SG&A expenses in the year ended December 31, 2012 increased by approximately $12.9 million to $35.4 million, compared to $22.5 million for the prior year period. As previously stated, the increase was primarily due to hiring and training of the Company’s new gastroenterology sales force, launch expenses associated with Omeclamox-Pak®, development of the Company’s OTC cough and cold product, an increase in stock compensation expense and operating expenses related to Great Southern Laboratories, expenses associated with acquisitions of Great Southern Laboratories, Cypress Pharmaceuticals, Hawthorn Pharmaceuticals and Somaxon Pharmaceuticals as well as an increase in corporate infrastructure costs to support the Company’s growth objectives.

Depreciation and amortization expense was $3.2 million for the year ended December 31, 2012, compared to $2.3 million for the prior year period. The Company recognized an income tax benefit of $0.4 million for the year ended December 31, 2012, compared to an income tax expense of $4.6 million in the prior year period.

Dr. Cocoa OTC Chocolate Flavored Cough and Cold Product Launch

The Company expects to launch Dr. Cocoa, an OTC chocolate flavored cough and cold product, in time for the 2013-2014 cough and cold season. The Dr. Cocoa product line includes daytime, nighttime, cough, cold and fever formulations.

Completed the Acquisition of Cypress Pharmaceuticals and Hawthorn Pharmaceuticals

On December 28, 2012, Pernix completed its acquisition of Cypress Pharmaceuticals, Inc. (“Cypress”), a privately-owned generic pharmaceutical company, and Hawthorn Pharmaceutical, Inc. (“Hawthorn”), a privately-owned branded pharmaceutical company. Under the terms of the definitive agreement announced on November 14, 2012 and as amended on December 28, 2012, Pernix will pay up to $102 million, including an up-front payment of $52.0 million in cash and $34.3 million in equity (approximately 4,427,084 shares of the Company’s common stock) at closing as well as up to $11 million payable in December 2013 and an additional $5 million in a milestone payment. In connection with the closing of the acquisition, the Company entered into a $42 million credit facility with Midcap Funding V, LLC and other lending parties.

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