United States

Securities and Exchange Commission

Washington, DC 20549

 

 

Form 10-Q

 

 

 

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

 

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

For the quarterly period ended:   Commission File No:
March 31, 2010   000-31279

 

 

OurPet’s Company

(Exact name of Registrant as specified in its charter)

 

 

 

Colorado   34-1480558
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

1300 East Street, Fairport Harbor, OH   44077
(Address of principal executive offices)   (Zip code)

Registrant’s telephone number, including area code: (440) 354-6500

 

 

Check whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its Corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ¨     No   ¨

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 the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

 

Large Accelerated Filer   ¨    Accelerated Filer   ¨
Non-Accelerated Filer   ¨    Smaller Reporting Company   x

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

Indicate the number of shares of outstanding of each of the Registrant’s classes of common equity, as of the last practicable date: As of May 7, 2010, the Registrant had outstanding 15,393,667 shares of Common Stock, 189,616 shares of Convertible Preferred Stock, convertible into 1,896,160 shares of Common Stock, and warrants exercisable for 4,717,887 shares of Common Stock.

 

 

 


Table of Contents

CONTENTS

 

     Page
Number

Part 1 – Financial Information

  

Item 1 – Financial Statements (Unaudited):

  

Consolidated Balance Sheets of OurPet’s Company and Subsidiaries as of March  31, 2010 and December 31, 2009

   3

Consolidated Statements of Operations of OurPet’s Company and Subsidiaries for the three month periods ended March 31, 2010 and 2009

   5

Consolidated Statement of Stockholders’ Equity of OurPet’s Company and Subsidiaries for the three month period ended March 31, 2010

   6

Consolidated Statements of Cash Flows of OurPet’s Company and Subsidiaries for the three month periods ended March 31, 2010 and 2009

   7

Notes to Consolidated Financial Statements

   8

Item  2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations:

  

Overview

   11

Results of Operations

   12

Liquidity and Capital Resources

   13

Critical Accounting Policies/Estimates

   14

Off-Balance Sheet Arrangements

   15

Forward Looking Statements

   15

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

   15

Item 4(T) – Controls and Procedures

   16

Part II – Other Information

  

Item 1 – Legal Proceedings

   16

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

   17

Item 3 – Defaults Upon Senior Securities

   17

Item 4 – Submission of Matters to a Vote of Security Holders

   17

Item 5 – Other Information

   17

Item 6 – Exhibits

   17

Signatures

   18

Certifications

  

 

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OURPET’S COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

     March 31,    December 31,
     2010    2009
     (Unaudited)     
ASSETS      

CURRENT ASSETS

     

Cash and cash equivalents

   $ 78,842    $ 84,555

Accounts receivable - trade, less allowance for doubtful accounts of $22,598 and $21,116

     1,984,193      1,881,179

Inventories

     3,010,048      2,984,035

Prepaid expenses

     256,407      93,130

Deferred Tax Asset less Valuation allowance of $281,331 and $377,734

     125,370      125,370
             

Total current assets

     5,454,860      5,168,269
             

PROPERTY AND EQUIPMENT

     

Computers and office equipment

     363,374      339,077

Warehouse equipment

     262,009      254,811

Leasehold improvements

     223,091      129,572

Tooling

     3,437,608      3,432,508

Construction in progress

     328,490      302,991
             

Total

     4,614,572      4,458,959

Less accumulated depreciation

     2,616,275      2,504,154
             

Net property and equipment

     1,998,297      1,954,805
             

OTHER ASSETS

     

Patents, less amortization of $179,190 and $170,863

     274,748      279,719

Goodwill

     67,511      67,511

Domain names and other assets

     156,800      128,438
             

Total other assets

     499,059      475,668
             

Total assets

   $ 7,952,216    $ 7,598,742
             

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

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OURPET’S COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONTINUED)

 

     March 31,     December 31,  
     2010     2009  
     (Unaudited)        
LIABILITIES     

CURRENT LIABILITIES

    

Notes payable

   $ 1,060,000      $ 949,000   

Current maturities of long-term debt

     323,155        956,589   

Accounts payable - trade

     958,717        1,046,101   

Accrued expenses

     309,782        417,199   
                

Total current liabilities

     2,651,654        3,368,889   
                

LONG-TERM DEBT

    

Long-term debt - less current portion above

     1,186,230        1,254,080   
                

Total liabilities

     3,837,884        4,622,969   
                

STOCKHOLDERS’ EQUITY

    

COMMON STOCK,

    

no par value; 50,000,000 shares authorized, 15,393,667 and 15,378,984 shares issued and outstanding at March 31, 2010 and December 31, 2009 respectively

     4,244,343        4,235,093   

CONVERTIBLE PREFERRED STOCK,

    

no par value; convertible into Common Stock at the rate of 10 common shares for each preferred share; 66,000 shares authorized, 66,000 shares issued and outstanding

     602,679        602,679   

Series 2009, no par value; convertible into Common Stock at the rate of 10 common shares for each preferred share; 175,000 shares authorized, 123,616 shares issued and outstanding at March 31, 2010

     865,312        —     

PAID-IN CAPITAL

     77,695        75,944   

ACCUMULATED DEFICIT

     (1,675,697     (1,937,943
                

Total stockholders’ equity

     4,114,332        2,975,773   
                

Total liabilities and stockholders’ equity

   $ 7,952,216      $ 7,598,742   
                

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

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OURPET’S COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

     For the Three Months Ended March 31,  
     2010     2009  

Net revenue

   $ 3,643,933      $ 3,390,379   

Cost of goods sold

     2,497,534        2,390,311   
                

Gross profit on sales

     1,146,399        1,000,068   

Selling, general and administrative expenses

     (818,536     (714,754

Litigation expense

     (35,809     (164,313
                

Income from operations

     292,054        121,001   

Other income and expense, net

     —          (32

Interest expense

     (29,808     (42,359
                

Income before income taxes

     262,246        78,610   

Income tax expense

     —          —     
                

Net income

   $ 262,246      $ 78,610   
                

Basic and Diluted Earnings Per Common Share After Dividend Requirements For Preferred Stock:

    

Net Income

   $ 0.01      $ —     
                

Weighted average number of common and equivalent shares outstanding used to calculate basic and diluted earnings per share

     18,173,581        15,313,600   
                

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

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OURPET’S COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

THREE MONTHS ENDED MARCH 31, 2010

(Unaudited)

 

     Preferred Stock    Series 2009
Preferred Stock
   Common Stock                Total
     Number of         Number of         Number of         Paid-In     Accumulated     Stockholders’
     Shares    Amount    Shares    Amount    Shares    Amount    Capital     Deficit     Equity

Balance at December 31, 2009

   66,000    $ 602,679    —      $ —      15,378,984    $ 4,235,093    $ 75,944      $ (1,937,943   $ 2,975,773

Common Stock issued upon exercise of stock option

   —        —      —        —      14,683      9,250      (9,250     —          —  

Preferred Stock issued

   —        —      123,616      865,312    —        —        —          —          865,312

Net income

   —        —      —        —      —        —        —          262,246        262,246

Stock-based compensation expense

   —        —      —        —      —        —        11,001        —          11,001
                                                          

Balance at March 31, 2010

   66,000    $ 602,679    123,616    $ 865,312    15,393,667    $ 4,244,343    $ 77,695      $ (1,675,697   $ 4,114,332
                                                          

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

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OURPET’S COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     For the Three Months Ended  
     March 31,  
     2010     2009  

CASH FLOWS FROM OPERATING ACTIVITIES

    

Net income

   $ 262,246      $ 78,610   

Adjustments to reconcile net income to net cash used in operating activities:

    

Depreciation expense

     112,121        111,502   

Amortization expense

     8,327        7,373   

Stock option expense

     6,000        5,256   

Warrant expense

     5,001        3,900   

(Increase) decrease in assets:

    

Accounts receivable - trade

     (103,014     (230,044

Inventories

     (26,013     (162,940

Prepaid expenses

     (163,277     (80,622

Patent costs

     (3,356     (11,057

Domain names and other assets

     (28,362     —     

Increase (decrease) in liabilities:

    

Accounts payable - trade

     (87,384     275,614   

Accrued expenses

     (107,417     (165
                

Net cash used in operating activities

     (125,128     (2,573
                

CASH FLOWS FROM INVESTING ACTIVITIES

    

Acquisition of property and equipment

     (155,613     (19,380
                

Net cash used in investing activities

     (155,613     (19,380
                

CASH FLOWS FROM FINANCING ACTIVITIES

    

Principal payments on long-term debt

     (701,284     (34,986

Net borrowings on bank line of credit

     111,000        —     

Issuance of Preferred Stock

     865,312        —     
                

Net cash provided by (used in) financing activities

     275,028        (34,986
                

Net increase (decrease) in cash

     (5,713     (56,939

CASH AT BEGINNING OF PERIOD

     84,555        363,573   
                

CASH AT END OF PERIOD

   $ 78,842      $ 306,634   
                

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

    

Interest paid

   $ 86,539      $ 22,668   
                

Non cash exercise of stock option

   $ 9,250      $ —     
                

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

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OURPET’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

(Unaudited)

BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements and include the accounts of OurPet’s Company and its wholly-owned subsidiaries (the “Company”), Virtu Company (“Virtu”) and SMP Company, Incorporated (“SMP”). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented have been included. All intercompany transactions have been eliminated. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes for the fiscal year ended December 31, 2009 included in the Company’s Form 10-K filed with the Securities and Exchange Commission on March 31, 2010.

INVENTORIES

Inventories are carried at the lower of cost, first-in, first-out method or market. Inventories at March 31, 2010 and December 31, 2009 consist of:.

 

     2010    2009

Finished goods

   $ 2,199,304    $ 2,163,787

Components and packaging

     810,744      820,248
             

Total

   $ 3,010,048    $ 2,984,035
             

All inventories are pledged as collateral for bank loans.

REVENUE RECOGNITION

With respect to revenue from product sales, revenue is recognized only upon shipment of products to customers. The Company derives its revenues from the sale of proprietary pet products under the OurPet’s ® , Pet Zone ® , SmartScoop ® , ecoPure Naturals ® , Play-N-Squeak ® , Durapet ® , Go! Cat Go™, Flappy ® and DockDogs ® labels. Net revenue is comprised of gross sales less discounts given to distributors and returns and allowances.

For the three months ended March 31, 2010, 39.1% of the Company’s net revenue was derived from two major customers. Revenue generated from each of these customers amounted to $749,919 and $650,852, which represents 20.9% and 18.2% of total revenue, respectively.

For the three months ended March 31, 2009, 50.9% of the Company’s net revenue was derived from two major customers. Revenue generated from each of these customers amounted to $852,364 and $809,442, which represents 26.1% and 24.8% of total revenue, respectively.

STOCK OPTIONS

“Share-Based Payment” standards require the grant-date value of all share-based payment awards that are expected to vest, including employee share options, to be recognized as employee compensation expense over the requisite service period. The Company adopted the modified prospective transition method on January 1, 2006. Under this transition method, the Company (1) did not restate any prior periods and (2) is recognizing compensation expense for all share-based payment awards that were outstanding, but not yet vested, as of January 1, 2006, based upon the same estimated grant-date fair values and service periods used to prepare the pro-forma disclosures. The amount of compensation expense recognized in 2010 and 2009 as a result of stock options is not material.

 

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OURPET’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

MARCH 31, 2010

(Unaudited)

 

NET INCOME PER COMMON SHARE

Basic and diluted net income per common share is based on the net income attributable to common stockholders after preferred stock dividend requirements for the period, divided by the weighted average number of common and equivalent dilutive shares outstanding during the period. Potential common shares whose effect would be anti-dilutive have not been included. As of March 31, 2010, common shares that are or could be potentially dilutive include 1,575,500 stock options at exercise prices from $0.20 to $1.55 a share, 4,717,887 warrants to purchase Common Stock at exercise prices from $0.282 to $1.432 a share, 660,000 shares underlying our original series of Preferred Stock at a conversion rate of $1.00 per share and 1,236,160 shares underlying a second Series 2009 Preferred Stock at a conversion rate of $.70 per share. As of March 31, 2009, common shares that are or could be potentially dilutive included 1,520,000 stock options at exercise prices from $0.20 to $1.55 a share, 4,363,817 warrants to purchase Common Stock at exercise prices from $0.283 to $1.438 a share and 660,000 shares underlying the Preferred Stock at a conversion rate of $1.00 per share.

INCOME TAXES

As of March 31, 2020, the Company had net operating loss carryforwards (NOL’s) for federal income tax purposes of approximately $1.2 million. There can be no assurance that the Company will realize the entire benefit of the NOL’s. The federal NOL’s are available to offset future taxable income and expire from 2015 through 2028 if not utilized. In the first quarters of 2010 and 2009, the Company has not recorded tax provisions due to the expected utilization of net operating loss carryforwards. The effective tax rate for the three months ended March 31, 2010 and 2009 is different from the tax benefit that would result from applying the statutory tax rates primarily due to the recognition of valuation differences.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value estimates discussed herein are based on certain market assumptions and pertinent information available to management as of December 31, 2009 and March 31, 2010. The respective carrying value of certain on balance sheet financial instruments approximated their fair values. These financial instruments include cash and cash equivalents, accounts receivable, accounts payable and accrued expenses. The fair value of the Company’s long-term debt is estimated based upon the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. The carrying value approximates the fair value of the debt.

SUBSEQUENT EVENTS

The Company assessed events occurring subsequent to March 31, 2010 through May 15, 2010 for potential recognition and disclosure in the consolidated financial statements and determined there were none to report.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2009-01, Topic 105 – Generally Accepted Accounting Principles – FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles .   The Codification is the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification does not change current GAAP, but is intended to simplify user access to all authoritative GAAP by providing all the authoritative literature related to a particular topic in one place. Rules and interpretive releases of the SEC under federal securities laws are also sources of authoritative GAAP for SEC registrants. The Company adopted this standard for the interim reporting period ending September 30, 2009.

In June 2008, the FASB issued accounting guidance related to determining whether instruments granted in share-based payment transactions are participating securities, which is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. This guidance clarified that instruments granted in share-based payment transactions can be participating securities prior to the requisite service having been rendered. A basic principle of this guidance is that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are to be included in the computation of EPS pursuant to the two-class method. All prior-period EPS data presented (including interim financial statements, summaries of earnings, and selected financial data) are required to be adjusted retrospectively to conform with this guidance. This

 

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OURPET’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

MARCH 31, 2010

(Unaudited)

Recently Issued Accounting Pronouncements (Continued)

 

accounting guidance was subsequently codified into ASC Topic 260, Earnings Per Share . The Company has presented the necessary disclosures in Note—Stock Options herein.

In April 2009, the FASB issued new guidance impacting ASC Topic 820, Fair Value Measurements and Disclosures . This ASC provides additional guidance in determining fair values when there is no active market or where the price inputs being used represent distressed sales. It reaffirms the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive. The adoption of this new guidance did not have a material effect on the Company’s results of operations or financial position.

In January 2010, the FASB issued ASU No. 2010-6, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements . This update requires new disclosures for fair value measurements and provided clarification for existing disclosure requirements. The majority of the new disclosure requirements became effective for us on January 1, 2010. Certain of the disclosure requirements will be effective for us on January 1, 2011. As ASU No. 2010-6 only requires enhanced disclosures, the adoption of ASU No. 2010-6 did not have a material effect on our consolidated financial position, results of operations or cash flows and did not materially expand our financial statement footnote disclosures.

In August 2009, the FASB issued ASU No. 2009-05, Fair Value Measurements and Disclosures (Topic 820) – Measuring Liabilities at Fair Value . This ASU provides amendments for fair value measurements of liabilities. It provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more techniques. ASU 2009-05 also clarifies that when estimating a fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. ASU 2009-05 is effective for the first reporting period (including interim periods) beginning after issuance or fourth quarter 2009. The adoption of this new guidance did not have a material impact on the Company’s financial position or results of operations.

In April 2009, the FASB issued new guidance impacting ASC 825-10-50, Financial Instruments , which relates to fair value disclosures for any financial instruments that are not currently reflected on the balance sheet of companies at fair value. This guidance amended existing GAAP to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This guidance is effective for interim and annual periods ending after June 15, 2009. The adoption of this new guidance did not have a material impact on the Company’s financial position or results of operations.

In April 2009, the FASB issued new guidance impacting ASC 320-10, Investments — Debt and Equity Securities , which provides additional guidance designed to create greater clarity and consistency in accounting for and presenting impairment losses on securities. This guidance is effective for interim and annual periods ending after June 15, 2009. The adoption of this new guidance did not have a material impact on the Company’s financial position or results of operations.

 

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OURPET’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

MARCH 31, 2010

(Unaudited)

Recently Issued Accounting Pronouncements (Continued)

 

In June 2009, the FASB issued new authoritative accounting guidance under ASC Topic 810, Consolidation , which amends prior guidance to change how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. The new authoritative accounting guidance requires additional disclosures about the reporting entity’s involvement with variable-interest entities and any significant changes in risk exposure due to that involvement as well as its affect on the entity’s financial statements. The new authoritative accounting guidance under ASC Topic 810 was effective January 1, 2010 and did not have a significant impact on the Company’s financial statements.

The FASB issued new authoritative accounting guidance under ASC Topic 855, Subsequent Events , which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued. ASC Topic 855 defines (i) the period after the balance sheet date during which a reporting entity’s management should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and (iii) the disclosures an entity should make about events or transactions that occurred after the balance sheet date. The new authoritative accounting guidance under ASC Topic 855 is effective for periods ending after June 15, 2009. The required disclosures are provided in Note Subsequent Events.

 

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

Overview

OurPet’s develops, designs, produces and markets a broad line of consumer brands containing innovative, high-quality accessory and consumable pet products. These products form our portfolio of brands, including Play-N-Squeak ® www.playnsqueak.com , SmartScoop ® www.smartscoop.com , ecoPure Naturals ® www.ecopurenaturals.com , Flappy ® Dog Toys www.flappydogtoys.com , Go! Cat Go ® ! cat toys, Durapet ® premium stainless steel bowls, Pet Zone ® dog waste management product, wild bird feeders, and dog houses, and a variety of raised feeders.

These products are manufactured by domestic and foreign subcontractors and then sold by us to retailers and distributors who then sell the products to the end consumer. According to the 2009/2010 APPA National Pet Owners Survey approximately 71.4 million U.S. households currently own a pet with an estimated pet population of 77.5 million dogs, 93.6 million cats and 15.0 million birds.

As discussed below and in Liquidity and Capital Resources on Pages 13 and 14, we have funded our operations principally from net cash provided from operating activities for the year ended December 31, 2009 and from financing activities in the three months ended March 31, 2010.

Under our line of credit facility with our bank we can borrow up to $2,000,000 based on the level of qualifying accounts receivable and inventories. At March 31, 2010 we had a balance due of $960,000 under the line of credit with the bank at an interest rate of prime plus .50%.

 

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RESULTS OF OPERATIONS

In the following discussion all references to 2010 are for the three months ended March 31, 2010 and all references to 2009 are for the three months ended March 31, 2009.

Net revenue for 2010 was $3,643,933, an increase of 7.5% in revenue from $3,390,379 in 2009, consisting of net sales of proprietary products for the retail pet business. This increase of $253,554 was the result of increased sales to new customers of approximately $520,000 offset by decreases in sales to our largest two customers of approximately $261,000. The decreases were due to non renewal of promotions and changes in merchandising assortments. Total sales to all customers of new products in 2010 that were not sold in 2009, including the new Play-N-Squeak ® products, new dog plush toys Topsy Turvy ® , Fluffles ® , LOLDog ® and Wild Hares ® , Flappy ® dog toys, and new Durapet ® bowl product items, were approximately $241,000. Our sales to foreign customers increased by approximately $41,000, or 26%, from 2009 mainly due to increased sales to customers in Canada.

While net revenue increased by 7.5% in 2010, cost of goods sold increased by 4.5%, from $2,390,311 in 2009 to $2,497,534 in 2010. This increase of approximately $107,000 was the result of the cost of purchased products sold increasing 2.3%, or approximately $47,000, due mainly to the increased amount of purchased products and increased freight costs needed for the higher volume sales in 2010, which were offset by improved product sourcing. Approximately $39,000 of the cost of goods sold increase came from increased salaries, wages, payroll taxes and benefits due to increased staffing and associated benefits for our research & development and quality assurance and project management personnel. Lastly, approximately 10% of the increase came from an increase of approximately $10,000 in quality assurance product testing costs. Our variable and fixed warehouse and overhead costs increased by 17.9% from the comparable quarter in 2009 due to the above noted increased costs for salaries, wages, and payroll taxes in our quality assurance and research and development departments.

The net revenue increase of 7.5%, as offset by 4.5% increase in the cost of goods sold, resulted in our gross profit on sales increasing by 14.6%, or $146,331 from $1,000,068 in 2009 to $1,146,399 in 2010.

Selling, general and administrative expenses in 2010 were $818,536, an increase of 14.52%, or $103,782, from $714,754 in 2009. This increase was primarily a result of (i) an increase in salaries and wages, payroll taxes and employee benefits of approximately $53,000 due to two additional employees in sales, marketing, and administration and an increase in accruals for managers’ bonus and employee profit sharing, (ii) an increase in sales and marketing expenses of approximately $35,000 mainly due to increased commissions, travel and promotional expenses, and (iii) an increase in professional expenses of approximately $15,000 mainly from higher investor relations costs and intellectual property protection costs.

Litigation expenses were $35,809 for 2010, a decrease of $128,504 from $164,313 for 2009. These expenses were for (i) legal fees and expenses related to our defense of patent infringement actions filed against us in late 2007 by a competitor alleging that our SmartScoop ® self scooping cat litter box infringes on their patents, and (ii) patent infringement suits we filed against several other competitors for their infringement on our Durapet ® and Play ‘N Squeak ® patents. The primary reason for the significant decrease in litigation expenses is due to the reduced SmartScoop ® case activity.

The income from operations improved by $171,053 from a $121,001 in 2009 to $292,054 in 2010 as a result of our gross profit on sales increasing by $146,331, or 14.6%, and the decrease in litigation expenses of $128,504, which was partially offset by a 14.5% increase in selling, general and administrative expenses of $103,782.

Interest expense for 2010 was $29,808, a decrease of $12,551, from $42,359 in 2009. This decrease was due to (i) a decrease in interest expense for our bank line of credit of approximately $12,400, a result of the decrease in our average balance to $591,000 in 2010 from $1,800,000 in 2009 combined with a rate decrease to 3.750% in 2010 from 4.00% in 2009, and (ii) a decrease in interest expense of $5,500 related to outstanding balances on contributor notes which were reduced from $1,367,000 to $767,000 through a combination of payments and conversion of some of the notes into preferred stock, partially offset by an increase in interest expense of approximately $8,000 related to our three year $800,000 bank term loan obtained in September

 

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2009. Also, interest expense for our older bank term notes decreased by approximately $2,600 due to the reduced principal balances from the monthly payments.

Net income for 2010 was $262,246 as compared to net income of $78,610 for 2009, or an increase in profit of $183,636. This increase was a result of the following changes from 2009 to 2010:

 

Net revenue increase of 7.5%

   $ 253,554   

Cost of goods sold increase of 4.5%

     (107,223
        

Gross profit on sales increase of 14.6%

     146,331   

Selling, general and administrative expenses increase of 14.5%

     (103,782

Litigation expense decrease

     128,504   
        

Income from operations

     171,053   

Other income and expense, net decrease

     32   

Interest expense decrease of 29.6%

     12,551   
        

Increase in Profitability

   $ 183,636   
        

LIQUIDITY AND CAPITAL RESOURCES

Our operating activities provide cash from the sale of our products to customers with the principal use of cash being for the payments to suppliers that manufacture our products and for freight charges for shipments to our warehouse and to our customers. Our investing activities use cash mostly for the acquisition of equipment such as tooling, computers and software. Our financing activities provide cash, if needed, under our line of credit with our bank that had $1,040,000 in available funds at March 31, 2010 based upon the balance of accounts receivable and inventories at that date.

As of March 31, 2010, we had $2,569,385 in principal amount of indebtedness consisting of:

 

Bank line of credit

   Prime plus .50%    $ 960,000

Bank term notes

   4.61% and 7.60%      700,868

Contributor notes payable

   Prime plus 2%      767,500

Pet Zone Products Ltd (“Pet Zone”) term loan

   7.75%      28,526

Installment notes payable

   7.30%      12,491

Other notes payable

   Prime plus 3% & 10%      100,000

The bank line of credit indebtedness of $960,000 is from a line of credit with our bank under which we can borrow up to $2,000,000 based on the level of qualifying accounts receivable and inventories. The line of credit is renewable annually by the bank and therefore is classified as a current liability on our balance sheet. Currently the line of credit has been renewed by the bank through June 30, 2010. Under our agreement with the bank we are currently required to: (i) maintain a debt service coverage ratio of at least 1.15; (ii) maintain a tangible net worth of no less than $3,000,000; and (iii) obtain the bank’s permission to incur additional indebtedness, make any expenditures for property and equipment in excess of $500,000 in any fiscal year, redeem any of our capital stock, or pay cash dividends other than dividends on our preferred stock (subject to meeting the debt service coverage ratio). At March 31, 2010 we were in compliance with the covenants and default provisions under our agreement with the bank and had a debt service coverage ratio of 1.53 and a tangible net worth of $4,511,300.

On October 2, 2009, we obtained an $800,000 term loan (bank term note 2) from our bank. The term loan was the second of two credit facilities extended to us by our bank on September 17, 2009, the other being the renewal of our existing $2,000,000 line of credit through June 30, 2010. The term loan was used to pay down our line of credit by $800,000 from $1,800,000 to $1,000,000. The term loan has a fixed interest rate of 4.61% and is payable monthly over a three year period in equal installments of $23,859 that include interest. Effective October 2, 2009, the interest rate on our line of credit was reduced to prime plus .5% from prime plus .75%. Both bank loans are secured by our accounts receivable, inventory, equipment, trademarks, patents and the personal guarantee of certain stockholders.

 

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Contributor notes totaling $1,367,500 were issued in 2008 to fund patent litigation expenses related to a lawsuit filed against us by a competitor. In February 2010, $600,000 of the Notes were retired through a cash payment of $329,988 and conversion of $270,012 of the notes to preferred stock. Of the remaining $767,500 in outstanding contributor notes, $265,000 is due June 20, 1011, $27,500 is due July 30, 2011, $25,000 is due July 24, 2011, $100,000 is due August 13, 2011, $50,000 is due on October 7, 2010 and $300,000 is due on October 31, 2012.

The installment notes payable are due in monthly payments of $560, including interest, through March 2012. The other notes payable are due in the amount of $75,000 on December 1, 2010, to Beachcraft L.P. and $25,000 on November 1, 2010 to Over the Hill Ltd., plus accrued interest. Our indebtedness, which is secured by liens on our assets, was used to finance our equipment and working capital requirements. The agreements related to such indebtedness contain the customary covenants and default provisions.

The note payable to Beachcraft L.P. was originally for $150,000, $75,000 of which was repaid in 2003. As of February 1, 2004, a new note payable to Beachcraft L.P. was issued to replace the $75,000 remaining balance. The replacement note is due on December, 2010 with interest payable quarterly at prime plus 3%. In consideration for this refinancing we issued warrants for the purchase of 56,250 shares of Common Stock to Beachcraft L.P. at an exercise price of $0.30 per share with an expiration date of February 1, 2010. Subsequent to their issuance the warrants were adjusted to 57,204 warrants exercisable at $0.295 per share in accordance with the anti-dilution provisions of the warrants. These warrants were exercised in 2007.

Our short-term and long-term liquidity will continue to depend on our ability to achieve cash-flow break even on our operations and to increase sales of our products. For the year ended 2008, we recorded a loss of approximately $1,728,000 due to approximately $2,323,000 of litigation expenses and therefore had to rely on our financing activities to fund operations. For the year ended December 31, 2009, litigation expenses were significantly lower, we recorded a profit of approximately $776,000 and were able to rely on cash from our operating activities to fund our operations. In 2010, we anticipate exceeding the required debt service coverage ratio and the tangible net worth required by our bank to maintain our line of credit and therefore we should be able to fund our operating cash requirements for 2010. We have no material commitments for capital expenditures.

Net cash used in operating activities for the three months ended March 31, 2010 was $125,128. Cash was provided by the net income for the three months of $262,246, as well as the non-cash charges for depreciation of $112,121, amortization of $8,327, stock option expense of $6,000, and warrant expense of $5,001. Cash was used by the net change of $(518,823) in our operating assets and liabilities as follows:

 

Accounts receivable increase

   $ (103,014

Inventories increase

     (26,013

Prepaid expenses increase

     (163,277

Patent costs increase

     (3,356

Domain names and other assets increase

     (28,362

Accounts payable decrease

     (87,384

Accrued expenses decrease

     (107,417
        

Net change

   $ (518,823
        

Net cash used in investing activities for the three months ended March 31, 2010 was $155,613, which was used for the acquisition of property and equipment. Cash provided by financing activities for the three months ended March 31, 2010 was $275,028 and consisted of $865,312 from the issuance of preferred stock and net increased borrowings on the bank line of credit of $111,000, offset by principal payments on debt of $701,284.

CRITICAL ACCOUNTING POLICIES/ESTIMATES

We prepare our consolidated financial statements in accordance with United States generally accepted accounting principles. We have identified the accounting policies below as critical to our business operations and understanding of our results of operations. For a detailed discussion on the application of these and other accounting policies, see Summary of Significant Accounting Policies footnote to our unaudited consolidated financial statements included elsewhere in this quarterly report on Form 10-Q. The application of these policies may require management to make judgments and estimates that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported

 

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amounts of revenue and expenses during the reporting period. Management uses historical experience and all available information to make these estimates and judgments, and different amounts could be reported using different assumptions and estimates.

Inventories. Inventories are stated at the lower of cost or net realizable value. We estimate net realizable value based on intended use, current market value and inventory ageing analyses. We write down our inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

Impairment of Long-Lived Assets . We review long-lived assets for possible impairment by evaluating whether the carrying amount of assets exceed its recoverable amount. Our judgment regarding the existence of impairment is based on legal factors, market conditions and operational performance of our assets. Future adverse changes in legal environment, market conditions or poor operating results could result in losses or an inability to recover the carrying value of the long-lived assets, thereby possibly requiring an impairment charge in the future.

Research and Development Expenses. Research and development expenditures are charged to operations when incurred and are included in cost of goods sold. If funding is not available from operations our ability to develop new and/or improved products could be adversely affected.

OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements that have or are likely to have a current of future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

FORWARD LOOKING STATEMENTS

When used in this Form 10-Q, statements that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “anticipates”, “intends”, “expects” and similar expressions are intended to identify such forward-looking statements, which speak only as of the date of this Form 10-Q. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Uncertainties, risks, and other factors that may cause actual results or performance to differ materially from any results of performance expressed or implied by forward-looking statements in this Form 10-Q include: (1) our ability to manage our operating expenses and realize operating efficiencies, (2) our ability to maintain and grow our sales with existing and new customers, (3) our ability to retain existing members of our senior management team and to attract additional management employees, (4) our ability to manage fluctuations in the availability and cost of key materials and tools of production, (5) general economic conditions that might impact demand for our products, (6) competition from existing or new participants in the pet products industry, (7) our ability to design and bring to market new products on a timely and profitable basis, (8) challenges to our patents or trademarks on existing or new products, (9) our ability to secure access to sufficient capital on favorable terms to manage and grow our business, or (10) our ability to successfully defend the alleged patent infringement actions against us.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, OurPet’s is not required to provide the information required by this item.

 

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ITEM 4(T). CONTROLS AND PROCEDURES

As of March 31, 2010, an evaluation was performed under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934, as amended. Based upon that evaluation, our President and Chief Executive Officer and our Chief Financial Officer each concluded that our disclosure controls and procedures are effective as of March 31, 2010. Further, there was no change during the last quarter in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

We are party to certain material legal proceedings which are described in our Annual Report on Form 10-K under the caption “Item 3 – Legal Proceedings” filed on March 31, 2010. Except as discussed herein, we have not been named in any new material legal proceedings and there have been no material developments in the previously reported legal proceedings.

On October 12, 2007, Applica Consumer Products, Inc. (“Applica”) filed an action in the U.S. District Court, Eastern District of Texas, against the Company alleging patent infringement of certain of its patents. Applica has alleged that the Company’s SmartScoop™ self-scooping cat litter box infringes upon patents Applica controls for self-cleaning litter boxes. Applica is seeking damages and a permanent injunction prohibiting the Company from further infringement of Applica’s patents. The case is currently partially stayed in view of the U.S. International Trade Commission (“ITC”) investigation discussed below. Certain activity regarding the patent suit is continuing and is in the discovery stage.

On or about December 2, 2007, Applica filed a complaint with the ITC in Washington D.C. whereby Applica sought an order that permanently excludes the Company from importing products that allegedly infringe on Applica’s patents. The ITC held a hearing on the matter in August and the Initial Determination was issued in December by the Administrative Law Judge with the ITC on the action filed against us by Applica and found in our favor on all but one claim. On April 7, 2009 the ITC issued a ruling upholding the Initial Determination by the ITC Administrative Law Judge. On April 21, 2009, we certified to the U.S. Customs that our new revised products are non-infringing so that we could continue to import the products and on May 28, 2009, U.S. Customs ruled in our favor that the new model SmartScoop TM can be freely imported into the United States. Applica appealed the ITC’s April 7, 2009 ruling in our favor and the appeal is currently pending in the Court of Appeals for the Federal Circuit. We separately appealed the ITC decision finding infringement under the one claim because we believe it was decided on incorrect facts. A ruling on our and Applica’s appeals was previously expected by June, however, we currently do not anticipate receiving the court ruling until closer to year end.

In addition to the above matters and in the normal course of conducting its business, we may become involved in various other litigation, including, but not limited to, preference claims by debtors in bankruptcy proceedings. We are not a party to any litigation or governmental proceeding which our management or legal representatives believe could result in any judgments or fines against us that would have a material adverse effect or impact in our financial position, liquidity or results of operation.

 

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On January 28, 2010 and February 1, 2010, OurPet’s sold an aggregate of 123,616 shares of its Series 2009 Preferred Stock in a private placement to a total of 15 accredited investors. All shares in the private placement were sold at a price of $7.00 a share for a total of $865,312. Payment for the shares comprised of $595,000 in cash and $270,312 in converted debt (including accrued interest). All were previously reported in our Form 8-K filed February 2, 2010 except for 6,572 shares totaling $46,004 purchased by two additional accredited investors on February 1, 2010. All shares are convertible at any time into shares of common stock at a conversion price of $.70/common share, subject to adjustment for stock splits, combinations and similar transactions. All shares receive a 6% ($0.42) cash dividend payable on December 1 st of each year provided that payment may be deferred if necessary for our compliance with our loan covenants. We have the limited right to convert the shares into common stock at any time after the trading price of our common stock reaches $1.50 per share for twenty consecutive days.

The shares sold were not registered under the Securities Act of 1933, as amended (the “Act”), in reliance on the private offering exemption from registration provided by Section 4(2) of the Act and Rule 506 of Regulation D of the rules promulgated under the Act. We did not utilize an underwriter or placement agent in connection with the private placement.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

 

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

No matters were submitted to a vote of security holders during the first quarter of fiscal 2010.

 

ITEM 5. OTHER INFORMATION

None.

 

ITEM 6. EXHIBITS

 

11*    Statement of Computation of Net Income Per Share.
31.1*    Rule 13a-14(a) Certification of the Principal Executive Officer.
31.2*    Rule 13a-14(a) Certification of the Principal Financial Officer.
32.1*    Section 1350 Certification of the Principal Executive Officer.
32.2*    Section 1350 Certification of the Principal Financial Officer.

 

  * Filed herewith

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

      OURPET’S COMPANY
Dated: May 14, 2010      

/s/ Steven Tsengas

      Steven Tsengas
      Chairman, President and Chief
      Executive Officer
      (Principal Executive Officer)
Dated: May 14, 2010      

/s/ Scott R. Mendes

      Scott R. Mendes
      Chief Financial Officer and Treasurer
      (Principal Financial and Accounting Officer)

 

18

Exhibit 11

OURPET’S COMPANY AND SUBSIDIARIES

STATEMENT OF COMPUTATION OF NET INCOME PER SHARE

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND MARCH 31, 2009

 

     2010     2009  

Net income

   $ 262,246      $ 78,610   

Preferred Stock dividend requirements

     (12,531     (3,499
                

Net income attributable to common stockholders

   $ 249,715      $ 75,111   
                

Weighted average number of common shares and dilutive common equivalent outstanding

     18,173,581        15,313,600   
                

Net income per common share

   $ 0.01      $ —     
                

Exhibit 31.1

Rule 13a-14(a) Certification of the Principal Executive Officer

I, Steven Tsengas, certify that:

1) I have reviewed this report on Form 10-Q of OurPet’s Company.

2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonable likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 14, 2010

/s/ Steven Tsengas                                                     

Chairman, President and Chief Executive Officer

(Principal Executive Officer)

Exhibit 31.2

Rule 13a-14(a) Certification of the Principal Financial Officer

I, Scott R. Mendes, certify that:

1) I have reviewed this report on Form 10-Q of OurPet’s Company.

2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonable likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 14, 2010

/s/ Scott R. Mendes                                

Chief Financial Officer and Treasurer

(Principal Financial Officer)

Exhibit 32.1

Section 1350 Certification of the Chief Executive Officer

In connection with the Quarterly Report of OurPet’s Company (the “Company”) on Form 10-Q for the quarter ended March 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, being the Chairman, President and Chief Executive Officer of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) This Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report.

 

 

/s/ Steven Tsengas

  BY STEVEN TSENGAS
  Chairman of the Board, President and
  Chief Executive Officer

Dated: May 14, 2010

This certification is made solely for the purpose of 18 U.S.C. Section 1350, subject to the knowledge standard contained in that statute, and not for any other purpose. A signed original of this written statement required by Section 906 has been provided to OurPet’s Company and will be retained by OurPet’s Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

Section 1350 Certification of the Principal Financial Officer

In connection with the Quarterly Report of OurPet’s Company (the “Company”) on Form 10-Q for the quarter ended March 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, being the Chief Financial Officer and Treasurer of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) This Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report.

 

 

/s/ Scott R. Mendes

  BY SCOTT R. MENDES
  Chief Financial Officer and Treasurer

Dated: May 14, 2010

This certification is made solely for the purpose of 18 U.S.C. Section 1350, subject to the knowledge standard contained in that statute, and not for any other purpose. A signed original of this written statement required by Section 906 has been provided to OurPet’s Company and will be retained by OurPet’s Company and furnished to the Securities and Exchange Commission or its staff upon request.