Form 10QSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

x   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

-OR-
 
o   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
incorporation or organization)
  
(I.R.S. Employer
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 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subjected to such filing requirements for the past 90 days.
Yes x No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-25 of the Exchange Act) Yes o No x
 
At August 8, 2007, there were 13,450,240 shares of common stock, par value $0.0025 per share, of the issuer outstanding.
 
Transitional small business disclosure format: Yes o No x
 

PACIFICHEALTH LABORATORIES, INC.

TABLE OF CONTENTS

 
3
         
PART I. FINANCIAL INFORMATION
    
         
 
ITEM 1.
FINANCIAL STATEMENTS
    
         
     
4
         
     
5
         
     
6
         
     
7
         
   
11
         
   
14
         
 PART II. OTHER INFORMATION    
         
   
14
         
   
15
         
   
15
         
   
15
         
   
15
         
   
15
         
 
18
 
2
 
Cautionary Note Regarding Forward-Looking Statements
 
 
As used herein, unless we otherwise specify, the terms the “Company,” "we," "us," and "our" means PacificHealth Laboratories, Inc.

This Report contains forward-looking statements concerning our financial condition, results of operations and business, including, without limitation, statements pertaining to:

·  
The development, testing, and commercialization of new products and the expansion of the market for our current products;
·  
The receipt of royalty payments from our agreements with business partners;
·  
Implementing aspects of our business plans;
·  
Financing goals and plans;
·  
Our existing cash and whether and how long these funds will be sufficient to fund our operations; and
·  
Our raising of additional capital through future equity financings.

These and other forward-looking statements are primarily in the section entitled "Management's Discussion and Analysis of Financial Conditions and Results of Operations". Generally, you can identify these statements because they include phrases such as "anticipates," "believes," "expects," "future," "intends," "plans," and similar terms. These statements are only predictions. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy, and actual results may differ materially from those we anticipated due to a number of uncertainties, many of which are unforeseen. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Report on Form 10-QSB. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including those stated in this Report. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. We cannot be sure when or if we will be permitted by regulatory agencies to undertake clinical trials or to commence any particular phase of clinical trials. Because of this, statements regarding the expected timing of clinical trials cannot be regarded as actual predictions of when we will obtain regulatory approval for any “phase” of clinical trials.

We believe it is important to communicate our expectations to our investors. There may be events in the future, however, that we are unable to predict accurately or over which we have no control. Cautionary language in this Report provides examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements.
 
3
 
PART I. FINANCIAL INFORMATION
    ITEM 1. FINANCIAL STATEMENTS
 
PACIFICHEALTH LABORATORIES, INC.
  
 
           
ASSETS
  
   
June 30,
 
December 31,
 
   
2007
 
2006
 
   
(Unaudited)
 
 
  
Current assets:
          
Cash and cash equivalents
  
$
1,500,446
  
$
2,564,038
  
Accounts receivable, net
    
1,170,724
   
502,234
 
Inventories
    
2,782,219
   
1,913,275
 
Prepaid expenses
    
172,155
   
144,059
 
Total current assets
    
5,625,544
   
5,123,606
 
               
Property and equipment, net
    
150,405
   
74,163
 
               
Deposits
    
10,895
   
10,895
 
               
Total assets
  
$
5,786,844
  
$
5,208,664
  
               
LIABILITIES AND STOCKHOLDERS' EQUITY
  
               
Current liabilities:
              
Notes payable
  
$
78,442
  
$
44,327
  
Accounts payable and accrued expenses
    
986,947
   
960,757
 
Deferred revenue
    
332,118
   
244,197
 
Total current liabilities
   
1,397,507
   
1,249,281
 
               
Stockholders' equity:
              
Common stock, $.0025 par value; authorized
              
50,000,000 shares; issued and outstanding:
              
 13,352,346 shares at June 30, 2007 and
              
12,776,690 shares at December 31, 2006
    
33,381
   
31,942
 
Additional paid-in capital
    
18,648,152
   
17,867,945
 
Accumulated deficit
    
(14,292,196
)
  
(13,940,504
)
     
4,389,337
   
3,959,383
 
               
Total liabilities and stockholders' equity
  
$
5,786,844
  
$
5,208,664
  
               
See accompanying notes to financial statements.
  
 
4
 
                   
PACIFICHEALTH LABORATORIES, INC.
  
 
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
  
(UNAUDITED)
  
                   
                   
   
Three Months
 
Six Months
  
   
Ended June 30,
 
Ended June 30,
 
   
2007
  
2006
  
2007
  
2006
  
                   
Revenues:
                  
Net product sales
  
$
2,069,889
  
$
1,747,206
  
$
3,888,783
  
$
3,322,602
  
                           
Cost of goods sold
    
1,304,359
   
952,691
   
2,437,246
   
1,711,086
 
                           
Gross profit
    
765,530
   
794,515
   
1,451,537
   
1,611,516
 
 
                          
Selling, general and administrative expenses
    
830,663
   
782,430
   
1,679,829
   
1,530,763
 
Research and development expenses
    
51,793
   
46,233
   
127,163
   
87,484
 
Depreciation expense
    
24,519
   
14,858
   
40,331
   
28,952
 
 
    
906,975
   
843,521
   
1,847,323
   
1,647,199
 
                           
Net operating loss
    
(141,445
)
  
(49,006
)
  
(395,786
)
  
(35,683
)
                           
Other income (expense):
                          
Gain on sale of patents/technology, net of expenses of $90,795
    
-
   
-
   
-
   
3,909,205
 
Other income
    
-
   
-
   
10,000
   
-
 
Interest income
    
15,395
   
24,319
   
35,931
   
32,733
 
Interest expense
    
(1,226
)
  
(1,487
)
  
(1,837
)
  
(30,136
)
     
14,169
   
22,832
   
44,094
   
3,911,802
 
                           
(Loss) income before income taxes
    
(127,276
)
  
(26,174
)
  
(351,692
)
  
3,876,119
 
                           
Provision for income taxes
    
-
   
-
   
-
   
1,278,000
 
                           
Net (loss) income
    
(127,276
)
  
(26,174
)
  
(351,692
)
  
2,598,119
 
                           
Less preferred dividends
    
-
   
(5,000
)
  
-
   
(10,425
)
                           
Net (loss) income applicable to common stockholders
  
$
(127,276
)
$
(31,174
)
$
(351,692
)
$
2,587,694
  
                           
Basic (loss) income per share
  
$
(0.01
)
$
0.00
  
$
(0.03
)
$
0.23
  
 
    
   
   
   
 
Diluted (loss) income per share
  
$
(0.01
)
$
0.00
  
$
(0.03
)
$
0.20
  
                           
Weighted average common shares - Basic
    
13,319,685
   
11,368,088
   
13,152,745
   
11,070,122
 
                           
Weighted average common shares - Diluted
    
13,319,685
   
11,368,088
   
13,152,745
   
13,167,853
 
                           
See accompanying notes to financial statements.
  
 
5
 
           
PACIFICHEALTH LABORATORIES, INC.
  
 
FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
  
(UNAUDITED)
  
           
   
2007
 
2006
 
Cash flows from operating activities:
          
Net (loss) income
  
$
(351,692
)
$
2,598,119
  
Adjustments to reconcile net (loss) income to net
              
cash used in operating activities:
              
Depreciation
    
40,331
   
28,952
 
Allowance for doubtful accounts
    
6,000
   
6,000
 
Writedown of packaging inventory
    
49,135
   
-
 
Equity instrument based consulting expense
    
124,867
   
109,639
 
Gain on sale of patents and technology,
              
net of expenses of $90,795
    
-
   
(3,909,205
)
Provision for income taxes
    
-
   
1,278,000
 
Changes in operating assets and liabilities:
              
Increase in accounts receivable
    
(674,490
)
  
(685,578
)
(Increase) decrease in inventories
    
(918,079
)
  
163,667
 
Increase in prepaid expenses
    
(28,096
)
  
(58,570
)
Increase in deposits
    
-
   
(20,472
)
Increase (decrease) in accounts payable/accrued expenses
    
26,190
   
(1,040,432
)
Increase (decrease) in deferred revenue
    
87,921
   
(29,835
)
Net cash used in operating activities
    
(1,637,913
)
  
(1,559,715
)
               
Cash flows from investing activities:
              
Purchase of property and equipment
    
(116,573
)
  
(52,145
)
Proceeds from sale of patents and technology,
              
net of expenses of $90,795
    
-
   
3,909,205
 
Net cash (used in) provided by investing activities
    
(116,573
)
  
3,857,060
 
               
Cash flows from financing activities:
              
Issuance of notes payable
    
79,305
   
763,443
 
Repayments of notes payable
    
(45,190
)
  
(825,326
)
Repayments of convertible notes payable
    
-
   
(500,000
)
Common stock issued
    
450,000
   
-
 
Proceeds from common stock options/warrants exercised
    
206,779
   
869,884
 
Net cash provided by financing activities
    
690,894
   
308,001
 
               
Net (decrease) increase in cash
    
(1,063,592
)
  
2,605,346
 
 
              
Cash, beginning balance
    
2,564,038
   
138,487
 
 
              
Cash, ending balance
  
$
1,500,446
  
$
2,743,833
  
 
              
               
Supplemental disclosures of cash flow information:
              
Cash paid for interest
  
$
1,837
  
$
30,136
  
               
Schedule of non-cash financing activity:
              
Conversion of 90,909 shares of Series A Preferred Stock
              
into 909,091 shares of common stock
  
$
-
  
$
966,387
  
               
See accompanying notes to financial statements.
  
 
6

PACIFICHEALTH LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
(UNAUDITED)
 
 
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, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007. 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, 2006.

 
On February 22, 2006, pursuant to an Asset Purchase Agreement of the same date, the Company sold to Mott’s LLP, a division of Cadbury Schweppes Americas Beverages (“CSAB”) the patents, trademarks, web sites, and other intellectual property related to its ACCELERADE and ENDUROX sports nutrition product lines for $4,000,000 in cash and potential future royalty payments. Simultaneously, the Company entered into a License Agreement with CSAB giving it the exclusive, royalty free right to continue to sell its sports nutrition products in powder, gel and pill form. Consequently, the Company will continue to sell its current sports nutrition products in the same manner as prior to the sale of the intellectual property assets.

 
The Company will receive royalty payments for a finite period following the launch of a product using the purchased assets, subject to an annual limitation on the amount of the royalty. There are no minimum royalties. CSAB launched a ready-to-drink (“RTD”) product in late June 2007.

 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. Actual results may differ from these estimates. The significant estimates and assumptions made by the Company are in the area of revenue recognition as it relates to customer returns, inventory obsolescence, allowance for doubtful accounts, and valuation allowances for deferred tax assets, and valuation of equity instruments issued under Statement of Financial Accounting Standards ("SFAS") No. 123R, "Share-Based Payment" ("SFAS 123R").

2. Revenue Recognition

Sales are recognized when all of the following criteria are met: (1) persuasive evidence that an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the seller’s price to the buyer is fixed and determinable; and, (4) collectibility is reasonably assured. Sales are recorded net of incentives paid to customers.

 
The Company has a sales agreement with a significant customer for all products sold to this customer whereby all unsold product is subject to return provisions. The Company recognizes revenue when this major customer sells through its products to its consumers. At June 30, 2007, the Company has deferred $332,118 in revenues related to this customer. At December 31, 2006, the Company had deferred $244,197 in revenues related to this customer.

3. Inventories
 
As of June 30, 2007 and December 31, 2006, inventories consisted of the following:
 

             
     
June 30, 2007
      
     
(Unaudited)
  
December 31, 2006
  
 
Raw materials
  
$
367,839
  
$
531,995
  
 
Work in process
    
-
    
77,771
  
 
Packaging supplies
    
73,172
    
41,378
  
 
Finished goods
    
2,184,435
    
1,165,188
  
 
Finished goods on consignment
    
156,773
    
96,943
  
     
$
2,782,219
  
$
1,913,275
  
 
 
7
 
4. Stock Based Compensation
 
 
Effective January 1, 2006, the Company adopted SFAS 123R which establishes standards for transactions in which an entity exchanges its equity instruments for goods or services. SFAS 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions, including issuances of stock options to employees. Utilizing the Modified Prospective method, the Company recorded charges of $64,023 and $123,357, respectively, in the three- and six- months ended June 30, 2007, representing the effect on loss from continuing operations, loss before income taxes, and net loss. The impact of the adoption of 123R was to reduce basic earnings per share by $0.00 and $0.01, respectively, in the three- and six- months ended June 30, 2007. The Company recorded charges of $49,254 and $98,880, respectively in the three- and six- months ended June 30, 2006, representing the effect on (loss) income from continuing operations, (loss) income before income taxes, and net (loss) income. The impact of the adoption of 123R was to reduce basic earnings per share by $0.00 and $0.01, respectively, in the three- and six- months ended June 30, 2006.

 
The Company granted 6,000 stock options to employees and directors during the three months ended June 30, 2007 with an exercise price of $2.05 per share. These options vest ratably through the second quarter of 2009. These options were determined to have a total fair value of $10,254. The Company granted 26,000 stock options to employees and directors during the six months ended June 30, 2007 with exercise prices ranging from $2.05 to $2.14 per share. These options were determined to have a total fair value of $46,054. Compensation expense recognized during the three months ended June 30, 2007 amounted to $64,023. Compensation expense recognized during the six months ended June 30, 2007 amounted to $124,867. These amounts were charged to operations and added to paid-in capital in accordance with SFAS 123R. The Company granted no options to employees and directors during the three months ended June 30, 2006. The Company granted 508,000 options to employees and directors during the six months ended June 30, 2006. These options were determined to have a total fair value of $230,540. Compensation expense recognized during the three months ended June 30, 2006 amounted to $25,302. Compensation expense recognized during the six months ended June 30, 2006 amounted to $98,880. These amounts were charged to operations and added to paid-in capital in accordance with SFAS 123R. The total intrinsic value of options exercised during the three and six months ended June 30, 2007 was $0.

 
The Company granted no stock options to consultants during the three months ended June 30, 2007. The Company granted 1,000 stock options to a consultant during the six months ended June 30, 2007 that vested upon grant with an exercise price of $2.10 per share. These options were determined to have a fair value of $1,510 that was charged to operations and added to paid-in capital in the six month period ended June 30, 2007. In addition, 1,000 options previously issued to consultants expired during the first six months of 2007. The Company granted no stock options to consultants during the three months ended June 30, 2006. The Company granted 89,000 stock options to consultants during the six months ended June 30, 2006 that vested upon grant with an exercise price of $0.20 per share. These options were determined to have a fair value of $10,759 that was charged to operations and added to paid-in capital in the six-month period ended June 30, 2006. 

 
A summary of employee options activity under our plans as of June 30, 2007 and changes during the six-month period then ended is presented below:

           
Weighted-
      
       
Weighted-
  
Average
      
       
Average
  
Remaining
  
Aggregate
  
       
Exercise
  
Contractual
  
Intrinsic
  
Options
  
Shares
  
Price
  
Term (Years)
  
Value
  
Balance, January 1, 2007
    
2,011,500
  
$
1.12
              
Granted during the period
    
26,000
  
$
2.12
              
Exercised during the period
    
(17,000
)
$
0.72
              
Expired during the period
    
(33,000
)
$
3.80
              
Outstanding, June 30, 2007
    
1,987,500
  
$
1.10
    
2.73
  
$
2,658,495
  
Exercisable, June 30, 2007
    
1,259,834
  
$
1.18
    
1.96
  
$
1,627,676
  
 
 
The market value of the Company’s common stock as of June 30, 2007 was $2.37 per share.
 
8
 
 
       
 
 
Weighted-
  
       
Average
  
       
Grant-Date
  
Nonvested Shares
  
Shares
  
Fair Value
  
Nonvested, January 1, 2007
    
942,000
  
$
0.81
  
Granted during the period
    
26,000
  
$
2.12
  
Vested during the period
    
(240,334
)
$
0.52
  
Forfeited during the period
    
-
  
$
-
  
Nonvested, June 30, 2007
    
727,666
  
$
0.95
  


 
As of June 30, 2007, the total fair value of non-vested awards amounted to $509,820. The weighted average remaining period over which such options are expected to be recognized is 1.97 years.

 
The fair value of each option award during the three months ended June 30, 2007 is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table:

 
 
June 30,
2007
 
Expected volatility
106-119%
 
Weighted-average volatility
113%
 
Expected dividends
0.0%
 
Expected term (in years)
5
 
Risk-free rate
3.35-4.75%

5. Income Taxes
 
 
The Company has approximately $12,398,000 in federal and $671,000 in state net operating loss carryovers generated through December 31, 2006 that can be used to offset future taxable income in calendar years 2007 through 2026. The net operating loss carryovers will expire in the year 2015 through the year 2026. As of June 30, 2007, the Company has fully reserved for these net operating loss carryovers. 

 
In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” - an interpretation of FASB Statement No. 109 (“FIN 48”), which clarifies the accounting and disclosure for uncertain tax positions, as defined. FIN 48 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. The Company adopted the provision of FIN 48 effective January 1, 2007. The adoption of FIN 48 had no material effect on the Company’s results of operations or financial position.

6. Concentration

 
The Company’s two largest customers accounted for approximately 17% and 17%, respectively, of net sales for the three months ended June 30, 2007 and the Company’s two largest customers accounted for approximately 17% and 17%, respectively, of net sales for the three months ended June 30, 2006. The Company’s two largest customers accounted for approximately 18% and 14%, respectively, of net sales for the six months ended June 30, 2007 and the Company’s two largest customers accounted for approximately 21% and 18%, respectively, of net sales for the six months ended June 30, 2006. At June 30, 2007, amounts due from these two customers represented approximately 31% and 17%, respectively, of accounts receivable. At December 31, 2006, amounts due from these two customers represented approximately 27% and 14%, respectively, of accounts receivable.
 
 
Two suppliers accounted for approximately 70% and 25%, respectively, of total inventory purchases for the three months ended June 30, 2007 and two suppliers accounted for approximately 74% and 17%, respectively, of total inventory purchases for the three months ended June 30, 2006. Two suppliers accounted for approximately 64% and 20%, respectively, of total inventory purchases for the six months ended June 30, 2007 and two suppliers accounted for approximately 58% and 30%, respectively, of total inventory purchases for the six months ended June 30, 2006. At June 30, 2007, amounts due to these two vendors represented approximately 57% and 8%, respectively, of accounts payable and accrued expenses. At December 31, 2006, amounts due to these two vendors represented approximately 3% and 2%, respectively, of accounts payable and accrued expenses.
 
9
 
7. Equity Instruments

Stock Issued
During the three months ended June 30, 2007, the Company did not issue any additional shares of its common stock. During the six months ended June 30, 2007, the Company issued an additional 243,243 shares of its common stock as a result of a private sale of stock to a new director of the Company and an investment fund managed by another new director of the Company resulting in proceeds of $450,000.

Options and Warrants
During the three months ended June 30, 2007, 11,000 options and 39,510 warrants were exercised, resulting in proceeds of $27,775. During the six months ended June 30, 2007, 19,000 options and 313,413 warrants were exercised, resulting in proceeds of $206,779. Of these shares, 8,120 were issued pursuant to a cashless exercise feature.

8. Subsequent Event

 
Between July 1, 2007 and August 8, 2007, the Company has issued an additional 97,894 shares of its common stock as a result of the exercise of options and warrants, resulting in proceeds of $51,259. Of these shares, 21,418 were issued pursuant to a cashless exercise feature.
 

10

Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In this Report on Form 10-QSB, the terms the “Company,” “we”, “us,” and “our” refer to PacificHealth Laboratories, Inc.
 
(a)            Introduction

PacificHealth Laboratories is a nutrition technology company that was incorporated in the State of Delaware in April 1995. Our mission is to discover, develop, and commercialize nutritional products to improve health, manage chronic disease, and enhance existing therapies that are patentable and are substantiated by well-controlled clinical trials conducted at leading university research centers. Our principal areas of focus include sports performance, weight loss, and management of Type II diabetes. Our products can be marketed without prior Food and Drug Administration (“FDA”) approval under current regulatory guidelines. We employ multiple strategies for the commercialization of our technologies: 1) launch a brand via highly targeted consumer channels, 2) license the technology to a major food or drug company, or 3) a combination of both 1 and 2.

We are focused on developing patented protein-based nutrition products using two core technology platforms. One platform involves the activation of biochemical pathways by specific nutritional compositions to enhance muscle growth, energy, and transport pathways. Using this nutritional technology platform, our research efforts have been directed to product development for 1) improving exercise performance, 2) post-surgical muscle recovery, and 3) oral rehydration. The second technology platform involves stimulation of specific satiety peptides that are released in the stomach. Using this nutritional technology platform, our research efforts have been directed in product development for 1) appetite suppression and weight loss, and 2) management of Type II diabetes.

ACTIVATION OF MUSCLE GROWTH, ENERGY AND TRANSPORT PATHWAYS

Exercise Performance
Our research into factors influencing exercise performance and muscle growth and recovery has led to the development and commercialization of a new generation of sports and recovery drinks. The key to our technology is the specific ratio in which protein is combined with carbohydrates. We have two patents on this technology and over 18 studies have been published demonstrating that products based on this technology can extend endurance, reduce muscle damage, improve rehydration, and accelerate muscle recovery. Our research in exercise performance has led to the introduction and commercialization of a number of products for the aerobic and strength training athlete. These include:

· ENDUROX EXCEL® - Introduced in March 1997.

· ENDUROX R4® Recovery Drink - Introduced in February 1999

· ACCELERADE® Sports Drink - Introduced in June 2001

· ACCEL GEL® - Introduced in February 2004

On February 22, 2006, pursuant to an Asset Purchase Agreement of the same date, we sold to Mott’s LLP, a division of Cadbury Schweppes Americas Beverages (“CSAB”), the patents, trademarks, web sites, and other intellectual property related to our ACCELERADE and ENDUROX sports nutrition product lines for $4,000,000 in cash and potential future royalty payments. Simultaneously, we entered into a License Agreement with CSAB giving us the exclusive, royalty free right to continue to sell our sports nutrition products in powder, gel and pill form. Consequently, we will continue to sell our current sports nutrition products in the same manner as prior to the sale of the intellectual property assets.

We will receive royalty payments for a finite period following the launch of a product using the purchased assets, subject to an annual limitation on the amount of the royalty and commencing upon the shipment of a minimum number of cases of the product. There are no minimum royalties. CSAB launched a RTD product in late June of 2007.
 
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Cadbury is contemplating the sale of their U.S. drink lines. We believe that this will not have a material effect on our financial statements.

Post-Surgical Muscle Recovery
Scientific insights emanating from our discoveries in sports nutrition have led to a potentially new and exciting medical application. Individuals undergoing orthopedic surgery, particularly involving the shoulder, hip or knee, experience muscle atrophy that occurs as a normal consequence of muscle immobilization in the post-surgery period. The degree of muscle atrophy a patient experiences significantly impacts health care costs and quality of life. We are currently evaluating a novel nutritional formulation that has the potential of slowing muscle atrophy following a period of forced immobilization. Such a product could have enormous benefit for the 1.6 million patients who undergo arthroscopy and muscle and knee replacement operations each year, and the 5 million patients who suffer a sports related injury. A clinical study to examine the effectiveness of this formulation is underway. We have filed one patent on this technology and plan to file additional patents in the future.

Oral Rehydration
Another scientific byproduct of our research on the effects of protein has been the identification of nutritional formulas that can enhance sodium transport. Such products would have widespread medical application in treating dehydration commonly associated with vomiting and diarrhea. We will continue our studies and may file patents for this indication in 2007.

ACTIVATION OF SATIETY PEPTIDES

Weight Loss 
Satiety peptides have been shown to reduce food intake and suppress appetite in humans. Our research has specifically focused on developing nutritional formulations that can stimulate cholecystokin (CCK), one of the body’s primary satiety peptides. CCK is normally released after a meal, particularly one high in fat and protein. CCK is often called the “feel full” protein because when it is released it gives a feeling of fullness and signals the brain to terminate the meal. The objective of our research is to develop a nutritional composition that stimulates and extends the duration of action of CCK in a calorically efficient way, i.e. to cause a release of CCK with 45-50 calories of specific nutrients rather than 1,000 calories.

The first product we commercialized using this technology was SATIETROL® that was released in April 2000. This was followed by the introduction of a meal replacement product called SATIETROL COMPLETE® in January 2001. Clinical studies showed that both of these products could reduce hunger and reduce caloric intake. In June 2001, we signed an exclusive worldwide licensing agreement with GlaxoSmithKline (“GSK”) for our weight loss technology. Under the agreement, we received an initial payment of $1,000,000 and received a subsequent milestone payment of $250,000. GSK subsequently terminated the agreement in September 2002 with all rights reverting back to us.

We have continued research in this area in order to develop a more effective composition that could be incorporated into different forms (ready-to-drink beverage and chewable tablet) and also has the potential to be added to food and increase the satiation property of the food to which it was added. Starting in the third quarter of 2003, the Company funded a number of clinical studies on an improved formulation. The new formulation was shown to be significantly better than the previous product in reducing caloric intake, slowing gastric emptying, and extending a feeling of satiation following a meal. We have seven patents on our appetite suppressant technology with additional patents pending. We test launched a ready-to-drink beverage using this improved technology under the trade name SATIATRIM® in January 2007 and officially launched the product in June 2007.

Type II Diabetes
Our appetite suppression technology may also have potential for the treatment of Type II diabetes, the fastest growing chronic condition in the U.S., affecting an estimated 46 million people. We have instituted clinical trials to measure the effectiveness of our formulation in controlling blood glucose.

(b)    Results of Operations - Three and Six Months Ended June 30, 2007 and 2006

We recorded a net loss applicable to common stockholders of ($127,276), or ($0.01) per share (basic and diluted), for the second quarter ended June 30, 2007 compared to a net loss applicable to common stockholders of ($31,174), or $0.00 per share (basic and diluted), for the second quarter ended June 30, 2006. We recorded a net loss applicable to common stockholders of ($351,692), or ($0.03) per share (basic and diluted), for the six-month period ended June 30, 2007, compared to net income applicable to common stockholders of $2,587,694, or $0.20 per share fully diluted, for the six-month period ended June 30, 2006. The six-month period ended June 30, 2006 would have resulted in a net loss (non-GAAP
 
12
 
measure) of ($43,511), or $0.00 per share (basic and diluted), if $2,631,205 (net of income taxes of $1,278,000) from the sale of patents and technology to CSAB were excluded from net income. See Part I, Item 2(a) above for a description of the CSAB transaction. The loss for the three- and six- month periods ended June 30, 2007 was primarily the result of two strategic decisions we made: (i) increased marketing and other expenses of $80,366 and $187,718, respectively, for the three- and six- month periods ended June 30, 2007 for the launch of SATIATRIM and (ii) lower gross margins as detailed below.

Revenues increased 18% in the quarter ended June 30, 2007 to $2,069,889 from $1,747,206 for the same period in 2006. Revenues in the six-month period ended June 30, 2007 increased 17% to $3,888,783 from $3,322,602 for the same period in 2006. Revenues increased in the three- and six- month periods ended June 30, 2007 as compared to the same periods in 2006 as a result of the implementation of an aggressive new retailer program which involves free-standing racks, increased serving sizes per canister that results in additional sales dollars per canister, and the expansion of the number of ACCELERADE and ACCEL GEL sku’s by some of our larger accounts in anticipation of the CSAB Ready-To-Drink launch. CSAB launched ACCELERADE Ready-to-Drink on June 21, 2007 so the second quarter and YTD 2007 received limited impacted from the CSAB incremental marketing expenditures. CSAB expects to spend $50 million on marketing the ACCELERADE brand that should have a positive effect on revenues in the second half of this year.
 
For the three months ended June 30, 2007, gross profit margin was 37.0% compared to 45.5% for the three months ended June 30, 2006. For the six months ended June 30, 2007, gross profit margin was 37.3% compared to 48.5% for the six months ended June 30, 2006. We experienced a change in our product mix. Also, in order to fully take advantage of the CSAB advertising spend, we redesigned all ACCELERADE and ACCEL GEL packaging to conform to the new CSAB ACCELERADE RTD packaging. To flush out old inventory, we aggressively discounted these products, leading to lower gross profit margins. We wrote off approximately $49,000 of non CSAB-type packaging material, which is the equivalent of 2.4% of the six-month revenues. We experienced cost of production and raw material price increases, specifically whey protein, in our finished products from 2006 to 2007. We also experienced a significant increase in freight costs coupled with our decision to provide free freight to more customers as a sales incentive. To address these issues, we have implemented our first ever price increase effective July 1, 2007. We believe this price increase should bring our margins back up to the low to mid 40% range as experienced for the year 2006. This price increase has met no resistance in the market place.

We completed our pilot product launch of SATIATRIM during the early part of the second quarter of 2007 and on June 28, 2007, commenced the official launch of the product. Based upon the results of the pilot campaign, we have developed what we expect to be an effective marketing campaign. The primary aspects of the marketing campaign will consist of a public relations effort directed at leading women’s magazines supplemented by numerous direct response campaigns including e-mail as well as a series of full-page color ads in one of the leading woman’s magazines. We are also expanding our efforts beyond the U.S. market. In August, a major direct response company will launch SATIATRIM in Great Britain. Approximately $450,000 of SATIATRIM finished goods inventory have lot expiration dates that commence in December 2007 with a final expiration date of January 11, 2008. We expect that we will be able to sell through the entire finished goods inventory prior to the expiration of those lots. However, there can be no assurances that we will be able to sell through all or any of the inventory on hand as of June 30, 2007. If such inventory is not sold as of the early part of the fourth quarter of 2007, we will be required to write down such inventory at a loss equal to the value of the recorded inventory at that time. We will monitor the effectiveness of the marketing campaign throughout the third quarter of 2007.

Selling, general, and administrative (“S, G, & A”) expenses increased to $830,663 for the three-month period ended June 30, 2007 from $782,430 for the three-month period ended June 30, 2006. S, G, & A expenses increased to $1,679,829 for the six-month period ended June 30, 2007 from $1,530,763 for the six-month period ended June 30, 2006. S, G, & A expenses increased primarily due to the investment in marketing and other expenses of $80,366 and $187,718 respectively, for the three- and six- month periods ended June 30, 2007 associated with the launch of SATIATRIM. We expect to continue to invest in the marketing of SATIATRIM. Late in the second quarter, we officially launched the product via a major public relations campaign that involves the Internet, radio, television, and print media.

Research and development (“R & D”) expenses were $51,793 for the three months ended June 30, 2007 compared to $46,233 for the three months ended June 30, 2006. R & D expenses were $127,163 for the six months ended June 30, 2007 versus $87,484 for the six months ended June 30, 2006. We anticipate R & D expenses will increase as we conduct additional clinical trials and seek out additional patents and claims for all of our products.
 
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Interest expense was $1,226 for the three months ended June 30, 2007 compared to $1,487 for the three months ended June 30, 2006. Interest expense was $1,837 for the six months ended June 30, 2007 compared to $30,136 for the six months ended June 30, 2006. $24,634 of interest expense in 2006 was incurred in connection with our accounts receivable funding from USA Funding that was paid off upon the completion of the CSAB transaction in the first quarter of 2006.

Income tax expense was $-0- for the three months ended June 30, 2007 and June 30, 2006. Income tax expense was $-0- for the six months ended June 30, 2007 compared to $1,278,000 for the six months ended June 30, 2006. The income tax expense in the six months ended June 30, 2006 was due to the aforementioned CSAB transaction. The effective tax rate in 2006 differs from the statutory tax rate primarily due to the utilization of net operating losses to reduce taxable income.

(c)    Liquidity and Capital Resources
 
At June 30, 2007, our current assets exceeded our current liabilities by approximately $4,228,000 with a ratio of current assets to current liabilities of approximately 4.0 to 1. At June 30, 2007, cash on hand was $1,500,446, a decrease of $1,063,592 from December 31, 2006, primarily as the result of an increase of $674,490 in accounts receivable, an increase in inventory of $868,944, a increase in prepaid expenses of $28,096, an increase in accounts payable and accrued expenses of $26,190, an increase in notes payable of $34,115 and an increase in deferred revenue of $87,921 from December 31, 2006. Accounts receivable increased at June 30, 2007 from December 31, 2006 due to normally higher revenues in the 2nd quarter as compared to the fourth quarter of the previous year. Inventories increased in advance of both the ACCELERADE marketing initiatives and the SATIATRIM launch. Deferred revenue increased as a major customer increased its inventories in the second quarter of 2007 as compared to the fourth quarter of 2006.

We have no material commitments for capital expenditures.

(d)    Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements between the Company and any other entity that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

ITEM 3. CONTROLS AND PROCEDURES
 
Evaluation of disclosure controls and procedures. Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of June 30, 2007, the end of the period covered by this Report, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are designed 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 SEC’s rules and forms; that such information is accumulated and disclosed to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure; and that such disclosure controls and procedures are effective.

Changes in internal control over financial reporting. During the quarter ended June 30, 2007, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.
 
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In the three month period ended June 30, 2007, we issued an additional 39,510 shares of our common stock as a result of the exercise of warrants which had been issued in private placements occurring in 2003, resulting in proceeds of $19,854. The offer and sale of these shares of Common Stock upon exercise of the warrants was exempt from registration under the Securities Act of 1933 in reliance upon Section 4(2) thereof and Rule 506 of Regulation D promulgated thereunder. No sale of the Common Stock involved the use of underwriters, and no commissions were paid in connection with the issuance or sale of the Common Stock. The shares of Common Stock have been registered under the Securities Act of 1933 for resale by the holders thereof.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.  

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a) On June 6, 2007, 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 10, 2007.

(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: 11,018,380 of 13,303,836):
 
 
Nominee
For
Against
Abstain
 
Robert Portman
10,709,593
-0-
308,787
 
Stephen P. Kuchen
10,709,593
-0-
308,787
 
David Portman
10,709,593
-0-
308,787
 
Michael Cahr
10,710,193
-0-
308,187
 
Adam Mizel
10,713,193
-0-
305,187
 
Marc Particelli
10,710,193
-0
308,187
 
(c) Another matter voted upon by the stockholders was the ratification of the appointment of Weiser, LLP as independent auditors for the Company for the fiscal year ending December 31, 2007. This matter was approved. The results of the balloting for this matter was as follows:
 
 
Matter
For
Against
Abstain
 
Appointment of auditors
10,987,322
25,975
5,083
 
 
ITEM 5. OTHER INFORMATION

None.

ITEM 6.  EXHIBITS

Exhibit
Number
  
Description of Exhibit(1)
     
3(i)(a)
  
Certificate of Incorporation of PacificHealth Laboratories, Inc. and all amendments thereto (incorporated by reference to Exhibit 3.1 to PacificHealth Laboratories, Inc.’s Registration Statement on Form SB-2 (Registration No. 333-36379) filed on September 25, 1997)
     
3(i)(b)
  
Certificate of Amendment of Certificate of Incorporation of PacificHealth Laboratories, Inc. (incorporated by reference to Exhibit 3.3 to PacificHealth Laboratories, Inc.’s Annual Report on Form 10-KSB filed on March 31, 2003)
     
 
15
 
Exhibit
Number
  
Description of Exhibit(1)
 
3(i)(c)
  
Certificate of Designations for Series A Preferred Stock (incorporated by reference to Exhibit 3.1 to PacificHealth Laboratories, Inc.’s Current Report on Form 8-K filed on January 28, 2005)
     
3(i)(d)
  
Certificate of Designations for Series B Preferred Stock, filed with the Secretary of State of the State of Delaware on April 28, 2005 (incorporated by reference to Exhibit 3(i) to PacificHealth Laboratories, Inc.’s Current Report on Form 8-K filed May 4, 2005)
     
3(ii)
  
Amended and Restated Bylaws of PacificHealth Laboratories, Inc. (incorporated by reference to Exhibit 3.2.1 to PacificHealth Laboratories, Inc.’s Amendment No. 3 to Registration Statement on Form SB-2/A filed on December 17, 1997)
     
4.1
  
Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to PacificHealth Laboratories, Inc.’s Amendment No. 3 to Registration Statement on Form SB-2/A filed on December 17, 1997)
     
4.2.1
  
Form of Securities Purchase Agreement entered into among PacificHealth Laboratories, Inc. and Certain of the Selling Stockholders dated August 26, 2003 (incorporated by reference to Exhibit 4.4 to PacificHealth Laboratories, Inc.’s Registration Statement on Form SB-2 filed on September 29, 2003)
     
4.2.2
  
Form of Registration Rights Agreement entered into among PacificHealth Laboratories, Inc. and Certain of the Selling Stockholders dated August 26, 2003 (incorporated by reference to Exhibit 4.5 to PacificHealth Laboratories, Inc.’s Registration Statement on Form SB-2 filed on September 29, 2003)
     
4.2.3
  
Form of Warrant issued to Certain of the Selling Stockholders in connection with Exhibit 4.2.1 on August 26, 2003 (incorporated by reference to Exhibit 4.6 to PacificHealth Laboratories, Inc.’s Registration Statement on Form SB-2 filed on September 29, 2003)
     
4.3
  
Stock Purchase Agreement dated June 1, 2001, by and between PacificHealth Laboratories, Inc. and Glaxo Wellcome International B.V. (incorporated by reference to Exhibit 4.1 to PacificHealth Laboratories, Inc.’s Current Report on Form 8-K filed on June 14, 2001)
     
4.4.1
  
Series A Preferred Stock Purchase Agreement dated January 28, 2005, by and between PacificHealth Laboratories, Inc. and Hormel HealthLabs, LLC (incorporated by reference to Exhibit 4.3 to PacificHealth Laboratories, Inc.’s Annual Report on Form 10-KSB filed on April 15, 2005)
     
4.4.2
  
Investors’ Rights Agreement dated January 28, 2005, by and between PacificHealth Laboratories, Inc. and Hormel HealthLabs, LLC (incorporated by reference to Exhibit 4.4 to PacificHealth Laboratories, Inc.’s Annual Report on Form 10-KSB filed on April 15, 2005)
     
4.4.3
  
Right of First Refusal and Co-Sale Agreement dated January 28, 2005, by and between PacificHealth Laboratories, Inc., Robert Portman and Hormel HealthLabs, LLC (incorporated by reference to Exhibit 4.5 to PacificHealth Laboratories, Inc.’s Annual Report on Form 10-KSB filed on April 15, 2005)
     
4.4.4
  
Certificate of Designations for Series A Preferred Stock (incorporated by reference to Exhibit 3.1 to PacificHealth Laboratories, Inc.’s Current Report on Form 8-K filed on January 28, 2005)
     
 
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Exhibit
Number
  
Description of Exhibit(1)
     
4.5
  
Certificate of Designations for Series B Preferred Stock, filed with the Secretary of State of the State of Delaware on April 28, 2005 (incorporated by reference to Exhibit 3(i) to PacificHealth Laboratories, Inc.’s Current Report on Form 8-K filed on May 4, 2005)
     
4.6.1
  
Securities Purchase Agreement, dated August 24, 2005 by and between PacificHealth Laboratories, Inc. and Hormel HealthLabs, LLC (incorporated by reference to Exhibit 10.1 to PacificHealth Laboratories, Inc.’s Current Report on Form 8-K filed on August 30, 2005)
     
4.6.2
  
Amended and Restated Investors’ Rights Agreement dated August 24, 2005 between PacificHealth Laboratories, Inc. and Hormel HealthLabs, LLC and any additional investor that becomes a party thereto (incorporated by reference to Exhibit 4.1 to PacificHealth Laboratories, Inc.’s Current Report on Form 8-K filed on August 30, 2005)
     
4.6.3
  
Form of Secured Convertible Promissory Note issued in connection with Exhibit 4.6.1 (incorporated by reference to Exhibit 10.2 to PacificHealth Laboratories, Inc.’s Current Report on Form 8-K filed on August 30, 2005)
     
4.6.4
  
Security Agreement dated August 24, 2005 by and between PacificHealth Laboratories, Inc. and Hormel HealthLabs, LLC (incorporated by reference to Exhibit 10.3 to PacificHealth Laboratories, Inc.’s Current Report on Form 8-K filed on August 30, 2005)
     
10.1
  
Employment Extension Agreement between PacificHealth Laboratories, Inc. and Robert Portman effective January 1, 2004, executed February 28, 2006 (incorporated by reference to Exhibit 10.6 to PacificHealth Laboratories, Inc.’s Post-Effective Amendment to Registration Statement on Form SB-2/A (File No. 333-109197) filed on May 2, 2006)
     
10.2.1
  
Asset Purchase Agreement dated February 22, 2006, by and between PacificHealth Laboratories, Inc. and Mott’s LLP (redacted, subject to request for confidential treatment) (incorporated by reference to Exhibit 10.8 to PacificHealth Laboratories, Inc.’s Annual report on Form 10-KSB filed on March 31, 2006)
     
10.2.2
  
License Agreement dated February 22, 2006, by and between PacificHealth Laboratories, Inc. and Mott’s LLP (redacted, subject to request for confidential treatment) (incorporated by reference to Exhibit 10.9 to PacificHealth Laboratories, Inc.’s Annual report on Form 10-KSB filed on March 31, 2006)
     
10.2.3
  
Consulting, License and Noncompetition Agreement dated February 22, 2006, by and between PacificHealth Laboratories, Inc., Mott’s LLP and Robert Portman (redacted, subject to request for confidential treatment) (incorporated by reference to Exhibit 10.10 to PacificHealth Laboratories, Inc.’s Annual report on Form 10-KSB filed on March 31, 2006)
     
31.1
  
Rule 13a-14(a) Certification of Chief Executive Officer (filed herewith)
     
31.2
  
Rule 13a-14(a) Certification of Chief Financial Officer (filed herewith)
     
32
  
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
 
(1)
In the case of incorporation by reference to documents filed by the Registrant under the Exchange Act, the Registrant’s file number under the Exchange Act is 000-23495.
 
 
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SIGNATURES

In accordance with the requirements of the Exchange Act, 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
  Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
   
  Date: August 8, 2007
 
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 EXHIBIT INDEX

Exhibit
Number
  
Description of Exhibit(1)
     
3(i)(a)
  
Certificate of Incorporation of PacificHealth Laboratories, Inc. and all amendments thereto (incorporated by reference to Exhibit 3.1 to PacificHealth Laboratories, Inc.’s Registration Statement on Form SB-2 (Registration No. 333-36379) filed on September 25, 1997)
     
3(i)(b)
  
Certificate of Amendment of Certificate of Incorporation of PacificHealth Laboratories, Inc. (incorporated by reference to Exhibit 3.3 to PacificHealth Laboratories, Inc.’s Annual Report on Form 10-KSB filed on March 31, 2003)
     
3(i)(c)
  
Certificate of Designations for Series A Preferred Stock (incorporated by reference to Exhibit 3.1 to PacificHealth Laboratories, Inc.’s Current Report on Form 8-K filed on January 28, 2005)
     
3(i)(d)
  
Certificate of Designations for Series B Preferred Stock, filed with the Secretary of State of the State of Delaware on April 28, 2005 (incorporated by reference to Exhibit 3(i) to PacificHealth Laboratories, Inc.’s Current Report on Form 8-K filed May 4, 2005)
     
3(ii)
  
Amended and Restated Bylaws of PacificHealth Laboratories, Inc. (incorporated by reference to Exhibit 3.2.1 to PacificHealth Laboratories, Inc.’s Amendment No. 3 to Registration Statement on Form SB-2/A filed on December 17, 1997)
     
4.1
  
Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to PacificHealth Laboratories, Inc.’s Amendment No. 3 to Registration Statement on Form SB-2/A filed on December 17, 1997)
     
4.2.1
  
Form of Securities Purchase Agreement entered into among PacificHealth Laboratories, Inc. and Certain of the Selling Stockholders dated August 26, 2003 (incorporated by reference to Exhibit 4.4 to PacificHealth Laboratories, Inc.’s Registration Statement on Form SB-2 filed on September 29, 2003)
     
4.2.2
  
Form of Registration Rights Agreement entered into among PacificHealth Laboratories, Inc. and Certain of the Selling Stockholders dated August 26, 2003 (incorporated by reference to Exhibit 4.5 to PacificHealth Laboratories, Inc.’s Registration Statement on Form SB-2 filed on September 29, 2003)
     
4.2.3
  
Form of Warrant issued to Certain of the Selling Stockholders in connection with Exhibit 4.2.1 on August 26, 2003 (incorporated by reference to Exhibit 4.6 to PacificHealth Laboratories, Inc.’s Registration Statement on Form SB-2 filed on September 29, 2003)
     
4.3
  
Stock Purchase Agreement dated June 1, 2001, by and between PacificHealth Laboratories, Inc. and Glaxo Wellcome International B.V. (incorporated by reference to Exhibit 4.1 to PacificHealth Laboratories, Inc.’s Current Report on Form 8-K filed on June 14, 2001)
     
4.4.1
  
Series A Preferred Stock Purchase Agreement dated January 28, 2005, by and between PacificHealth Laboratories, Inc. and Hormel HealthLabs, LLC (incorporated by reference to Exhibit 4.3 to PacificHealth Laboratories, Inc.’s Annual Report on Form 10-KSB filed on April 15, 2005)
     
4.4.2
  
Investors’ Rights Agreement dated January 28, 2005, by and between PacificHealth Laboratories, Inc. and Hormel HealthLabs, LLC (incorporated by reference to Exhibit 4.4 to PacificHealth Laboratories, Inc.’s Annual Report on Form 10-KSB filed on April 15, 2005)
 
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Exhibit
Number
  
Description of Exhibit(1)
     
4.4.3
  
Right of First Refusal and Co-Sale Agreement dated January 28, 2005, by and between PacificHealth Laboratories, Inc., Robert Portman and Hormel HealthLabs, LLC (incorporated by reference to Exhibit 4.5 to PacificHealth Laboratories, Inc.’s Annual Report on Form 10-KSB filed on April 15, 2005)
     
4.4.4
  
Certificate of Designations for Series A Preferred Stock (incorporated by reference to Exhibit 3.1 to PacificHealth Laboratories, Inc.’s Current Report on Form 8-K filed on January 28, 2005)
     
4.5
  
Certificate of Designations for Series B Preferred Stock, filed with the Secretary of State of the State of Delaware on April 28, 2005 (incorporated by reference to Exhibit 3(i) to PacificHealth Laboratories, Inc.’s Current Report on Form 8-K filed on May 4, 2005)
     
4.6.1
  
Securities Purchase Agreement, dated August 24, 2005 by and between PacificHealth Laboratories, Inc. and Hormel HealthLabs, LLC (incorporated by reference to Exhibit 10.1 to PacificHealth Laboratories, Inc.’s Current Report on Form 8-K filed on August 30, 2005)
     
4.6.2
  
Amended and Restated Investors’ Rights Agreement dated August 24, 2005 between PacificHealth Laboratories, Inc. and Hormel HealthLabs, LLC and any additional investor that becomes a party thereto (incorporated by reference to Exhibit 4.1 to PacificHealth Laboratories, Inc.’s Current Report on Form 8-K filed on August 30, 2005)
     
4.6.3
  
Form of Secured Convertible Promissory Note issued in connection with Exhibit 4.6.1 (incorporated by reference to Exhibit 10.2 to PacificHealth Laboratories, Inc.’s Current Report on Form 8-K filed on August 30, 2005)
     
4.6.4
  
Security Agreement dated August 24, 2005 by and between PacificHealth Laboratories, Inc. and Hormel HealthLabs, LLC (incorporated by reference to Exhibit 10.3 to PacificHealth Laboratories, Inc.’s Current Report on Form 8-K filed on August 30, 2005)
     
10.1
  
Employment Extension Agreement between PacificHealth Laboratories, Inc. and Robert Portman effective January 1, 2004, executed February 28, 2006 (incorporated by reference to Exhibit 10.6 to PacificHealth Laboratories, Inc.’s Post-Effective Amendment to Registration Statement on Form SB-2 (File No. 333-109197) filed on May 2, 2006)
     
10.2.1
  
Asset Purchase Agreement dated February 22, 2006, by and between PacificHealth Laboratories, Inc. and Mott’s LLP (redacted, subject to request for confidential treatment) (incorporated by reference to Exhibit 10.8 to PacificHealth Laboratories, Inc.’s Annual report on Form 10-KSB filed on March 31, 2006)
     
10.2.2
  
License Agreement dated February 22, 2006, by and between PacificHealth Laboratories, Inc. and Mott’s LLP (redacted, subject to request for confidential treatment) (incorporated by reference to Exhibit 10.9 to PacificHealth Laboratories, Inc.’s Annual report on Form 10-KSB filed on March 31, 2006)
     
10.2.3
  
Consulting, License and Noncompetition Agreement dated February 22, 2006, by and between PacificHealth Laboratories, Inc., Mott’s LLP and Robert Portman (redacted, subject to request for confidential treatment) (incorporated by reference to Exhibit 10.10 to PacificHealth Laboratories, Inc.’s Annual report on Form 10-KSB filed on March 31, 2006)
     
31.1
  
Rule 13a-14(a) Certification of Chief Executive Officer (filed herewith)
     
31.2
  
Rule 13a-14(a) Certification of Chief Financial Officer (filed herewith)
 
20
 
Exhibit
Number
  
Description of Exhibit(1)
     
32
  
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
    
(1)
In the case of incorporation by reference to documents filed by the Registrant under the Exchange Act, the Registrant’s file number under the Exchange Act is 000-23495.

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