##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-QSB
 (Mark One)
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended: September 30, 2007
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 000-49635
 MINRAD INTERNATIONAL, INC.
 (Exact name of small business issuer as specified in its charter)
 
 Delaware
    
    870299034(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)50 Cobham Drive, Orchard Park, New York
    
    14127(Address of principal executive offices)
    
    (Zip Code)
 (716) 855-1068
Issuers Telephone Number
 (Former name, former address and former fiscal year if changed since last report)
 
 þ o
 o þ
  o þ




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##### 



MINRAD INTERNATIONAL, INC.
FORM 10-QSB
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2007
 TABLE OF CONTENTS
 PAGEPART I.
    
    FINANCIAL INFORMATIONITEM 1.
    
    FINANCIAL STATEMENTS (Unaudited)Consolidated Balance Sheets at September 30, 2007 and December 31, 2006
    
    3Consolidated Statements of Operations Three and Nine-month periods
ended September 30, 2007 and 2006
    
    4Consolidated Statement of Changes in Stockholders Equity Nine-month
period ended September 30, 2007
    
    5Consolidated Statement of Changes in Stockholders Equity (Deficit)
Nine-month period ended September 30, 2006
    
    6Consolidated Statements of Cash Flows Nine-month periods ended
September 30, 2007 and 2006
    
    7Notes to Financial Statements
    
    8ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
    
    13ITEM 3.
    
    CONTROLS AND PROCEDURES
    
    16PART II.
    
    OTHER INFORMATIONITEM 1.
    
    LEGAL PROCEEDINGS
    
    17ITEM 2.
    
    UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS
    
    17ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
    
    17ITEM 4
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    17ITEM 5.
    
    OTHER INFORMATION
    
    17ITEM 6.
    
    EXHIBITS AND REPORTS ON FORM 8-K
    
    17SIGNATURES
    
    17EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



Item 1. Financial Statements .
 MINRAD INTERNATIONAL, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
 September 30, 2007
    
    
    December 31, 2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    118
    
    
    $
    4,664Investments
    
    
    
    
    
    
    7,249Interest receivable
    
    
    
    
    
    
    86Accounts receivable
    
    
    3,304
    
    
    
    10,473Inventories, net
    
    
    14,176
    
    
    
    4,360Prepaid expenses and other current assets
    
    
    1,607
    
    
    
    1,477Total current assets
    
    
    19,205
    
    
    
    28,309Property and equipment:Machinery and equipment
    
    
    3,027
    
    
    
    2,420Computers and software
    
    
    1,446
    
    
    
    571Furniture and fixtures
    
    
    797
    
    
    
    662Leasehold improvements
    
    
    385
    
    
    
    385Construction in progress
    
    
    15,135
    
    
    
    4,17720,790
    
    
    
    8,215Less accumulated depreciation
    
    
    1,973
    
    
    
    1,234Total property and equipment
    
    
    18,817
    
    
    
    6,981Other assets, net
    
    
    592
    
    
    
    439Total assets
    
    $
    38,614
    
    
    $
    35,729LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Bank demand note payable
    
    $
    4,300
    
    
    $
    Accounts payable
    
    
    8,101
    
    
    
    965Accrued expenses
    
    
    678
    
    
    
    1,262Current portion of long term debt
    
    
    205
    
    
    
    Total current liabilities
    
    
    13,284
    
    
    
    2,227Long term debt
    
    
    1,775
    
    
    
    Commitments and contingencies
    
    
    
    
    
    
    Stockholders equityCommon stock
    
    
    479
    
    
    
    470Additional paid-in-capital
    
    
    78,591
    
    
    
    76,513Accumulated deficit
    
    
    (55,515
    )
    
    
    (43,481
    )Total stockholders equity
    
    
    23,555
    
    
    
    33,502Total liabilities and stockholders equity
    
    $
    38,614
    
    
    $
    35,729
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##### Table of Contents



MINRAD INTERNATIONAL, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
 Three month periods ended
    
    
    Nine month periods endedSeptember
    
    
    September
    
    
    September
    
    
    September30, 2007
    
    
    30, 2006
    
    
    30, 2007
    
    
    30, 2006Revenue
    
    $
    2,691
    
    
    $
    5,278
    
    
    $
    9,921
    
    
    $
    10,449Cost of goods sold
    
    
    3,286
    
    
    
    3,214
    
    
    
    8,809
    
    
    
    6,121Gross profit (loss)
    
    
    (595
    )
    
    
    2,064
    
    
    
    1,112
    
    
    
    4,328Operating expenses:Sales and marketing
    
    
    2,144
    
    
    
    1,613
    
    
    
    6,016
    
    
    
    3,183Research and development
    
    
    1,590
    
    
    
    836
    
    
    
    4,037
    
    
    
    1,856Finance and administrative
    
    
    842
    
    
    
    1,444
    
    
    
    3,135
    
    
    
    3,308Total operating expenses
    
    
    4,576
    
    
    
    3,893
    
    
    
    13,188
    
    
    
    8,347Operating loss
    
    
    (5,171
    )
    
    
    (1,829
    )
    
    
    (12,076
    )
    
    
    (4,019
    )Interest income (expense):Interest expense:
    
    
    (98
    )
    
    
    
    
    
    
    (118
    )
    
    
    (153
    )Interest income
    
    
    9
    
    
    
    304
    
    
    
    160
    
    
    
    418Total non-operating
income (expense)
    
    
    (89
    )
    
    
    304
    
    
    
    42
    
    
    
    265Net loss
    
    
    (5,260
    )
    
    
    (1,525
    )
    
    
    (12,034
    )
    
    
    (3,754
    )Less preferred stock dividends:Cash dividends
    
    
    
    
    
    
    (162
    )
    
    
    
    
    
    
    (324
    )Non cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (183
    )Net loss available for common stockholders
    
    $
    (5,260
    )
    
    $
    (1,687
    )
    
    $
    (12,034
    )
    
    $
    (4,261
    )Net loss per share basic and diluted
    
    $
    (0.11
    )
    
    $
    (0.04
    )
    
    $
    (0.25
    )
    
    $
    (0.12
    )Weighted average common shares outstanding basic and diluted
    
    
    47,876
    
    
    
    41,563
    
    
    
    47,390
    
    
    
    34,810
  - 4 -




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##### Table of Contents



MINRAD INTERNATIONAL, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2007 (UNAUDITED)
(in thousands, except number of shares)
 Series AConvertiblePreferred Stock
    
    
    Common Stock
    
    
    Additional
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Paid-In Capital
    
    
    Deficit
    
    
    TotalBalance at December 31, 2006
    
    
    
    
    
    $
    
    
    
    
    47,048,240
    
    
    $
    470
    
    
    $
    76,513
    
    
    $
    (43,481
    )
    
    $
    33,502Stock options exercised
    
    
    
    
    
    
    
    
    
    
    45,291
    
    
    
    1
    
    
    
    116
    
    
    
    
    
    
    
    117Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    122
    
    
    
    
    
    
    
    122Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,386
    )
    
    
    (3,386
    )Balance at March 31, 2007
    
    
    
    
    
    $
    
    
    
    
    47,093,531
    
    
    $
    471
    
    
    $
    76,751
    
    
    $
    (46,867
    )
    
    $
    30,355Stock options exercised
    
    
    
    
    
    
    
    
    
    
    241,331
    
    
    
    2
    
    
    
    407
    
    
    
    
    
    
    
    409Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    275
    
    
    
    
    
    
    
    275Stock warrants exercised
    
    
    
    
    
    
    
    
    
    
    389,400
    
    
    
    3
    
    
    
    553
    
    
    
    
    
    
    
    556Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,388
    )
    
    
    (3,388
    )Balance at June 30, 2007
    
    
    
    
    
    $
    
    
    
    
    47,724,262
    
    
    $
    476
    
    
    $
    77,986
    
    
    $
    (50,255
    )
    
    $
    28,207Stock options exercised
    
    
    
    
    
    
    
    
    
    
    79,559
    
    
    
    1
    
    
    
    192
    
    
    
    
    
    
    
    193Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    268
    
    
    
    
    
    
    
    268Stock warrants exercised
    
    
    
    
    
    
    
    
    
    
    196,164
    
    
    
    2
    
    
    
    145
    
    
    
    
    
    
    
    147Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,260
    )
    
    
    (5,260
    )Balance at September 30, 2007
    
    
    
    
    
    $
    
    
    
    
    47,999,985
    
    
    $
    479
    
    
    $
    78,591
    
    
    $
    (55,515
    )
    
    $
    23,555
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##### Table of Contents



MINRAD INTERNATIONAL, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS DEFICIT
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2006 (UNAUDITED)
(in thousands, except number of shares)
 Series AConvertible Preferred
    
    
    
    
    
    
    
    
    
    
    AdditionalStock
    
    
    Common Stock
    
    
    Paid-In
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    TotalBalance at December 31, 2005
    
    
    11,200
    
    
    $
    3
    
    
    
    29,058,431
    
    
    $
    291
    
    
    $
    40,262
    
    
    $
    (36,209
    )
    
    $
    4,347Conversion of preferred
stock and accrued
dividends to common stock
    
    
    (290
    )
    
    
    
    
    
    
    145,953
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    2Stock options exercised
    
    
    
    
    
    
    
    
    
    
    33,608
    
    
    
    
    
    
    
    57
    
    
    
    
    
    
    
    57Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    118
    
    
    
    
    
    
    
    118Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (183
    )
    
    
    (183
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (565
    )
    
    
    (565
    )Balance at March 31, 2006
    
    
    10,910
    
    
    $
    3
    
    
    
    29,237,992
    
    
    $
    292
    
    
    $
    40,438
    
    
    $
    (36,957
    )
    
    $
    3,776Conversion of preferred
stock and accrued
dividends to common stock
    
    
    (286
    )
    
    
    
    
    
    
    219,713
    
    
    
    2
    
    
    
    179
    
    
    
    
    
    
    
    181Stock options exercised
    
    
    
    
    
    
    
    
    
    
    92,164
    
    
    
    1
    
    
    
    153
    
    
    
    
    
    
    
    154Stock warrants exercised
    
    
    
    
    
    
    
    
    
    
    480,956
    
    
    
    5
    
    
    
    470
    
    
    
    
    
    
    
    475Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    131
    
    
    
    
    
    
    
    131Sale of common stock; net
of costs
    
    
    
    
    
    
    
    
    
    
    11,500,000
    
    
    
    115
    
    
    
    34,397
    
    
    
    
    
    
    
    34,512Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (162
    )
    
    
    (162
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,665
    )
    
    
    (1,665
    )Balance at June 30, 2006
    
    
    10,624
    
    
    $
    3
    
    
    
    41,530,825
    
    
    $
    415
    
    
    $
    75,768
    
    
    $
    (38,784
    )
    
    $
    37,402Stock options exercise
    
    
    
    
    
    
    
    
    
    
    62,458
    
    
    
    1
    
    
    
    97
    
    
    
    
    
    
    
    98Stock warrants exercised
    
    
    
    
    
    
    
    
    
    
    73,536
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    398
    
    
    
    
    
    
    
    398Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (162
    )
    
    
    (162
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,525
    )
    
    
    (1,525
    )Balance at September 30, 2006
    
    
    10,624
    
    
    $
    3
    
    
    
    41,666,819
    
    
    $
    417
    
    
    $
    76,262
    
    
    $
    (40,471
    )
    
    $
    36,211
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##### Table of Contents



MINRAD INTERNATIONAL, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
 Nine-Month Period
    
    
    Nine-Month PeriodEnded
    
    
    EndedSeptember 30, 2007
    
    
    September 30, 2006Cash flows from operating activities:Net loss
    
    $
    (12,034
    )
    
    $
    (3,754
    )Adjustments to reconcile net loss to net
cash used by operating activities:Depreciation and amortization
    
    
    747
    
    
    
    368Stock based compensation
    
    
    665
    
    
    
    647(Increase) decrease in assets:Accounts receivable
    
    
    7,169
    
    
    
    (3,062
    )Interest receivable
    
    
    86
    
    
    
    (88
    )Inventories
    
    
    (9,816
    )
    
    
    (3,038
    )Prepaid expenses
    
    
    (130
    )
    
    
    (742
    )Increase (decrease) in liabilities:Accounts payable
    
    
    3,921
    
    
    
    (1,834
    )Accrued expenses
    
    
    (584
    )
    
    
    1,871Net cash used by operating activities
    
    
    (9,976
    )
    
    
    (9,632
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (9,360
    )
    
    
    (2,439
    )Proceeds from sales of investments
    
    
    7,249
    
    
    
    Acquisition of other assets
    
    
    (161
    )
    
    
    (136
    )Purchases of investments
    
    
    
    
    
    
    (10,778
    )Net cash used by investing activities
    
    
    (2,272
    )
    
    
    (13,353
    )Cash flows from financing activities:Borrowings under demand notes payable
    
    
    4,300
    
    
    
    400Repayments under demand note payable
    
    
    
    
    
    
    (3,120
    )Principal payments on long-term debt
    
    
    (83
    )
    
    
    Proceeds from long term debt
    
    
    2,063
    
    
    
    Proceeds from options exercised
    
    
    719
    
    
    
    310Proceeds from sale of common stock; net of costs
    
    
    
    
    
    
    34,512Proceeds from warrants exercised
    
    
    703
    
    
    
    475Preferred cash dividends paid
    
    
    
    
    
    
    (324
    )Net cash provided by financing activities
    
    
    7,702
    
    
    
    32,253Net increase (decrease) in cash and cash equivalents
    
    
    (4,546
    )
    
    
    9,268Cash and cash equivalents  Beginning of period
    
    
    4,664
    
    
    
    669Cash and cash equivalents  End of period
    
    $
    118
    
    
    $
    9,937
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##### Table of Contents



MINRAD INTERNATIONAL, INC. AND SUBSIDIARIES
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  BASIS OF PRESENTATION
  NOTE 2  RECENT ACCOUNTING PRONOUNCEMENTS
  NOTE 3  INVENTORIES
  September 30,
    
    
    December 31,2007
    
    
    2006Raw materials
    
    $
    8,839
    
    
    $
    1,179Work-in-process
    
    
    4,308
    
    
    
    2,028Finished goods
    
    
    1,029
    
    
    
    1,153Total
    
    $
    14,176
    
    
    $
    4,360
  NOTE 4  DEBT
     Year
    
    Commitment2007
    
    $
    502008
    
    
    2062009
    
    
    2142010
    
    
    2222011
    
    
    230Thereafter
    
    
    1,058Total
    
    $
    1,980
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##### Table of Contents



MINRAD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 4  DEBT (CONTINUED)
 th
 NOTE 5  EQUITY
  NOTE 6  SUPPLEMENTAL CASH FLOW INFORMATION
  Nine-Month Periods Ended2007
    
    
    2006Non-cash investing and financing activities(in thousands):Property and equipment acquisitions recorded as accounts payable
    
    $
    3,215
    
    
    $
    855Cashless exercise of warrants
    
    $
    1
    
    
    $
    1Preferred stock dividend payable
    
    $
    
    
    
    $
    170Conversion of preferred stock to common stock
    
    $
    
    
    
    $
    576Conversion of accrued dividends to common stock
    
    $
    
    
    
    $
    183
 NOTE 7  STOCK OPTIONS
    - 9 -




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##### Table of Contents



MINRAD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 7  STOCK OPTIONS (CONTINUED)
 Service Based Options:
 Nine-Month Periods EndedSeptember 30,
    
    September 30,2007
    
    2006Expected dividend yield
    
    
    0
    %
    
    
    0
    %Expected stock price volatility
    
    
    34
    %
    
    
    34
    %Risk-free interest rate
    
    
    4.7
    %
    
    
    4.8
    %Expected life of options
    
    3.6 Years
   
    5.0 Years
 Performance Based Options:
 Nine-Month Periods EndedSeptember 30,
    
    September 30,2007
    
    2006Expected dividend yield
    
    
    N/A
    
    
    
    0
    %Expected stock price volatility
    
    
    N/A
    
    
    
    34
    %Risk-free interest rate
    
    
    N/A
    
    
    
    4.8
    %Expected life of options
    
    
    N/A
    
    
    3.0 Years
  Service Based Options:
 Number of
    
    
    
    
    
    WeightedShares
    
    Weighted
    
    Average
    
    AggregateSubject To
    
    Average
    
    Remaining Life
    
    IntrinsicOptions
    
    Exercise Price
    
    (Years)
    
    ValueOutstanding as of December 31, 2006
    
    
    3,470,051
    
    
    $
    2.47Granted to employees  Nine-month
period ended September 30, 2007
    
    
    1,046,000
    
    
    $
    6.10Forfeited  Nine-month period ended September 30, 2007
    
    
    (412,750
    )
    
    $
    4.63Exercised  Nine-month period ended September 30, 2007
    
    
    (356,431
    )
    
    $
    1.90Outstanding as of September 30, 2007
    
    
    3,746,870
    
    
    $
    3.30
    
    
    
    3.35
    
    
    $
    6,798Exercisable as of September 30, 2007
    
    
    2,224,620
    
    
    $
    2.02
    
    
    
    3.22
    
    
    $
    6,170Performance Based Options:Number of
    
    
    
    
    
    WeightedShares
    
    Weighted
    
    Average
    
    AggregateSubject To
    
    Average
    
    Remaining
    
    IntrinsicOptions
    
    Exercise Price
    
    Life (Years)
    
    ValueOutstanding as of December 31, 2006
    
    
    1,480,000
    
    
    $
    4.25Granted to employees  Nine-month period ended
September 30, 2007
    
    
    
    
    
    $
    Forfeited  Nine-month period ended September 30, 2007
    
    
    (1,338,875
    )
    
    $
    4.25Exercised  Nine-month period ended September 30, 2007
    
    
    (9,750
    )
    
    $
    4.25Outstanding as of September 30, 2007
    
    
    131,375
    
    
    $
    4.25
    
    
    
    1.00
    
    
    $
    71Exercisable as of September 30, 2007
    
    
    131,375
    
    
    $
    4.25
    
    
    
    1.00
    
    
    $
    71
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##### Table of Contents



MINRAD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 7  STOCK OPTIONS (CONTINUED)
   Service Based Options:
 Number ofNon-vested
    
    WeightedShares Subject To
    
    Average Grant-Options
    
    Date Fair ValueNon-vested as of December 31, 2006
    
    
    1,461,710
    
    
    $
    1.20Non-vested granted  Nine-month period ended September 30, 2007
    
    
    1,040,000
    
    
    $
    1.55Vested  Nine-month period ended September 30, 2007
    
    
    (572,460
    )
    
    $
    1.09Forfeited  Three-month period ended September 30, 2007
    
    
    (407,000
    )
    
    $
    1.34Non-vested as of September 30, 2007
    
    
    1,522,250
    
    
    $
    1.42
 Performance Based Options:
 Number ofNon-vested
    
    WeightedShares Subject To
    
    Average Grant-Options
    
    Date Fair ValueNon-vested as of December 31, 2006
    
    
    1,338,875
    
    
    $
    0.97Non-vested granted  Nine-month period ended September 30, 2007
    
    
    
    
    
    $
    Vested  Nine-month period ended September 30, 2007
    
    
    
    
    
    $
    Forfeited  Nine-month period ended September 30, 2007
    
    
    (1,338,875
    )
    
    $
    0.97Non-vested as of September 30, 2007
    
    
    
    
    
    $
    
   NOTE 8  EARNINGS PER SHARE
  - 11 -




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##### Table of Contents



MINRAD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 9  SUBSEQUENT EVENTS
  th
 - 12 -




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations .
 Managements Discussion and Analysis of Financial Condition and Results of Operations
  Company Background
 TM TM
 Results of Operations  Nine-month period ended September 30, 2007 Compared To Nine-Month Period
Ended September 30, 2006.
 Nine-Month Periods EndedSeptember 30,
    
    
    September 30,(in thousands)
    
    2007
    
    
    2006Revenue
    
    $
    9,921
    
    
    $
    10,449Cost of goods sold
    
    
    8,809
    
    
    
    6,121Gross profit
    
    $
    1,112
    
    
    $
    4,328Gross margin
    
    
    11
    %
    
    
    41
    %
 Revenue
    Gross Profit
  - 13 -




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##### Table of Contents



Nine-Month Periods EndedSeptember 30,
    
    
    September 30,(in thousands)
    
    2007
    
    
    2006Operating expenses:Sales and marketing
    
    $
    6,016
    
    
    $
    3,183Research and development
    
    
    4,037
    
    
    
    1,856Finance and administrative
    
    
    3,135
    
    
    
    3,308Total operating expenses
    
    $
    13,188
    
    
    $
    8,347
 Sales & Marketing
  Research & Development
  Finance & Administrative
  Nine-Month Periods EndedSeptember 30,
    
    
    September 30,(in thousands)
    
    2007
    
    
    2006Non-operating (income) expense:Interest expense  bank and other
    
    $
    (118
    )
    
    $
    (153
    )Interest Income
    
    
    160
    
    
    
    418Total non-operating (income) expense
    
    $
    42
    
    
    $
    265
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##### Table of Contents



Interest Expense  bank and other
  Interest Income
  Nine-Month Periods EndedSeptember 30,
    
    
    September 30,(in thousands, except per share data)
    
    2007
    
    
    2006Net Loss
    
    $
    (12,034
    )
    
    $
    (3,754
    )Less preferred stock dividends  cash
    
    
    
    
    
    
    (324
    )Less preferred stock dividends  non cash
    
    
    
    
    
    
    (183
    )Net loss available to common
    
    $
    (12,034
    )
    
    $
    (4,261
    )Net loss per share, basic and diluted
    
    $
    (0.25
    )
    
    $
    (0.12
    )Weighted average common shares outstanding, basic and diluted
    
    
    47,390,015
    
    
    
    34,810,115
 Net Loss
  Dividends
  Liquidity and Capital
    - 15 -




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##### Table of Contents



Forward-Looking Statements
   
 Item 3. Controls and Procedures .
 Evaluation of Disclosure Controls and Procedures
 Changes in Internal Control Over Financial Reporting
 
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings .
  
 Item 2. Unregistered Sales of Securities and Use of Proceeds.
  
 Item 3. Defaults upon Senior Securities .
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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  
 Item 6. Exhibits and Reports onForm 8-K .
 The following exhibits are filed as part of this Quarterly Report on Form 10-QSB
 32.1
    
    Certification of Principal Executive Officer Pursuant to
Rules 13a-14(a)/15d-14(a) under the Exchange Act.31.2
    
    Certification of Principal Financial Officer Pursuant to
Rules 13a-14(a)/15d-14(a) under the Exchange Act.32.1
    
    Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 Signatures
   Date: November 13, 2007
    MINRAD INTERNATIONAL, INC.By:
    /s/ William H. Burns, Jr.William H. Burns, Jr., Chairman and CEO(Duly authorized officer and chief
executive officer of the Registrant) - 17 -