|
|||
Research
and development expenses
|
1,657
|
3,003
|
|||||
Contract
termination liability
|
902
|
386
|
|||||
Other
|
5,041
|
5,628
|
|||||
Total
|
$
|
13,330
|
$
|
18,542
|
December
31,
|
June
30,
|
||||||
2007
|
2007
|
||||||
(Unaudited)
|
|||||||
Revolving
credit facility
|
$
|
15,143
|
$
|
9,866
|
|||
Real
estate term loan
|
10,533
|
10,933
|
|||||
Machinery
and equipment term loans
|
4,914
|
5,601
|
|||||
STAR
Note Payable
|
4,552
|
-
|
|||||
Sutaria
Note Payable
|
3,000
|
-
|
|||||
Capital
leases
|
386
|
183
|
|||||
38,528
|
26,583
|
||||||
Less:
amount representing interest on capital leases
|
58
|
38
|
|||||
Total
debt
|
38,470
|
26,545
|
|||||
Less:
current maturities
|
30,680
|
12,057
|
|||||
Long-term
debt, less current maturities
|
$
|
7,790
|
$
|
14,488
|
Tullis-Dickerson
Capital Focus III, L.P. (“Tullis”)
|
$
|
833
|
||
Aisling
Capital II, L.P. (“Aisling”)
|
$
|
833
|
||
Cameron
Reid (“Reid”)
|
$
|
833
|
||
Sutaria
Family Realty, LLC (“SFR”)
|
$
|
2,500
|
·
|
Secured
Convertible 12% Promissory Notes due 2009 (the “Convertible Notes”) in the
original principal amount equal to the principal and accrued interest
on
the STAR Notes through the date of exchange. The conversion price
of the
Convertible Notes is to be $0.95 per share and interest is to be
payable
quarterly, in arrears, in either cash or PIK Notes, at the option
of the
Company;
|
·
|
Warrants
to acquire an aggregate of 1,842 shares of Common Stock (the “Warrants”)
with an exercise price of $0.95 per share. In
accordance with EITF 00-27, Application
of Issue No. 98-5 to Certain Convertible Instruments (“EITF
00-27”),
a
commitment date occurs for purposes of determining the fair value
of the
issuer's common stock to be used to measure the intrinsic value of
an
embedded conversion option when the following two characteristics
have
been met: i) the agreement specifies all significant terms, including
the
quantity to be exchanged, the fixed price, and the timing of the
transaction, and ii) the agreement includes a disincentive for
nonperformance that is sufficiently large to make performance probable.
The above characteristics were met on November 14, 2007 as all significant
terms were agreed to and performance was probable as the funds had
been
received and the majority shareholders had delivered a proxy approving
the
transaction. Accordingly,
the Company recorded a discount to the debt of $480, which is being
accreted over the life of the STAR Notes. Non-cash interest of $32
was
recognized during the six months ended December 31, 2007.
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
December
31,
|
December
31,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Numerator:
|
|||||||||||||
Net (loss) income
|
$
|
(10,897
|
)
|
$
|
(4,124
|
)
|
$
|
(17,794
|
)
|
$
|
(2,494
|
)
|
|
Less:
|
|||||||||||||
Series A-1 Preferred stock dividends
|
(41
|
)
|
(41
|
)
|
(82
|
)
|
(82
|
)
|
|||||
Series B-1 Preferred stock dividends
|
--
|
(206
|
)
|
--
|
(413
|
)
|
|||||||
Series C-1 Preferred stock dividends
|
--
|
(206
|
)
|
--
|
(247
|
)
|
|||||||
Deemed dividend from Series B-1
warrants exercise price modification
|
(158
|
)
|
--
|
(158
|
)
|
--
|
|||||||
Deemed dividend from Series C-1
warrants exercise price modification
|
(157
|
)
|
--
|
(157
|
)
|
--
|
|||||||
Deemed dividend on Series B-1
exchange for Series D-1
|
(1,515
|
)
|
--
|
(1,515
|
)
|
--
|
|||||||
Deemed dividend on Series C-1
exchange for Series D-1
|
(1,515
|
)
|
--
|
(1,515
|
)
|
(1,094
|
)
|
||||||
Net
income (loss) attributable to common stockholders
|
$
|
(14,283
|
)
|
$
|
(4,577
|
)
|
$
|
(21,221
|
)
|
$
|
(4,330
|
)
|
|
Denominator:
|
|||||||||||||
Denominator
for basic and diluted EPS
weighted
average shares outstanding
|
66,738
|
65,063
|
66,467
|
64,892
|
|||||||||
Basic
and Diluted EPS:
|
$
|
(0.21
|
)
|
$
|
(0.07
|
)
|
$
|
(0.32
|
)
|
$
|
(0.07
|
)
|
Common
stock outstanding
|
66,738
|
|||
Stock
options outstanding
|
10,525
|
|||
Warrants
outstanding
|
6,406
|
|||
Common
stock issuable upon converstion of preferred stocks:
|
||||
Series C
|
6
|
|||
Series A-1 (maximum contingent conversion) (a)
|
4,855
|
|||
Series B-1 (c)
|
10,526
|
|||
Series C-1 (c)
|
10,526
|
|||
Total (b)
|
109,582
|
(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 July 24,
2017
(the end of the current vesting and conversion
periods).
|
(c)
|
Upon
the Company obtaining Stockholder Approval, which is reasonably assured
as
the major shareholders have provided a proxy approving the transactions,
the Series B-1 and Series C-1 Convertible Preferred Stock held by
Tullis
and Aisling shall be exchangeable for shares of a new Series D-1
Convertible Preferred Stock, which shall be substantially similar
to the
B-1 and C-1 Convertible Preferred Stock other than the Conversion
price
which is to be $0.95 per share instead of $1.5338 per
share.
|
Shares
Issued
|
||||||||||
Shares
|
And
|
Par
Value
|
Liquidation
|
|||||||
Authorized
|
Outstanding
|
Per
Share
|
Preference
|
|||||||
15
|
10
|
$
|
100
|
$
|
10,000
|
Shares
Issued
|
||||||||||
Shares
|
And
|
Par
Value
|
Liquidation
|
|||||||
Authorized
|
Outstanding
|
Per
Share
|
Preference
|
|||||||
10
|
10
|
$
|
100
|
$
|
10,000
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
December
31,
|
December
31,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Customer
"A"
|
13
|
%
|
12
|
%
|
13
|
%
|
10
|
%
|
|||||
Customer
"B"
|
*
|
16
|
%
|
*
|
15
|
%
|
|||||||
Customer
"C"
|
*
|
13
|
%
|
*
|
14
|
%
|
|||||||
Customer
"D"
|
*
|
10
|
%
|
*
|
17
|
%
|
|||||||
Customer
"E"
|
*
|
*
|
11
|
%
|
*
|
||||||||
Customer
"F"
|
*
|
18
|
%
|
*
|
17
|
%
|
|||||||
* Sales to customer were less than 10% |
Accounts
Receivable
|
||||
December
31,
|
||||
2007
|
||||
Customer
"A"
|
$
|
7,736
|
||
Customer
"B"
|
68
|
|||
Customer
"C"
|
525
|
|||
Customer
"D"
|
564
|
|||
Customer
"E"
|
617
|
|||
Customer
"F"
|
103
|
Three
Month Periods Ended December 31,
|
|||||||||||||
2007
|
2006
|
||||||||||||
|
|
%
of
|
|
%
of
|
|||||||||
Sales
|
Sales
|
Sales
|
Sales
|
||||||||||
Ibuprofen
|
$
|
6,615
|
41
|
%
|
$
|
8,551
|
49
|
%
|
|||||
Bactrim®
|
3,562
|
22
|
4,556
|
26
|
|||||||||
Naproxen
|
2,893
|
18
|
2,422
|
14
|
|||||||||
Hydrocodone/Acetaminophen
|
1,040
|
6
|
--
|
0
|
|||||||||
Isometheptene/Dichloral
|
1,492
|
9
|
--
|
0
|
|||||||||
Hydrocodone/Ibuprofen
|
541
|
3
|
104
|
1
|
|||||||||
Female
hormone product
|
--
|
0
|
1,766
|
10
|
|||||||||
All
Other Products
|
71
|
1
|
80
|
0
|
|||||||||
Total
|
$
|
16,214
|
100
|
%
|
$
|
17,479
|
100
|
%
|
Six
Month Periods Ended December 31,
|
|||||||||||||
2007
|
2006
|
||||||||||||
|
|
%
of
|
|
%
of
|
|||||||||
Sales
|
Sales
|
Sales
|
Sales
|
||||||||||
Ibuprofen
|
$
|
15,981
|
47
|
%
|
$
|
17,173
|
43
|
%
|
|||||
Bactrim®
|
7,022
|
20
|
9,304
|
23
|
|||||||||
Naproxen
|
5,008
|
15
|
5,520
|
14
|
|||||||||
Hydrocodone/Acetaminophen
|
1,715
|
5
|
--
|
0
|
|||||||||
Isometheptene/Dichloral
|
1,492
|
4
|
447
|
1
|
|||||||||
Female
hormone product
|
1,275
|
4
|
6,791
|
17
|
|||||||||
Hydrocodone/Ibuprofen
|
1,213
|
4
|
1,030
|
2
|
|||||||||
All
Other Products
|
223
|
1
|
40
|
0
|
|||||||||
Total
|
$
|
33,929
|
100
|
%
|
$
|
40,305
|
100
|
%
|
·
|
Net sales of Ibuprofen for the three and six month periods ended December 31, 2007 decreased by $1,936, or 22.6% and $1,192 or 6.9%, as compared to sales for the three and six months ended December 31, 2006, respectively. The sales decreases resulted primarily from our inability to obtain sufficient quantities of raw materials in the three months ended December 31, 2007, which blocked us from producing sufficient quantities of finished product to satisfy open orders. |
·
|
Net
sales of our Bactrim products for the three and six months ended
December
31, 2007 decreased $994, or 21.8% and $2,282 or 24.5%, as compared
to
sales for the three and six month periods ended December 31, 2006,
respectively. (We market our Sulfamethoxazole - Trimethoprim products
in
two strengths: 400mg / 80mg, commonly referred to as generic Bactrim®, and
800mg / 160mg, commonly referred to as Bactrim-DS® (both, “Bactrim”)). The
sales decrease resulted from our inability to obtain sufficient quantities
of raw materials in the three months ended December 31, 2007, which
blocked us from producing sufficient quantities of finished product
to
satisfy open orders. In addition, the decrease in sales primarily
relates
to lower selling prices in the December 2007 quarter as compared
to the
prior year.
|
·
|
Net
sales of our Naproxen products for the three month period ended December
31, 2007 increased $471, or 19.4%, as compared to sales for the three
month period ended December 31, 2006. However, sales for the six
month
period ended December 31, 2007 decreased $512, or 9.3%, as compared
to
sales for the six month period ended December 31, 2006 due to increased
competitive pressure and due to losing private label distributor
business
to a large wholesaler and retailer in July
2007.
|
·
|
Net
sales of our female hormone products for the three months ended December
31, 2007 were zero, and sales for the six month period ended December
31,
2007 decreased $5,516, or 81.2%, as compared to sales for the six
month
period ended December 31, 2006. During the past six months, two additional
competitors entered the market for these products, resulting in decreased
selling prices, lower volume sold and lower margins. On February
13, 2008
we terminated the agreement with Centrix under which we marketed
this
product. See Note 17 to the condensed consolidated financial statements
contained herein for additional
discussion.
|
·
|
We
re-entered the market with distribution of our
Isometheptene/Dichloral/Acetominophen capsules product in October
2007
(equivalent to branded product Midrin®). Our sales of this product through
major wholesaler and retailer channels of distribution have steadily
increased as we increase our sources of raw material
supply.
|
·
|
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. Net sales of this product for the three and six month
periods ended December 31, 2007 increased by $437 or 420.2% and $183
or
17.8%, respectively as compared to sales for the six month period
ended
December 31, 2006.
|
·
|
During
the six months ended December 31, 2007, we re-launched seven strengths
of
our hydrocodone bitartrate/acetaminophen tablet products though retail
and
wholesale channels of distribution.
|
o
|
Headcount
was reduced on January 29, 2008 resulting in a 20% decrease in
compensation costs on an annualized
basis.
|
o
|
Research
& development (R&D) initiatives have been suspended, resulting in
a substantial reduction in R&D expense commencing February 1, 2008.
|
Tullis-Dickerson
Capital Focus III, L.P. (“Tullis”)
|
$
|
833
|
||
Aisling
Capital II, L.P. (“Aisling”)
|
$
|
833
|
||
Cameron
Reid (“Reid”)
|
$
|
833
|
||
Sutaria
Family Realty, LLC (“SFR”)
|
$
|
2,500
|
·
|
Secured
Convertible 12% Promissory Notes due 2009 (the “Convertible Notes”) in the
original principal amount equal to the principal and accrued interest
on
the STAR Notes through the date of exchange. The conversion price
of the
Convertible Notes is to be $0.95 per share and interest is to be
payable
quarterly, in arrears, in either cash or PIK Notes, at the option
of the
Company;
|
·
|
Warrants
to acquire an aggregate of 1,842 shares of Common Stock (the “Warrants”)
with an exercise price of $0.95 per share.
|
Exhibits
|
||
21.1
|
List
of Subsidiaries.
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Rules 13a-14(a) as adopted,
pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification
of the Chief Financial Officer pursuant to Rules 13a-14(a) as adopted,
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
32.1
|
Certifications
of the Chief Executive Officer and the Chief Financial Officer
pursuant to
18 U.S.C. Section 1350 as adopted, pursuant to Section 906 of the
Sarbanes-Oxley Act of
2002.
|
INTERPHARM HOLDINGS, INC. | ||
(Registrant) | ||
|
|
|
Date: February 15, 2008 | By: | /s/ Peter Giallorenzo |
Peter Giallorenzo, |
||
Chief Financial Officer | ||
(Duly authorized to sign on behalf of registrant) |
Exhibits
|
||
Number
|
Description
|
|
21.1
|
List
of
Subsidiaries
|
|
Name
of Subsidiary
|
Jurisdiction
|
Ownership
Percentage
|
Interpharm,
Inc.
|
New
York
|
100%
|
Micro
Computer Store, Inc.
|
New
York
|
100%
|
Innovative
Business Micros, Inc.
|
New
York
|
100%
|
Logix
Solutions, Inc.
|
Colorado
|
90%
|
Saturn
Chemical, LLC
|
New
York
|
100%
|
Interpharm
Realty, LLC
|
New
York
|
100%
|