Sale of Patents Boosts PacificHealth Labs Progress

MATAWAN, N.J.—PacificHealth Labs Inc. (OTCBB:PHLI) reported a 58-percent increase in first quarter net sales to $1.6 million, up from about $1.0 million sold in the same quarter last year. Still, operating income was only marginally positive. However, a $3.9 million gain from the sale of patents and technology to Mott’s LLP helped drive overall earnings to $2.6 million or $0.22 per share, a marked improvement from $0.72 million or $0.07 per share lost in first quarter 2005.

“In the first quarter, we completed the asset purchase transaction with Mott’s, which is part of the Cadbury Schweppes Americas Beverages group,” said Robert Portman, president and chief executive officer (CEO) of PacificHealth (www.pacifichealthlabs.com). “We used the initial down payment to eliminate our outstanding debt, which has greatly improved our balance sheet. As Mott’s moves closer to the introduction of an Accelerade ready-todrink (RTD), our powder should receive a positive boost because of increased brand spend.This plus the potential of significant royalties paints a very positive picture for both our Accelerade and Endurox® R4® powder and gel business.” He noted Accelerade has become the official drink of the National Strength and Conditioning Association, the largest health and fitness organization in the world, a designation that will increase awareness of Accelerade and Endurox R4 among a key group of influencers, the strength and conditioning coaches.

Portman stated the successful quarter was also attributed to company initiatives. “Our first quarter results reflect a number of changes we instituted last year pertaining to our sales and marketing strategy,” he said. “These changes resulted in a major turnaround in our operations. This year we had an operating profit of $13,000 compared to a $701,000 loss for the corresponding quarter in 2005.” He noted the first quarter is traditionally a weak one because of the seasonal nature of sports drink sales.“However, this year sales were up 58 percent compared to last year,” he added. “And we introduced a new flavor for our Accel Gel® line and we will be shipping our new Lemonade Accelerade this month.”