PacificHealth sees calmer waters ahead in 2006

By staff reporter

- Last updated on GMT

After a tumultuous 2005, PacificHealth Labs looks to be sailing
towards a steadier year, thanks to a strategic shift and the sale
of its sports drink intellectual property.

The New Jersey company has reported a net loss for full year 2005 of $0.65m (or -$0.06 per share), compared to $2.52m (-$0.25 per share). Revenue slipped, however, from $6.8m in 2004 to $5.4m.

One of the main blows to have struck PacificHealth in 2004 was retailer GNC's decision in March to discontinue the NTS strength training product line, causing it to write off its own inventory of $679,000 and patents in the amount of $137,138.

This was reflected in the full 2004 results, and is therefore a major reason why 2005 looks so much better in comparison.

Sales, general and administration expenses were down to $3.7m, from $4.6m in 2004.

Although the company had received a $1 million equity investment from Hormel Health Labs in January 2005, by August it was in dire straits, with fears that the company would not be able to continue operating for more than 30 to 60 days beyond 15 August 2005, if no additional financing came through.

Consequently it managed to raise $500,000 from the placement of convertible debt.

President and CEO Robert Portman called 2005 "a pivotal year"​, in which the company effected a major shift in strategy involving management changes, a more aggressive stance on licensing, cost-saving, and streamlining of sales and marketing.

Portman is optimistic about the prospects for the coming year - and part of that optimism is down to the sale of PacificHealth's sports drink technology, including its Accelerade and Endurox brands, for $4m upfront with a built-in royalty revenue stream.

The company has managed to pay off all its outstanding debt, and should save almost $1m in operating expenses in 2006 thanks to streamlining of its sales and marketing, e-commerce expansion and discontinuation of low potential brands.

While operating losses were $700,000 in Q1 2005, Portman expects that losses will be all but eliminated in the same three months of 2006, and that sales will be "appreciably higher".

As for the rest of the year, Q3 will see the launch of a new drink product incorporating the company's Satietrim weight loss technology, and research has been initiated at the UK's Manchester University to investigate the potential of this same technology in managing type II diabetes.

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