Q2 2009 Earning Report of Geo Pharma, Inc.

GEOPHARMA, INC.

FORMReport)
10-K
(Annual

Filed 06/30/09 for the Period Ending 03/31/09

Address 6950 BRYAN DAIRY RD
LARGO, FL 33777
Telephone 7275448866
CIK 0001098315
Symbol GORX
SIC Code 2834 - Pharmaceutical Preparations
Industry Biotechnology & Drugs
Sector Healthcare
Fiscal Year 03/31

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

FORM 10-K

 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
ACT OF 1934
For the fiscal year ended March 31, 2009

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number 001-16185

GEOPHARMA, INC.
(Exact name of registrant as specified in its charter)

State of Florida 59-2600232
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

6950 Bryan Dairy Road, Largo, Florida 33777
(Address of principal executive officers) (Zip Code)

Registrant’s telephone number, including area code (727) 544-8866

Securities registered pursuant to Section 12(b) of the Act:

None.

Securities registered pursuant to Section 12(g) of the Act:

Common Capital Stock
(Title of Class)

Indicate by check mark if the registrant is a well known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes 
No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
 No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.

Large accelerated filer Accelerated filer
Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes 
No

The aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 19, 2009 was $8,585,420.

The number of shares outstanding of the registrant’s common stock at $.01 par value as of June 19, 2009 was 19,467,723.

Documents Incorporated by Reference: None

ITEM 1. BUSINESS.
Caution Regarding Forward-Looking Statements
Certain oral statements made by management from time to time and certain statements contained in press releases and periodic reports
issued by GeoPharma, Inc. (the “Company”), as well as those contained herein, that are not historical facts are “forward-looking statements”
within the meaning of Section 21E of the Securities and Exchange Act of 1934 and, because such statements involve risks and uncertainties,
actual results may differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements,
including those in Management’s Discussion and Analysis of Financial Condition and Results of Operations, are statements regarding the
intent, belief or current expectations, estimates or projections of the Company, its Directors or its Officers about the Company and the industry
in which it operates, and are based on assumptions made by management. Forward-looking statements include without limitation statements
regarding: (a) the Company’s growth and business expansion, including future acquisitions; (b) the Company’s financing plans; (c) trends
affecting the Company’s financial condition or results of operations; (d) the Company’s ability to continue to control costs and to meet its
liquidity and other financing needs; (e) the declaration and payment of dividends; (f) the Company’s use of proceeds from their private
placements, and (g) the Company’s ability to respond to changes in customer demand and regulations. Although the Company believes that its
expectations are based on reasonable assumptions, it can give no assurance that the anticipated results will occur. When issued in this report,
the words “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and similar expressions are generally intended to
identify forward-looking statements.

Important factors that could cause the actual results to differ materially from those in the forward-looking statements include, among
other items, (i) changes in the regulatory and general economic environment related to the health care, generic drug, nutraceutical, sports
nutrition product and performance drink industries; (ii) conditions in the capital markets, including the interest rate environment and the
availability of capital; (iii) changes in the competitive marketplace that could affect the Company’s revenue and/or cost and expenses, such as
increased competition, lack of qualified marketing, management or other personnel, and increased labor and inventory costs; (iv) changes in
technology or customer requirements, which could render the Company’s technologies noncompetitive or obsolete; (v) new product
introductions, product sales mix and the geographic mix of sales and (vi) its customers’ willingness to continue to accept its Internet platform.
Further information relating to factors that could cause actual results to differ from those anticipated is included but not limited to information
under the headings “Business,” and “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in this Form
10-K as of and for the year ended March 31, 2009. The Company disclaims any intention or obligation to update or revise forward-looking
statements, whether as a result of new information, future events or otherwise.

History
We were incorporated as Energy Factors, Inc., a Florida corporation, in 1985. In August 1998 we changed our name to Innovative Health
Products, Inc., in February 2000 we changed our name to Go2Pharmacy.com, Inc., and in September 2000 we changed our name to
Go2Pharmacy, Inc., in anticipation of our merger with the Delaware corporation Go2Pharmacy.com, Inc. Our merger with Go2Pharmacy.com,
Inc. was effected simultaneously with the successful completion of our initial public offering during November 2000. Effective September 6,
2002, we changed our name to Innovative Companies, Inc. and effective May 18, 2004 we changed our name to GeoPharma, Inc. We continue
to conduct contract nutritional and herbal supplement product line manufacturing business under the name Innovative Health Products, Inc.

In April 2000, we formed a wholly-owned distribution subsidiary named Breakthrough Engineered Nutrition, Inc., a Florida corporation,
for the purpose of marketing and distributing our own branded product lines. Breakthrough Engineered Nutrition also conducts distribution
business as DelMar Labs. Effective March 31, 2009, the Company is discontinuing its Distribution segment which includes Breakthrough
Engineered Nutrition.

In September 2000, we formed a wholly-owned manufacturing subsidiary named Belcher Pharmaceuticals, Inc., a Florida corporation, for
the purpose of conducting over-the counter, and now pharmaceutical, generic drug and Cephalosporin antibiotic product line manufacturing
and distribution for ourselves and others.

In March 2001, we incorporated our pharmacy benefit management company, Go2PBM Services, Inc. Go2PBM Services was created to
administer drug benefits for health maintenance organizations, insurance company plans, preferred provider organizations, self-insured
corporate health plans and Taft-Hartley self-insured labor unions. A pharmacy benefit manager was designed to oversee all member benefits in
low risk plans, while taking an exclusively administrative role in higher risk plans. Our administrative services included claim processing,
network management and customer service. Effective May 15, 2007, we discontinued our pharmacy benefit management operations.

In September 2002, we incorporated two wholly-owned Florida corporation distribution companies, IHP Marketing, Inc. and
Breakthrough Marketing, Inc., for the purpose of marketing and distributing additional branded product lines to the public in the future. IHP
Marketing also conducts distribution business as Archer Stevens Pharmaceuticals and Breakthrough Marketing conducts distribution business
as Bentley Labs.

In February 2004, we incorporated Belcher Capital Corporation, a Delaware corporation, for the purpose of issuing the shares of
preferred stock as a part of our $10 million private placement.

In August 2005, we formed American Antibiotics, LLC, a Florida limited liability corporation that will manufacture and distribute Beta-
Lactam antibiotic pharmaceutical products. GeoPharma owns 51% of American Antibiotics, LLC.

In June 2006, we formed a wholly-owned manufacturing subsidiary named Libi Labs, Inc., a Florida corporation, for the purpose of
conducting nutraceutical and cosmeceutical liquid, gel and cream manufacturing for ourselves and others.

Effective June 14, 2007, we acquired 100% of the common stock of EZ-Med Company (“EZ-Med”), a Florida corporation. EZ-Med is a

manufacturer of a patented soft-textured chew technology. EZ-Med was founded in 1997 by Edwin Christensen, the original patent
holder of Kibbles & Bits ® dog food. EZ-Med develops, manufactures and markets a full line of companion animal nutrition supplements.

Effective October 16, 2007, we acquired 100% of the common stock of Dynamic Health Products, Inc. (“BOSS”), a Florida corporation.
BOSS develops, markets and distributes a wide variety of sports nutrition products, performance drinks, non-prescription dietary supplements,
health and beauty care products, health food and nutritional products, soft goods and other related products. Effective March 31, 2009, the
Company is discontinuing its Distribution segment which includes BOSS.

Business Overview
At GeoPharma, Inc. we manufacture, package and distribute private label dietary supplements, generic drugs and health and beauty
products for companies worldwide under our Florida-incorporated companies, Innovative Health Products, Inc., Libi Labs, Belcher
Pharmaceuticals, Inc., American Antibiotics, LLC and EZ-Med. Innovative Health Products and Libi Labs specialize in the development and
manufacture of a broad range of nutritional supplements and cosmeceuticals. As a private-label contract manufacturer, we develop and
manufacture for ourselves, and our customers, dietary supplements and health and beauty care products for distribution through various outlets.
Belcher Pharmaceuticals, Inc is a state-of-the-art FDA-registered, drug development and manufacturing facility for generic and Cephlasporin
antibiotic drugs. Our fourth 51%-owned, Florida corporation, American Antibiotics, LLC will manufacture and distribute Beta-Lactum
antibiotics.

Through EZ-Med Company, we are a developer and private-label contract manufacturer of companion animal nutritional supplements, that are
marketed worldwide.

Overall Business Strategy
We are continuing to build a multi-faceted company able to maximize our efficiencies and capitalize on our synergies through vertical
operations. The generic drug segment was started during the fiscal year ended March 31, 2003. While we are currently working on several
Abbreviated New Drug Applications (“ANDAs”), we have procured three ANDAs from established drug development companies abroad and
seven ANDAs resulting from our 2005 investment in American Antibiotics. We have filed the ANDA transfer paperwork with the FDA for the
three purchased ANDAs. Completion of this transfer process will enable us to start manufacturing and selling these three drugs contingent only
on the FDA’s approval. The seven ANDAs centering on Beta-Lactum antibiotics await FDA facility approval from the FDA. The Company
may from time to time enter into agreements with third parties with respect to the development of new products or the purchase of new
products and their related technologies. We are also working on certain drug products that may lead us to file value-added drug filings like a
505(b)2. We have in-licensed a novel peptide drug and have filed a worldwide patent on this peptide; this may lead to the potential
development of a new drug thus allowing us to file a New Drug Application (“NDA”).

To manage our operations, we have assembled and maintained a management team with experience in manufacturing, marketing, sales,
distribution, and technology to assist in leading us to our sales, profit and overall business goals. Our regulatory and analytical departments
have been strengthened. Our Regulatory Affairs’ department has the ability to prepare all the necessary documentation required by the FDA
and any other regulatory agency. In reference to the manufacture and the distribution of generic drugs, numerous licensures have been applied
for and obtained, which include a drug enforcement agency (“DEA”) license, a State of Florida prescription drug manufacturing permit, State
of Florida and other specific states’ wholesale distribution licenses.

We have upgraded the analytical laboratory to support all of our development work. Additional analytical and other lab equipment have
been added to conduct the required analysis of an active pharmaceutical ingredient (“API”) in addition to generating data for the ANDA work.
The research, development, stability testing, clinical testing and FDA review process leading up to an approval takes approximately 12 – 36
months depending on the nature of the drug. Some of the products require little review or very little laboratory testing and hence may take only
one year. In an attempt to further differentiate ourselves from other generic drug development companies, our focus remains on projects that we
were able to eliminate the high barriers to entry based on our strategic alliances and other formed relationships that provide for an API source
that would otherwise normally be difficult to source. Our current strategy is to continue to work on drug products that can be brought to market
at an even pace, as we believe this approach allows for immediate revenue generation and provides for a possible future, continuous revenue
generation stream. Our vertical operations consist of manufacturing and distribution, sales and marketing, in-house formulation laboratory and
other chemical analysis services, customer service and public relations. We will be able to support our own needs as well as those of our
customers, from order processing, manufacturing through end-user distribution. We have streamlined all of our manufacturing facilities in
order to continue growing both our generic drug and nutraceutical manufacturing segments.

We are continuing to develop our sales and marketing strategies to build our recognition among national grocery, mass retail, major
pharmaceutical drug distributors and national drug chains, long-term care facilities and other health product consumer organizations, while
building brand awareness of our branded and other proprietary products as well as our private label capabilities.

Through the development of our generic drug and private label manufacturing, we intend to provide wholesale, retail, and institutional
customers with an efficient source for their generic drug products, nutritional and functional convenience foods and other pharmacy-related
product needs. By vertically integrating our core business operations, we believe we have, and will continue, to achieve increased brand
recognition and exposure, ancillary product and service revenues, and will be able to provide competitively priced products, quick turn around
and overall superior customer service.

EZ-Med Company (“EZ-Med”) is a manufacturer of a patented soft-textured chew technology. EZ-Med’s soft chew technology is well
suited for senior citizens and children’s applications in pharmaceutical and over-the-counter drugs, as well as many applications in the animal
health industry. The patented technology allows for easy compliance and masking of bitter tasting, as well as difficult to swallow drugs usually
indicative of typical oral dosage delivery systems.

Using its own patented soft-chew technology, EZ-Med develops, manufactures and currently sells a full line of companion animal
nutritional supplements sold worldwide under a variety of private labels of many of the world’s leading animal health companies. One of the
major causes of product failure in veterinary medicine is improper dosing and lack of client/patient compliance with recommended dosage
regimens. EZ-Med has developed products based on the most current scientific knowledge, coupled with their patented delivery system that
makes therapy convenient for the owner and pet.

Research and Development
Product development remains the core element of our historical as well as current and future growth strategy spanning across all of our
existing business segments. Our research and development activities consist principally of:
• the potential for enhancing existing products or formulas,
• researching and developing new product formulations and
• introducing technology to improve production efficiency and enhance product quality.

The scientific process of developing new products and obtaining FDA approval is complex, costly and time-consuming; there can be no
assurance that any saleable products will be developed despite the amount of time and money spent on research and development. The
development of products may be curtailed at any stage of development due to the introduction of competing generic products or for other
reasons including changes in laws or regulations or for any other reason deemed necessary by management. Our generic drug and nutraceutical
research and development departments develop new concepts and formulations for our generic drugs, our branded distribution product lines
and our customers’ nutraceutical private label products. We carefully select our products we target, keeping in view our competitive advantage,
particularly as related to the source of a raw material or API, the total market size and what portion of the market is potentially available to our
Company. Dr. Sekharam, our President, provides guidance and direction for both our generic drug and nutraceutical research and development
teams and analytical laboratory personnel as related to product development and product manufacture. Our lab chemists perform product
development, product and process improvements. Our technical staff prepares cost estimates and samples based on those resulting
formulations. Prior to the final manufacture of any of our products, the team prepares documentation of the necessary custom and other
operational procedures to be performed. Our chemists and our research and development regulatory staff personnel prepare all the necessary
product information for label requirements.

During the fiscal years ended March 31, 2006-2009, Belcher Pharmaceuticals has made substantial progress in the animal and human
ANDA areas and has strengthened laboratory staff, adding more analytical equipment and manufacturing machinery. The blending, tableting
and liquid manufacturing areas have been expanded in line with our generic drug strategic plans. Belcher has filed a patent on a novel method
to stabilize the drug Levothyroxine. Levothyroxine, sold under the brand names, Abbott’s Synthroid ® and King Pharmaceutical’s Soloxine
® /Levoxyl ® , is used for humans as well as pets to treat thyroid-related conditions. Levothyroxine is the second most prescribed drug in the

United States with over 13 million patients and according to NDC Health 2002, the combined retail sales for all Levothyroxine sodium tablet
products was approximately $ 1.1 billion (2002). Due to unique stability problems associated with this drug, millions of tablets have been
recalled per data received from the FDA. We have solved this problem by using a unique stabilizing method. Using this novel method, the
stability of the drug is substantially improved. Different formulations–variations have been developed for human and veterinary applications.

Belcher received FDA approval on November 7, 2007 for an animal ANDA on Carprofen, a non-steroidal anti-inflammatory drug
(NSAID) that is used by veterinarians for the relief of pain and inflammation associated with osteoarthritis and post operative pain management
in canines, and is a generic version for Pfizer’s Rimadyl, an arthritis and joint-ailment product for pets as Pfizer’s patent expired in 2004. We
have an exclusive arrangement with a pet drug distributor that markets this drug.

On November 24, 2004 the FDA provided 510(K) approval, called a PMA approval to market Mucotrol, a concentrated oral gel wafer
indicated for the management and relief of pain associated with oral lesions of various etiologies, including oral mucositis/stomatitis resulting
from chemotherapy or radiotherapy; irritation due to oral surgery; traumatic ulcers caused by braces, ill-fitting dentures, or disease; and diffuse
apthous ulcers. The 2.2 gram wafer contains compressed powder and slowly dissolves in the mouth to form a soothing and protective layer
over mucosal lesions. PMA approval is based on a determination by FDA that the PMA contains sufficient valid scientific evidence to assure
that the device is safe and effective for its intended use(s). An approved PMA is, in effect, a private license granting permission to market the
device. Mucositis is a painful inflammation of the mucosa of the mouth that may occur due to radiation or chemotherapy. Mucositis afflicts
approximately 40% of patients receiving cancer chemotherapy and 75% percent of bone marrow transplant recipients as well as 100% of
patients receiving radiotherapy for cancer of the head and neck. It is estimated that approximately 300,000 cancer patients in the U.S. suffer
from mucositis associated with cancer treatments. Earlier, we submitted double blind placebo controlled studies on Mucotrol to the FDA for
510(K) approval. We have a marketing agreement with Cura Pharmaceuticals to promote and distribute Mucotrol in the United States and are
negotiating with marketing companies abroad to take Mucotrol to markets outside the United States.

Our new Cephalasporin manufacturing facility is operational at this time. Test batches of Cephalexin have been completed and necessary
documentation has been submitted to the FDA. We are awaiting an approval from the FDA.

We contract with outside laboratories to conduct bioequivalency studies. Bioequivalency studies must be conducted and documented in
conformity with FDA standards (see “Government Regulation”) and are used to demonstrate that the rate and extent of absorption of a generic
drug is not different from the corresponding brand name drug. Research and development expenses for the fiscal years ended March 31, 2009
and 2008, totalled approximately $1,800,000 and $1,600,000, respectively, and consisted primarily of salaries, bioequivalency studies and
laboratory supplies. Research and development costs are expensed as incurred.

Our research and development laboratory is equipped with modern laboratory test equipment, including high pressure liquid
chromatography, atomic absorption spectroscopy, gas liquid chromatography, as well as instruments to test different parameters like pH,
viscosity, moisture, gradient sizing, ash, melting point, refractive index, tablet hardness, dissolution and disintegration. We also have a micro
lab to test samples for microbiological loads including yeast, bacteria and fungi. The laboratory has stability chambers to test both the long-
term and the accelerated shelf life of products. Our laboratory is well equipped to handle all aspects of generic drug development. We believe
that our laboratory facilities are in compliance with all applicable environmental regulations.

Our product development team works closely with the Company’s executive management as well as our customers. Working closely with

management allows management to monitor adherence to our short-term, mid-term and long-range business plans; working closely with
our customers assists in assuring that we provide value-added features in the final product that satisfies their ultimate needs. As our
development response time is critical to capitalizing on consumer trends and preferences, we focus on meeting end-user needs as quickly as
possible. We believe that this type of flexibility and attention to customer needs, while still keeping the overall strategic goals of the Company,
results in more valuable and marketable products.

While we are working on these ANDA projects, we are also working simultaneously on a few long-term projects. These projects may
take considerable time and effort and their commercial benefits depend on several factors on which we may not have full control. Some of
these type of research outcomes may help improve existing products. If the outcome of certain projects is not within the scope of our area of
expertise, our proprietary technology developed or discovered may be licensed to other companies for a fee on a sales per unit or percentage of
sales royalty basis.

We also possess proprietary and patented technology to manufacture soft chew products for human and veterinary applications. Due to
this process, the ingredients are not exposed to heat and thus the potency is preserved. This technology is being applied for the development of
several products containing active or critical ingredients.

Marketing and Sales
Our marketing and promotion strategy is targeted toward stimulating demand for our products and service capabilities and by increasing
our brand awareness. We currently employ a traditional in-house sales force that markets our branded and private label products directly to
wholesale, retail and institutional customers as well our distribution and broker network. We also utilize product promotions and print media to
reach new customers in targeted markets. We intend to increase these efforts significantly in the areas of direct sales, telesales, and traditional
and online advertising.

We plan to hire additional marketing representatives to contact prospective customers including self-insured employers, health
maintenance organizations, and other health benefit provider associations to market our generic drug and nutraceutical manufacturing
capabilities in addition to pursuing contractual arrangements with pharmacies related to our future generic drug manufacturing and distribution.
As a manufacturer, we have the facilities, equipment, manufacturing capacity, skilled work force and industry experience to control product
processing and minimize product cost from order inception to distribution of finished products to our customers. By utilizing our
manufacturing capabilities, we intend to build institutional relationships through high quality and low cost custom product lines. We are
continuously seeking ways to expand our manufacturing customer base. We intend to increase our market penetration of private label
manufacturing customers by increasing our outside sales and telephone sales efforts, by reducing manufacturing time with additional fully-
automated high-speed manufacturing equipment, by delivering high quality products and by providing research and development support to
improve our customers’ product offerings. We will also continue to develop strategic alliances with new manufacturing customers. We intend
to increase our ongoing development and marketing of new products in order to capitalize on and create market opportunities in new market
segments. We feel that we can differentiate ourselves from our competitors by providing customers with more value-added products.
Consequently, we intend to produce and market additional, as well as enhance currently existing products and dietary supplements that
integrate a variety of compounds to achieve greater bio-availability, effectiveness and product convenience. We differentiate ourselves from
other dietary supplement manufacturers by providing faster and more appropriate responses to our customers. Our development response time
for proprietary and private label products is critical to capitalize on consumer trends and preferences. We intend to utilize these trends and
preferences to expand our customer base and provide consumers with the most timely and well adapted products for their needs.

We intend to increase telephone sales by hiring an in-house telesales group to prospect for customers for our private label manufacturing
services and for our branded products that we distribute. We have increased our advertising efforts by investing in additional print ads for our
branded products by implementing online sales and marketing techniques to increase brand awareness and direct traffic to our web sites,
www.geopharmainc.com and onlineihp.com and by other promotional efforts. This includes purchasing banner advertising on search engine
web sites and Internet directories, as well as direct links from health-related web sites. We feel that these efforts are and will continue to
compliment our existing and future strategic agreements and traditional advertising efforts. Some of the sales personnel we expect to hire will
devote a substantial portion of their time enhancing relationships with our customers’ key personnel, informing them of new product
developments and industry trends, and aiding them in designing store displays and merchandising programs for our branded products.

We also increase the flexibility of our product offerings by extending various credit terms to our customers, subject to our credit approval
process. In most cases, where credit terms are granted, we require a prepayment of 50% of the amount of the sales order, with the balance due
within 30 days of shipment.

We believe that the health care, pharmaceutical and dietary supplement industries are fragmented and currently offer attractive
acquisition opportunities. We intend to pursue acquisition opportunities that will broaden our product lines, provide efficiencies in
manufacturing through economies of scale, broaden our customer base, complement our existing businesses and further our overall strategic
business goals.

Principal Suppliers – Nutraceutical and Herbal Supplements
We obtain all of the raw materials for the manufacture of our products from third party suppliers primarily located within the United
States. We do not have purchase contracts with any of our suppliers to provide materials required for our nutraceutical product manufacturing.

Principal Suppliers – Generic Drug Pharmaceuticals
Since the federal drug application process requires specification of raw material suppliers, if raw materials from a specified supplier were
to become unavailable, FDA approval of a new supplier would be required. A delay of six months or more in the manufacture and marketing of
the drug involved while a new supplier becomes qualified by the FDA and its manufacturing process is found to meet FDA standards could,
depending on the particular product, have a material adverse effect on our results of operations and financial condition. Generally we attempt to
minimize the effects of any such situation by providing for, where economically and otherwise feasible, two or more suppliers of raw materials
for the drugs we intend to manufacture. In addition, we may attempt to enter into a contract with a raw material supplier in an effort to ensure
adequate supply for our products.

Competition
The principal competitive factor in the generic pharmaceutical market is the ability to be the first company, or among the first companies,
to introduce a generic product after the related branded patent expires. Additional competitive factors in the generic drug pharmaceutical
market include:
• introduction of other generic drug manufacturers’ products in direct competition with the Company’s products,
• consolidation among distribution outlets through mergers and acquisitions and the formation of buying groups,
• ability of generic competitors to quickly enter the market after patent expiration or exclusivity periods, diminishing the amount and
duration of significant profits,
• the willingness of generic drug customers, including wholesale and retail customers, to switch among pharmaceutical
manufacturers,
• pricing pressure and product deletions by competitors,
• a company’s reputation as a manufacturer of quality products,
• a company’s level of service (including maintaining sufficient inventory levels for timely deliveries),

• product appearance and
• a company’s breadth of product line.

Approvals for new products may have a synergistic effect on a company’s entire product line since orders for new products are frequently
accompanied by, or bring about, orders for other products available from the same source. We believe that price is a significant competitive
factor, particularly as the number of generic entrants with respect to a particular product increases. As competition from other manufacturers
intensify, selling prices typically decline. We hope to compete by selecting appropriate products, based on therapeutic segment market sizes
and number of competitors manufacturing the products, and by keeping our prices competitive and by providing reliability in the timely
delivery, and in the quality, of our products. Many different manufacturers can sell the same generic drug and hence there will be intense
pressure on the pricing. According to the Generic Pharmaceutical Industry Association, generics typically enter the market 30% below the
brand price and decline to 60 or 70% of the brand price after two years. There is intense competition in the generic drug industry in the United
States, which is eroding price and profit margins. We compete with numerous pharmaceutical manufacturers, including both generic and brand-
name manufacturers, many of which have been in business for a longer period of time than us, have a greater number of products in the market
and have considerably greater financial, technical, research, manufacturing, marketing and other resources.

We compete on the basis of product quality, cost and customer service. Our branded products’ success depends primarily on our
increasing brand recognition across multiple distribution channels, our ability to quickly develop, advertise, market and promote new and
existing products with high quality and value, and our efficient distribution of these products. Our competitors include chain drug stores, such
as CVS and Walgreen’s; warehouse clubs, such as BJ’s and Costco; mail order pharmacies; major department stores, such as Macy’s and
Nordstrom; and health, beauty salons, spas and Internet portals with shopping services, such as Yahoo!, Google, and America Online.

Many of these competitors currently offer online ordering of their products. In addition, many of these online and traditional competitors
have longer operating histories, greater brand recognition, and substantially greater economic, marketing and other resources than we do. These
resources may provide some of these competitors with greater opportunities to form joint ventures and favorable vendor agreements as this
market develops. In addition, traditional pharmacies can provide customers with the ability to see and feel products, and may be able to address
immediate customer product needs in ways that we cannot.

BOSS (Accounted for under the distribution segment discontinuing effective March 31, 2009)
BOSS – Marketing and Sales
Our products are marketed directly to our wholesale and retail customers through our in-house salespeople. We market and distribute a
wide variety of sports nutrition products, performance drinks, non-prescription dietary supplements, health and beauty care products, health
food and nutritional products, soft goods and other related products to gyms, health food stores, regional and national chain drugstores, internet
companies, mail order facilities, mass merchandisers, discounters, distributors and brokers. Our products are also marketed through catalog
sales and through our web site www.bossonline.net .

BOSS – Products
We market and distribute a wide variety of sports nutrition products, performance drinks, non-prescription dietary supplements, health
and beauty care products, health food and nutritional products, soft goods and other related products. We distribute approximately 2,500
individual inventory items purchased from over 100 suppliers.

BOSS – Product Development
Generally, the more novel and unique our products are, the greater the profit margins. Along with product development teams, we work
closely with our customers to understand their needs, their strengths and their objectives to be met, thus involving the team to create products
with more unique sales points. Our response time in developing our own proprietary products is critical and enables us to take advantage of
consumer trends and preferences.

BOSS – Principal Suppliers and Sources of Supply
We obtain all of our products from third party suppliers in ready-to-sell finished goods form. There can be no assurance that suppliers
will provide products needed by us in the quantities requested or at a price we are willing to pay. Because we do not control the actual
production of these products, as they are the branded products of our suppliers and not our branded products, they could be subject to delays
caused by interruption in production of materials based on conditions not within our control. Such conditions include job actions or strikes by
employees of suppliers, weather, crop conditions, transportation interruptions and natural disasters or other catastrophic events. Our inability to
obtain adequate supplies of products from our vendors at favorable prices, or at all, could have a material adverse effect on our business,
financial condition, results of operations and cash flows.

BOSS – Competition
The wholesale distribution industry in which we operate is highly competitive. Numerous companies, many of which have greater size
and greater financial, personnel, distribution and other resources than us, compete with us.

We face substantial competition from other regional and national distributors in the sports nutrition products, performance drinks, non-
prescription dietary supplements, health and beauty care products, health food and nutritional products, soft goods and other related products
industries, both domestic and abroad. Our branded products face substantial competition from broad line manufacturers, major private label
manufacturers and, more recently, large pharmaceutical companies and pharmacies, both domestic and abroad. Increased competition from
such companies could have a material adverse affect on the our business because such companies have greater financial and other resources
available to them and possess marketing and distribution capabilities far greater than ours.

We compete on the basis of competitive pricing, our ability to offer new products and customer service. Due to our larger purchasing
power, we are able to offer products at what we believe are more attractive prices to our customers. We work closely with contract
manufacturers to continue to develop future products and to expand our product line to satisfy the continuing changing needs of customers. We
have trained in-house customer service personnel available to address all of our customer’s needs. Our ability to compete favorably with our
competitors with respect to our branded products will depend primarily upon our development of brand recognition across multiple distribution
channels, our ability to quickly develop new products with market potential, to successfully advertise, market and promote our products, as
well as our product quality and the development of a strong and effective distribution network.

Trademarks and Intellectual Property
We utilize the federally registered trademarks VETPROFEN ™ , and 4-HOOF ™ . We also utilize the registered domain names
geopharmainc.com, onlineihp.com and bossonline.net. We believe that protecting our trademarks and registered domain names is crucial to our
business strategy of building strong brand name recognition and that such trademarks have significant value in the marketing of our products.

Our policy is to pursue registrations of all the trademarks associated with our key products. We rely on common law trademark rights to
protect our unregistered trademarks. Common law trademark rights generally are limited to the geographic area in which the trademark is
actually used, while a United States federal registration of a trademark enables the registrant to stop the unauthorized use of the trademark by
any third party anywhere in the United States. Furthermore, the protection available, if any, in foreign jurisdictions may not be as extensive as
the protection available to us in the United States.

We believe patent protection of our proprietary products is important to our brand business. Our success with our brand products will
depend, in part, on our ability to obtain, and successfully defend if challenged, patent or other proprietary protection for such products. We
currently have a number of U.S. and foreign patents issued or pending. However, the issuance of a patent is not conclusive as to its validity or
as to the enforceable scope of the claims of the patent. Accordingly, our patents may not prevent other companies from developing similar or
functionally equivalent products or from successfully challenging the validity of our patents. If our patent applications are not approved or,
even if approved, if such patents are circumvented or not upheld in a court of law, our ability to competitively market our patented products and
technologies may be significantly reduced. Also, such patents may or may not provide competitive advantages for their respective products or
they may be challenged or circumvented by competitors, in which case our ability to commercially market these products may be diminished.
From time to time, we may need to obtain licenses to patents and other proprietary rights held by third parties to develop, manufacture and
market our products. If we are unable to timely obtain these licenses on commercially reasonable terms, our ability to commercially market
such products may be inhibited or prevented.

We also rely on trade secrets and proprietary know-how that we seek to protect, in part, through confidentiality agreements with our
partners, customers, employees and consultants. It is possible that these agreements will be breached or will not be enforceable in every
instance, and that we will not have adequate remedies for any such breach. It is also possible that our trade secrets will otherwise become
known or independently developed by competitors.

We may find it necessary to initiate litigation to enforce our patent rights, to protect our trade secrets or know-how or to determine the
scope and validity of the proprietary rights of others. Litigation concerning patents, trademarks, copyrights and proprietary technologies can
often be protracted and expensive and, as with litigation generally, the outcome is inherently uncertain.

Pharmaceutical companies with brand products are increasingly suing companies that produce off-patent forms of their brand name
products for alleged patent infringement or other violations of intellectual property rights which may delay or prevent the entry of such a
generic product into the market. For instance, when we file an ANDA seeking approval of a generic equivalent to a brand drug, we may certify
under the Drug Price Competition and Patent Restoration Act of 1984 (the “Hatch-Waxman Act”) to the FDA that we do not intend to market
our generic drug until any patent listed by the FDA as covering the brand drug has expired, in which case, the ANDA will not be approved by
the FDA until no earlier than the expiration of such patent(s). On the other hand, we could certify that we believe the patent or patents listed as
covering the brand drug are invalid and/or will not be infringed by the manufacture, sale or use of our generic form of the brand drug. In that
case, we are required to notify the brand product holder or the patent holder that such patent is invalid or is not infringed. If the patent holder
sues us for patent infringement within 45 days from receipt of the notice, the FDA is then prevented from approving our ANDA for 30 months
after receipt of the notice unless the lawsuit is resolved in our favor in less time or a shorter period is deemed appropriate by a court. In
addition, increasingly aggressive tactics employed by brand companies to delay generic competition, including the use of Citizens Petitions and
seeking changes to U.S. Pharmacopeia, have increased the risks and uncertainties regarding the timing of approval of generic products.

Litigation alleging infringement of patents, copyrights or other intellectual property rights may be costly and time consuming. Although
we seek to ensure that we do not infringe upon the intellectual property rights of others, there can be no assurance that third parties will not
assert intellectual property infringement claims against us. Any infringement claims by third parties against us may have a materially adverse
affect on our business, financial condition, results of operations and cash flows.

Government Regulation
Generic drugs, dietary supplements and other health and beauty care products are subject to significant government regulation. These
products are regulated by the Food and Drug Administration (“FDA”), Federal Trade Commission (“FTC”), Consumer Product Safety
Commission, as well as other state and federal regulatory entities. While we use our best efforts to adhere to the regulatory and licensing
requirements, as well as any other requirements affecting our products, compliance with these often requires subjective legislative
interpretation. Consequently, we cannot assure that our compliance efforts will be deemed sufficient by regulatory agencies and commissions
enforcing these requirements. Violation of these regulations may result in civil and criminal penalties, which could materially and adversely
affect our operations. Recent events have suggested that the regulatory requirements governing our industry may expand in the near future.

A generic drug is identical, or bioequivalent, to a brand name drug in dosage form, safety, strength, route of administration, quality,
performance characteristics and intended use. Generic drugs can be manufactured after the expiration of patents or exclusivities associated with
the drug. Although generic drugs are chemically identical to their branded counterparts, they are typically sold at substantial discounts from
their branded equivalent’s price.

Brand name drugs, also called innovator drugs, generally are protected by one or more patents. When patents or other periods of
exclusivity expire, manufacturers can submit an ANDA for the approval of a human generic drug and ANDA for an animal drug. The animal
ANDA process does not require the drug sponsor to repeat costly animal and clinical research on ingredients or dosage forms already approved
for effectiveness and safety.

To gain FDA approval, a generic drug must (a) contain the same active ingredients as the innovator drug (inactive ingredients may vary)
(b) be identical in strength, dosage form, and route of administration (c) have the same use indications (d) be bioequivalent (e) meet the same
batch requirements for identity, strength, purity, and quality (f) be manufactured under the same strict standards of FDA’s good manufacturing
practice regulations required for innovator products.

There are generally two types of applications that would be used to obtain FDA approval for pharmaceutical products:

New Drug Application (“NDA”): Generally, the NDA procedure is required for drugs with active ingredients and/or with a dosage form,
dosage strength or delivery system of an active ingredient not previously approved by the FDA. We do not expect to submit an NDA in the
foreseeable future during the fiscal year ending March 31, 2010.

Abbreviated New Drug Application (“ANDA”): The Waxman-Hatch Act established a statutory procedure for submission of ANDAs to
the FDA covering generic equivalents of previously approved brand-name drugs. Under the ANDA procedure, an applicant is not required to
submit complete reports of preclinical and clinical studies of safety and efficacy, but instead is required to provide bioavailability data
illustrating that the generic drug formulation is bioequivalent to a previously approved drug. Bioavailability measures the rate and extent of
absorption of a drug’s active ingredient and its availability at the site of drug action, typically measured through blood levels. A generic drug is
bioequivalent to the previously approved drug if the rate and extent of absorption of the generic drug are not significantly different from that of
the previously approved brand-name drug.

The FDA may deny an ANDA if applicable regulatory criteria are not satisfied. The FDA may withdraw product approvals if compliance
with regulatory standards is not maintained or if new evidence demonstrating that the drug is unsafe or lacks efficacy for its intended uses
becomes known after the product reaches the market. The timing of final FDA approval of ANDA applications depends on a variety of factors,
including whether or not the maker of the applicable branded drug is entitled to the protection of one or more statutory exclusivity periods,
during which the FDA is prohibited from approving generic products. FDA approval is required before each dosage form of any new drug can
be marketed. Applications for FDA approval must contain information relating to bio-equivalency, product formulation, raw material suppliers,
stability, manufacturing processes, packaging, labeling and quality control. FDA procedures require full-scale manufacturing equipment to be
used to produce test batches for FDA approval. Validation of manufacturing processes by the FDA also is required before a company can

market new products. The FDA conducts pre-approval and post-approval reviews and plant inspections to enforce these rules.
Supplemental filings are required for approval to transfer products from one manufacturing site to another and may be under review for a year
or more. In addition, certain products may only be approved for transfer once new bioequivalency studies are conducted.

The FDA issued a final rule on June 18, 2003, which became effective on August 18, 2003, streamlining the generic drug approval
process by limiting a drug company to only one 30-month stay of a generic drug’s entry into the market for resolution of a patent challenge.
This will help maintain a balance between the innovator companies’ intellectual property rights and the desire to get generic drugs on the
market in a timely fashion. The rule clarifies the types of patents that innovators must submit for listing and prohibits the submission of patents
claiming packaging, intermediates or metabolite innovations. Patents claiming a different polymorphic form of the active ingredient described
in a NDA must be submitted if the NDA holder has test data demonstrating that the drug product containing the polymorph will perform in the
same way as the drug product described in the NDA. The final rule also clarifies the type of patent information required to be submitted and
revises the declaration that NDA applicants must provide regarding their patents to help ensure that NDA applicants submit only appropriate
patents.

The final rule is intended to make the patent submission and listing process more efficient, as well as enhance the ANDA and 505(b)(2)
application approval process. We believe the changes are designed to enable consumers to save billions of dollars each year by making it easier
for generic drug manufacturers to get safe and effective products on the market when the appropriate patent protection expires.

In addition to the federal government, various states have laws regulating the manufacture and distribution of pharmaceuticals, as well as
regulations dealing with doctors, pharmacies, hospitals and other drug prescribers, related to the substitution of generic drugs for brand name
drugs. The Company’s operations are also subject to regulation, licensing requirements and inspection by the states in which its operations are
located and/or it conducts business.

Certain activities of the Company may also be subject to FTC enforcement. The FTC enforces a variety of antitrust and consumer
protection laws designed to ensure that the nation’s markets function competitively, are vigorous, efficient and free of undue restrictions.

We are also governed by federal and state laws of general applicability, including laws regulating matters of environmental quality,
working conditions and equal employment opportunity.

The manufacture, packaging, labeling, advertising, promotion, distribution and sale of our dietary supplements manufactured is subject to
regulation by numerous governmental agencies, particularly the FDA, which regulates our products under the Federal Food, Drug and
Cosmetic Act, and the FTC, which regulates the advertising of our products under the Federal Trade Commission Act. Our products are also
subject to regulation by, among other regulatory agencies, the Consumer Product Safety Commission, the United States Department of
Agriculture, the United States Department of Environmental Regulation and the Occupational Safety and Health Administration. The
manufacture, labeling and advertising of our products is also regulated by the Occupational Safety and Health Administration through various
state and local agencies where our products are distributed.

Our manufacture of dietary supplements is subject to significant labeling regulation. Labeling claims are governed by the Food and Drug
Administration, the Federal Food, Drug and Cosmetic Act, and the recent Dietary Supplement Health and Education Act of 1994 (DSHEA).
Any manufacture of over-the-counter drugs must comply with all Food and Drug Administration guidelines and Food and Drug Administration
enforced Good Manufacturing Practices (GMP) regulations for those products as set forth in official monographs of the United States
Pharmacoepia and other applicable laws enforced by the Food and Drug Administration. These include manufacturing and product information,
such as claims in a product’s labeling, package inserts, and accompanying literature. The Dietary Supplement Health and Education Act of
1994 guidelines permit certain dietary supplement labeling claims without prior authorization by the Food and Drug Administration, provided
that the manufacturer has substantiation for the claims and complies with certain notification and disclaimer requirements. The legislation gives
dietary supplement manufacturers more freedom to market their products, while providing consumers adequate information for informed
decisions on the use of supplements.

Under the Dietary Supplement Health and Education Act of 1994 and previous food labeling laws, supplement manufacturers may use
three types of labeling claims, with the approval of the Food and Drug Administration. These claims include nutrient-content claims, disease
claims, and nutrition-support claims, which include “structure-function claims.” Nutrient-content claims describe the level of a nutrient in a
food or dietary supplement. For example, a supplement containing at least 200 mg of calcium per serving could carry the claim “high in
calcium.” Disease claims show a link between a substance and a disease or health-related condition. The Food and Drug Administration
authorizes disease claims based on a direct review of scientific evidence or documentation of established diet-to-health links from highly
regarded scientific bodies, such as the National Academy of Sciences. For example, it is permissible to advertise a link between calcium and a
lower risk of osteoporosis, if the supplement contains sufficient amounts of calcium. Nutrition-support claims describe a link between a
nutrient and deficiency diseases that may result from diets lacking the nutrient. For example, the label of a Vitamin C supplement could state
that Vitamin C prevents scurvy. When these types of claims are used, the label must mention the prevalence of the nutrient-deficiency disease
in the United States. Finally, structure-function claims refer to the supplement’s effect on the body’s structure or function, including its overall
effect on a person’s well-being. For example, a structure-function claim could state “antioxidants maintain cell integrity.” Structure-function
claims must be accompanied by the disclaimer “This statement has not been evaluated by the Food and Drug Administration. This product is
not intended to diagnose, treat, cure, or prevent any disease.” Manufacturers who plan to use a structure-function claim on a particular product
must inform the Food and Drug Administration of the use of the claim no later than 30 days after the product is first marketed. The Food and
Drug Administration may then advise the manufacturer to change or delete the claim. Claims made for our dietary supplement products may
include statements of nutritional support and health and nutrient content. The Food and Drug Administration’s interpretation of what
constitutes an acceptable statement of nutritional support may change in the future thereby requiring that we revise our branded labels. The
Food and Drug Administration recently issued a proposed rule on what constitutes permitted structure/function claims as distinguished from
prohibited disease claims. Although we believe our product claims comply with the law, depending on the content of the final regulation, we
may need to revise our branded labels.

Our advertising of dietary supplement products is also subject to regulation by the Federal Trade Commission under the Federal Trade
Commission Act, in addition to state and local regulation. The Federal Trade Commission Act prohibits unfair methods of competition and
unfair or deceptive acts or practices in or affecting commerce. The Federal Trade Commission Act also provides that the dissemination or the
causing to be disseminated of any false advertisement pertaining to drugs or foods, which would include dietary supplements, is an unfair or
deceptive act or practice. Under the Federal Trade Commission’s Substantiation Doctrine, an advertiser is required to have a “reasonable basis”
for all objective product claims before the claims are made. Failure to adequately substantiate claims may be considered either deceptive or
unfair practices. Pursuant to this Federal Trade Commission requirement we are required to have adequate substantiation for all material
advertising claims made for our products.

In recent years the Federal Trade Commission has initiated numerous investigations of dietary supplement and weight loss products and
companies. The Federal Trade Commission is reexamining its regulation of advertising for dietary supplements and has announced that it will
issue a guidance document to assist supplement marketers in understanding and complying with the substantiation requirement. Upon release
of this guidance document we will be required to evaluate our compliance with the guideline and may be required to change our advertising
and promotional practices. We may be the subject of investigation in the future. The Federal Trade Commission may impose limitations on our
advertising of products. Any such limitations could materially adversely affect our ability to successfully market our products. The Federal
Trade Commission has a variety of processes and remedies available to it for enforcement, both administratively and judicially, including
compulsory processes, cease and desist orders, and injunctions. Federal Trade Commission enforcement can result in orders requiring, among
other things, limits on advertising, corrective advertising, consumer redress, divestiture of assets, rescission of contracts and such other relief as
may be deemed necessary. A violation of such orders could have a material adverse affect on our business, financial condition and results of
operations.

Governmental regulations in foreign countries where our plans to commence or expand sales may prevent or delay entry into the market
or prevent or delay the introduction, or require the reformulation, of certain of our products. Compliance with such foreign governmental
regulations is generally the responsibility of our distributors for those countries. These distributors are independent contractors over whom we
have limited control.

We manufacture certain products pursuant to contracts with customers who distribute the products under their own or other trademarks.
Such private label customers are subject to government regulations in connection with their purchase, marketing, distribution and sale of such
products. We are subject to government regulations in connection with our manufacturing, packaging and labeling of such products. Our
private label customers are independent companies and their labeling, marketing and distribution of their products is beyond our control. The
failure of these customers to comply with applicable laws or regulations could have a materially adverse effect on our business, financial
condition, results of operations and cash flows.

We may be subject to additional laws or regulations by the Food and Drug Administration or other federal, state or foreign regulatory
authorities, the repeal of laws or regulations which we consider favorable, such as the Dietary Supplement Health and Education Act of 1994,
or more stringent interpretations of current laws or regulations, from time to time in the future. We are unable to predict the nature of such
future laws, regulations, interpretations or applications, nor can we predict what effect additional governmental regulations or administrative
orders, when and if promulgated, would have on our business in the future. The Food and Drug Administration or other governmental
regulatory bodies could, however, require the reformulation of certain products to meet new standards, the recall or discontinuance of certain
products not able to be reformulated, imposition of additional record keeping requirements, expanded documentation of the properties of
certain products, expanded or different labeling and scientific substantiation. Any or all of such requirements could have a materially adverse
affect on our business, financial condition, results of operations and cash flows.

Innovative Health Products’ nutraceutical facility was inspected by the Department of Agriculture and the FDA in November 2004, and
although we did receive an FDA 483, a written list of observations, were found to be generally in compliance with current Good Manufacturing
Practices (GMP) and do not believe the observations were material. We have taken appropriate corrective actions based on the FDA inspection
findings.

Belcher Pharmaceuticals facility was inspected by the FDA, the DEA and the Department of Agriculture all of which found us generally
in compliance. As we have in the past, we will continue our strong focus on compliance activities at all levels of our Company in support of
our current and future strategic growth plans .

As a public company, the Company is subject to certain provisions to the recently enacted Sarbanes-Oxley Act of 2002 (the “Sarbanes-
Oxley Act”), which implemented a broad range of corporate governance and accounting measures for public companies designed to promote
honesty and transparency in corporate America and better protect investors from corporate wrongdoing. The Company is required to implement
the applicable provisions of the Sarbanes-Oxley Act of 2002 as of its fiscal year ended March 31, 2010.

Facilities-Manufacturing Segment
Our primary nutraceutical manufacturing facility is located in 33,222 square feet in Largo, Florida. We use this location for our executive
offices and for the manufacturing, packaging and warehousing of health products, laboratory services, research and development, marketing
and final distribution. Our manufacturing facilities at this site utilize high-speed encapsulating, tableting, packaging and other production line
equipment. The facility is large enough to handle bulk orders, but versatile enough to provide quick response to customer needs. This site also
houses our graphic arts department, which assists us and our customers’ print layout and graphic needs.

Our second nutraceutical manufacturing facility is a 6,000 square foot manufacturing facility in Largo, Florida, and is leased.

Our third nutraceutical manufacturing facility is a 10,300 square foot manufacturing facility in Largo, Florida, and is leased.

Facilities-Pharmaceutical Segment
Our first pharmaceutical manufacturing facility has expanded its location by adding 10,000 square feet to the already exiting 10,000
square feet of leased space in Largo, Florida. This facility is registered with the United States Food and Drug Administration and is used for
our laboratory services, research and development, manufacture, packaging and distribution of our generic drug products. The second facility is
also 10,000 square feet in order to manufacture Cephalosporin products. Manufacturing of Cephalexin will commence with the approval of the
ANDA filing that is currently pending with the FDA.

Our second pharmaceutical manufacturing facility is a 30,000 square foot state-of-the-art generic drug manufacturing facility in Largo,
Florida, and is leased. This facility has been registered with the FDA, the DEA and the State of Florida.

Our Beta-Lactam leased facility is located within 65,000 square feet of leased space in Baltimore, Maryland. This facility is registered
with the United States Food and Drug Administration and is used for our laboratory services, research and development, manufacture,
packaging and distribution of Beta-Lactam products.

Facilities-Distribution Segment
Our first distribution warehousing facility is located in 55,000 square feet of leased space in Largo, Florida. In addition to the
warehousing of our distribution segments’ non-drug finished goods, this facility also is used for storage of additional manufacturing packaging.

In connection with the operations of BOSS, we lease five distribution facilities as follows: 10,000 square feet in Largo, Florida; 26,200
square feet in Scranton, Pennsylvania; 15,000 square feet in Cranston, Rhode Island; 14,725 square feet in Henderson, Nevada; and 9,000
square feet in Dallas, Texas.

Currently, we can manufacture approximately 900 million tablets and capsules annually. For the fiscal year ended March 31, 2009, we
operated at approximately 65% of our total capacity. Our manufacturing facilities normally operate two shifts per day, five days per week.
Certain packaging lines or capsule and tablet production lines run longer as demand warrants. We operate flexible manufacturing lines that can
shift output efficiently among various pieces of equipment depending upon factors such as batch size, tablets or capsule count, and labeling
requirements. While we believe we can double our sales volume without expanding our current facilities, we will expand our manufacturing
capacities upon receiving Food and Drug Administration registration for production of generic drugs. An increase in production would require
additional space and personnel for warehousing and shipping operations, but would not necessarily require substantial capital investment. Our
manufacturing revenues are generated by fulfilling sales orders received from our customers within an average turn-around time ranging from
30-60 days. Consequently, we experience a backlog for future revenues at all times. As of March 31, 2009 we had approximately $4,200,000,
in backlog manufacturing sales orders.

Private Label Products-Manufacturing
Sales of our manufactured private label products accounted for approximately 92.2% of our total consolidated revenues from continuing
operations, or $20.2 million for the year ended March 31, 2009, 99.1% of our total consolidated revenues, or $24.4 million for the year ended
March 31, 2008. We currently manufacture products for over 400 private label customers in 47 states in the United States and ship to several
countries internationally. Our private label business has a widely distributed revenue base. For the year ended March 31, 2009, we had sales of
5% of more of total consolidated revenues to six of our nonaffiliated private label customers, Central Coast with 17.9%, Intelligent Beauty with
8.8%, Pristine Bay with 8.3%, Vetquinol with 7.8%, Iovate with 6.0% and Sogeval with 5.3%. We currently manufacture products for over 400
private label customers in 47 states in the United States and ship to several countries internationally. Our private label business has a widely
distributed revenue base. For the year ended March 31, 2008, we had sales of 5% of more of total consolidated revenues to one of our
nonaffiliated private label customers, Jacks Distribution LLC with 8.3%. For the years ended March 31, 2009, 2008, we did not have sales of
5% or more of total consolidated revenues to any company that is a party to an exclusive manufacturing agreement with us.

Pharmaceutical
Sales of our pharmaceutical products accounted for approximately 7.8% of our total consolidated revenues, or $1.7 million for the year
ended March 31, 2009 with sales of our pharmaceutical products accounted for approximately 0.4% of our total consolidated revenues, or
$232,000 for the year ended March 31, 2008. For the years ended March 31, 2009 and 2008, we did not have sales of 5% or more of total
consolidated revenues to any company that is a party to an exclusive manufacturing agreement with us.

Employees
As of March 31, 2009 we had 271 employees all of which were full-time employees, as compared to 342 employees as of March 31,
2008. Of the 271 full-time employees as of March 31, 2009, 15 were engaged in marketing and sales, seven were devoted to customer service,
217 were devoted to production, laboratory, distribution and warehousing, one was devoted to web site development and database
administration, and 32 were responsible for management and administration. None of our employees are covered by a collective bargaining
agreement. We believe we have good relations with our employees. Employees are permitted to participate in employee benefit plans of the
Company that may be in effect from time to time, to the extent eligible, and employees may be entitled to receive an annual bonus as
determined at the sole discretion of the Company’s Board of Directors based on the Board’s evaluation of the employee’s performance and the
financial performance of the Company.

Item 1A. RISK FACTORS.
New or Amended Government Regulation Could Adversely Impact Our Business and Operations: We may be subject to additional laws
or regulations by the Food and Drug Administration or other federal, state or foreign regulatory authorities, subject to the repeal of laws or
regulations which we consider favorable, such as the Dietary Supplement Health and Education Act of 1994, or subject to more stringent
interpretations of current laws or regulations, from time to time in the future. We are unable to predict the nature of such future laws,
regulations, interpretations or applications, nor can we predict what effect additional governmental regulations or administrative orders, when
and if promulgated, would have on our business in the future. We also can not predict what effect these regulations, and the related publicity
from promulgation of such regulations, could have on consumer perceptions related to the nutraceutical market in which we operate. The
Company, and its customers, depend on positive publicity as it relates to the efficacy and overall health benefits derived from certain products
we manufacture for others. The Food and Drug Administration has also announced that it is considering promulgating new Good
Manufacturing Practices regulations, specific to dietary supplements. Such regulations, if promulgated, may be significantly more rigorous than
currently applicable regulations and contain quality assurance requirements similar to Good Manufacturing Practices regulations for drug
products. Therefore, we may be required to expend additional capital resources on upgrading manufacturing processes and/or equipment in the
future in order to comply with the law. The Food and Drug Administration or other governmental regulatory bodies could require the
reformulation of certain products to meet new standards, the recall or discontinuance of certain products not able to be reformulated, imposition
of additional record keeping requirements, expanded documentation of the properties of certain products and expanded or different labeling and
scientific substantiation. Any or all of such requirements could have a materially adverse affect on our business, financial condition, results of
operations and cash flows. Our failure to comply with applicable Food and Drug Administration regulatory requirements could result in, among
other things, injunctions, product withdrawals, recalls, product seizures, fines, and possible criminal prosecutions.

Product Acceptance into the Generic Drug Market: Certain manufacturers of brand name drugs and/or their affiliates have introduced
generic pharmaceutical products equivalent to their brand name drugs at relatively lower prices or partnered with generic companies to
introduce generic products. Such actions have the effect of reducing the potential market share and profitability of generic products developed
by the Company and may inhibit it from developing and introducing generic pharmaceutical products comparable to certain brand name drugs.
This price competition has led to an increase in customer demand for downward price adjustments by the manufacturers of generic
pharmaceutical products, including the Company, for certain products that may have planned to manufacture in the future. There can be no
assurance that such price reductions for these products or others, will not continue, or even increase, and therefore could have a material
adverse effect on the Company’s revenues, gross margins, income generated from operations and cash flows.

The Unavailability of Raw Materials When Needed Could Adversely Impact Our Business and Operations: Since the federal drug
application process requires specification of raw material suppliers as related to the production of generic drugs, if raw materials from a
specified supplier were to become unavailable, FDA approval of a new supplier would be required. A delay of six months or more in the
manufacture and marketing of the drug involved while a new supplier becomes qualified by the FDA and its manufacturing process is found to
meet FDA standards could, depending on the particular product, have a material adverse effect on the Company’s results of operations and
financial condition. Generally the Company attempts to minimize the effects of any such situation by providing for, where economically and
otherwise feasible, two or more suppliers of raw materials for the drugs it manufactures.

FDA Approvals: The Company plans to submit generic drug human and animal ANDAs for the FDAs approval to manufacture generic
drugs for animals and humans in the future. The Company can not predict, nor guarantee, that the FDA will approve any or all applications
submitted, nor can the Company predict when such applications will be reviewed or approved. Failure for the FDA to approve certain generic
drug products as they are submitted by the Company could have an adverse effect on future revenues, cash flows and financial position.

We Can Not Predict the Effects of Terrorism on the Economy or on our Company: The terrorist attacks on September 11, 2001,
exacerbated an already fragile economic situation and have added to a growing level of uncertainty and caution in the marketplace. The adverse
impacts to our business may include, but are not limited to, a delay in placing or a decrease in the size of orders, a lengthening of sales cycles
and increased credit risks. We can give no estimate of how long these effects may last. The occurrence of any future terrorist activity will
further exacerbate these effects.

The Unavailability of Additional Funds When Needed Could Adversely Impact Our Business and Operations: Management believes that
cash expected to be generated from operations, current cash reserves, and existing financial arrangements will be sufficient for the Company to
meet its capital expenditures and working capital needs for its operations as presently conducted. In addition, the Company may require more
significant capital to expand operations or complete cash based acquisitions. If cash flows from operations, current cash reserves and available
credit facilities are not sufficient, it will be necessary for the Company to seek additional financing. There can be no assurance that such
financing would be available in amounts and on terms acceptable to the Company.

The Company has implemented Section 404 of the Sarbanes-Oxley Act of 2002: We have implemented the rules and regulations of the
Securities Exchange Commission (the “SEC” or “Commission”) associated with Section 404 of the Sarbanes-Oxley Act, which requires a
reporting company to, among other things, annually review and disclose its internal controls over financial reporting, and evaluate and disclose
changes in its internal controls over financial reporting quarterly. Under Section 404 a reporting company is required to document and evaluate
such internal controls in order to allow its management to report on, and its independent auditors to attest to, these controls. We are required to
comply with Section 404 for our fiscal year ended March 31, 2009 so that our independent registered accountants can opine as of March 31,
2010 as to whether our internal controls are effective over financial reporting. We have performed the system and process documentation
surrounding our controls and procedures, including those over our financial reporting. In the course of our ongoing internal control evaluation,
we may identify additional areas of our internal controls requiring improvement, and will plan to design enhanced processes and controls to
address issues that might be identified through this ongoing review. Following that review, we will be evaluating and testing the significant
controls identified in order to comply with the management certification and auditor attestation requirements of Section 404.

As a result of the initial year of implementation ended March 31, 2009, we expect to incur additional expenses and diversion of
management’s time in the future. We cannot be certain as to the timing of completion of our documentation, evaluation, testing and possible
remediation actions or the impact of the same on our operations, and may not be able to ensure that the processes are effective or that the
internal controls are or will be effective in a timely manner as prescribed by Section 404 of Sarbanes-Oxley. Any failure to implement
effectively new or improved internal controls, or to resolve difficulties encountered in their implementation, could harm our operating results,
cause us to fail to meet reporting obligations or result in management being required to give a qualified assessment of our internal controls over
financial reporting or our independent auditors providing an adverse opinion regarding management’s assessment. Any such result could cause
investors to lose confidence in our reported financial information, which could have a material adverse effect on our stock price.

Our Insurance Coverage May not be Sufficient to Cover All Risk Exposure: The Company has maintained its insurance coverages for its
directors and officers, general liability insurance, and product liability insurance at levels deemed adequate by the Company’s Board of
Directors. The Company can not guarantee that these same levels of insurance, at premiums acceptable to the Company, will be available in the
future. As related to product liability insurance, a reduction in coverage or an exclusion for one or more key raw materials, may adversely
affect our ability to continue our business as currently conducted. In addition, a loss of one or more of any of these insurance policies, or a
claim-related loss in excess of insured limits will adversely affect our ability to continue our business as currently conducted.

Potential fluctuations in our quarterly financial results may make it difficult for investors to predict our future performance: Our
quarterly operating results may fluctuate significantly in the future as a result of a variety of factors including but not limited to, our termination
of the PBM contract on May 15, 2007 and our discontinuation of our Distribution segment which includes BOSS and Breakthrough Engineered
Nutrition, the level and timing of incurring research and development expenses, any delays in receiving any Food and Drug Administration’s
approvals, and possible increases in generic drug competition, many of these and other conditions may be outside our control and may
adversely effect the Company’s financial condition and results of operations and cash flows.

In addition to any forward-looking statements issued by management, such factors above may create other risks affecting our long-term
success. We believe that quarter-to-quarter comparisons of our historical operating results may not be a good indication of our future
performance, nor would our operating results for any particular quarter be indicative of our future operating results.

Litigation: On September 29, 2006, Schering Corporation (“Schering”) filed an action in the United States District Court for the District
of New Jersey, against Belcher Pharmaceuticals, Inc. and GeoPharma, Inc. (along with nineteen other defendants) alleging that the filing of
Belcher Pharmaceuticals’ Abbreviated New Drug Application (“ANDA”) for 5 mg Desloratadine Tablets, AB-rated to Clarinex ® , infringed
U.S. Patent No. 6,100,274 (“the ‘274 patent”) Case No. 3:06-cv-04715-MLC-TJB. On November 8, 2006, Belcher filed a motion to dismiss in
the New Jersey case for lack of jurisdiction. On October 5, 2006 Schering filed an action in the United States District Court for the Middle
District of Florida, Tampa Division, Case No. 8:06-cv-01843-SCB-EAJ, against Belcher Pharmaceuticals, Inc. and GeoPharma, Inc. alleging
that the filing of Belcher Pharmaceuticals’ ANDA for 5 mg Desloratadine Tablets, AB-rated to Clarinex ® , infringed the ‘274 patent. On
February 14, 2008 Belcher and Schering entered into a stipulation to withdraw the motion to dismiss the New Jersey action and to consolidate
the New Jersey and Florida actions.

On February 20, 2008, Sepracor Inc. and University of Massachusetts (“Sepracor”) filed an action in the United States District Court for
the District of New Jersey, against Belcher Pharmaceuticals, Inc. and GeoPharma, Inc. alleging that the filing of Belcher Pharmaceuticals’
ANDA for 5 mg Desloratadine Tablets, AB-rated to Clarinex ® , infringed U.S. Patent No. 7,214,683 (“the ‘683 patent”) and U.S. Patent
No. 7,214,684 (“the ‘684 patent”) Case No. 3:08-cv-00945-MLC-TJB.

Company management and Belcher disputes Schering’s claims in the two actions and believes its proposed desloratadine product does
not infringe any valid claim of the ‘274 patent. Company management and Belcher also disputes Sepracor’s claims and believes its proposed
desloratadine product does not infringe any valid claim of the ‘683 patent or the ‘684 patent. The possible outcome cannot be determined at this
time.

Litigation concerning patents and proprietary rights is possible and often expensive. Pharmaceutical companies with patented brand
products are increasingly suing companies that produce generic forms of their patented brand name products for alleged patent infringement or
other violations of intellectual property rights, which may delay or prevent the entry of such generic products into the market. There is a risk
that a branded pharmaceutical company may sue the filing person for alleged patent infringement or other manufacturing, developing and/or
selling the same generic pharmaceutical products may similarly file lawsuits against the Company or its strategic partners claiming patent
infringement or invalidity. Such litigation is time consuming, and could result in a substantial delay in, or prevent, the introduction and/or
marketing of products, which could have a material adverse effect on the Company’s business, financial condition and results of operations.

During September 2006, the Company, through its 51% owned subsidiary, American Antibiotics, LLC, filed in the Circuit Court for

Anne Arundel County, Maryland, Case No. C-06-117230, naming defendents Consolidated Pharmaceutical Group (“CPG”), the directors
of CPG and two other individuals acting on behalf of CPG (collectively “the Defendents”). The litigation arises from and relates to agreements
entered into between American Antibiotics and CPG for the purchase by American Antibiotics all of CPG’s rights, title and interest in various
pharmaceutical Abbreviated New Drug Applications (“ANDAs”) and for the Baltimore Maryland facility lease (the “Lease”). The Suit brought
by the Company alleges that the Defendents breached the ANDA agreement with certain misrepresentations and by failing to perform all the
required improvements and modifications to the Baltimore, Maryland facility. Consolidated with American Antibiotic’s lawsuit is a separate
action file against it by CPG, alleging that American Antibiotics has failed to pay rent that is due and owing under the Lease. Both cases have
been stayed pending the outcome of settlement discussions, which are ongoing between the parties.

On May 1, 2006 Esther Krausz and Sharei Yeshua (“Note Holders”) filed an action against Dynamic Health Products, Inc. in the Circuit
Court of Broward County, Florida (Index No. 06-6187) alleging Dynamic Health Products, Inc. defaulted on note payment obligations. The
face amount of the note alleged to be held by Ester Krausz totals $280,000.00, the face amount of the note alleged to be held by Sharei Yeshua
totals $220,000.00. The notes contain an interest rate of 8% per annum. Preliminary discovery has been conducted. Dynamic Health Products,
Inc. filed a third party action against the agent for the Note Holders seeking indemnity and that action was settled in May 2008. The Note
Holders have filed a request for trial with the court but no date has been set. Dynamic Health Products, Inc. is investigating whether the
purported agent made any payments to the Note Holders on behalf of Dynamic Health Products, Inc. without disclosing those payments. To
date, Plaintiffs have not provided copies of the notes to Dynamic Health Products, Inc. or made a specific monetary demand. Dynamic Health
Products, Inc. intends to vigorously defend itself in this action.

On April 4, 2008, Vital Pharmaceuticals, Inc. vs. Bob O’Leary Health Food Distribution Co., Inc., Case No. 08-14868, in the Circuit
Court of the 17th Judicial Circuit in and for Broward County, Florida. Vital Pharmaceuticals, Inc. (“VPX”) sued Boss in April, 2008 for
$579,274.65, plus interest, attorney’s fees, and costs. Boss counterclaimed for, amongst other things, breach of its distributorship agreement
with VPX and false representations. On June 17, 2009, the Court, in a bench pronouncement not yet memorialized in a written order, ruled that:
(1) Boss is granted leave to amend its Counterclaim to assert additional claims against VPX, including amongst other things for Breach of
Fiduciary Duty and Unfair and Deceptive Trade Practices; and (2) VPX sold to Boss $472,274.65 in products received; and (3) VPX is
prohibited from receiving that sum (if ever) until such time as Boss’s Counterclaims and Affirmative Defenses are resolved. Boss intends to
continue to prosecute its Counterclaim and Affirmative Defenses and anticipates a favorable resolution to the case. The Court’s written ruling
may differ from the above recitation.

ITEM 2. PROPERTIES.
We own our corporate headquarters located in Largo, Florida. In addition, we lease facilities in Largo, Florida, Baltimore, Maryland,
Scranton, Pennsylvania, Cranston, Rhode Island, Henderson, Nevada and Dallas, Texas. Following is a description of these facilities as of
March 31, 2009.
Location Segment(s) Used By Purpose Approx. Sq. Ft. Annual Rent
6950 Bryan Dairy Road, Corporate, Corporate headquarters, distribution, sales
Largo, FL 33777 distribution and and marketing, analytical, research and
manufacturing development, nutraceutical manufacturing
and warehousing 33,222 $ 0(owned)
6901 Bryan Dairy Road, Ste. 130, Manufacturing Nutraceutical and cosmeceutical
Largo, FL 33777 manufacturing and storage 6,000 $ 42,000
6901 Bryan Dairy Road, Ste. 110, Manufacturing Manufacturing and warehousing
Largo, FL 33777 10,300 $ 121,128
8145 Bryan Dairy Road, Manufacturing Warehousing and storage
Largo, FL 33777 55,000 $ 216,651
6911 Bryan Dairy Road, Ste. 210, Pharmaceutical Generic drug manufacturing, analytical,
Largo, FL 33777 research and development, and regulatory
affairs 30,000 $ 212,000
12393 Belcher Road, Ste. 420, Pharmaceutical Medical device and generic drug
Largo, FL 33773 manufacturing 10,000 $ 79,000
12393 Belcher Road, Ste. 430, Pharmaceutical Cephalosporin manufacturing, analytical,
Largo, FL 33773 research and development 10,000 $ 79,000
6110 Robinwood Road, Pharmaceutical Beta-Lactum manufacturing, analytical,
Baltimore, MD 21225 research and development, regulatory
affairs and warehousing 55,000 $ 522,000
12399 Belcher Road, Ste. 140, Distribution Distribution, warehousing and
Largo, FL 33773 administration 10,000 $ 93,600
701 Hudson Avenue, Distribution Distribution, warehousing, sales and
Scranton, PA 18504 marketing, and administration 26,200 $ 100,545
40 Western Industrial Drive, Distribution Distribution, warehousing, sales and
Cranston, RI 02921 administration 15,000 $ 138,924
192 Gallagher Crest Road, Distribution Distribution and warehousing
Henderson, NV 89014 14,725 $ 79,170
4930 Olson Drive, Ste. 300, Distribution Distribution and warehousing
Dallas, TX 75227 9,000 $ 55,800

ITEM 3. LEGAL PROCEEDINGS.
On September 29, 2006, Schering Corporation (“Schering”) filed an action in the United States District Court for the District of New
Jersey, against Belcher Pharmaceuticals, Inc. and GeoPharma, Inc. (along with nineteen other defendants) alleging that the filing of Belcher
Pharmaceuticals’ Abbreviated New Drug Application (“ANDA”) for 5 mg Desloratadine Tablets, AB-rated to Clarinex ® , infringed U.S.
Patent No. 6,100,274 (“the ‘274 patent”) Case No. 3:06-cv-04715-MLC-TJB. On November 8, 2006, Belcher filed a motion to dismiss in the
New Jersey case for lack of jurisdiction. On October 5, 2006 Schering filed an action in the United States District Court for the Middle District
of Florida, Tampa Division, Case No. 8:06-cv-01843-SCB-EAJ, against Belcher Pharmaceuticals, Inc. and GeoPharma, Inc. alleging that the
filing of Belcher Pharmaceuticals’ ANDA for 5 mg Desloratadine Tablets, AB-rated to Clarinex ® , infringed the ‘274 patent. On February 14,
2008 Belcher and Schering entered into a stipulation to withdraw the motion to dismiss the New Jersey action and to consolidate the New
Jersey and Florida actions.

On February 20, 2008, Sepracor Inc. and University of Massachusetts (“Sepracor”) filed an action in the United States District Court for
the District of New Jersey, against Belcher Pharmaceuticals, Inc. and GeoPharma, Inc. alleging that the filing of Belcher Pharmaceuticals’
ANDA for 5 mg Desloratadine Tablets, AB-rated to Clarinex ® , infringed U.S. Patent No. 7,214,683 (“the ‘683 patent”) and U.S. Patent
No. 7,214,684 (“the ‘684 patent”) Case No. 3:08-cv-00945-MLC-TJB.

Company management and Belcher disputes Schering’s claims in the two actions and believes its proposed desloratadine product does
not infringe any valid claim of the ‘274 patent. Company management and Belcher also disputes Sepracor’s claims and believes its proposed
desloratadine product does not infringe any valid claim of the ‘683 patent or the ‘684 patent. The possible outcome cannot be determined at this
time.

During September 2006, the Company, through its 51% owned subsidiary, American Antibiotics, LLC, filed in the Circuit Court for

Q2 2009 Earning Report of Geo Pharma, Inc.

Q2 2009 Earning Report of Geo Pharma, Inc.

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Q2 2009 Earning Report of Geo Pharma, Inc.