DOYLESTOWN, Pa.—ProPhase Labs Inc. (NASDAQ: PRPH) released its financials for the second quarter (2Q10), ended June 30. The company reported a net loss for 2Q10 of $2.3 million, compared to a net loss of $4.6 million in the comparable 2009 period. Net sales of $1.1 million were down $617,000 compared to 2Q09, which was attributed to the discontinuation of its candy processing and contract manufacturing operation in New Jersey, and a net reduction in customer purchases and stocking. However, ProPhase did realize expense reductions of $1.9 million in sales, marketing and administration expenses and $236,000 in R&D costs in 2Q10. It did see increased costs in marketing and R&D for new products for the Cold-EEZE® and Kids-EEZE® product lines to be introduced during the 2010-2011 cold season.
“In the second quarter, we continued to feel the effects of both the retail overstock created by H1N1 related sales in late 2009 and the lower incidence of colds in Q1 and Q2 2010 compared to Q1 and Q2 2009," said Ted Karkus, ProPhase CEO. He added by closing the production plant and discontinuing the candy product line, the company did reduce losses as the line had been historically unprofitable. Instead, ProPhase is focusing its efforts on expanding the Cold-EEZE franchise with new packaging and new flavors, and expanding the children’s product offerings.
ProPhase is also continuing to pursue new market opportunities presented as a result of its participation in the Phusion Laboratories joint venture. Phusion is now focused on developing two new skin-care product lines for wrinkles and for acne. Phusion is in the early stages of investigating commercialization of these and other products.
In addition, on Aug. 11, ProPhase filed a praecipe for a writ of summons in the Court of Common Pleas for Bucks County, Pa. This filing is the first step in initiating an action against certain former officers and directors of the company, and against certain third parties. The company is preparing to assert claims arising from, among other things, a variety of transactions and payments previously made or entered into by the company. All of the transactions and events which would be the subject of the Complaint occurred prior to the installation of the current Board of Directors in June 2009.
