SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark one)
| |x| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the Quarterly Period Ended: | September 27, 2003 |
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 Number 0-11274
PHARMACEUTICAL FORMULATIONS, INC.
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation or organization) 460 Plainfield Avenue, Edison, NJ (Address of principal executive offices) (Registrant's telephone number, including area code) |
22-2367644 (IRS Employer Identification No.) 08818 (Zip code) (732) 985-7100 |
Indicate by check mark 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.
|_| Yes No
|x|
Indicate by check mark whether the registration is an accelerated filer (as defined in Exchange Act Rule 12b-2). |_| Yes No |x|
The number of shares outstanding of common stock, $.08 par value, as of November 7, 2003 was 85,345,787.
PHARMACEUTICAL FORMULATIONS, INC. AND SUBSIDIARIES
PART I FINANCIAL INFORMATION
| ITEM 1 | FINANCIAL STATEMENTS |
CONSOLIDATED BALANCE SHEETS
September 27,
2003 December 28,
ASSETS (Unaudited) 2002
------------------- ------------------
CURRENT ASSETS
Cash $ 86,000 $ 17,000
Accounts receivable - net of allowance for doubtful
accounts of $429,000 and $407,000 11,231,000 9,334,000
Inventories 13,881,000 13,131,000
Prepaid expenses and other current assets 2,269,000 1,547,000
------------------ ------------------
Total current assets 27,467,000 24,029,000
PROPERTY, PLANT AND EQUIPMENT
Net of accumulated depreciation and amortization
of $33,563,000 and $31,513,000 14,048,000 13,802,000
OTHER ASSETS
Goodwill 4,340,000 -
Other assets 376,000 130,000
------------------ ------------------
Total other assets 4,716,000 130,000
------------------ ------------------
$ 46,231,000 $ 37,961,000
================== ==================
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)
CURRENT LIABILITIES
Current portion of long-term debt $ 3,058,000 $ 2,484,000
Current portion of capital lease obligations 2,305,000 2,461,000
Due to ICC Industries Inc. 10,022,000 8,812,000
Accounts payable 8,869,000 7,744,000
Accrued expenses 1,274,000 1,733,000
------------------ ------------------
Total current liabilities 25,528,000 23,234,000
------------------ ------------------
LONG-TERM DEBT DUE ICC INDUSTRIES INC. 19,419,000 17,117,000
------------------ ------------------
LONG-TERM DEBT, OTHER 17,026,000 11,785,000
------------------ ------------------
LONG-TERM CAPITAL LEASE OBLIGATIONS 2,629,000 3,130,000
------------------ ------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' (DEFICIENCY)
Common stock, par value $.08 per share; 200,000,000 shares
authorized; 85,345,787 and 85,327,612 shares issued and 6,828,000 6,827,000
outstanding
Capital in excess of par value 52,024,000 51,796,000
Accumulated deficit
(77,223,000) (75,928,000)
------------------ ------------------
Total stockholders' (deficiency) (18,371,000) (17,305,000)
------------------ ------------------
$ 46,231,000 $ 37,961,000
================== ==================
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended Three Months Ended
----------------------------------- -----------------------------
September 27, September 28, September 27, September 28,
2003 2002 2003 2002
----------------- -------------- ------------- -------------
REVENUES
Gross sales $ 53,664,000 $ 43,039,000 $ 19,017,000 $ 16,142,000
Less: Sales discounts and allowances 1,258,000 763,000 404,000 198,000
------------ ----------- ------------ ------------
NET SALES 52,406,000 42,276,000 18,613,000 15,944,000
------------ ----------- ------------ ------------
COSTS AND EXPENSES
Cost of goods sold 43,322,000 35,863,000 14,834,000 13,063,000
Selling, general and administrative 8,752,000 7,032,000 3,463,000 2,217,000
Research and development 235,000 218,000 88,000 83,000
------------ ----------- ------------ ------------
52,309,000 43,113,000 18,385,000 15,363,000
------------ ----------- ------------ ------------
INCOME (LOSS) FROM
OPERATIONS 97,000 (837,000) 228,000 581,000
------------ ----------- ------------ ------------
OTHER INCOME (EXPENSE)
Interest expense (2,551,000) (3,032,000) (844,000) (947,000)
Other 258,000 449,000 (35,000) 125,000
------------ ----------- ------------ ------------
(2,293,000) (2,583,000) (879,000) (822,000)
------------ ----------- ------------ ------------
LOSS BEFORE INCOME TAX
BENEFIT (2,196,000) (3,420,000) (651,000) (241,000)
INCOME TAX BENEFIT 901,000 1,539,000 271,000 302,000
------------ ----------- ------------ ------------
$ (1,295,000) $ (1,881,000) $ (380,000) $ 61,000
NET INCOME (LOSS) ============ ============ ============= ============
INCOME (LOSS) PER SHARE - BASIC AND DILUTED $ (0.02) $ (0.02) $ (0.00) $ 0.00
============ ============ ============= ============
BASIC AND DILUTED AVERAGE COMMON SHARES
OUTSTANDING 85,342,000 85,260,000 85,346,000 85,268,000
============ ============ ============= ============
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
-------------------------------------------
September 27, September 28,
2003 2002
--------------------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,295,000) $ (1,881,000)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Income tax benefit (901,000) (1,539,000)
Depreciation and amortization of property, plant and equipment 2,050,000 1,761,000
Amortization of bond discount and deferred financing costs 207,000 754,000
Amortization of deferred gain on sale/leaseback (39,000) (60,000)
Changes in current assets and liabilities:
Increase in accounts receivable (223,000) (2,200,000)
Decrease (increase) in inventories 1,379,000 (1,636,000)
Increase in prepaid expenses and other current assets (450,000) (535,000)
Increase in due to ICC Industries Inc. 2,581,000 1,798,000
Decrease in accounts payable and accrued expenses (16,000) (4,206,000)
----------------- ----------------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 3,293,000 (7,744,000)
----------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Konsyl Pharmaceuticals, Inc., net of cash acquired
(8,768,000) -
(Increase) decrease in other assets (135,000) 447,000
Increase in property, plant and equipment (1,317,000) (1,371,000)
----------------- ----------------
NET CASH USED IN INVESTING ACTIVITIES (10,220,000) (924,000)
----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in due to ICC Industries Inc. 1,832,000 12,100,000
Proceeds from equipment financing 1,216,000 -
Repayments of capital lease obligations (1,873,000) (915,000)
Long-term debt in connection with Konsyl acquisition 6,200,000 -
Repayments of long-term debt (385,000) (2,582,000)
Proceeds from issuance of common stock under rights offering 6,000 -
----------------- ----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,996,000 8,603,000
----------------- ----------------
NET INCREASE (DECREASE) IN CASH 69,000 (65,000)
CASH, BEGINNING OF PERIOD 17,000 149,000
---------------- -----------------
CASH, END OF PERIOD $ 86,000 $ 84,000
================ ================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| Note 1 | Interim Financial Reporting and Change in Fiscal Year During December 2002, we changed our fiscal year-end from the 52-53 week period which ends on the Saturday closest to June 30 to the 52-53 week period which ends on the Saturday closest to December 31. The consolidated balance sheet as of December 28, 2002 has been derived from the audited consolidated balance sheet of that date and is presented for comparative purposes. Certain amounts have been reclassified to conform to the current period presentation. The accompanying financial statements should be read in conjunction with the audited financial statements for the six months ended December 28, 2002 as filed in the Company’s Form 10-K. Accordingly, footnotes that would substantially duplicate such disclosure have been omitted. The interim financial statements reflect all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results of operations for the nine months ended September 27, 2003 are not necessarily indicative of the results to be expected for the fiscal year ending January 3, 2004 or any other period. Stock Based Compensation In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 148, “Accounting for Stock-Based Compensation–Transition and Disclosure”. This statement amends FAS No. 123, “Accounting for Stock-Based Compensation”, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, FAS No. 148 amends the disclosure requirements of FAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. Pursuant to FAS No. 148, we have elected to continue to account for employee stock-based compensation under Accounting Principles Board Opinion No. 25, “Accounting for Stock-Issued to Employees”, using an intrinsic value approach to measure compensation expense. Accordingly, no compensation expense has been recognized for options granted under our stock compensation plans since all such options were granted at exercise prices equal to or greater than fair market value on the date of grant. The weighted average assumptions used for the period presented are as follows: |
Nine Months Ended Three Months Ended
------------------------------- ----------------------------
September 27, September 28, September 27, September 28,
2003 2002 2003 2002
----------- -------------- ------------ --------------
Risk free interest rate 2.4% 3.5% 2.4% 3.5%
Expected dividend yield 0 0 0 0
Expected lives 5 years 5 years 5 years 5 years
Expected volatility 125% 125% 125% 125%
| Had compensation cost for the Company’s option plans been determined using the fair value method at the grant dates, the effect on the Company’s net income (loss) and income (loss) per share would have been as follows: |
Nine Months Ended Three Months Ended
------------------------------- ----------------------------------
September 27, September 28, September 27, September 28,
2003 2002 2003 2002
-------------- ------------- --------------- ---------------
Net income (loss) as reported $(1,295,000) $(1,881,000) $(380,000) $61,000
Add: Stock based employee
compensation expense included
in reported net income
(loss), net of related tax
effects - - - -
Deduct: Total stock based
employee compensation
determined under the fair
value method for all awards,
net of related tax effects (102,000) (36,000) (34,000) (8,000)
Pro forma net income (loss) $(1,397,000) $(1,917,000) $(414,000) $53,000
Basic and diluted income (loss)
per share $(0.02) $(0.02) $(0.00) $0.00
| New Accounting Pronouncements In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”). FIN 46 requires a variable interest entity to be consolidated by a company, if that company is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. FIN 46 also requires disclosures about variable interest entities that a company is not required to consolidate but in which it has a significant variable interest. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003 and to existing entities in the first fiscal year or interim period beginning after June 15, 2003. Certain of the disclosure requirements apply to all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. The initial adoption of this accounting pronouncement did not have a material impact on the Company's consolidated financial statements. In April 2003, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends SFAS No. 133 for decisions made as part of the FASB's Derivatives Implementation Group process, other FASB projects dealing with financial instruments, and in connection with implementation issues raised in relation to the application of the definition of a derivative. This statement is generally effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The Company does not believe the adoption of this standard will have a material impact on its consolidated financial statements. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 clarifies the definition of a liability as currently defined in FASB Concepts Statement No. 6, "Elements of Financial Statements," as well as other planned revisions. This statement requires a financial instrument that embodies an obligation of an issuer to be classified as a liability. In addition, the statement establishes standards for the initial and subsequent measurement of these financial instruments and disclosure requirements. Certain portions of SFAS No. 150 are effective for financial instruments entered into or modified after May 31, 2003. The Company does not believe the adoption of this standard will have a material impact on its consolidated financial statements. |
| Note 2 | Acquisition of Konsyl Pharmaceuticals, Inc. On May 15, 2003 the Company completed its acquisition of the stock of Konsyl Pharmaceuticals, Inc. of Fort Worth, Texas (“Konsyl”) for an aggregate purchase price of $9,131,000. The consideration for the acquisition consisted of $6,411,000 of cash and a $2,500,000 seller note. In addition, as part of the purchase price, the Company issued warrants to purchase 1.2 million shares of common stock of PFI at an exercise price of $.204 per share, valued at $220,000. The warrants are exercisable until April 15, 2010. The acquisition has been accounted for as a purchase; accordingly, the assets acquired and liabilities assumed will be recorded at their fair values with the residual of the purchase price recorded as goodwill. The Company has utilized preliminary estimates and assumptions in determining the allocation of purchase price to assets acquired and liabilities assumed of Konsyl. While management believes such estimates and assumptions are reasonable, the final allocation of the purchase price may differ from that reflected in the September 27, 2003 consolidated balance sheet after a more extensive review of fair values of assets acquired The amount and components of the estimated purchase price along with the allocation to assets purchased are as follows: |
Cash $ 143,000
Accounts receivable 1,674,000
Inventory 2,129,000
Prepaid expenses 474,000
Property, plant and equipment, net 979,000
Other assets 116,000
Goodwill 4,340,000
Less Accounts payable (724,000)
-----------
$ 9,131,000
-----------
| The transaction was
financed by a combination of asset-based and term loan financing aggregating
$3,700,000 from PFI’s existing lender, CIT Business Credit, as well as a
loan of $1,627,000 from, and $595,000 of equipment financing facilitated
by, ICC Industries Inc., the holder of approximately 74.5 million shares
(approximately 87%) of the common stock of PFI, a five year note to the former
stockholder of Konsyl in the amount of $2,500,000 and Konsyl’s own cash of
$350,000, a cash payment of $142,000. Konsyl is a manufacturer and distributor of powdered dietary natural fiber supplements. The products are manufactured at its plant in Easton, Maryland and are sold, both domestically and internationally, to pharmaceutical wholesalers, drugstore chains, mass merchandisers, grocery store chains, and grocery distributors. Products are sold under both the “Konsyl®” brand name and various private labels. Equipment and other physical property of Konsyl which were acquired are used for the manufacture, marketing and distribution of powdered dietary natural supplements; the Company plans to continue to use these assets for the same purpose. In connection with PFI’s acquisition of Konsyl, PFI, Konsyl and Mr. Frank X. Buhler, the former majority stockholder of Konsyl, entered into a consultancy agreement for one year at $5,000 per month. In addition, Mr. Buhler was elected to the Board of Directors of PFI at the annual meeting of the stockholders of PFI. Konsyl also entered into a five-year lease with ANDA Investments Ltd., a company owned by Mr. Buhler, regarding the company’s manufacturing facility in Maryland. Annual rent is $200,000, payable quarterly. In addition, Konsyl has an option to purchase the facility for $2,250,000. This option expires on May 14, 2006. The following unaudited pro forma summary presents the financial information as if the acquisition of Konsyl had occurred on January 1, 2003 for the nine months ended September 27, 2003 information and as if the acquisition of Konsyl had occurred on January 1, 2002 for the nine months ended September 28, 2002 information. These pro forma results have been prepared for comparative purposes and do not purport to be indicative of what would have occurred had the acquisition been made on January 1, 2002 or January 1, 2003, nor is it indicative of future results. |
Nine Months Ended
-------------------------------------------
September 27, 2003 September 28, 2002
-------------------- -------------------
Net sales $56,415,000 $50,732,000
Net loss $(1,384,000) $(1,383,000)
Basic and diluted loss per common share $(0.02) $(0.02)
| Note 3 | Commitments and Contingencies In March 2002, action was brought against PFI in the United States District Court for the Southern District of New York seeking $20 million in damages and $40 million in punitive damages related to the sales of allegedly defective product. Management believes the lawsuit is without merit and is vigorously defending against it. In May 1998, PFI brought an action against one of its former outside corporate counsels seeking damages for conflict of interest, breaches of fiduciary duty and loyalty, negligence and malpractice during its representation of the Company. The action is still pending. In July 2000, an action was instituted in the Circuit Court of Cook County, Illinois against the Company by Apotex Corporation and Torpharm, Inc. seeking an unspecified amount in damages and specific performance in the nature of purchasing a certain product from Apotex. The complaint alleges that the Company would purchase a certain product exclusively from Apotex. The counts specified in the complaint include breach of contract, negligent misrepresentation, breach of implied covenant of good faith and fair dealing, breach of implied covenant to use best efforts, specific performance, breach of fiduciary duty, reformation and a Uniform Commercial Code action for the price of 3 million tablets. Management believes the lawsuit is without merit and is vigorously defending against it. PFI is a party to various other legal proceedings arising in the normal conduct of business. Management believes that the final outcome of all current legal matters will not have a material adverse effect upon our financial position or results of operations. |
| Note 4 | Inventories Inventories consist of the following: |
September 27, 2003 December 28, 2002
------------------ -----------------
Raw materials $ 4,998,000 $ 4,423,000
Work in progress 1,058,000 1,315,000
Finished goods 7,825,000 7,393,000
------------- ------------
$13,881,000 $13,131,000
============== ============
| Note 5 | Related Party Transactions ICC, a major international manufacturer and marketer of chemical, plastic and pharmaceutical products, is our principal shareholder. The following transactions with ICC are reflected in the consolidated financial statements as of or for the nine months ended September 27, 2003 and September 28, 2002: |
2003 2002
----------------- ---------------
Inventory purchases $ 5,175,000 $ 1,887,000
Interest charges 769,000 736,000
Accounts payable 9,248,000 8,136,000
Note payable 21,789,000 18,322,000
| Note 6 | Debt On May 15, 2003, the Company reached an agreement with The CIT Group/Business Credit, Inc. to extend its existing revolving credit facilities to December 31, 2006 and the credit line with CIT was increased from $15 million to $20 million, including a term loan of $2 million to be repaid over forty months with interest at prime plus 0.75%. As of September 27, 2003, the Company was in violation of certain earnings covenants. As of November 10, 2003, the Company has applied for and CIT has verbally agreed to a waiver of these violations. A written waiver is expected to be received shortly. There can be no assurance that such violations will not occur in the future or that CIT will agree to waivers at any such time. |
| ITEM 2 | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
RESULTS OF OPERATIONS
| On May 15, 2003 Pharmaceutical Formulations, Inc. completed its
acquisition of the stock of Konsyl Pharmaceuticals, Inc. of Fort Worth, Texas.
The results of operations for Konsyl are included in the consolidated results of
operations from May 16, 2003. Gross sales for the nine months ended September 27, 2003 were $53,664,000 as compared to $43,039,000 in the comparable period in the prior year, an increase of $10,625,000 or 24.7%. Gross sales for the current quarter were $19,017,000 as compared to $16,142,000 in the comparable period in the prior year, an increase of $2,875,000 or 17.8%. Konsyl’s gross sales in the current three and nine month periods were $2,677,000 and $4,016,000, respectively. The balance of the sales increase came from established private label customers. Net sales for the nine months ended September 27, 2003 were $52,406,000 as compared to $42,276,000 in the comparable period in the prior fiscal year, an increase of $10,130,000 or 24.0% due to higher gross sales. Net sales for the three months ended September 27, 2003 were $18,613,000 as compared to $15,944,000 in the comparable period in the prior fiscal year, an increase of $2,669,000 or 16.7% also due to higher gross sales. Sales discounts and allowances in the three months and nine months ended September 27, 2003 increased over the respective prior year periods due to volume related rebate programs. Cost of sales as a percentage of net sales was 82.7% for the nine months ended September 27, 2003 as compared to 84.8% in the prior year period. This decrease of 2.1% resulted from the inclusion of Konsyl. Cost of sales as a percentage of net sales was 79.7% for the three months ended September 27, 2003 as compared to 81.9% in the prior year period. Selling, general and administrative expenses were $8,752,000 for the nine months ended September 27, 2003 as compared to $7,032,000 in the prior year period, an increase of $1,720,000 or 24.5%, of which $1,249,000 was related to the inclusion of Konsyl and related transition costs. Selling, general and administrative expenses were $3,463,000 for the three months ended September 27, 2003 as compared to $2,217,000 in the prior year period, an increase of $1,246,000 or 56.2%, of which $801,000 was related to the inclusion of Konsyl. The remaining increase reflects higher insurance, legal, freight and commission expenses. Interest expense was $2,551,000 for the nine months ended September 27, 2003 as compared to $3,032,000 for the prior year period. Interest expense was $844,000 for the three months ended September 27, 2003 as compared to $947,000 for the prior year period. The decrease is primarily a result of lower interest rates, offset by interest on increased borrowings to fund the Konsyl acquisition. Interest expense arising from the Konsyl acquisition was approximately $185,000 for the period May 16, 2003 to September 27, 2003. In December 2001, ICC became an 85.6% owner of our common stock. As a result of the increase in ICC’s ownership of PFI, we file a consolidated tax return with ICC. In accordance with a tax sharing agreement between the two companies, we will be reimbursed for the tax savings generated from ICC’s use of our losses. In addition, the agreement provides for an allocation of the group’s tax liability, based upon the ratio that each member’s contribution of taxable income bears to the consolidated taxable income of the group. In connection with this tax sharing agreement, we recorded a tax benefit of $901,000 for the nine months ended September 27, 2003 and a benefit of $1,539,000 for the nine months ended September 28, 2002. The tax benefit was $271,000 for the three months ended September 27, 2003 as compared to $302,000 for the comparable prior year period. PFI reported a net loss of $1,295,000 or $.02 per share for the nine months ended September 27, 2003 as compared to a net loss of $1,881,000 or $.02 per share in the prior year period. For the three months ended September 27, 2003, PFI reported a net loss of $380,000 or $.00 per share as compared with a net income of $61,000 or $.00 per share in the prior year period. |
LIQUIDITY AND CAPITAL RESOURCES
Cash increased $69,000
during the nine months ended September 27, 2003. |
| ITEM 3 | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK PFI would be adversely affected by an increase in interest rates. Each 1% change in the prime rate will change the Company’s annual expenditure by approximately $450,000, based on current levels of borrowing and related base interest rates. |
| ITEM 4 | CONTROLS AND PROCEDURES |
| As of the end of the period covered by this Report, the Company
carried out an evaluation, under the supervision and with the participation of
senior management, including the Company’s Chief Executive Officer and the
Company’s Chief FinancialOfficer, of the effectiveness of the design and
operation of the Company’s disclosure controls and procedures pursuant to
Exchange Act Rule 13a-15(e). Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer believe, as of the end of the period covered
by this report, the Company’s disclosure controls and procedures provide
reasonable assurances 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
Commission’s rules and forms. The Company has not identified any changes in its internal controls over financial reporting during the quarter ended September 27, 2003 that have materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting. |
PART II. OTHER INFORMATION
| ITEM 1 | LEGAL PROCEEDINGS See Note 3 to Notes to Consolidated Financial Statements. |
| ITEM 2 | CHANGES IN SECURITIES AND USE OF PROCEEDS None. |
| ITEM 3 | DEFAULTS UPON SENIOR SECURITIES None. |
| ITEM 4 | SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS None. |
| ITEM 5 | OTHER INFORMATION When used in the Form 10-Q and in future filings by the Company with the Securities and Exchange Commission, in the Company’s press releases and in oral statements made with the approval of an authorized executive officer, the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated”, “estimate,” “project,” “expect,” “believe,” “hope,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on such forward-looking statements, which speak only as of the date made. |
| ITEM 6 | EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits |
| 31 | Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32 | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| (b) Reports on Form 8-K - | The Registrant filed or furnished the following reports on Form 8-K during the third quarter of the fiscal year ending January 3, 2004: |
| Date of Report | Item Number (Summary) |
| June 30, 2003 | 5 | (regarding debenture extension, election of a new director and reelection of all other incumbent directors) |
| July 14, 2003 | 9 | (regarding Regulation FD disclosure of appointments of certain executive officers) |
| August 12, 2003 | 7 | (regarding Financial Statements, Pro Forma Financial Information and Exhibits relating to a press release issued on August 12, 2003) |
| 9 | (regarding Results of Operation and Financial Condition for the quarter and six months ended June 28, 2003, as announced in the press release issued on August 12, 2003) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PHARMACEUTICAL FORMULATIONS, INC.
(REGISTRANT)
| Date: November 10, 2003 | By: | /s/James Ingram James Ingram Chairman and Chief Executive Officer (Principal Executive Officer) |
| Date: November 10, 2003 | By: | /s/Walter Kreil Walter Kreil Chief Financial Officer (Principal Accounting Officer) |
Exhibit Index
| 31. | Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32. | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200 |