Gross profit for 2012 was $1.788 million, or 21.4% of revenue, compared with $2.478 million, or 24.2% of revenue, in 2011 and reflects additional allowances provided to retailers to promote product awareness and product sell through.

Operating Expenses were approximately $2.121 million in 2012 compared with $1.606 million in 2011, a net increase of $514,600, or 32.0%. We continued to incur expenses for future revenue growth, specifically in Sales and Marketing, which increased by $217,900, or 149%, up from $146,400 in 2011 to $364,300, as the Company participated in the International Hotel, Motel and Restaurant Show and initiated rebranding activities to include all aspects of the product, such as logo and package design, advertising and merchandising.

Professional Fees for 2012 were $269,300 compared with $96,200 for 2011, an increase of $173,100, or 180%, as we incurred expenses in staffing the new entity CIHK with a Director and Manager, investor relations activities and package design and rebranding of our new product line. The Company realized a net loss of $607,200 compared with net income of $575,600 in the same period of the prior year.

Inventory increased to $584,400 at the end of 2012 from $58,700 at the end of 2011, necessitated by the Company’s domestic distribution program.

Investing for future growth

The Company is continuing to invest in the capabilities and technologies required to execute on its strategy to increase sales and production volume in all markets served. The rate of spending on these activities, however, will continue to be determined and driven by market opportunities.

Mr. Wallach noted, “As a result of our new strategic direction, we have achieved more success in securing larger accounts and have improved our new product launch outcomes in 2012. We anticipate that, through our association with AC Kinetics, we will create greater product value as we further improve the performance of our product lines. We will continue to focus on new product development and, together with our improved merchandizing approach, expect our new launches to be even stronger than prior efforts. We are already realizing improved product visibility in stores as a result of our revitalization of our brand in early 2013.”