Florida
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59-0676812
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(State
or other jurisdiction of incorporation or organization)
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(IRS
Employer Identification No.)
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Large
accelerated filer o
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller
reporting company x
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(Do
not check if a smaller reporting
company)
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Page
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||
PART
I – FINANCIAL INFORMATION
|
||
Item
1:
|
Financial
Statements
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3
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Item
2:
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Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
13
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Item
3:
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Quantitative
and Qualitative Disclosures about Market Risk
|
16
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Item
4T:
|
Controls
and Procedures
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16
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PART
II – OTHER INFORMATION
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||
Item
1:
|
Legal
Proceedings
|
17
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Item
1A:
|
Risk
Factors
|
17
|
Item
2:
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
17
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Item
3:
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Defaults
Upon Senior Securities
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17
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Item
4:
|
Submission
of Matters to a Vote of Security Holders
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17
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Item
5:
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Other
Information
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18
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Item
6:
|
Exhibits
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18
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Signatures
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19
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Certifications
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20
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September 30, 2008
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December 31, 2007
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||||||
CURRENT
ASSETS
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|||||||
Cash
and cash equivalents
|
$
|
4,494
|
$
|
4,977
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|||
Short-term
investments
|
3,150
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3,950
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|||||
Restricted
cash
|
278
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1,110
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|||||
Accounts
receivable, net
|
1,394
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1,430
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|||||
Inventories
|
5,536
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4,240
|
|||||
Prepaid
expenses and other current assets
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364
|
306
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|||||
TOTAL
CURRENT ASSETS
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15,216
|
16,013
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|||||
Property,
plant and equipment, net
|
1,436
|
1,419
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|||||
Deferred
income taxes
|
-
|
277
|
|||||
Trademarks,
goodwill and other intangibles, net
|
6,744
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5,749
|
|||||
Other
assets
|
2,842
|
2,846
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|||||
TOTAL
ASSETS
|
$
|
26,238
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$
|
26,304
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|||
CURRENT
LIABILITIES
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|||||||
Current
portion of long-term debt
|
$
|
413
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$
|
1,110
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|||
Accounts
payable and accrued expenses
|
2,112
|
2,156
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|||||
TOTAL
CURRENT LIABILITIES
|
2,525
|
3,266
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|||||
Long-term
debt, less current portion
|
392
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-
|
|||||
COMMITMENTS
AND CONTINGENCIES
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|||||||
STOCKHOLDERS'
EQUITY
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|||||||
Preferred
stock, $.01 par value; 1,000,000 shares authorized; none
issued.
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|||||||
Common
stock, $.01 par value; 25,000,000 shares authorized;
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|||||||
4,389,771
shares issued at September 30, 2008 and December 31, 2007
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44
|
44
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|||||
Additional
paid-in capital
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17,796
|
17,736
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|||||
Retained
earnings
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5,537
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5,258
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|||||
Treasury
stock, 18,827 shares held at September 30, 2008, at cost
|
(56
|
)
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-
|
||||
TOTAL
STOCKHOLDERS' EQUITY
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23,321
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23,038
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|||||
TOTAL
LIABILITIES & STOCKHOLDERS' EQUITY
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$
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26,238
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$
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26,304
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Quarter ended Sept. 30
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Nine Months ended Sept. 30,
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||||||||||||
2008
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2007
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2008
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2007
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||||||||||
Revenue
|
$
|
5,420
|
$
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5,600
|
$
|
14,129
|
$
|
15,747
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|||||
Cost
of revenue
|
2,849
|
2,960
|
7,281
|
8,491
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|||||||||
Gross
profit
|
2,571
|
2,640
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6,848
|
7,256
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|||||||||
Selling,
general and administrative expenses
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2,194
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2,064
|
6,130
|
6,536
|
|||||||||
Operating
income
|
377
|
576
|
718
|
720
|
|||||||||
Interest
income
|
36
|
93
|
193
|
278
|
|||||||||
Interest
expense
|
(3
|
)
|
(6
|
)
|
(9
|
)
|
(20
|
)
|
|||||
Income
before income taxes
|
410
|
663
|
902
|
978
|
|||||||||
Provision
for income taxes
|
164
|
260
|
360
|
389
|
|||||||||
NET
INCOME
|
$
|
246
|
$
|
403
|
$
|
542
|
$
|
589
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|||||
Basic
income per share
|
$
|
0.06
|
$
|
0.09
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$
|
0.12
|
$
|
0.13
|
|||||
Diluted
income per share
|
$
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0.06
|
$
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0.09
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$
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0.12
|
$
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0.13
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|||||
Dividends
per share
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$
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0.02
|
$
|
0.04
|
$
|
0.06
|
$
|
0.06
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Nine Months Ended Sept. 30,
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|||||||
2008
|
2007
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
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|||||||
NET
INCOME
|
$
|
542
|
$
|
589
|
|||
Adjustments
to reconcile net income to net cash flows
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|||||||
provided
by operating activities:
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|||||||
Depreciation
and amortization
|
87
|
102
|
|||||
Stock
option compensation
|
60
|
69
|
|||||
Deferred
income taxes
|
277
|
321
|
|||||
Changes
in operating assets & liabilities
|
|||||||
Accounts
receivable
|
76
|
(124
|
)
|
||||
Inventories
|
(1,089
|
)
|
(177
|
)
|
|||
Prepaid
expenses and other current assets
|
(50
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)
|
(66
|
)
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|||
Other
assets
|
4
|
9
|
|||||
Accounts
payable and accrued expenses
|
(354
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)
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(81
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)
|
|||
Total
adjustments to net income
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(989
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)
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53
|
||||
NET
CASH FLOWS (USED IN) PROVIDED BY OPERATING
ACTIVITIES
|
(447
|
)
|
642
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||||
CASH
FLOWS FROM INVESTING ACTIVITIES
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|||||||
Proceeds
from sale of short-term investments
|
800
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-
|
|||||
Acquisition
of Bowman Beauty and Barber Supply, Inc. ("Bowman")
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(500
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)
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-
|
||||
Purchases
of property, plant and equipment
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(17
|
)
|
(16
|
)
|
|||
NET
CASH FLOWS PROVIDED BY (USED IN) INVESTING
ACTIVITIES
|
283
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(16
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)
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||||
CASH
FLOWS FROM FINANCING ACTIVITIES
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|||||||
Decrease
in restricted cash
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832
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836
|
|||||
Repayment
of long-term debt
|
(832
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)
|
(832
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)
|
|||
Purchases
of treasury stock
|
(56
|
)
|
-
|
||||
Dividends
|
(263
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)
|
(263
|
)
|
|||
NET
CASH FLOWS (USED IN) FINANCING ACTIVITIES
|
(319
|
)
|
(259
|
)
|
|||
NET
(DECRASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
(483
|
)
|
367
|
||||
CASH
AND CASH EQUIVALENTS AT BEGINNING OF YEAR
|
4,977
|
7,064
|
|||||
CASH
AND CASH EQUIVALENTS AT END OF THIRD QUARTER
|
$
|
4,494
|
$
|
7,431
|
|||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
|
|||||||
Interest
paid
|
$
|
12
|
$
|
20
|
|||
Income
taxes paid
|
$
|
-
|
$
|
82
|
|||
Note
payable issued to former owner of Bowman and other liabilities
assumed
|
$
|
(528
|
)
|
$
|
-
|
15-30
years
|
|
5-10
years
|
|
Furniture
and office equipment
|
3-5
years
|
(in
thousands)
|
2008
|
2007
|
|||||
Raw
materials
|
$
|
1,258
|
$
|
1,380
|
|||
Packaging
and components
|
1,969
|
1,995
|
|||||
Work-in-process
|
474
|
437
|
|||||
Finished
goods
|
6,638
|
5,231
|
|||||
Total
inventory
|
10,339
|
9,043
|
|||||
Less:
amount included in Other Assets
|
(4,803
|
)
|
(4,803
|
)
|
|||
Inventory
included in Current Assets
|
$
|
5,536
|
$
|
4,240
|
Quarter ended Sept. 30,
|
Nine Months ended Sept. 30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Revenue
|
|||||||||||||
Distributors
|
$
|
4,183
|
$
|
4,082
|
$
|
10,674
|
$
|
10,681
|
|||||
Brands
|
1,237
|
1,518
|
3,455
|
5,066
|
|||||||||
5,420
|
5,600
|
14,129
|
15,747
|
||||||||||
Operating
Income (Loss)
|
|||||||||||||
Distributors
|
(85
|
)
|
147
|
(308
|
)
|
(330
|
)
|
||||||
Brands
|
462
|
429
|
1,026
|
1,050
|
|||||||||
377
|
576
|
718
|
720
|
||||||||||
Net
interest income
|
33
|
87
|
184
|
258
|
|||||||||
Income
before income taxes
|
410
|
663
|
902
|
978
|
|||||||||
Provision
for income taxes
|
164
|
260
|
360
|
389
|
|||||||||
Net
income
|
$
|
246
|
$
|
403
|
$
|
542
|
$
|
589
|
|||||
|
Sept.
30,
|
December 31,
|
|||||||||||
2008
|
2007
|
||||||||||||
Total
assets
|
|||||||||||||
Distributors
|
$
|
7,917
|
$
|
5,944
|
|||||||||
Brands
|
10,574
|
11,274
|
|||||||||||
Total
segment assets
|
18,491
|
17,218
|
|||||||||||
Cash
and cash equivalents, short-term investments, restricted
cash
|
7,922
|
10,037
|
|||||||||||
Eliminations
and other
|
(175
|
)
|
(951
|
)
|
|||||||||
Total
assets
|
$
|
26,238
|
$
|
26,304
|
Bowman
purchase price allocation:
|
||||
(000)
|
||||
Accounts
receivable, net
|
$
|
40
|
||
Inventories
|
207
|
|||
Prepaid
expenses and other current assets
|
8
|
|||
Property,
plant and equipment, net
|
87
|
|||
Accounts
payable and accrued expenses
|
(309
|
)
|
||
Long-term
debt assumed
|
(28
|
)
|
||
Net
assets of Bowman
|
5
|
|||
Goodwill
|
995
|
|||
Purchase
price ($500 cash plus $500 note payable)
|
$
|
1,000
|
(in
thousands, except per share data)
|
Quarter ended Sept. 30
|
Nine Months ended Sept. 30,
|
|||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Revenue
|
$
|
5,657
|
$
|
6,334
|
$
|
15,665
|
$
|
17,950
|
|||||
Net
income
|
$
|
246
|
$
|
403
|
$
|
542
|
$
|
589
|
|||||
Net
income per share
|
$
|
0.06
|
$
|
0.09
|
$
|
0.12
|
$
|
0.13
|
Item 2. |
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
(000)
|
||||
Revenue
|
$
|
410
|
||
Cost
of revenue
|
246
|
|||
Gross
profit
|
164
|
|||
Selling,
general and administrative expenses
|
131
|
|||
Operating
income
|
33
|
|||
Interest
expense
|
1
|
|||
Income
before income taxes
|
$
|
32
|
Variances
versus Prior Year
|
Third
Qtr.
|
Year-to-Date
|
|||||||||||
(in
thousands)
|
Excluding
|
Excluding
|
|||||||||||
As
Reported
|
Bowman
|
As
Reported
|
Bowman
|
||||||||||
Revenue
|
$
|
(180
|
)
|
$
|
(590
|
)
|
$
|
(1,618
|
)
|
$
|
(2,028
|
)
|
|
Cost
of revenue
|
(111
|
)
|
(357
|
)
|
(1,210
|
)
|
(1,456
|
)
|
|||||
Gross
profit
|
(69
|
)
|
(233
|
)
|
(408
|
)
|
(572
|
)
|
|||||
Selling,
general and administrative expenses
|
130
|
(1
|
)
|
(406
|
)
|
(537
|
)
|
||||||
Operating
income
|
$
|
(199
|
)
|
$
|
(232
|
)
|
$
|
(2
|
)
|
$
|
(35
|
)
|
Item 3. |
Quantitative
and Qualitative Disclosure about Market
Risk
|
Item 4T: |
Controls
and Procedures
|
(a)
|
Evaluation
of Disclosure Controls and
Procedures
|
Item 1. |
Legal
Proceedings
|
Item 1A: |
Risk
Factors
|
Item 2: |
Unregistered
Sales of Equity Securities and Use of
Proceeds
|
Item 3: |
Defaults
upon Senior Securities
|
Item 4: |
Submission
of Matters to a Vote of Security Holders
|
Item 5: |
Other
Information
|
Item 6: |
Exhibits
|
THE
STEPHAN CO.
|
|
By:
|
/s/
Frank F. Ferola
|
Frank
F. Ferola
|
|
President
and Chairman of the Board
|
|
November
19, 2008
|
|
By:
|
/s/
Robert C. Spindler
|
Robert
C. Spindler
|
|
Chief
Financial Officer
|
|
November
19, 2008
|