United States

Securities and Exchange Commission

Washington, DC 20549

 

 

Form 10-Q

 

x QUARTERLY REPORT UNDER TO 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: June 30, 2009   Commission File No: 000-31279

 

 

OurPet’s Company

(Exact name of Registrant as specified in its charter)

 

 

 

Colorado   34-1480558

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

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 to its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to rule 405 of regulation S-T 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 July 31, 2009, the Registrant had outstanding 15,312,984 shares of Common Stock, 66,000 shares of Convertible Preferred Stock, convertible into 660,000 shares of Common Stock, and warrants exercisable for 4,363,817 shares of Common Stock.

 

 

 


Table of Contents

CONTENTS

 

       Page Number

Part I – Financial Information

  
Item 1 – Financial Statements (unaudited):   
  Consolidated Balance Sheets of OurPet’s Company and Subsidiaries as of June 30, 2009 and December 31, 2008    3
  Consolidated Statements of Operations of OurPet’s Company and Subsidiaries for the three and six month periods ended June 30, 2009 and 2008    5
  Consolidated Statement of Stockholders’ Equity of OurPet’s Company and Subsidiaries for the six month period ended June 30, 2009    6
  Consolidated Statements of Cash Flows of OurPet’s Company and Subsidiaries for the six month periods ended June 30, 2009 and 2008    7
  Notes to Consolidated Financial Statements    8
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations:   
  Overview    12
  Results of Operations    12
  Liquidity and Capital Resources    15
  Critical Accounting Policies/Estimates    16
  Off-Balance Sheet Arrangements    17
  Forward Looking Statements    17

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

   17

Item 4(T) – Controls and Procedures

   17

Part II – Other Information

  

Item 1 – Legal Proceedings

   17

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

   18

Item 3 – Defaults Upon Senior Securities

   18

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

   18

Item 5 – Other Information

   18

Item 6 – Exhibits

   19
  Signatures    19
  Certifications    21

 

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OURPET’S COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

     June 30,
2009
   December 31,
2008
     (Unaudited)     
ASSETS      

CURRENT ASSETS

     

Cash and cash equivalents

   $ 372,969    $ 363,573

Accounts receivable - trade, less allowance for doubtful accounts of $22,771 and $22,477

     1,765,208      1,420,884

Inventories

     3,389,102      3,303,617

Prepaid expenses

     169,647      73,995
             

Total current assets

     5,696,926      5,162,069
             

PROPERTY AND EQUIPMENT

     

Computers and office equipment

     333,080      296,298

Warehouse equipment

     254,812      254,176

Leasehold improvements

     128,372      120,705

Tooling

     3,416,695      3,316,059

Construction in progress

     141,659      199,386
             

Total

     4,274,618      4,186,624

Less accumulated depreciation

     2,329,387      2,110,074
             

Net property and equipment

     1,945,231      2,076,550
             

OTHER ASSETS

     

Patents, less amortization of $155,113 and $140,209

     259,744      259,506

Goodwill

     67,511      67,511

Domain names and other assets

     10,000      12,350
             

Total other assets

     337,255      339,367
             

Total assets

   $ 7,979,412    $ 7,577,986
             

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)

 

     June 30,
2009
    December 31,
2008
 
     (Unaudited)        
LIABILITIES     

CURRENT LIABILITIES

    

Notes payable

   $ 1,900,000      $ 1,900,000   

Current maturities of long-term debt

     750,251        144,581   

Accounts payable - trade

     1,409,002        1,238,367   

Accrued expenses

     675,625        666,051   
                

Total current liabilities

     4,734,878        3,948,999   
                

LONG-TERM DEBT

    

Long-term debt - less current portion above

     797,726        1,474,036   
                

Total liabilities

     5,532,604        5,423,035   
                
STOCKHOLDERS’ EQUITY     

COMMON STOCK ,
no par value; authorized 50,000,000 shares, issued and outstanding 15,312,984

     4,196,153        4,196,153   

CONVERTIBLE PREFERRED STOCK,
no par value; convertible into Common Stock at the rate of 10 common shares for each preferred share; authorized 5,000,000 shares, issued and outstanding 66,000 shares

     602,679        602,679   

PAID-IN CAPITAL

     88,143        69,829   

ACCUMULATED DEFICIT

     (2,440,167     (2,713,710
                

Total stockholders’ equity

     2,446,808        2,154,951   
                

Total liabilities and stockholders’ equity

   $ 7,979,412      $ 7,577,986   
                

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

 

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CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

     For the Three Months Ended
June 30,
    For the Six Months Ended
June 30,
 
     2009     2008     2009     2008  

Net revenue

   $ 3,605,332      $ 3,015,604      $ 6,995,711      $ 5,920,868   

Cost of goods sold

     2,521,688        2,218,441        4,911,999        4,256,842   
                                

Gross profit on sales

     1,083,644        797,163        2,083,712        1,664,026   

Selling, general and administrative expenses

     802,900        631,735        1,517,684        1,285,938   

Litigation expense

     81,361        890,091        245,674        1,449,213   
                                

Income (loss) from operations

     199,383        (724,663     320,354        (1,071,125

Other income and expense, net

     37,722        1,028        37,720        811   

Interest expense

     (42,172     (46,200     (84,531     (90,993
                                

Income (loss) before income taxes

     194,933        (769,835     273,543        (1,161,307

Income tax expense

     —          —          —          —     
                                

Net income (loss)

   $ 194,933      $ (769,835   $ 273,543      $ (1,161,307
                                

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

        

Net Income (Loss)

   $ 0.01      $ (0.05   $ 0.02      $ (0.08
                                

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

     16,005,237        15,246,226        15,984,780        15,245,105   
                                

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

SIX MONTHS ENDED JUNE 30, 2009

(Unaudited)

 

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

Balance at December 31, 2008

   66,000    $ 602,679    15,312,984    $ 4,196,153    $ 69,829    $ (2,713,710   $ 2,154,951

Net Income

   —        —      —        —        —        273,543        273,543

Stock-based compensation expense

   —        —      —        —        18,314      —          18,314
                                             

Balance at June 30, 2009

   66,000    $ 602,679    15,312,984    $ 4,196,153    $ 88,143    $ (2,440,167   $ 2,446,808
                                             

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 Six Months Ended
June 30,
 
     2009     2008  

CASH FLOWS FROM OPERATING ACTIVITIES

    

Net income (loss)

   $ 273,543      $ (1,161,307

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

    

Depreciation expense

     219,313        219,652   

Amortization expense

     14,904        13,618   

Stock option expense

     10,514        8,323   

Warrant expense

     7,800        4,381   

(Increase) decrease in assets:

    

Accounts receivable - trade

     (344,324     (274,689

Inventories

     (85,485     (489,353

Prepaid expenses

     (95,652     (56,980

Patent cost additions

     (15,142     (18,964

Domain names and other assets

     2,350        (58

Increase in liabilities:

    

Accounts payable - trade

     170,635        1,060,824   

Accrued expenses

     9,574        70,328   
                

Net cash provided by (used in) operating activities

     168,030        (624,225
                

CASH FLOWS FROM INVESTING ACTIVITIES

    

Acquisition of property and equipment

     (87,994     (157,566
                

Net cash (used in) investing activities

     (87,994     (157,566
                

CASH FLOWS FROM FINANCING ACTIVITIES

    

Principal payments on long-term debt

     (70,640     (129,344

Net borrowing on bank line of credit

     —          200,000   

Issuances of Common Stock

     —          630   

Issuance of long-term debt

     —          865,000   
                

Net cash (used in) provided by financing activities

     (70,640     936,286   
                

Net increase in cash

     9,396        154,495   

CASH AT BEGINNING OF PERIOD

     363,573        28,843   
                

CASH AT END OF PERIOD

   $ 372,969      $ 183,338   
                

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

    

Interest paid

   $ 46,925      $ 70,922   
                

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

JUNE 30, 2009

( 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, 2008 included in the Company’s Form 10-K filed with the Securities and Exchange Commission on March 31, 2009.

INVENTORIES

Inventories are carried at the lower of cost, first-in, first-out method or market. Inventories at June 30, 2009 and December 31, 2008 consist of:

 

     2009    2008

Finished goods

   $ 2,544,837    $ 2,425,396

Components and packaging

     844,265      878,221
             

Total

   $ 3,389,102    $ 3,303,617
             

All inventories are pledged as collateral for bank and small business administration 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 June 30, 2009, 41.7% of the Company’s revenue was derived from two major customers. Revenue generated from each of these customers amounted to $799,426 and $702,788, respectively which represents 22.2% and 19.5% of total revenue.

For the three months ended June 30, 2008, 45.0% of the Company’s revenue was derived from two major customers. Revenue generated from each of these customers amounted to $711,079 and $646,244, respectively which represents 23.6% and 21.4% of total revenue.

For the six months ended June 30, 2009, 46.1% of the Company’s revenue was derived from two major customers. Revenue generated from each of these customers amounted to $1,639,795 and $1,586,627, respectively, which represents 23.4% and 22.7% of total revenue.

For the six months ended June 30, 2008, 43.5% of the Company’s revenue was derived from two major customers. Revenue generated from each of these customers amounted to $1,377,786 and $1,198,384, respectively, which represents 23.3% and 20.2% of total revenue.

 

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OURPET’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

(Unaudited)

STOCK OPTIONS

In December 2004, the FASB issued FAS No.123R, “Share-Based Payment”, which revised FAS 123, “Accounting for Stock-Based Compensation”, and superseded ABP Opinion No. 25, “Accounting for Stock Issued to Employees” (ABP 25”) and related interpretations. FAS 123R requires 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 FAS 123R on January 1, 2006 and applied the modified prospective transition method. 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 FAS 123 pro-forma disclosures. The amount of compensation expense recognized in 2009 and 2008 as a result of stock options is not material.

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 antidilutive have not been included. As of June 30, 2009, common shares that are or could be potentially dilutive include 1,588,000 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. As of June 30, 2008, common shares that could be potentially dilutive include 1,410,500 stock options at exercise prices from $0.21 to $1.55 a share, 4,469,009 warrants to purchase Common Stock at exercise prices from $0.284 to $1.444 a share and 660,000 shares underlying the Preferred Stock at a conversion rate of $1.00 per share.

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, 2008. 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 June 30, 2009 through August 14, 2009 for potential recognition and disclosure in the consolidated financial statements. No events were identified that would require adjustment to or disclosure in the financial statements.

RECENT ACCOUNTING PRONOUNCEMENTS

In February 2007, the FASB issued FAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115, which provides all entities with an option to report selected financial assets and liabilities at fair value. The objective of the FAS No. 159 is to improve financial reporting by providing entities with the opportunity to mitigate volatility in earnings caused by measuring related assets and liabilities differently without having to apply the complex provisions of

 

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OURPET’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

(Unaudited)

RECENT ACCOUNTING PRONOUNCEMENTS - Continued

hedge accounting. FAS No. 159 is effective as of the beginning of an entity’s first fiscal year beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007 provided the entity also elects to apply the provisions of FAS No. 157, Fair Value Measurements. The adoption of this standard did have a material effect on the Company’s results of operations or financial position.

In September 2006, the FASB issued FAS No. 157, Fair Value Measurements , which provides enhanced guidance for using fair value to measure assets and liabilities. The standard applies whenever other standards require or permit assets or liabilities to be measured at fair value. The Standard does not expand the use of fair value in any new circumstances. FAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. In February 2008, the FASB issued Staff Position No. 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13, which removed leasing transactions accounted for under FAS No. 13 and related guidance from the scope of FAS No. 157. Also in February 2008, the FASB issued Staff Position No. 157-2, Partial Deferral of the Effective Date of Statement 157, which deferred the effective date of FAS No. 157 for all nonfinancial assets and nonfinancial liabilities to fiscal years beginning after November 15, 2008. The adoption of this standard did not have a material effect on the Company’s results of operations or financial position.

In December 2007, the FASB issued FAS No. 141 (revised 2007), Business Combinations (“FAS 141(R)”), which establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in an acquiree, including the recognition and measurement of goodwill acquired in a business combination. FAS No. 141(R) is effective for fiscal years beginning on or after December 15, 2008. Earlier adoption is prohibited. The adoption of this standard did not have a material effect on the Company’s results of operations or financial position.

In April 2008, the FASB issued FASB Staff Position No. 142-3, Determination of the Useful Life of Intangible Assets (“FSP 142-3”). FSP 142-3 amends the factors that should be considered in developing assumptions about renewal or extension used in estimating the useful life of a recognized intangible asset under FAS No. 142, Goodwill and Other Intangible Assets. This standard is intended to improve the consistency between the useful life of a recognized intangible asset under FAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under FAS No. 141R and other GAAP. FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008. The measurement provisions of this standard will apply only to intangible assets of the Company acquired after the effective date. The adoption of this FSB did not have a material effect on the Company’s results of operations or financial position.

In June 2008, the FASB issued FASB Staff Position (FSP) No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, to clarify that instruments granted in share-based payment transactions can be participating securities prior to the requisite service having been rendered. A basic principle of the FSP 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. The provisions of this FSP are effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data presented (including interim financial statements, summaries of earnings, and selected financial data)

 

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OURPET’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

(Unaudited)

RECENT ACCOUNTING PRONOUNCEMENTS - Continued

are required to be adjusted retrospectively to conform with the provisions of the FSP. The adoption of this FSP did not have a material effect of the Company’s results of operations or financial position.

In April 2009, the FASB issued FSP No. 107-1 and APB 28-1, Interim Disclosures about Fair Value of 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. Prior to issuing this ESP, fair values for these assets and liabilities were only disclosed once a year. The ESP now requires these disclosures on a quarterly basis, providing qualitative and quantitative information about fair value estimates for all those financial instruments not measured on the balance at fair value. FSP No. 107-1 and APB 28-1 is effective for interim and annual periods ending after June 15, 2009, but entities may early adopt this FSP for the interim and annual periods ending after March 15, 2009. The adoption of this FSP did not have a material effect on the Company’s results of operations or financial position.

In May 2009, the FASB issued FAS No. 165, Subsequent Events , which requires companies to evaluate events and transactions that occur after the balance sheet date but before the date the financial statements are issued, or available to be issued in the case of non-public entities. FAS No. 165 requires entities to recognize in the financial statements the effect of all events or transactions that provide additional evidence of conditions that existed at the balance sheet date, including the estimates inherent in the financial preparation process. Entities shall not recognize the impact of events or transactions that provide evidence about conditions that did not exist at the balance sheet date but arose after that date. FAS No. 165 also requires entities to disclose the date through which subsequent events have been evaluated. FAS No. 165 was effective for interim and annual reporting periods ending after June 15, 2009. The Company adopted the provisions of FAS No. 165 for the quarter ended June 30, 2009, as required, and adoption did not have a material impact on Company’s results of operations or financial position.

In June 2009, the FASB issued FAS No. 167, Amendments to FASB Interpretation No. 46(R) . FAS 167, which amends FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities , (FIN 46(R)), prescribes a qualitative model for identifying whether a company has a controlling financial interest in a variable interest entity (VIE) and eliminates the quantitative model prescribed by FIN 46(R). The new model identifies two primary characteristics of a controlling financial interest: (1) provides a company with the power to direct significant activities of the VIE, and (2) obligates a company to absorb losses of and/or provides rights to receive benefits from the VIE. FAS No. 167 requires a company to reassess on an ongoing basis whether it holds a controlling financial interest in a VIE. A company that holds a controlling financial interest is deemed to be the primary beneficiary of the VIE and is required to consolidate the VIE. This statement is effective for fiscal years beginning after November 15, 2009. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

In June 2009, the FASB issued FAS No. 168, The ‘FASB Accounting Standards Codification’ and the Hierarchy of Generally Accepted Accounting Principles. FAS No. 168 establishes the FASB Accounting Standards Codification (Codification), which was officially launched on July 1, 2009, and became the primary source of authoritative U.S. GAAP recognized by the FASB to be

 

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OURPET’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

(Unaudited)

RECENT ACCOUNTING PRONOUNCEMENTS - Continued

applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under the authority of Federal securities laws are also sources of authoritative GAAP for SEC registrants. The subsequent issuances of new standards will be in the form of Accounting Standards Updates that will be included in the Codification. FAS No. 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. As such, the Company plans to adopt FAS No.168 in connection with its third quarter 2009 reporting. As the Codification is neither expected nor intended to change GAAP, the adoption of FAS No.168 will not have a material impact on its results of operations or financial position.

 

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 15 and 16, we have funded our operations principally from net cash provided by borrowings during the year ended December 31, 2008 and from operating activities in the six months ended June 30, 2009.

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 June 30, 2009 we had a balance due of $1,800,000 under the line of credit with the bank at an interest rate of prime plus .75%.

RESULTS OF OPERATIONS

Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008

In the following discussion all references to 2009 are for the three months ended June 30, 2009 and all references to 2008 are for the three months ended June 30, 2008

Net revenue for 2009 was $3,605,332, an increase of 19.6% in revenue from $3,015,604 in 2008, consisting of net sales of proprietary products for the retail pet business. Of the $589,728 increase, approximately $145,000 came from our two largest customers and the balance of approximately $445,000 from all other customers. Total sales to all customers of new products in 2009 that were not sold in 2008, including the new Play-N-Squeak products, Flappy dog toys and new Durapet bowl items were approximately $806,000. Our sales to foreign customers increased by approximately $75,000 or 60% from 2008, mainly due to increased sales in England, Canada and Finland.

 

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While net revenue increased by 19.6% in 2009, cost of goods sold increased by 13.7%, from $2,218,441 in 2008 to $2,521,688 in 2009. The increase in cost of goods sold was due to the cost of purchased products sold and freight increasing by 15.47% (due mainly to the increased amount of purchased products needed for the higher volume sales in 2009) and lower gross margins on certain of our products.

Our variable and fixed warehouse and overhead cost increased by 6.0% from the comparable quarter in 2008 due mainly to increased costs for salaries, wages and payroll taxes for additional employees hired in research and development along with increased accruals for operations employee profit sharing.

As a result of the net revenue increasing by 19.6% and the cost of goods sold increasing by 13.7%, the Company’s gross profit on sales increased by $286,481 or 35.9% from $797,163 in 2008 to $1,083,644 in 2009.

Selling, general and administrative expenses in 2009 were $802,900, an increase of 27.1% or $171,165 from $631,735 for 2008. This increase was primarily the result of (i) increased marketing and promotion expenses of approximately $107,000 and (ii) increased salaries, wages, payroll taxes and employee benefits of approximately $53,000.

Litigation expenses in 2009 were $81,361, a decrease of $808,730 or 90.9% from $890,091 from 2008. 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) our filing patent infringement suits against several other competitors for their infringing on our Durapet and Play ‘N Squeak patents. The primary reason for the significant decrease in litigation expenses is due to reduced SmartScoop™ case activity while appeals are pending. It should be noted that OurPet’s won 7 out of the alleged 8 claims.

Income from our operations improved by $924,047 from a loss of ($724,663) in 2008 to an income of $199,384 in 2009 as a result of our gross profit on sales increasing by $286,481 or 35.9% and the decrease in litigation expenses of $808,730 which was partially offset by a 27.2% increase in selling, general and administrative expenses of $171,165.

Interest expense for 2009 was $42,172, a decrease of $4,028, from $46,200 in 2008. This decrease was primarily due to the approximately $7,000 decrease in interest expense for the bank line of credit due to the decrease in our average rate paid from 5.88% in 2008 to 4.00% in 2009 which more than offset the increase in average principal balance outstanding from $1,700,000 in 2008 to $1,800,000 in 2009. Also, the interest expense for the bank term notes and other subordinated debt decreased by approximately $4,000 due to the reduced principal balances from the monthly payments. These decreases were partially offset by the increased interest accrued for the promissory notes payable to the ten contributors of approximately $7,000 due to the increase in principal balances outstanding of $502,500.

Other income and expense net for 2009 was $37,722 an increase of $36,694 from $1,028 in 2008. This increase was primarily due to the receipt in April 2009 of $37,659 in final settlement proceeds from an action we had filed against Akon Plastic Enterprises, Inc. and certain parties related to it. Net Income for 2009 was $194,933 as compared to a net loss of ($769,835) for 2008 or an increase in profit of $ $964,768. This increase was a result of the following changes from 2008 to 2009.

 

Net revenue increase of 19.6%

   $ 589,728   

Cost of goods sold increase of 13.7%

     (303,247
        

Gross profit on sales increase of 35.9%

     286,481   

Selling, general and administrative expenses increase of 27.1%

     (171,165

Litigation expense decrease

     808,730   
        

Income (loss) from operations

     924,046   

Other income and expense, net increase

     36,694   

Interest expense decrease of 8.72%

     4,028   
        

Increase in Profitability

   $ 964,768   
        

 

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Six Months Ended June 30, 2009 Compared to Six Months Ended June 30, 2008

In the following discussion all references to 2009 are for the six months ended June 30, 2009 and all references to 2008 are for the six months ended June 30, 2008.

Net revenue for 2009 was $6,995,711, an increase of 18.2% in revenue from $5,920,868 in 2008, consisting of net sales of proprietary products for the retail pet business. Of the $1,074,843 increase, approximately $650,000 came from our two largest customers and the balance of approximately $425,000 from all other customers. Total sales to all customers of new products in 2009 that were not sold in 2008, including the new Play-N-Squeak products, Flappy dog toys and new Durapet bowl items were approximately $1,310,000. Our sales to foreign customers increased by approximately $104,000 or 41% from 2008, mainly due to increased sales in England and Finland.

While net revenue increased by 18.2% in 2009, cost of goods sold increased by 15.4%, from $4,256,842 in 2008 to $4,911,999 in 2009. The increase in cost of goods sold was due to the cost of purchased products sold and freight increasing by 18.21% (due mainly to the increased amount of purchased products needed for the higher volume sales in 2009) and lower gross margins on certain of our products.

Our variable and fixed warehouse and overhead cost increased by 3.5% from the comparable half year in 2008 due mainly to increased costs for salaries, wages and payroll taxes for additional employees hired in research and development along with increased accruals for operations employee profit sharing.

As a result of the net revenue increasing by 18.2% and the cost of goods sold increasing by 15.4%, the Company’s gross profit on sales increased by $419,686 or 25.2% from $1,664,026 in 2008 to $2,083,712 in 2009.

Selling, general and administrative expenses in 2009 were $1,517,684, an increase of 18.0% or $231,746 from $1,285,938 for 2008. This increase was primarily the result of (i) increased marketing and promotion expenses of approximately $123,000 and (ii) increased salaries, wages, payroll taxes and employee benefits of approximately $104,000.

Litigation expenses in 2009 were $245,674, a decrease of $1,203,539 or 83.0% from $1,449,213 from 2008. 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) our filing patent infringement suits against several other competitors for their infringing 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.

Income from our operations improved by $1,391,479 from a loss of ($1,071,125) in 2008 to an income of $320,354 in 2009 as a result of our gross profit on sales increasing by $419,686 or 25.2% and the decrease in litigation expenses of $1,203,539 which was partially offset by an 18.0% increase in selling, general and administrative expenses of $231,746.

Interest expense for 2009 was $84,531, a decrease of $6,462, from $90,993 in 2008. This decrease was primarily due to the approximately $15,000 decrease in interest expense for the bank line of credit due to the decrease in our average rate paid from 6.26% in 2008 to 4.00% in 2009 which more than offset the increase in average principal balance outstanding from $1,629,000 in 2008 to $1,800,000 in 2009. Also, the interest expense for the bank term notes and other subordinated debt decreased by approximately $9,000 due to the reduced principal balances from the monthly payments. These decreases were partially offset by the increased interest accrued for the promissory notes payable to the ten contributors of approximately $18,000 due to the increase in principal balances outstanding of $502,500 and time period during the 1 st half of 2008 in which funds were received.

Other income and expense net for 2009 was $37,720, an increase of $36,909 from $811 in 2008. This increase was primarily due to the receipt in April 2009 of $37,659 in final settlement proceeds from an action we had filed against Akon Plastic Enterprises, Inc. and certain parties related to it.

 

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Net income for 2009 was $273,543 as compared to a net loss of ($1,161,307) for 2008 or an increase in profit of $ $1,434,850. This increase was a result of the following changes from 2008 to 2009.

 

Net revenue increase of 18.2%

   $ 1,074,843   

Cost of goods sold increase of 15.4%

     (655,157
        

Gross profit on sales increase of 25.2%

     419,686   

Selling, general and administrative expenses increase of 18.0%

     (231,746

Litigation expense decrease

     1,203,539   
        

Income (loss) from operations

     1,391,479   

Other income and expense, net increase

     36,909   

Interest expense decrease of 7.1%

     6,462   
        

Increase in Profitability

   $ 1,434,850   
        

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 approximately $200,000 in available funds at June 30, 2009 based upon the balance of accounts receivable and inventories at that date.

As of June 30, 2009, we had $3,447,977 in principal amount of indebtedness consisting of:

 

Bank line of credit

   Prime plus .75%    $ 1,800,000

Bank term note

   7.60%      108,286

Contributor notes payable

   Prime plus 2%      1,367,500

Pet Zone Products Ltd term loan

   7.75%      55,452

Installment note payable

   7.30%      16,739

Other notes payable

   Prime plus 3% & 10%      100,000

The bank line of credit borrowing of $1,800,000 is under our line of credit agreement with our bank which allows us to borrow up to $2,000,000 based on the level of qualifying accounts receivable and inventories. The line of credit agreement is renewable annually by the bank and therefore is classified as a current liability on our balance sheet. Currently the agreement has been renewed by the bank through August 30, 2009. OurPet’s is in the process of finalizing an increase in its line of credit along with an extension through June 30, 2010. Under our agreements with the bank we are currently required to maintain a debt service coverage ratio of 1.15, a tangible net worth of $3,000,000, and obtain permission from the bank for any of the following: (a) to incur additional indebtedness, (b) enter additional leases if it would require total lease payments exceeding $190,280 in any fiscal year, (c) make any expenditures for property and equipment in excess of $300,000 in any fiscal year, and (d) pay cash dividends or redeem any of our capital stock other than dividends on our preferred stock subject to meeting the debt service coverage ratio. At June 30, 2009 we were in compliance with the covenants and default provisions under our agreement with the bank and had a debt service coverage ratio of 3.78 and a tangible net worth of $3,632,505.

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 February 1, 2010, to Beachcraft L.P. and $25,000 on August 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 February 1, 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.

 

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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 depend on our ability to achieve cash-flow break even on our operations and to increase sales of our products. We recorded a profit of approximately $187,000 for the year ended 2007 but recorded a loss of approximately $1,728,000 for the year ended 2008 and therefore relied on cash from our financing activities to fund our operations. The loss for the year ended 2008 included approximately $2,323,000 of litigation expenses which adversely affected our liquidity and financial covenants. We had significantly lower litigation expenses in the 1 st half of 2009 and expect them to remain lower for the remainder of 2009. Absent a failure to maintain the required debt service coverage ratio and the tangible net worth required by our bank to maintain our line of credit, we should be able to fund our operating cash requirements for 2009. We have no material commitments for capital expenditures.

Net cash provided from operating activities for the six months ended June 30, 2009 was $168,030. Cash totaling $526,074 was provided by the net income for the six months ended June 30, 2009 of $273,543, the non-cash charges for depreciation of $219,313, amortization of $14,904, stock option expense of $10,514 and warrant expense of $7,800. Cash was used by the net change of ($358,044) in our operating assets and liabilities as follows:

 

Accounts receivable increase

   $ (344,324

Inventories increase

     (85,485

Prepaid expenses increase

     (95,652

Patent costs increase

     (15,142

Other assets increase

     2,350   

Accounts payable increase

     170,635   

Accrued expenses increase

     9,574   
        

Net change

   $ (358,044
        

Net cash used in investing activities for the six months ended June 30, 2009 was $87,994, which was used for the acquisition of property and equipment. Cash used in financing activities for the six months ended June 30, 2009 was $70,640 for the principal payments on long-term debt.

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 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.

 

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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 or 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.

 

ITEM 4(T). CONTROLS AND PROCEDURES

As of June 30, 2009, 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 pursuant to Rule 13a-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, our President and Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective as of June 30, 2009.

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, 2009. 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.

 

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On March 3, 2009, the parties agreed to settle and dismiss an action that we had previously filed against Akon Plastic Enterprises, Inc. and certain parties related to it. The settlement agreement and mutual release were executed as of March 27, 2009 and final settlement funds of $ 37,659 were received on April 8, 2009.

On April 7, 2009 the International Trade Commission (“ITC”) issued a ruling upholding the Initial Determination by the ITC Administrative Law Judge which found in our favor on all but one claim with respect to claims filed against us by a competitor, Applica Consumer Products, Inc. We have appealed the ITC decision regarding the claim to the Court of Appeals for the Federal Circuit. On April 21, 2009 we certified to the U.S. Customs that our new revised products are non-infringing so that we can continue to import the products and on May 28, 2009 U.S. Customs ruled in our favor that the new model SmartScoop ® can be freely imported into the United States.

Additionally, 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.

 

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

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

 

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

The Annual Meeting of Stockholders of the Company was held on May 15, 2009. There were 13,587,758 shares of Common Stock present at the meeting in person or by proxy. The results of the vote taken at such meeting with respect to each nominee for director were as follows:

 

Nominee

   For    Against    Abstain

Joseph T. Aveni

   11,178,740    0    108,600

Dr. William M. Fraser

   11,178,740    0    108,600

James D. Ireland III

   11,178,740    0    108,600

John Spirk

   11,178,740    0    108,600

Dr. Steven Tsengas

   11,178,740    0    108,600

A vote was taken on the proposal to ratify the appointment of S.R. Snodgrass, A.C. as our independent auditors for the year ending December 31, 2009. Of the 13,587,758 shares present at the meeting in person or by proxy, 11,178,340 were voted in favor of such proposal, 600 shares were voted against such proposal, and 108,600 shares abstained from voting.

 

ITEM 5. OTHER INFORMATION

None.

 

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ITEM 6. EXHIBITS

 

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

 

* Filed herewith

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: August 14, 2009       /s/ Steven Tsengas
      Steven Tsengas
      Chairman, President and Chief Executive Officer
      (Principal Executive Officer)
Dated: August 14, 2009       /s/ Scott R. Mendes
      Scott R. Mendes
      Chief Financial Officer and Treasurer
      (Principal Financial and Accounting Officer)

 

19

Exhibit 11

OURPET’S COMPANY AND SUBSIDIARIES

STATEMENT OF COMPUTATION OF NET INCOME PER SHARE

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2009    2008     2009    2008  

Net income (loss)

   $ 194,933    $ (769,834   $ 273,543    $ (1,161,306

Preferred Stock dividend requirements

     —        (6,564     —        (13,128
                              

Net income (loss) attributable to common stockholders

   $ 194,933    $ (776,398   $ 273,543    $ (1,174,434
                              

Weighted average number of common shares outstanding

     15,312,984      15,246,226        15,312,984      15,245,105   

Preferred Stock Common Share Equivalents

     660,000      —          660,000      —     

Dilutive Stock Options outstanding for the Period

     32,253      —          11,796      —     

Dilutive Warrants outstanding for the Period

     —        —          —        —     
                              

Weighted average number of common and equivalent shares outstanding

     16,005,237      15,246,226        15,984,780      15,245,105   
                              

Net income (loss) per common share

   $ 0.01    $ (0.05   $ 0.02    $ (0.08
                              

 

20

Exhibit 31.1

Rule 13a-14(a) Certification of the Chief 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 we 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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: August 14, 2009

/s/ Steven Tsengas
Chairman, President and Chief Executive Officer
(Principal Executive Officer)

 

21

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 we 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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: August 14, 2009

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

 

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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 June 30, 2009 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, certify, 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: August 14, 2009

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.

 

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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 June 30, 2009 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, certify, 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: August 14, 2009

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.

 

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