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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
-OR-
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from____________to____________
Commission File No. 333-36379
PACIFICHEALTH LABORATORIES, INC.
-----------------------------------------------------------------
(Exact name of Small Business Issuer as specified in its charter)
DELAWARE 22-3367588
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
100 Matawan Road, Suite 420
Matawan, NJ 07747
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (732) 739-2900
Check whether the issuer (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. Yes [X] No [_]
At August 12, 2004, there were 10,240,545 shares of common stock, par value
$.0025 per share, of the issuer outstanding.
Transitional small business disclosure format: Yes [_] No [X]
PACIFICHEALTH LABORATORIES, INC.
TABLE OF CONTENTS
--------------------------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets as of June 30, 2004 (Unaudited) and December 31, 2003......................................3
Statements of Operations (Unaudited) for the three and six months ended
June 30, 2004 and June 30, 2003..................................................................4
Statements of Cash Flows (Unaudited) for the six months ended
June 30, 2004 and June 30, 2003..................................................................5
Notes to Financial Statements.............................................................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.................................................................9
ITEM 3. CONTROLS AND PROCEDURES............................................................................12
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings..................................................................................12
ITEM 2. Changes in Securities and Small Business Issuer Purchases of Equity Securities.....................12
ITEM 3. Defaults Upon Senior Securities....................................................................13
ITEM 4. Submission of Matters to a Vote of Security Holders................................................13
ITEM 5. Other Information..................................................................................14
ITEM 6. Exhibits and Reports on Form 8-K...................................................................14
SIGNATURES........................................................................................................14
2
PACIFICHEALTH LABORATORIES, INC.
BALANCE SHEETS
ASSETS
June 30, December 31,
2004 2003
(Unaudited)
------------ ------------
Current assets:
Cash and cash equivalents $ 1,117,639 $ 1,798,703
Accounts receivable, net 1,250,558 669,300
Inventories 1,442,046 738,062
Prepaid expenses 219,453 191,859
------------ ------------
Total current assets 4,029,696 3,397,924
Property and equipment, net 113,737 60,307
Patents 155,251 155,251
Deposits 19,320 10,895
------------ ------------
Total assets $ 4,318,004 $ 3,624,377
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 614,758 $ 470,145
Accounts payable and accrued expenses 1,217,791 376,693
------------ ------------
Total current liabilities 1,832,549 846,838
------------ ------------
Stockholders' equity:
Common stock, $.0025 par value; authorized
50,000,000 shares; issued and outstanding:
10,240,545 shares at June 30, 2004 and
10,188,545 shares at December 31, 2003 25,600 25,471
Additional paid-in capital 15,778,193 15,788,068
Accumulated deficit (13,318,338) (13,036,000)
------------ ------------
2,485,455 2,777,539
------------ ------------
Total liabilities and stockholders' equity $ 4,318,004 $ 3,624,377
============ ============
3
PACIFICHEALTH LABORATORIES, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2004 AND 2003
(UNAUDITED)
Three Months Six Months
Ended June 30, Ended June 30,
--------------------------------- ---------------------------------
2004 2003 2004 2003
-------------- ------------ -------------- ------------
Revenues:
Net product sales $ 2,204,522 $ 1,520,552 $ 4,508,119 $ 2,918,331
Cost of goods sold 1,099,830 737,272 2,229,645 1,456,993
------------ ------------ ------------ ------------
Gross Profit 1,104,692 783,280 2,278,474 1,461,338
Selling, general and administrative expenses 1,312,345 1,029,219 2,406,039 2,026,922
Research & development expense 34,961 43,248 73,333 130,539
Depreciation expense 11,770 13,356 21,279 27,473
------------ ------------ ------------ ------------
1,359,076 1,085,823 2,500,651 2,184,934
------------ ------------ ------------ ------------
Loss before other income and expense (254,384) (302,543) (222,177) (723,596)
Other income (expense):
Interest income 2,191 522 4,792 1,466
Interest expense (30,616) (8,952) (57,647) (9,946)
Other -- 5,000 -- 5,000
------------ ------------ ------------ ------------
(28,425) (3,430) (52,855) (3,480)
------------ ------------ ------------ ------------
Loss before income taxes (282,809) (305,973) (275,032) (727,076)
Provision for income taxes 7,306 -- 7,306 --
------------ ------------ ------------ ------------
Net loss $ (290,115) $ (305,973) $ (282,338) $ (727,076)
============ ============ ============ ============
Basic and diluted loss per share $ (0.03) $ (0.05) $ (0.03) $ (0.12)
============ ============ ============ ============
Weighted average common shares:
Basic and diluted 10,240,545 6,115,703 10,229,616 6,115,438
============ ============ ============ ============
4
PACIFICHEALTH LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003
(UNAUDITED)
2004 2003
----------- -----------
Cash flows from operating activities:
Net loss $ (282,338) $ (727,076)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 21,279 27,473
Fair value of stock options and warrants granted 16,139 7,552
Changes in assets and liabilities:
Increase in accounts receivable (581,258) (433,749)
Decrease (Increase) in inventories (703,984) 328,512
Increase in prepaid expenses (27,594) (128,331)
Increase in deposits (8,425) (13,387)
Increase in accounts payable/accrued expenses 841,098 413,112
Decrease in other current liabilities -- (68,266)
----------- -----------
Net cash used in operating activities (725,083) (594,160)
----------- -----------
Cash flows from investing activity:
Purchase of fixed assets (74,709) (19,794)
----------- -----------
Net cash used in investing activities (74,709) (19,794)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable 3,732,575 254,491
Repayments of notes payable (3,587,962) (59,417)
Common stock issued 42,750 --
Fees in connection with private placement (68,635) --
Common stock options/warrants exercised -- 1,060
----------- -----------
Net cash provided by financing activities 118,728 196,134
----------- -----------
Net decrease in cash and cash equivalents (681,064) (417,820)
Cash and cash equivalents, beginning balance 1,798,703 628,436
----------- -----------
Cash and cash equivalents, ending balance $ 1,117,639 $ 210,616
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 54,647 $ 9,946
=========== ===========
5
PACIFICHEALTH LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The accompanying unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United
States of America for interim financial information and with the
instructions for Form 10-QSB and Item 310 of Regulation S-B. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three- and six-months ended
June 30, 2004 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2004. The unaudited financial
statements should be read in conjunction with the financial statements and
footnotes thereto included in the Company's annual report on Form 10-KSB
for the year ended December 31, 2003.
2. REVENUE RECOGNITION
Sales are recognized when all of the following criteria are met:
(1) persuasive evidence of an arrangement exists; (2) delivery has
occurred or services have been rendered; (3) the seller's price to the
buyer is fixed or determinable; and, (4) collectibility is reasonably
assured. Sales are recorded net of incentives paid to customers.
In December 2003, the Company entered into a purchasing agreement with a
significant customer for new products whereby such products are subject to
a right of return provision if certain minimum levels of retail sales in a
12-month period of time from the date of initial sale are not achieved.
Approximately $70,000 of sales in the three months ending June 30, 2004
and $820,000 of sales in the six months ending June 30, 2004 are subject
to this right of return. As of June 30, 2004, the customer has reached 60%
of the minimum retail sales threshold. Management believes these minimums
will be met based upon retail sales to date of the product reported by the
customer as well as the Company's past history with similar products such
as ENDUROX R(4) in similar channels of distribution.
In April 2004, the Company entered into a purchasing agreement with the
same significant customer for all other products sold to this customer
that are also subject to return provisions identical or similar to the one
disclosed above. Approximately $541,000 of sales in the three months and
six months ending June 30, 2004 is subject to this right of return. As of
June 30, 2004, the customer has reached 18% of the minimum retail sales
threshold. Management believes these minimums will be met based upon the
Company's past history with this customer with these products.
3. INVENTORIES
As of June 30, 2004 and December 31, 2003, inventories consisted of the
following:
2004 2003
---- ----
Raw Materials $ 51,150 $ 14,841
Work in Process 47,203 --
Packaging supplies 47,496 33,127
Finished goods 1,296,197 690,094
---------- ---------
$1,442,046 $ 738,062
========== =========
6
4. STOCK BASED COMPENSATION
The Company granted 5,000 Incentive Stock Options (ISOs) to employees
during the three months ended June 30, 2004 with an exercise price of
$1.11 per share. 2,500 of these options vest during the second quarter of
2005 and 2,500 of these options vest during the second quarter of 2006.
The Company granted 17,000 Incentive Stock Options (ISOs) to employees
during the six months ended June 30, 2004 with exercise prices ranging
from $0.83 to $1.11 per share. 1,000 of these options vested upon grant,
5,500 of these options vest during the first quarter of 2005, 2,500 of
these options vest during the second quarter of 2005, 5,500 of these
options vest during the first quarter of 2006 and 2,500 of these options
vest during the second quarter of 2006. The exercise price for all
employee options granted was equal to the fair market value of the common
stock on the date of grant. Since the Company accounts for its options
under APB No. 25, no compensation expense was recognized. In addition,
211,000 options issued to employees expired during the first six months
of 2004.
The Company granted no stock options and warrants to consultants during
the three months ended June 30, 2004. The Company granted 38,500 stock
options and warrants to consultants during the six months ended June 30,
2004. 18,500 options and warrants vested upon grant with exercise prices
ranging from $0.83 per share to $0.90 per share; 10,000 warrants vest in
the first quarter of 2005 with an exercise price of $0.88 per share; and
10,000 warrants vest in the first quarter of 2006 with an exercise price
of $0.88 per share. These options and warrants were determined to have a
value of $16,139 for the six months ended June 30, 2004 and this amount
was charged to operations and added to paid-in capital in accordance with
SFAS 123. In addition, 42,000 options issued to consultants expired during
the first six months of 2004.
The following table illustrates the effect on net loss and loss per share
if the fair value based method had been applied to all awards:
Quarter Ended June 30, Six Months Ended June 30,
2003 2004 2003 2004
------ ------ ------ ------
Reported net loss $ (290,115) $ (305,973) $ (282,338) $ (727,076)
Stock-based employee compensation
expense included in reported net loss,
net of related tax effects - 0 - - 0 - - 0 - - 0 -
Stock-based employee compensation
determined under the fair value based
method, net of related tax effects (43,855) (64,298) (86,657) (130,271)
---------- ---------- ---------- ----------
Pro forma net loss $ (333,970) $ (370,271) $ (368,995) $ (857,347)
========== ========== ========== ==========
Basic and diluted loss per share:
As reported ($0.03) ($0.05) ($0.03) ($0.12)
Pro forma ($0.03) ($0.06) ($0.04) ($0.14)
5. INCOME TAXES
The Company has approximately $12,613,000 in Federal net operating loss
carryovers that were generated through June 30, 2004 and are available to
offset future taxable income in calendar years 2004 through 2024.
The components of the Company's deferred tax assets as of June 30, 2004
and December 31, 2003 are as follows:
2004 2003
---- ----
Net operating loss carry forwards $ 4,415,000 $ 4,830,000
Deferred charges -- --
Valuation allowance (4,415,000) (4,830,000)
----------- -----------
Deferred tax asset $ -- $ --
7
6. NOTES PAYABLE
Included in notes payable at June 30,2004 is $545,687 payable to USA
Funding. During the second quarter of 2003, the Company secured a $750,000
revolving asset-based credit facility from USA Funding of Dallas, TX. This
facility was for one year commencing on June 1, 2003. This credit facility
has been increased to $1,000,000 and has been renewed for 2 years
commencing June 1, 2004. The amount of available credit is based on the
value of the Company's eligible receivables from time to time. Eligible
receivables include those receivables that have payment terms equal to or
less than net 45 days or have been outstanding for less than 90 days. The
receivables are financed with recourse. This credit facility bears
interest at a rate of prime plus 1.75% as well as a 0.75% discount rate on
all advances.
7. CONCENTRATION
Our two largest customers accounted for approximately 30% and 17%,
respectively, of net sales for the three months ended June 30, 2004 and
17% and 21%, respectively, of net sales for the three months ended June
30, 2003. Our two largest customers accounted for approximately 37% and
18%, respectively, of net sales for the six months ended June 30, 2004 and
21% and 25%, respectively, of net sales for the six months ended June 30,
2003. At June 30, 2004, amounts due from these two customers represented
approximately 47% and 15%, respectively, of accounts receivable. At
December 31, 2003, amounts due from these two customers represented
approximately 24% and 31%, respectively, of accounts receivable.
One supplier accounted for approximately 46% of total purchases for the
three months ended June 30, 2004 and 36% of total purchases for the three
months ended June 30, 2003. This one supplier accounted for approximately
45% of total purchases for the six months ended June 30, 2004 and 26% of
total purchases for the six months ended June 30, 2003. At June 30, 2004
and December 31, 2003, amounts due to this vendor represented
approximately 61% and 14%, respectively, of accounts payable/accrued
expenses.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This quarterly report on Form 10-QSB contains statements relating to
future results of the Company (including certain projections and business
trends) that are "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. These statements can be identified by
introductory words such as "expects", "plans", "intends", "believes", "will",
"estimates", "forecasts", "projects" or words of similar meaning, and by the
fact that they do not relate strictly to historical or current facts. Actual
outcomes and results may differ materially from what is expressed or implied in
our forward-looking statements. Among the factors that affect future results are
changes in political and economic conditions; demand for and market acceptance
of new and existing products, as well as other risks and uncertainties detailed
from time to time in the filings of the Company with the Securities and Exchange
Commission.
(A) INTRODUCTION
The Company was incorporated in April 1995 as a nutrition technology
company that researches, develops, and commercializes functionally unique
proprietary products for sports performance, weight loss and Type 2 diabetes.
SPORTS PERFORMANCE
------------------
Our first sports performance product, ENDUROX(R), was introduced in
March 1996 with commercial sales beginning in May 1996. In March 1997, we
extended the ENDUROX line of products with ENDUROX EXCEL(R). In February 1999,
we introduced ENDUROX(R) R(4)(R) Performance/Recovery Drink to be taken
following exercise. In clinical studies performed or funded by the Company,
ENDUROX R(4) has demonstrated a number of exercise-related benefits including
enhanced performance, extended endurance, and decreased post-exercise muscle
damage. In June 2001, we introduced ACCELERADE(R) Sports Drink, to be taken
during exercise using the same patented technology as ENDUROX R(4). Research
studies funded by the Company have shown that ACCELERADE is significantly
better than conventional sports drinks in improving endurance during exercise.
In 2003, the Company introduced a ready-to-drink form of ACCELERADE into test
market in the state of Colorado. In March 2004, the Company introduced
COUNTDOWN(R), the first product specifically engineered for immediate
post-workout intake by strength-training athletes. In the second quarter of
2004, the Company introduced ACCEL GEL(R), the first gel product based on the
ACCELERADE 4-1 ratio of carbohydrates to protein.
WEIGHT LOSS
-----------
In weight loss, the Company has focused its research and development
efforts on development of novel nutritional compositions that stimulate the
body's major satiety peptide, or cholecystokinin (CCK). In April 2000, we
introduced our first weight loss product, SATIETROL(R), a natural appetite
control product based on this research. Clinical studies performed or funded by
the Company have shown that Satietrol, a pre meal beverage, can reduce hunger up
to 43% 3 1/2 hours after eating. In January 2001, we extended our weight loss
product line with the introduction of SATIETROL COMPLETE(R), a 220-calorie meal
replacement product that incorporates the patented SATIETROL technology. In June
2001, the Company signed an exclusive worldwide Licensing Agreement with
GlaxoSmithKline ("GSK") for its SATIETROL technology. Under the Agreement, the
Company received an initial payment of $1,000,000 and received a subsequent
milestone payment of $250,000. GSK subsequently canceled the Licensing Agreement
in September 2002 with all rights reverting to the Company. In the third quarter
of 2003, the Company funded clinical studies performed at a private research
9
firm that showed a statistically significant reduction in caloric intake in
overweight individuals using a new improved form of SATIETROL in both beverage
and tablet form. In 2004, the Company is conducting additional studies on
SATIETROL including measuring the impact on caloric-intake using a chewable
tablet form of SATIETROL.
TYPE 2 DIABETES
---------------
Type 2 diabetes has become the fastest growing chronic condition in the
United States. Obesity and poor glucose regulation appear to be primary
characteristics of this condition. Research has suggested that cholecystokinin
(CCK) may play a role in insulin release and glucose regulation. The Company's
research in this area is to develop a nutritional product that can help Type 2
diabetics lose weight by controlling appetite while improving glucose
regulation. The Company expects to initiate clinical trials on a product for use
by Type 2 diabetics in the future.
(B) RESULTS OF OPERATIONS -- THREE- AND SIX-MONTHS ENDED JUNE 30, 2004 VS.
JUNE 30, 2003
We recorded a net loss of ($290,115), or ($0.03) per share, for the
second quarter ended June 30, 2004 compared to a net loss of ($305,973), or
($0.05) per share, for the second quarter ended June 30, 2003. We recorded a net
loss of ($282,338), or ($0.03) per share, for the six-month period ended June
30, 2004, compared to a net loss of ($727,076), or ($0.12) per share, for the
six-month period ended June 30, 2003. The decrease in the net loss for the
three- and six- month periods ended June 30, 2004 versus the same periods in
2003 is due primarily to increased revenues.
Revenues in the quarter ended June 30, 2004 were $2,204,522 compared to
$1,520,552 for the same period in 2003. Revenues in the six-month period ended
June 30, 2004 were $4,508,119 compared to revenues of $2,918,331 for the same
period in 2003. Revenues increased in both the three- and six-month periods
ended June 30, 2004 due to increases in ACCELERADE and ENDUROX R(4) powder
revenues of 29% and 22% respectively, as well as the introduction of new
products ACCEL GEL and COUNTDOWN.
Approximately $820,000 in sales of new products in the first six months
of 2004 is subject to a right of return provision if a significant customer does
not achieve certain minimum levels of retail sales in a 12-month period of time
from the date of initial sale. Management believes these minimums will be met
based upon retail sales reported by the customer of the product as well as the
Company's past history with similar products such as ENDUROX R(4) in similar
channels of distribution.
In May 2004, the Company entered into a purchasing agreement with a
significant customer in which all products sold to this customer are subject to
return provisions identical or similar to the one disclosed above. Management
believes these minimums will be met based upon the Company's past history with
this customer with these and similar products.
Gross profit was $1,104,692 for the three months ended June 30, 2004
compared to $783,280 for three months ended June 30, 2003. Gross profit was
$2,278,474 for the six months ended June 30, 2004 compared to $1,461,338 for the
six months ended June 30, 2003. The increases in gross profit are due to higher
revenues. Gross profit margin on product sales was 50.1% for the three months
ended June 30, 2004, compared to 51.5% for the three months ended June 30, 2003.
Our gross profit margin on product sales was 50.5% for the six-month period
ended June 30, 2004 versus 50.1% for the six-month period ended June 30, 2003.
The decrease in gross profit margin in the second quarter of 2004 is due to
10
promotional expenses paid to promote the Company's new COUNTDOWN product for
strength-training athletes that are deducted from revenues. From time to time,
the Company may incur additional promotional expenses in connection with the
sale of its products. These promotional expenses should result in higher unit
volumes of sales of these products. In the second quarter of 2004, the Company
sold $10,960 of previously written-off SATIETROL inventory with zero cost as
compared to $24,462 of such sales in the similar period in 2003. In the six
months ended June 30, 2004, the Company sold $17,554 of previously written-off
SATIETROL inventory with zero cost as compared to $39,750 of such sales in the
similar period in 2003.
Our selling, general, and administrative ("S, G, & A") expenses
increased to $1,312,345 for the three-month period ended June 30, 2004 from
$1,029,219 for the three-month period ended June 30, 2003. Our S, G, & A
expenses increased to $2,406,039 for the six-month period ended June 30, 2004
from $2,026,922 for the six-month period ended June 30, 2003. S, G, & A expenses
increased due primarily to increases in advertising and marketing expenses
associated with the launch of our new COUNTDOWN product for strength-training
athletes.
Research and development ("R & D") expenses were $34,961 for the three
months ended June 30, 2004 versus $43,248 for the three months ended June 30,
2003. R & D expenses were $73,333 for the six months ended June 30, 2004 versus
$130,539 for the six months ended June 30, 2003. R & D expenses decreased in the
six-month period ended June 30, 2004 compared to the same period in 2003 due to
R & D expenses associated with the test market of the ready-to-drink form of our
ACCELERADE product in the first quarter of 2003. We anticipate R & D expenses
will increase as additional clinical trials and studies are conducted on all of
our products as we continue to seek out additional patents and claims for our
products.
Interest expense increased to $30,616 for the three months ended June
30, 2004 from $8,952 for the three months ended June 30, 2003. Interest expense
increased to $57,647 for the six months ended June 30, 2004 from $9,946 for the
six months ended June 30, 2003. The increase is due to our accounts receivable
funding described in the Liquidity section below.
(C) OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on the Company's financial
condition, changes in financial condition, revenue or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to investors, and the Company does not have any unconsolidated special
purpose entities.
(D) LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2004, the Company's current assets exceeded its current
liabilities by approximately $2.2 million with a ratio of current assets to
current liabilities of approximately 2.2 to 1. At June 30, 2004, cash on hand
was $1,117,639, a decrease of $681,064 from December 31, 2003, primarily due to
the net loss as well as an increase of $581,258 in accounts receivable and an
increase in inventory of $703,984 from December 31, 2003. These were offset by
an increase in accounts payable/accrued expenses of $841,098 from December 31,
2003. Accounts receivable, inventory, and accounts payable increased in support
of increased revenues.
11
During the second quarter of 2003, the Company secured a $750,000
revolving asset-based credit facility from USA Funding of Dallas, Texas. This
facility was for one year commencing on June 1, 2003. This credit facility has
been increased to $1,000,000 and has been renewed for 2 years commencing June 1,
2004. The amount of available credit is based on the value of the Company's
eligible receivables from time to time. This credit facility bears interest at a
rate of prime plus 1.75% as well as a 0.75% discount rate on all advances. At
June 30, 2004, the Company had approximately $250,000 of availability under this
credit facility and as of August 12, 2004, the Company had approximately
$150,000 of availability under this credit facility.
Because of our ability to borrow against our credit facility as
described above, more favorable payment terms from our main vendors, and the
equity raised in the 2003 private placements, we believe we have sufficient cash
availability to fund all of our planned activities for at least the next twelve
months. We may seek to raise additional equity capital in order to take
advantage of any potential opportunities that may present themselves.
ITEM 3. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Based on their
evaluation of the Company's disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), the Company's chief executive officer
and chief financial officer have concluded that as of June 30, 2004, the end of
the period covered by this report, the Company's disclosure controls and
procedures were effective to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms and are operating in
an effective manner.
CHANGES IN INTERNAL CONTROLS. During the fiscal quarter ended June 30,
2004, there were no significant changes in the Company's internal control over
financial reporting that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.
II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY
SECURITIES
(A), (B) CHANGES IN SECURITIES:
None.
12
(C) RECENT SALES OF UNREGISTERED SECURITIES:
None.
(D) USE OF PROCEEDS FROM REGISTERED SECURITIES.
Not applicable.
(E) PURCHASES OF EQUITY SECURITIES BY ISSUER AND AFFILIATED PURCHASERS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On June 9, 2004, the Company held its Annual Meeting of Stockholders,
pursuant to information contained in the Company's Notice of Annual
Meeting of Stockholders and Proxy Statement that were mailed to
stockholders on May 7, 2004.
(b) One of the matters listed in the Company's Proxy for the meeting was
the annual Election of Directors. There were six nominees for election
who were elected by the shareholders to serve for a one-year term. The
results of the balloting were as follows (Shares voting: 8,478,906 of
10,240,545):
Nominee For Against Abstain
------- --- ------- -------
Robert Portman 8,431,606 -0- 46,900
Stephen P. Kuchen 8,433,406 -0- 45,100
David Portman 7,687,454 -0- 791,052
Michael Cahr 8,433,406 -0- 45,100
Joseph Harris 8,434,006 -0- 44,500
Gregory Horn 8,443,906 -0- 35,000
(c) Another matter voted upon by the stockholders was the ratification of
the appointment of Eisner, LLP as independent auditors for the Company
for the fiscal year ending December 31, 2004. This matter was approved.
The results of the balloting for this matter was as follows:
Matter For Against Abstain
------ --- ------- -------
Appointment of auditors 8,423,406 28,500 27,000
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ITEM 5. OTHER INFORMATION
(A) OTHER INFORMATION
None.
(B) MATERIAL CHANGES TO PROCEDURES FOR SECURITY HOLDERS TO RECOMMEND NOMINEES TO
BOARD
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
31.1 Rule 13a-14(a) Certification of Robert Portman, Chief Executive
Officer.
31.2 Rule 13a-14(a) Certification of Stephen P. Kuchen, Chief Financial
Officer
32 Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(B) REPORTS ON FORM 8-K:
On April 5, 2004, the Company furnished to the Securities and Exchange
Commission a Current Report on Form 8-K (date of earliest event reported - March
29, 2004) to which a copy of the Company's Press Release of April 2, 2004
announcing financial results for the quarter ended March 31, 2004 and a copy of
the Company's Press Release of March 29, 2004 announcing financial results for
the quarter and year ended December 31, 2003 and presenting a condensed balance
sheet were attached as exhibits.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PACIFICHEALTH LABORATORIES, INC.
By: /S/ STEPHEN P. KUCHEN
--------------------------------
STEPHEN P. KUCHEN
Vice President (Principal Financial Officer
and Principal Accounting Officer)
Date: AUGUST 12, 2004
-------------------------
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