**U.
      S. SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**





**FORM
      10-Q**





**[
                X ]**
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES****EXCHANGE
                ACT OF 1934**


**For
        the quarterly period ended September 30,
        2007**


**or**




**[    ]**
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES****EXCHANGE
                ACT OF 1934**


**For
        the transition period from ____ to _____**


**Commission
      File Number: 001-32433**




**PRESTIGE
      BRANDS HOLDINGS, INC.**


(Exact
      name of Registrant as specified in its charter)





**Delaware**
            
            **20-1297589**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (I.R.S.
                Employer Identification No.)





**90
                North Broadway**
              **Irvington,
                New York 10533**(Address
                of Principal Executive Offices, including zip code)**(914)
                524-6810**(Registrant’s
                telephone number, including area
                code)











Indicate
      by check mark whether the Registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the Registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes x No o





Indicate
      by check mark whether the Registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer.  See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act.  (Check one):




Large
              accelerated filer o
            Accelerated
              filer x
            Non-accelerated
              filer o








Indicate
      by check mark whether the Registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes o 
No
x





As
      of
      October 31, 2007, there were 50,003,321 shares of common stock
      outstanding.






















**Prestige
      Brands Holdings, Inc.**


**Form
      10-Q**


**Index**





**PART
                  I.**
              **FINANCIAL
                  INFORMATION**Item
                  1.
              Consolidated
                  Financial StatementsConsolidated
                  Statements of Operations – three months ended September 30, 2007 and
                  2006 and six months ended September 30, 2007 and 2006
                  (unaudited)
              2Consolidated
                  Balance Sheets – September 30, 2007 and March 31, 2007
                  (unaudited)
              3Consolidated
                  Statement of Changes in Stockholders’ Equity and Comprehensive
                  Income – six months ended September 30, 2007
                  (unaudited)
              4Consolidated
                  Statements of Cash Flows – three months ended September 30, 2007 and
                  2006 and six months ended September 30, 2007 and 2006
                  (unaudited)
              5Notes
                  to Unaudited Consolidated Financial Statements
              6Item
                  2.
              Management’s
                  Discussion and Analysis of Financial Condition and
                  Results of Operations
              24Item
                  3.
              Quantitative
                  and Qualitative Disclosure About Market Risk
              41Item
                  4.
              Controls
                  and Procedures
              41**PART
                  II.**
              **OTHER
                  INFORMATION**Item
                  1.
              Legal
                  Proceedings
              42Item
                  1A.
              Risk
                  Factors
              43Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              43Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              43Item
                  6.
              Exhibits
              44Signatures
              45











-1-


**PART
                I**
            **FINANCIAL
                INFORMATION**





**Item
                1.**
            **FINANCIAL
                STATEMENTS**





**Prestige
      Brands Holdings, Inc.**


**Consolidated
      Statements of Operations**


***(Unaudited)***








**Three
                Months**
              **Ended
                September 30**
            
            
            **Six
                Months**
              **Ended
                September 30*****(In
                thousands, except per share data)***
            
            **2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006****Revenues**Net
                sales
            
            $
            86,840
            
            
            $
            84,033
            
            
            $
            164,881
            
            
            $
            159,600Other
                revenues
            
            
            497
            
            
            
            518
            
            
            
            1,067
            
            
            
            874Total
                revenues
            
            
            87,337
            
            
            
            84,551
            
            
            
            165,948
            
            
            
            160,474**Cost
                of Sales**Costs
                of sales
            
            
            42,770
            
            
            
            41,259
            
            
            
            80,092
            
            
            
            77,584Gross
                profit
            
            
            44,567
            
            
            
            43,292
            
            
            
            85,856
            
            
            
            82,890**Operating
                Expenses**Advertising
                and promotion
            
            
            11,017
            
            
            
            9,455
            
            
            
            18,803
            
            
            
            16,857General
                and administrative
            
            
            10,184
            
            
            
            7,259
            
            
            
            17,830
            
            
            
            13,693Depreciation
            
            
            129
            
            
            
            219
            
            
            
            253
            
            
            
            439Amortization
                of intangible assets
            
            
            2,627
            
            
            
            2,193
            
            
            
            5,254
            
            
            
            4,386Total
                operating expenses
            
            
            23,957
            
            
            
            19,126
            
            
            
            42,140
            
            
            
            35,375Operating
                income
            
            
            20,610
            
            
            
            24,166
            
            
            
            43,716
            
            
            
            47,515**Other
                income (expense)**Interest
                income
            
            
            173
            
            
            
            403
            
            
            
            360
            
            
            
            588Interest
                expense
            
            
            (9,768
            )
            
            
            (10,146
            )
            
            
            (19,642
            )
            
            
            (20,123
            )Total
                other income (expense)
            
            
            (9,595
            )
            
            
            (9,743
            )
            
            
            (19,282
            )
            
            
            (19,535
            )Income
                before provision for
              income taxes
            
            
            11,015
            
            
            
            14,423
            
            
            
            24,434
            
            
            
            27,980Provision
                for income taxes
            
            
            4,186
            
            
            
            5,639
            
            
            
            9,285
            
            
            
            10,940Net
                income
            
            $
            6,829
            
            
            $
            8,784
            
            
            $
            15,149
            
            
            $
            17,040Basic
                earnings per share
            
            $
            0.14
            
            
            $
            0.18
            
            
            $
            0.30
            
            
            $
            0.35Diluted
                earnings per share
            
            $
            0.14
            
            
            $
            0.18
            
            
            $
            0.30
            
            
            $
            0.34Weighted
                average shares outstanding:
              Basic
            
            
            49,710
            
            
            
            49,451
            
            
            
            49,686
            
            
            
            49,389Diluted
            
            
            50,046
            
            
            
            49,994
            
            
            
            50,042
            
            
            
            49,991





*See
      accompanying notes.*




-2-


**Prestige
      Brands Holdings, Inc.**


**Consolidated
      Balance Sheets**


***(Unaudited*)**





***(In
      thousands)***


**Assets**
            
            **September
                30, 2007**
            
            
            **March
                31, 2007**Current
                assetsCash
                and cash equivalents
            
            $
            8,799
            
            
            $
            13,758Accounts
                receivable
            
            
            46,512
            
            
            
            35,167Inventories
            
            
            27,783
            
            
            
            30,173Deferred
                income tax assets
            
            
            3,337
            
            
            
            2,735Prepaid
                expenses and other current assets
            
            
            3,628
            
            
            
            1,935Total
                current assets
            
            
            90,059
            
            
            
            83,768Property
                and equipment
            
            
            1,391
            
            
            
            1,449Goodwill
            
            
            308,915
            
            
            
            310,947Intangible
                assets
            
            
            651,903
            
            
            
            657,157Other
                long-term assets
            
            
            8,310
            
            
            
            10,095Total
                Assets
            
            $
            1,060,578
            
            
            $
            1,063,416**Liabilities
                and Stockholders’ Equity**Current
                liabilitiesAccounts
                payable
            
            $
            21,318
            
            
            $
            19,303Accrued
                interest payable
            
            
            7,556
            
            
            
            7,552Other
                accrued liabilities
            
            
            12,771
            
            
            
            10,505Current
                portion of long-term debt
            
            
            3,550
            
            
            
            3,550Total
                current liabilities
            
            
            45,195
            
            
            
            40,910Long-term
                debt
            
            
            433,563
            
            
            
            459,800Other
                long-term liabilities
            
            
            2,801
            
            
            
            2,801Deferred
                income tax liabilities
            
            
            117,609
            
            
            
            114,571Total
                Liabilities
            
            
            599,168
            
            
            
            618,082**Commitments
                and Contingencies – Note 13****Stockholders’
                Equity**Preferred
                stock - $0.01 par valueAuthorized
–
5,000
                sharesIssued
                and outstanding –
                None
            
            
            --
            
            
            
            --Common
                stock - $0.01 par valueAuthorized
–
250,000
                sharesIssued
–
50,060
                shares
            
            
            501
            
            
            
            501Additional
                paid-in capital
            
            
            380,371
            
            
            
            379,225Treasury
                stock, at cost – 57 shares at September 30, 2007
              and
                55 shares at March 31, 2007
            
            
            (44
            )
            
            
            (40
            )Accumulated
                other comprehensive income
            
            
            98
            
            
            
            313Retained
                earnings
            
            
            80,484
            
            
            
            65,335Total
                stockholders’ equity
            
            
            461,410
            
            
            
            445,334Total
                Liabilities and Stockholders’ Equity
            
            $
            1,060,578
            
            
            $
            1,063,416


*See
      accompanying notes.*




-3-


**Prestige
      Brands Holdings, Inc.**


**Consolidated
      Statement of Changes in Stockholders’ Equity**


**and
      Comprehensive Income**


**Six
      Months Ended September 30, 2007**


***(Unaudited)***








**Common
                Stock**
              **Par**
              **Shares              
                Value**
            
            
            **Additional**
              **Paid-in**
              **Capital**
            
            
            **Treasury
                Stock**
              **Shares            
                Amount**
            
            
            **Accumulated**
              **Other**
              **Comprehensive**
              **Income**
            
            
            **Retained**
              **Earnings**
            
            
            **Totals*****(In
                thousands)***Balances
                - March 31, 2007
            
            
            50,060
            
            
            $
            501
            
            
            $
            379,225
            
            
            
            55
            
            
            $
            (40
            )
            
            $
            313
            
            
            $
            65,335
            
            
            $
            445,334Stock-based
                compensation
            
            
            --
            
            
            
            --
            
            
            
            1,146
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            1,146Purchase
                of common stock for treasury
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            2
            
            
            
            (4
            )
            
            
            --
            
            
            
            --
            
            
            
            (4
            )Components
                of comprehensive income:Net
                income
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            15,149
            
            
            
            15,149Amortization
                of interest rate caps reclassified into earnings, net of income tax
                expense of $139
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            218
            
            
            
            --
            
            
            
            218Unrealized
                loss on interest rate caps, net of income tax benefit of
                $277
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            (433
            )
            
            
            --
            
            
            
            (433
            )Total
                comprehensive income
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            14,934Balances
                – September 30, 2007
            
            
            50,060
            
            
            $
            501
            
            
            $
            380,371
            
            
            
            57
            
            
            $
            (44
            )
            
            $
            98
            
            
            $
            80,484
            
            
            $
            461,410





*See
      accompanying notes.*




-4-


**Prestige
      Brands Holdings, Inc.**


**Consolidated
      Statements of Cash Flows**


***(Unaudited)***








**Six
                Months Ended September 30*****(In
                thousands)***
            
            **2007**
            
            
            **2006****Operating
                Activities**Net
                income
            
            $
            15,149
            
            
            $
            17,040Adjustments
                to reconcile net income to net cash provided by operating
                activities:Depreciation
                and amortization
            
            
            5,507
            
            
            
            4,825Deferred
                income taxes
            
            
            4,622
            
            
            
            6,197Amortization
                of deferred financing costs
            
            
            1,561
            
            
            
            1,609Stock-based
                compensation
            
            
            1,146
            
            
            
            224Changes
                in operating assets and liabilitiesAccounts
                receivable
            
            
            (11,345
            )
            
            
            2,595Inventories
            
            
            2,390
            
            
            
            5,202Prepaid
                expenses and other current assets
            
            
            (1,692
            )
            
            
            (1,047
            )Accounts
                payable
            
            
            1,884
            
            
            
            4,494Income
                taxes payable
            
            
            --
            
            
            
            (1,731
            )Accrued
                liabilities
            
            
            2,270
            
            
            
            3,326Net
                cash provided by operating activities
            
            
            21,492
            
            
            
            42,734**Investing
                Activities**Purchases
                of equipment
            
            
            (194
            )
            
            
            (313
            )Purchase
                of business
            
            
            (16
            )
            
            
            (31,242
            )Net
                cash used for investing activities
            
            
            (210
            )
            
            
            (31,555
            )**Financing
                Activities**Repayment
                of long-term debt
            
            
            (26,237
            )
            
            
            (8,865
            )Purchase
                of common stock for treasury
            
            
            (4
            )
            
            
            (6
            )Net
                cash used for financing activities
            
            
            (26,241
            )
            
            
            (8,871
            )Increase
                (decrease) in cash
            
            
            (4,959
            )
            
            
            2,308Cash
                - beginning of period
            
            
            13,758
            
            
            
            8,200Cash
                - end of period
            
            $
            8,799
            
            
            $
            10,508Interest
                paid
            
            $
            18,078
            
            
            $
            18,306Income
                taxes paid
            
            $
            5,664
            
            
            $
            6,287





*See
                accompanying notes.*




-5-


**Prestige
      Brands Holdings, Inc.**


**Notes
      to Consolidated Financial Statements**


***(Unaudited)***











**1.**
            **Business
                and Basis of Presentation**





***Nature
                of Business***


Prestige
      Brands Holdings, Inc. (referred to herein as the “Company” which reference
      shall, unless the context requires otherwise, be deemed to refer to Prestige
      Brands Holdings, Inc. and all of its direct or indirect wholly-owned
      subsidiaries on a consolidated basis) is engaged in the marketing, sales and
      distribution of over-the-counter healthcare, personal care and household
      cleaning brands to mass merchandisers, drug stores, supermarkets and club stores
      primarily in the United States, Canada and certain international
      markets.  Prestige Brands Holdings, Inc. is a holding company with no
      assets or operations and is also the parent guarantor of the senior secured
      credit facility and the senior subordinated notes more fully described in Note
      8
      to the consolidated financial statements.





***Basis
                of Presentation***


The
      unaudited consolidated financial statements presented herein have been prepared
      in accordance with generally accepted accounting principles for interim
      financial reporting and with the instructions to Form 10-Q and Article 10 of
      Regulation S-X.  Accordingly, they do not include all of the
      information and footnotes required by United States generally accepted
      accounting principles (“GAAP”) for complete financial statements.  All
      significant intercompany transactions and balances have been
      eliminated.  In the opinion of management, the financial statements
      include all adjustments, consisting of normal recurring adjustments that are
      considered necessary for a fair presentation of the Company’s consolidated
      financial position, results of operations and cash flows for the interim
      periods.  Operating results for the three and six month periods ended
      September 30, 2007 are not necessarily indicative of results that may be
      expected for the year ending March 31, 2008.  This financial
      information should be read in conjunction with the Company’s financial
      statements and notes thereto included in the Company’s Annual Report on Form
      10-K for the year ended March 31, 2007.





***Use
      of Estimates***


The
      preparation of financial statements in conformity with GAAP requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and disclosure of contingent assets and liabilities
      at
      the date of the financial statements, as well as the reported amounts of
      revenues and expenses during the reporting period.  Although these
      estimates are based on the Company’s knowledge of current events and actions
      that the Company may undertake in the future, actual results could differ
      materially from those estimates.  As discussed below, the Company’s
      most significant estimates include those made in connection with the valuation
      of intangible assets, sales returns and allowances, trade promotional allowances
      and inventory obsolescence.


***Cash
        and Cash Equivalents***


The
      Company considers all short-term deposits and investments with original
      maturities of three months or less to be cash
      equivalents.  Substantially all of the Company’s cash is held by one
      bank located in Wyoming.  The Company does not believe that, as a
      result of this concentration, it is subject to any unusual financial risk beyond
      the normal risk associated with commercial banking relationships.




***Accounts
        Receivable***


The
      Company extends non-interest bearing trade credit to its customers in the
      ordinary course of business.  The Company maintains an allowance for
      doubtful accounts receivable based upon historical collection experience and
      expected collectibility of the accounts receivable.  In an effort to
      reduce credit risk, the Company (i) has established credit limits for all of
      its
      customer relationships, (ii) performs ongoing credit evaluations of customers’
financial condition, (iii) monitors the payment history and aging of customers’
receivables, and (iv) monitors open orders against an individual customer’s
      outstanding receivable balance.


-6-
 ***Inventories***


Inventories
      are stated at the lower of cost or fair value, where cost is determined by
      using
      the first-in, first-out method.  The Company provides an allowance for
      slow moving and obsolete inventory, whereby it reduces inventories for the
      diminution of value, resulting from product obsolescence, damage or other issues
      affecting marketability, equal to the difference between the cost of the
      inventory and its estimated market value.  Factors utilized in the
      determination of estimated market value include (i) current sales data and
      historical return rates, (ii) estimates of future demand, (iii) competitive
      pricing pressures, (iv) new product introductions, (v) product expiration dates,
      and (vi) component and packaging obsolescence.


***Property
        and Equipment***


Property
      and equipment are stated at cost and are depreciated using the straight-line
      method based on the following estimated useful lives:




**Years**Machinery
            5Computer
                equipment
            3Furniture
                and fixtures
            7Leasehold
                improvements
            5





Expenditures
      for maintenance and repairs are charged to expense as incurred.  When
      an asset is sold or otherwise disposed of, the cost and associated accumulated
      depreciation are removed from the accounts and the resulting gain or loss is
      recognized in the consolidated statement of operations.




Property
      and equipment are reviewed for impairment whenever events or changes in
      circumstances indicate that the carrying amount of such assets may not be
      recoverable.  An impairment loss is recognized if the carrying amount
      of the asset exceeds its fair value.


***Goodwill***


The
      excess of the purchase price over the fair market value of assets acquired
      and
      liabilities assumed in purchase business combinations is classified as
      goodwill.  In accordance with Financial Accounting Standards Board
      (“FASB”) Statement of Financial Accounting Standards (“Statement”) No. 142,
“Goodwill and Other Intangible Assets,” the Company does not amortize goodwill,
      but performs impairment tests of the carrying value at least
      annually.  The Company tests goodwill for impairment at the “brand”
level which is one level below the operating segment level.


***Intangible
        Assets***


Intangible
      assets, which are composed primarily of trademarks, are stated at cost less
      accumulated amortization.  For intangible assets with finite lives,
      amortization is computed on the straight-line method over estimated useful
      lives
      ranging from five to 20 years.





Indefinite
      lived intangible assets are tested for impairment at least annually, while
      intangible assets with finite lives are reviewed for impairment whenever events
      or changes in circumstances indicate that the carrying amount of such assets
      may
      not be recoverable.  An impairment loss is recognized if the carrying
      amount of the asset exceeds its fair value.





***Deferred
      Financing Costs***


The
      Company has incurred debt issuance costs in connection with its long-term
      debt.  These costs are capitalized as deferred financing costs and
      amortized using the straight-line method, which approximates the effective
      interest method, over the term of the related debt.




-7-




***Revenue
        Recognition***


Revenues
      are recognized in accordance with Securities and Exchange Commission (“SEC”)
      Staff Accounting Bulletin 104, “Revenue Recognition,” when the following
      criteria are met: (1) persuasive evidence of an arrangement exists; (2) the
      product has been shipped and the customer takes ownership and assumes risk
      of
      loss; (3) the selling price is fixed or determinable; and (4) collection of
      the
      resulting receivable is reasonably assured.  The Company has
      determined that the transfer of risk of loss occurs when product is received
      by
      the customer and, accordingly, recognizes revenue at that
      time.  Provision is made for estimated discounts related to customer
      payment terms and estimated product returns at the time of sale based on the
      Company’s historical experience.





As
      is customary in
      the consumer products industry,the
      Company
      participatesin the promotional programs of its customers to enhance the sale of its
      products.The cost of these promotional programs varies based
      on the actual number of units sold during a finite period of time.The
      Company estimates the cost of such promotional programs at their inception
      based
      on historical experience and current market conditions and reduces sales by
      such
      estimates.These
      promotional
      programs consist of direct to consumer incentives such ascoupons and
      temporary price reductions, as well as incentives to the Company’s customers,
      such as slotting fees and cooperative advertising.  Estimates of the
      costs of these promotional programs are based on (i) historical sales
      experience, (ii) the current offering, (iii) forecasted data, (iv) current
      market conditions, and (v) communication with customer purchasing/marketing
      personnel.  At the completion of the promotional program, the
      estimated amounts are adjusted to actual results.





Due
      to
      the nature of the consumer products industry, the Company is required to
      estimate future product returns.  Accordingly, the Company records an
      estimate of product returns concurrent with recording sales which is made after
      analyzing (i) historical return rates, (ii) current economic trends, (iii)
      changes in customer demand, (iv) product acceptance, (v) seasonality of the
      Company’s product offerings, and (vi) the impact of changes in product
      formulation, packaging and advertising.


***Costs
        of Sales***


Costs
      of
      sales include product costs, warehousing costs, inbound and outbound shipping
      costs, and handling and storage costs.  Shipping, warehousing and
      handling costs were $6.6 million and $6.5 million for the three month periods
      ended September 30, 2007 and 2006, respectively, and $12.2 million for each
      of
      the six month periods ended September 30, 2007 and 2006,
      respectively.


***Advertising
        and Promotion Costs***


Advertising
      and promotion costs are expensed as incurred.  Slotting fees
      associated with products are recognized as a reduction of
      sales.  Under slotting arrangements, the retailers allow the Company’s
      products to be placed on the stores’ shelves in exchange for such
      fees.  Direct reimbursements of advertising costs are reflected as a
      reduction of advertising costs in the period earned.


***Stock-based
        Compensation***


During
      fiscal 2006,
      the Company adopted FASB, Statement No. 123(R), “Share-Based Payment”
(“Statement No. 123(R)”) with the grants of restricted stock and options to
      purchase common stock to employees and directors in accordance with the
      provisions of the Company’s 2005Long-Term Equity Incentive Plan (the
“Plan”).  Statement No. 123(R) requires the Company to measure the
      cost of services to be rendered based on the grant-date fair value of the equity
      award.  Compensation expense is to be recognized over the period an
      employee is required to provide service in exchange for the award, generally
      referred to as the requisite service period, and is included as a component
      of
      general and administrative expenses.  The Company recorded stock-based
      compensation costs of $685,000 and $1.1 million during the three and six month
      periods ended September 30, 2007, respectively.  During the three and
      six month periods ended September 30, 2006, the Company recorded stock-based
      compensation costs of $233,000 and $224,000, respectively.  During the
      three month period ended June 30, 2006, the Company recorded a net stock-based
      compensation credit of $9,000 due to the reversal of stock-based compensation
      costs in the amount of $142,000 associated with the departure of a former member
      of management.


***Income
        Taxes***


Income
      taxes are recorded in accordance with the provisions of FASB Statement No.
      109,
“Accounting for Income Taxes” (“Statement No. 109”).  Pursuant to
      Statement No. 109, deferred tax assets and liabilities are




-8-


determined
      based on the differences between the financial reporting and tax bases of assets
      and liabilities using the enacted tax rates and laws that will be in effect
      when
      the differences are expected to reverse.  A valuation allowance is
      established when necessary to reduce deferred tax assets to the amounts expected
      to be realized.





In
      June
      2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes--an interpretation of FASB Statement 109” (“FIN 48”), which
      clarifies the accounting for uncertainty in income taxes recognized in a
      company’s financial statements in accordance with Statement No.
      109.  FIN 48 prescribes a recognition threshold and measurement
      attributes for the financial statement recognition and measurement of a tax
      position taken or expected to be taken in a tax return.  As a result,
      the Company has applied a more-likely-than-not recognition threshold for all
      tax
      uncertainties.  FIN 48 allows the recognition of only those tax
      benefits that have a greater than 50% likelihood of being sustained upon
      examination by the various taxing authorities.  The adoption of FIN
      48, effective April 1, 2007, did not result in a cumulative effect adjustment
      to
      the opening balance of retained earnings or adjustment to any of the components
      of assets, liabilities or equity in the consolidated balance sheet.





The
      Company is subject to federal and state taxation in the US, as well as in
      various foreign jurisdictions.  The Company remains subject to
      examination by tax authorities for years after 2003.





The
      Company classifies penalties and interest related to unrecognized tax benefits
      as income tax expense in the Statement of Operations.


***Derivative
        Instruments***


FASB
      Statement No. 133, “Accounting for Derivative Instruments and Hedging
      Activities” (“Statement No. 133”), requires companies to recognize derivative
      instruments as either assets or liabilities in the balance sheet at fair
      value.  The accounting for changes in the fair value of a derivative
      instrument depends on whether it has been designated and qualifies as part
      of a
      hedging relationship and further, on the type of hedging
      relationship.  For those derivative instruments that are designated
      and qualify as hedging instruments, a company must designate the hedging
      instrument, based upon the exposure being hedged, as a fair value hedge, a
      cash
      flow hedge or a hedge of a net investment in a foreign operation.





The
      Company has designated its derivative financial instruments as cash flow hedges
      because they hedge exposure to variability in expected future cash flows that
      are attributable to interest rate risk.  For these hedges, the
      effective portion of the gain or loss on the derivative instrument is reported
      as a component of other comprehensive income (loss) and reclassified into
      earnings in the same line item associated with the forecasted transaction in
      the
      same period or periods during which the hedged transaction affects earnings.
      Any
      ineffective portion of the gain or loss on the derivative instruments is
      recorded in results of operations immediately.





***Earnings
      Per Share***


Basic
      earnings per share is calculated based on income available to common
      stockholders and the weighted-average number of shares outstanding during the
      reporting period.  Diluted earnings per share is calculated based on
      income available to common stockholders and the weighted-average number of
      common and potential common shares outstanding during the reporting
      period.  Potential common shares, composed of the incremental common
      shares issuable upon the exercise of stock options, stock appreciation rights
      and unvested restricted shares, are included in the earnings per share
      calculation to the extent that they are dilutive.





***Fair
      Value of Financial Instruments***


The
      carrying value of cash, accounts receivable and accounts payable at both
      September 30, 2007 and March 31, 2007 approximates fair value due to the
      short-term nature of these instruments.  The carrying value of
      long-term debt at both September 30, 2007 and March 31, 2007 approximates fair
      value based on interest rates for instruments with similar terms and
      maturities.


***Recently
        Issued Accounting Standards***


In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities - Including an amendment of FASB
      Statement No. 115” (“Statement No. 159”).  Statement No. 159 permits
      companies to choose to measure certain financial instruments and certain other
      items at fair value.




-9-


Unrealized
      gains and losses on items for which the fair value option has been elected
      will
      be recognized in earnings at each subsequent reporting
      date.  Statement No. 159 is effective for the Company’s interim
      financial statements issued after April 1, 2008.  The Company is
      evaluating the impact that the adoption of Statement No. 159 will have on its
      consolidated financial statements.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”
(“Statement No. 157”) to address inconsistencies in the definition and
      determination of fair value pursuant to GAAP.  Statement No. 157
      provides a single definition of fair value, establishes a framework for
      measuring fair value in GAAP and expands disclosures about fair value
      measurements in an effort to increase comparability related to the recognition
      of market-based assets and liabilities and their impact on
      earnings.  Statement No. 157 is effective for the Company’s interim
      financial statements issued after April 1, 2008.  The Company is
      evaluating the impact that the adoption of Statement No. 157 will have on its
      consolidated financial statements.





Management
      has reviewed and continues to monitor the actions of the various financial
      and
      regulatory reporting agencies and is currently not aware of any other
      pronouncement that could have a material impact on the
      Company’s consolidated financial position, results of operations or cash
      flows.








**2.**
            **Accounts
                Receivable**





Accounts
      receivable consist of the following (in thousands):


**September
                30,**
              **2007**
            
            
            **March
                31,**
              **2007**Accounts
                receivable
            
            $
            48,679
            
            
            $
            35,274Other
                receivables
            
            
            1,286
            
            
            
            1,68149,965
            
            
            
            36,955Less
                allowances for discounts, returns and
              uncollectible
                accounts
            
            
            (3,453
            )
            
            
            (1,788
            )$
            46,512
            
            
            $
            35,167








**3.**
            **Inventories**





Inventories
      consist of the following (in thousands):


**September
                30,**
              **2007**
            
            
            **March
                31,**
              **2007**Packaging
                and raw materials
            
            $
            2,281
            
            
            $
            2,842Finished
                goods
            
            
            25,502
            
            
            
            27,331$
            27,783
            
            
            $
            30,173





Inventories
      are shown net of allowances for obsolete and slow moving inventory of $1.3
      million and $1.8 million at September 30, 2007 and March 31, 2007,
      respectively.




-10-





**4.**
            **Property
                and Equipment**





Property
      and equipment consist of the following (in thousands):


**September 30,**
              **2007**
            
            
            **March
                31,**
              **2007**Machinery
            
            $
            1,397
            
            
            $
            1,480Computer
                equipment
            
            
            477
            
            
            
            566Furniture
                and fixtures
            
            
            205
            
            
            
            247Leasehold
                improvements
            
            
            319
            
            
            
            3722,398
            
            
            
            2,665Accumulated
                depreciation
            
            
            (1,007
            )
            
            
            (1,216
            )$
            1,391
            
            
            $
            1,449








**5.**
            **Goodwill**





A
      reconciliation of the activity affecting goodwill by operating segment is as
      follows (in thousands):





**Over-the-Counter**
              **Healthcare**
            
            
            **Household**
              **Cleaning**
            
            
            **Personal**
              **Care**
            
            
            **Consolidated**Balance
                – March 31, 2007
            
            $
            235,647
            
            
            $
            72,549
            
            
            $
            2,751
            
            
            $
            310,947Acquisition
                purchase price adjustments
            
            
            (2,032
            )
            
            
            --
            
            
            
            --
            
            
            
            (2,032
            )Balance
                – September 30, 2007
            
            $
            233,615
            
            
            $
            72,549
            
            
            $
            2,751
            
            
            $
            308,915








**6.**
            **Intangible
                Assets**





A
      reconciliation of the activity affecting intangible assets is as follows (in
      thousands):





**Indefinite**
              **Lived**
              **Trademarks**
            
            
            **Finite**
              **Lived**
              **Trademarks**
            
            
            **Non**
              **Compete**
              **Agreement**
            
            
            **Totals*****Carrying
                Amounts***Balance
                – March 31, 2007
            
            $
            544,963
            
            
            $
            139,470
            
            
            $
            196
            
            
            $
            684,629Additions
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --Balance
                – September 30, 2007
            
            $
            544,963
            
            
            $
            139,470
            
            
            $
            196
            
            
            $
            684,629***Accumulated
                Amortization***Balance
                – March 31, 2007
            
            $
            --
            
            
            $
            27,375
            
            
            $
            97
            
            
            $
            27,472Additions
            
            
            --
            
            
            
            5,232
            
            
            
            22
            
            
            
            5,254Balance
                – September 30, 2007
            
            $
            --
            
            
            $
            32,607
            
            
            $
            119
            
            
            $
            32,726








-11-


At
      September 30, 2007, intangible assets are expected to be amortized over a period
      of five to 30 years as follows (in thousands):





**Year
                Ending September 30**2008
            
            $
            10,5072009
            
            
            9,7992010
            
            
            9,0712011
            
            
            9,0712012
            
            
            9,071Thereafter
            
            
            59,421$
            106,940








**7.**
            **Other
                Accrued Liabilities**





Other
      accrued liabilities consist of the following (in thousands):





**September
                30,**
              **2007**
            
            
            **March
                31,**
              **2007**Accrued
                marketing costs
            
            $
            7,820
            
            
            $
            5,687Accrued
                payroll
            
            
            3,100
            
            
            
            3,721Accrued
                commissions
            
            
            357
            
            
            
            335Other
            
            
            1,494
            
            
            
            762$
            12,771
            
            
            $
            10,505





-12-





**8.**
            **Long-Term
                Debt**





Long-term
      debt consists of the following (in thousands):


**September
                30,**
              **2007**
            
            
            **March
                31,**
              **2007**Senior
                revolving credit facility (“Revolving Credit Facility”), which expires on
                April 6, 2009 and is available for maximum borrowings of up to $60.0
                million.  The Revolving Credit Facility bears interest at the
                Company’s option at either the prime rate plus a variable margin or LIBOR
                plus a variable margin.  The variable margins range from 0.75%
                to 2.50% and at September 30, 2007, the interest rate on the Revolving
                Credit Facility was 8.75% per annum.  The Company is also
                required to pay a variable commitment fee on the unused portion of
                the
                Revolving Credit Facility.  At September 30, 2007, the
                commitment fee was 0.50% of the unused line.  The Revolving
                Credit Facility is collateralized by substantially all of the Company’s
                assets.
            
            $
            --
            
            
            $
            --Senior
                secured term loan facility (“Tranche B Term Loan Facility” and together
                with the Revolving Credit Facility, the “Senior Credit Facility”) that
                bears interest at the Company’s option at either the prime rate plus a
                margin of 1.25% or LIBOR plus a margin of 2.25%.  At September
                30,
                2007, the average interest rate on the Tranche B Term Loan Facility
                was 7.74%.  Principal payments of $887,500 plus accrued interest
                are payable quarterly.  At September 30, 2007, the Company may
                borrow up to a maximum amount of $200.0 million under the Tranche
                B Term
                Loan Facility.  Current amounts outstanding under the Tranche B
                Term Loan Facility mature on April 6, 2011, while any additional
                amounts
                borrowed will mature on October 6, 2011.  The Tranche B Term
                Loan Facility is collateralized by substantially all of the Company’s
                assets.
            
            
            311,113
            
            
            
            337,350Senior
                Subordinated Notes that bear interest at 9.25% which is payable on
                April
                15th
                and
                October 15th
                of each
                year.  The Senior Subordinated Notes mature on April 15, 2012;
                however, the Company may redeem some or all of the Senior Subordinated
                Notes on or prior to April 15, 2008 at a redemption price equal to
                100%
                plus a make-whole premium, and after April 15, 2008, at redemption
                prices
                set forth in the Indenture governing the Senior Subordinated
                Notes.  The Senior Subordinated Notes are unconditionally
                guaranteed by Prestige Brands Holdings, Inc. and its domestic wholly-owned
                subsidiaries other than Prestige Brands, Inc., the issuer.  Each
                of these guarantees is joint and several.  There are no
                significant restrictions on the ability of any of the guarantors
                to obtain
                funds from their subsidiaries.
            
            
            126,000
            
            
            
            126,000437,113
            
            
            
            463,350Current
                portion of long-term debt
            
            
            (3,550
            )
            
            
            (3,550
            )$
            433,563
            
            
            $
            459,800





Effective
      as of December 19, 2006: (i) a Second Supplemental Indenture (“Second
      Supplemental Indenture”), and (ii) a Guaranty Supplement (“Indenture Guaranty
      Supplement”) were entered into with the trustee for the holders




-13-


of
      the
      Senior Subordinated Notes.  The Second Supplemental Indenture
      supplements and amends the Indenture, dated as of April 6, 2004, as supplemented
      on October 6, 2004 (“Indenture”).  Pursuant to the terms of the Second
      Supplemental Indenture and the Indenture Guaranty Supplement, the Company agreed
      to guaranty all of the obligations of Prestige Brands, Inc., an indirect
      wholly-owned subsidiary of the Company (“PBI”), set forth in the Indenture
      governing PBI’s Senior Subordinated Notes.  The Second Supplemental
      Indenture also amended the covenant requiring Prestige Brands International,
      LLC
      (“Prestige Brands International”), an indirect wholly-owned subsidiary of the
      Company, to file periodic reports with the SEC pursuant to Section 13 or 15(d)
      of the Securities Exchange Act of 1934, as amended (“Exchange
      Act”).  So long as the Company or any other guarantor is required to
      file periodic reports under Section 13 or 15(d) of the Exchange Act that are
      substantially the same as the periodic reports that Prestige Brands
      International would otherwise be required to file with the SEC pursuant to
      the
      Indenture, Prestige Brands International is not required to file such
      reports.





Also
      effective as of December 19, 2006, a Joinder Agreement (“Joinder Agreement”) and
      a Guaranty Supplement (“Credit Agreement Guaranty Supplement”) were entered into
      with the administrative agent for the lenders under the Senior Credit
      Facility.  Pursuant to the terms of the Joinder Agreement and the
      Credit Agreement Guaranty Supplement, the Company agreed to become a party
      to
      the Pledge and Security Agreement (“Security Agreement”) and the Guaranty
      (“Credit Agreement Guaranty”), each dated as of April 6, 2004, by PBI and
      certain of its affiliates in favor of the lenders.  The Security
      Agreement and the Credit Agreement Guaranty secure the performance by PBI of
      its
      obligations under the Credit Agreement, dated as of April 6, 2004, as amended
      (“Credit Agreement”), by granting security interests to PBI’s lenders in
      collateral owned by the Company and certain of its subsidiaries and providing
      guaranties of such obligations by certain of PBI’s affiliates.





The
      Senior Credit Facility contains various financial covenants, including
      provisions that require the Company to maintain certain leverage ratios,
      interest coverage ratios and fixed charge coverage ratios.  The Senior
      Credit Facility and the Senior Subordinated Notes also contain provisions that
      restrict the Company from undertaking specified corporate actions, such as
      asset
      dispositions, acquisitions, dividend payments, repurchase of common shares
      outstanding, changes of control, incurrence of indebtedness, creation of liens,
      making of loans and transactions with affiliates.  Additionally, the
      Senior Credit Facility and the Senior Subordinated Notes contain cross-default
      provisions whereby a default pursuant to the terms and conditions of either
      indebtedness will cause a default on the remaining indebtedness.  At
      September 30, 2007, the Company was in compliance with its applicable financial
      and other covenants under the Senior Credit Facility and the
      Indenture.





Future
      principal payments required in accordance with the terms of the Senior Credit
      Facility and the Senior Subordinated Notes are as follows (in
      thousands):





**Year
                Ending September 30**2008
            
            $
            3,5502009
            
            
            3,5502010
            
            
            3,5502011
            
            
            300,4632012
            
            
            126,000$
            437,113





In
      an
      effort to mitigate the impact of changing interest rates, the Company entered
      into interest rate cap agreements with various financial
      institutions.  In June 2004, the Company purchased a 5% interest rate
      cap with a notional amount of $20.0 million which expired in June
      2006.  In March 2005, the Company purchased interest rate cap
      agreements with a total notional amount of $180.0 million and cap rates ranging
      from 3.25% to 3.75%.  On May 31, 2006, an interest rate cap agreement
      with a notional amount of $50.0 million and a 3.25% cap rate
      expired.  Additionally, an interest rate cap agreement with a notional
      amount of $80.0 million and a 3.50% cap rate expired on May 30,
      2007.  The remaining agreement, with a notional amount of $50.0
      million and a cap rate of 3.75%, terminates on May 30, 2008.  The
      Company is accounting for the interest rate cap agreements as cash flow
      hedges.  The fair values of the interest rate cap agreements, which
      are included in other long-term assets, were $486,000 and $1.2 million at
      September 30, 2007 and March 31,
      2007,
      respectively.




-14-


**9.**
            **Stockholders’
                Equity**





The
      Company is authorized to issue 250.0 million shares of common stock, $0.01
      par
      value per share, and 5.0 million shares of preferred stock, $0.01 par value
      per
      share. The Board of Directors may direct the issuance of the undesignated
      preferred stock in one or more series and determine preferences, privileges
      and
      restrictions thereof.





Each
      share of common stock has the right to one vote on all matters submitted to
      a
      vote of stockholders.  The holders of common stock are also entitled
      to receive dividends whenever funds are legally available and when declared
      by
      the Board of Directors, subject to prior rights of holders of all classes of
      stock outstanding having priority rights as to dividends.  No
      dividends have been declared or paid on the Company’s common stock through
      September 30, 2007.








**10.**
            **Earnings
                Per Share**





The
      following table sets forth the computation of basic and diluted earnings per
      share (in thousands):





**Three
                Months Ended**
              **September
                30**
            
            
            **Six
                Months Ended**
              **September
                30****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006****Numerator**Net
                income
            
            $
            6,829
            
            
            $
            8,784
            
            
            $
            15,149
            
            
            $
            17,040**Denominator**Denominator
                for basic earnings per share – weighted average shares
            
            
            49,710
            
            
            
            49,451
            
            
            
            49,686
            
            
            
            49,389Dilutive
                effect of unvested restricted common stock
            
            
            336
            
            
            
            543
            
            
            
            356
            
            
            
            602Denominator
                for diluted earnings
              per
                share
            
            
            50,046
            
            
            
            49,994
            
            
            
            50,042
            
            
            
            49,991**Earnings
                per Common Share:**Basic
            
            $
            0.14
            
            
            $
            0.18
            
            
            $
            0.30
            
            
            $
            0.35Diluted
            
            $
            0.14
            
            
            $
            0.18
            
            
            $
            0.30
            
            
            $
            0.34





At
      September 30, 2007, 243,000 shares of restricted stock issued to management
      and
      employees prior to the Company’s initial public offering are unvested and
      excluded from the calculation of basic earnings per share; however, such shares
      are included in the calculation of diluted earnings per share.  At
      September 30, 2007, 160,000 shares of restricted stock granted to management,
      directors and employees, subject only to time vesting requirements, have been
      excluded from basic earnings per share; however, such shares are included in
      the
      calculation of diluted earnings per share.  Additionally, 378,000
      shares of restricted stock granted to management and employees, as well as
      16,000 stock appreciation rights have been excluded from the calculation of
      both
      basic and diluted earnings per share since vesting of such shares is subject
      to
      contingencies, while options to purchase 255,000 shares of common stock have
      been excluded from diluted earnings per shares because their inclusion would
      be
      anti-dilutive.





At
      September 30, 2006, 522,000 shares of restricted stock issued to management
      and
      employees prior to the Company’s initial public offering were unvested and
      excluded from the calculation of basic earnings per share; however, such shares
      are included in the calculation of diluted earnings per
      share.  Additionally, at September 30, 2006, 278,000 shares of
      restricted stock granted to management and employees have been excluded from
      the
      calculation of both basic and diluted earnings per share since vesting of such
      shares is subject to contingencies.








-15-


**11.**
            **Share-Based
                Compensation**





In
      connection with the Company’s initial public offering, the Board of Directors
      adopted the Plan which provides for the grant, to a maximum of 5.0
      million shares, of stock options, restricted stock units, deferred stock units
      and other equity-based awards.  Directors, officers and other
      employees of the Company and its subsidiaries, as well as others performing
      services for the Company, are eligible for grants under the Plan.  The
      Company believes that such awards better align the interests of its employees
      with those of its stockholders.





During
      2006, the Company adopted Statement No. 123(R) with the initial grants of
      restricted stock and options to purchase common stock to employees and directors
      in accordance with the provisions of the Plan.  During the six month
      period ended September 30, 2007, the Company recorded compensation costs and
      related tax benefits of $1.1 million and $418,000, respectively, while during
      the six month period ended September 30, 2006, the Company recorded compensation
      costs and related tax benefits of $225,000 and $88,000,
      respectively.





**Restricted
      Shares**


Restricted
      shares granted under the Plan generally vest in 3 years, contingent on
      attainment of Company performance goals, including both revenue and earnings
      per
      share growth targets, or time vesting, as determined by the Compensation
      Committee of the Board of Directors.  Certain restricted share awards
      provide for accelerated vesting if there is a change of control.  The
      fair value of nonvested restricted shares is determined as the closing price
      of
      the Company’s common stock on the day preceding the grant date.  The
      weighted-average grant-date fair value of restricted shares granted during
      2007
      was $12.52.





A
      summary
      of the Company’s restricted shares granted under the Plan is presented
      below:





**Restricted
                Shares**
            
            **Shares**
              **(000)**
            
            
            **Weighted-Average**
              **Grant-Date**
              **Fair
                Value**Nonvested
                at March 31, 2006
            
            
            198.0
            
            
            $
            12.32Granted
            
            
            156.5
            
            
            
            9.83Vested
            
            
            (13.1
            )
            
            
            10.67Forfeited
            
            
            (39.0
            )
            
            
            12.82Nonvested
                at September 30, 2006
            
            
            302.4
            
            
            $
            11.04Nonvested
                at March 31, 2007
            
            
            294.4
            
            
            $
            11.05Granted
            
            
            292.0
            
            
            
            12.52Vested
            
            
            (24.8
            )
            
            
            10.09Forfeited
            
            
            (23.2
            )
            
            
            11.39Nonvested
                at September 30, 2007
            
            
            538.4
            
            
            $
            11.88








-16-


**Options**


The
      Plan
      provides that the exercise price of the option granted shall be no less than
      the
      fair market value of the Company’s common stock on the date the option is
      granted.  Options granted have a term of no greater than 10 years from
      the date of grant and vest in accordance with a schedule determined at the
      time
      the option is granted, generally 3 years.





The
      fair
      value of each option award is estimated on the date of grant using the
      Black-Scholes Option Pricing Model (“Black-Scholes Model”) that uses the
      assumptions noted in the following table.  Expected volatilities are
      based on the historical volatility of the Company’s common stock and other
      factors, including the historical volatilities of comparable
      companies.  The Company uses appropriate historical data, as well as
      current data, to estimate option exercise and employee termination
      behaviors.  Employees that are expected to exhibit similar exercise or
      termination behaviors are grouped together for the purposes of
      valuation.  The expected terms of the options granted are derived from
      management’s estimates and information derived from the public filings of
      companies similar to the Company and represent the period of time that options
      granted are expected to be outstanding.  The risk-free rate represents
      the yield on U.S. Treasury bonds with a maturity equal to the expected term
      of
      the granted option.  The weighted-average grant-date fair value of the
      options granted during the six month period ended September 30, 2007 was
      $5.30.  There were no options granted during 2006.





**2007**
            
            
            **2006**Expected
                volatility
            
            
            33.2
            %
            
            
            --Expected
                dividends
            
            
            --
            
            
            
            --Expected
                term in years
            
            
            6.0
            
            
            
            --Risk-free
                rate
            
            
            4.5
            %
            
            
            --





A
      summary
      of option activity under the Plan is as follows:





**Options**
            
            **Shares**
              **(000)**
            
            
            **Weighted-Average**
              **Exercise**
              **Price**
            
            
            **Weighted-**
              **Average**
              **Remaining**
              **Contractual
                Term**Outstanding
                at March 31, 2006
            
            
            61.8
            
            
            $
            12.95
            
            
            
            4.3Granted
            
            
            --
            
            
            
            --
            
            
            
            --Exercised
            
            
            --
            
            
            
            --
            
            
            
            --Forfeited
                or expired
            
            
            (61.8
            )
            
            
            12.95
            
            
            
            --Outstanding
                at September 30, 2006
            
            
            --
            
            
            $
            --
            
            
            
            --Outstanding
                at March 31, 2007
            
            
            --
            
            
            $
            --
            
            
            
            --Granted
            
            
            255.1
            
            
            
            12.86
            
            
            
            10.0Exercised
            
            
            --
            
            
            
            --
            
            
            
            --Forfeited
                or expired
            
            
            --
            
            
            
            --
            
            
            
            --Outstanding
                at September 30, 2007
            
            
            255.1
            
            
            $
            12.86
            
            
            
            10.0Exercisable
                at September 30, 2007
            
            
            --
            
            
            $
            --
            
            
            
            --








**Stock
      Appreciation Rights (“SARS”)**


The
      Plan
      provides that the issuance price of a SAR shall be no less than the market
      price
      of the Company’s common stock on the date the SAR is granted.  SARS
      may be granted with a term of no greater than 10 years from the date of grant
      and will vest in accordance with a schedule determined at the time the SAR
      is
      granted, generally 3 years.  The Board of Directors, in its sole
      discretion, may settle the Company’s obligation to the executive in shares of
      the Company’s common stock, cash, other securities of the Company or any
      combination thereof.  The weighted-average grant date fair value of
      the SARS granted during the six month period ended September 30, 2006 was
      $3.68.  There were no SARS granted during the six month period ended
      September 30,




-17-


2007.  The
      fair value of each SAR award was estimated on the date of grant using the
      Black-Scholes Model using the assumptions noted in the following
      table.





**2007**
            
            
            **2006**Expected
                volatility
            
            
            --
            
            
            
            50.0
            %Expected
                dividends
            
            
            --
            
            
            
            --Expected
                term in years
            
            
            --
            
            
            
            2.8Risk-free
                rate
            
            
            --
            
            
            
            5.0
            %





A
      summary
      of SARS activity under the Plan is as follows:





**SARS**
            
            **Shares**
              **(000)**
            
            
            **Grant**
              **Date**
              **Stock**
              **Price**
            
            
            **Weighted-**
              **Average**
              **Remaining**
              **Contractual
                Term**Outstanding
                at March 31, 2006
            
            
            --
            
            
            $
            --
            
            
            
            --Granted
            
            
            16.1
            
            
            
            9.97
            
            
            
            2.75Forfeited
                or expired
            
            
            --
            
            
            
            --
            
            
            
            --Outstanding
                at September 30, 2006
            
            
            16.1
            
            
            $
            9.97
            
            
            
            2.5Exercisable
                at September 30, 2006
            
            
            --
            
            
            $
            --
            
            
            
            --Outstanding
                at March 31, 2007
            
            
            16.1
            
            
            $
            9.97
            
            
            
            2.00Granted
            
            
            --
            
            
            
            --
            
            
            
            --Forfeited
                or expired
            
            
            --
            
            
            
            --
            
            
            
            --Outstanding
                at September 30, 2007
            
            
            16.1
            
            
            $
            9.97
            
            
            
            1.50Exercisable
                at September 30, 2007
            
            
            --
            
            
            $
            --
            
            
            
            --





At
      September 30, 2007 and March 31, 2007, there were $4.9 million and $1.4 million,
      respectively, of unrecognized compensation costs related to nonvested
      share-based compensation arrangements under the Plan based on management’s
      estimate of the shares that will ultimately vest.  The Company expects
      to recognize such costs over the next 3.0 years.  However, certain of
      the restricted shares vest upon the attainment of Company performance goals
      and
      if such goals are not met, no compensation costs would ultimately be recognized
      and any previously recognized compensation cost would be reversed.  At
      September 30, 2007, there were 4.1 million shares available for issuance under
      the Plan.








**12.**
            **Income
                Taxes**





Income
      taxes are recorded in the Company’s quarterly financial statements based on the
      Company’s estimated annual effective income tax rate.  The effective
      tax rates used in the calculation of income taxes were 38.0% and 39.1% for
      the
      periods ended September 30, 2007 and 2006, respectively.  The
      reduction in the income tax rates results from the implementation of initiatives
      to obtain operational, as well as tax, efficiencies during the fiscal year
      ended
      March 31, 2007.





At
      September 30, 2007, Medtech Products Inc., a wholly-owned subsidiary of the
      Company, had a net operating loss carryforward of approximately $2.6 million
      which may be used to offset future taxable income of the consolidated group
      and
      which begins to expire in 2020.  The net operating loss carryforward
      is subject to an annual limitation as to usage under Internal Revenue Code
      Section 382 of approximately $240,000.








-18-


**13.**
            **Commitments
                and Contingencies**





The
      legal
      proceedings in which we are involved have been disclosed previously in our
      Annual Report on Form 10-K for the fiscal year ended March 31, 2007, our
      Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2007 and
      our
      Current Report on Form 8-K filed with the SEC on October 24,
      2007.  The following disclosure contains recent developments in our
      pending legal proceedings and should be read in conjunction with the legal
      proceedings disclosure contained in Part I, Item 3 of our Annual Report on
      Form
      10-K for the fiscal year ended March 31, 2007, Part II, Item 1 of our Quarterly
      Report on Form 10-Q for the fiscal quarter ended June 30, 2007 and our Current
      Report on Form 8-K filed with the SEC on October 24, 2007.





*Securities
      Class Action Litigation*


On
      September 4, 2007, the United States District Court for the Southern District
      of
      New York issued an Order certifying a class consisting of all persons who
      purchased the common stock of the Company pursuant to, or traceable to, the
      Company’s initial public offering on or about February 9, 2005 through November
      15, 2005 and were damaged thereby.  The Company’s management continues
      to believe that the remaining claims in the case are legally deficient and
      that
      it has meritorious defenses to the claims that remain.  The Company
      intends to vigorously defend against the claims remaining in the case;
      however, the Company cannot reasonably estimate the potential range of loss,
      if
      any.





*OraSure
      Technologies Arbitration*


At
        the
        end of August 2007, the Company and OraSure Technologies, Inc. (“OraSure”)
        participated in an arbitration hearing at which each party presented its
        case to
        the arbitration panel.  On October 22, 2007, the Company received
        notification from the arbitrators that they had issued a Partial Final Award
        (the “Award”) in the pending arbitration with OraSure.  The
        arbitrators acknowledged that there was a technical breach of the non-compete
        clause in the Distribution Agreement between the parties but OraSure’s proof of
        damages was speculative and not supported by credible
        evidence.  Therefore, the arbitrators awarded nominal damages to
        OraSure in the amount of One Dollar ($1.00).  In addition, the
        arbitrators awarded to OraSure counsel fees and arbitrator compensation in
        an
        amount to be determined pursuant to further proceedings.  The Company
        will vigorously contest the award of fees to OraSure as the Company believes
        that OraSure should only be entitled to a modest award in light of the
        arbitrators’ rejection of OraSure’s asserted damages and claims beyond the One
        Dollar ($1.00) nominal award.





The
        arbitration panel also dismissed with prejudice OraSure’s remaining claims for
        breach of the Distribution Agreement, OraSure’s request for injunctive relief
        and the Company’s counterclaims, respectively.  Furthermore, the
        arbitrators confirmed the Company's position that the Distribution Agreement
        will terminate on December 31, 2007.  The Company does not expect any
        interruptions in supply of its Compound W Freeze Off® branded cryosurgical wart
        remover as it transitions to a new supplier after December 31,
        2007.





*DenTek
      Oral Care, Inc. Litigation*


In
      April
      2007, the Company filed a lawsuit in the U.S. District Court in the Southern
      District of New York against DenTek Oral Care, Inc. (“DenTek”) alleging (i)
      infringement of intellectual property associated with The Doctor’s®
NightGuardTMdental protector
      which is used for the protection of teeth from
      nighttime teeth grinding; and (ii) the violation of unfair competition and
      consumer protection laws.  On October 4, 2007, the Company filed a
      Second Amended Complaint in which it named Kelly M. Kaplan, Raymond Duane and
      C.D.S. Associates, Inc. as additional defendants in the action against DenTek
      and added other claims to the previously filed complaint.  Ms. Kaplan
      and Mr. Duane were formerly employed by the Company and C.D.S. Associates,
      Inc.
      is a corporation controlled by Mr. Duane.  In the Second Amended
      Complaint, the Company has alleged patent, trademark and copyright infringement,
      unfair competition, unjust enrichment, violation of New York’s Consumer
      Protection Act, breach of contract, tortuous interference with contractual
      and
      business relations, civil conspiracy and trade secret
      misappropriation.  On October 19, 2007, the Company filed a motion for
      preliminary injunction with the Court in which the Company has asked the Court
      to enjoin the defendants from (i) continuing to improperly use the Company’s
      trade secrets; (ii) continuing to breach any contractual agreements with the
      Company; and (iii) marketing and selling any dental protector products or other
      products in which Ray Duane or Kelly Kaplan has had any involvement or provided
      any assistance to DenTek.  A hearing date for the motion for
      preliminary injunction has not yet been set by the Court.  Discovery
      requests have been served by the parties and discovery is ongoing.





-19-


In
      addition to the matters described above, the Company is involved from time
      to time in other routine legal matters and other claims incidental to its
      business.  The Company reviews outstanding claims and proceedings
      internally and with external counsel as necessary to assess probability and
      amount of potential loss.  These assessments are re-evaluated at each
      reporting period and as new information becomes available to determine whether
      a
      reserve should be established or if any existing reserve should be
      adjusted.  The actual cost of resolving a claim or proceeding
      ultimately may be substantially different than the amount of the recorded
      reserve.  In addition, because it is not permissible under GAAP to
      establish a litigation reserve until the loss is both probable and estimable,
      in
      some cases there may be insufficient time to establish a reserve prior to the
      actual incurrence of the loss (upon verdict and judgment at trial, for example,
      or in the case of a quickly negotiated settlement).  The Company
      believes the resolution of routine matters and other incidental claims, taking
      into account reserves and insurance, will not have a material adverse effect
      on
      its business, financial condition or results from operations.





*Lease
      Commitments*


The
      Company has operating leases for office facilities and equipment in New York,
      New Jersey and Wyoming, which expire at various dates through 2011.





The
      following summarizes future minimum lease payments for the Company’s operating
      leases (in thousands):




**Facilities**
            
            
            **Equipment**
            
            
            **Total****Year
                Ending September 30,**2008
            
            $
            650
            
            
            $
            122
            
            
            $
            7722009
            
            
            362
            
            
            
            98
            
            
            
            4602010
            
            
            --
            
            
            
            67
            
            
            
            672011
            
            
            --
            
            
            
            4
            
            
            
            4$
            1,012
            
            
            $
            291
            
            
            $
            1,303





Rent
      expense for the three month periods ended September 30, 2007 and 2006 was
      $145,000 and $136,000, respectively; while during the six month periods ended
      September 30, 2007 and 2006, rent expense was $298,000 and $275,000,
      respectively.








**14.**
            **Concentrations
                of Risk**





The
      Company’s sales are concentrated in the areas of over-the-counter healthcare,
      household cleaning and personal care products.  The Company sells its
      products to mass merchandisers, food and drug accounts, and dollar and club
      stores.  During the three and six month periods ended September 30,
      2007 approximately 56.4% and 56.5%, respectively, of the Company’s total sales
      were derived from its four major brands, while during the three and six month
      periods ended September 30, 2006, approximately 61.1% and 60.2%, respectively,
      of the Company’s total sales were derived from these four major
      brands.  During the three and six month periods ended September 30,
      2007, approximately 22.8% and 23.8%, respectively, of the Company’s sales were
      made to one customer, while during the three and six month periods ended
      September 30, 2006, 24.1% and 24.6% of sales were to this customer.  At
      September 30, 2007, approximately 19.5% of accounts receivable were owed by
      the
      same customer.





The
      Company manages product distribution in the continental United States through
      a
      main distribution center in St. Louis, Missouri.  A serious
      disruption, such as a flood or fire, to the main distribution center could
      damage the Company’s inventories and could materially impair the Company’s
      ability to distribute its products to customers in a timely manner or at a
      reasonable cost.  The Company could incur significantly higher costs
      and experience longer lead times associated with the distribution of its
      products to its customers during the time that it takes the Company to reopen
      or
      replace its distribution center.  As a result, any such disruption
      could have a material adverse affect on the Company’s sales and
      profitability.





-20-


The
      Company has relationships with over 40 third-party manufacturers.  Of
      those, the top 10 manufacturers produced items that accounted for approximately
      79% of the Company’s gross sales during the six months ended September 30,
      2007.  The Company does not have long-term contracts with 4 of these
      manufacturers and certain manufacturers of various smaller brands, which
      collectively, represented approximately 35% of the Company’s gross sales for
      2007.  The lack of manufacturing agreements for these products exposes
      the Company to the risk that a manufacturer could stop producing the Company’s
      products at any time, for any reason or fail to provide the Company with the
      level of products the Company needs to meet its customers’
demands.  Without adequate supplies of merchandise to sell to the
      Company’s customers, sales would decrease materially and the Company’s business
      would suffer.








**15.**
            **Business
                Segments**





Segment
      information has been prepared in accordance with FASB Statement No. 131,
“Disclosures about Segments of an Enterprise and Related
      Information.”  The Company’s operating and reportable segments consist
      of (i) Over-the-Counter Healthcare, (ii) Household Cleaning and (iii) Personal
      Care.





There
      were no inter-segment sales or transfers during any of the periods
      presented.  The Company evaluates the performance of its operating
      segments and allocates resources to them based primarily on contribution
      margin.





The
      table
      below summarizes information about the Company’s operating and reportable
      segments (in thousands).





**Three
                Months Ended September 30, 2007****Over-the-Counter**
            
            
            **Household**
            
            
            **Personal****Healthcare**
            
            
            **Cleaning**
            
            
            **Care**
            
            
            **Consolidated**Net
                sales
            
            $
            50,003
            
            
            
            30,925
            
            
            $
            5,912
            
            
            $
            86,840Other
                revenues
            
            
            --
            
            
            
            497
            
            
            
            --
            
            
            
            497Total
                revenues
            
            
            50,003
            
            
            
            31,422
            
            
            
            5,912
            
            
            
            87,337Cost
                of sales
            
            
            19,688
            
            
            
            19,587
            
            
            
            3,495
            
            
            
            42,770Gross
                profit
            
            
            30,315
            
            
            
            11,835
            
            
            
            2,417
            
            
            
            44,567Advertising
                and promotion
            
            
            8,154
            
            
            
            2,575
            
            
            
            288
            
            
            
            11,017Contribution
                margin
            
            $
            22,161
            
            
            $
            9,260
            
            
            $
            2,129
            
            
            
            33,550Other
                operating expenses
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            12,940Operating
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            20,610Other
                (income) expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            9,595Provision
                for income taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            4,186Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            6,829








-21-


**Six
                Months Ended September 30, 2007****Over-the-Counter**
            
            
            **Household**
            
            
            **Personal****Healthcare**
            
            
            **Cleaning**
            
            
            **Care**
            
            
            **Consolidated**Net
                sales
            
            $
            92,429
            
            
            $
            60,270
            
            
            $
            12,182
            
            
            $
            164,881Other
                revenues
            
            
            --
            
            
            
            1,039
            
            
            
            28
            
            
            
            1,067Total
                revenues
            
            
            92,429
            
            
            
            61,309
            
            
            
            12,210
            
            
            
            165,948Cost
                of sales
            
            
            35,074
            
            
            
            37,980
            
            
            
            7,038
            
            
            
            80,092Gross
                profit
            
            
            57,355
            
            
            
            23,329
            
            
            
            5,172
            
            
            
            85,856Advertising
                and promotion
            
            
            14,035
            
            
            
            4,203
            
            
            
            565
            
            
            
            18,803Contribution
                margin
            
            $
            43,320
            
            
            $
            19,126
            
            
            $
            4,607
            
            
            
            67,053Other
                operating expenses
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            23,337Operating
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            43,716Other
                (income) expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            19,282Provision
                for income taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            9,285Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            15,149








**Three
                Months Ended September 30, 2006****Over-the-Counter**
              **Healthcare**
            
            
            **Household**
              **Cleaning**
            
            
            **Personal**
              **Care**
            
            
            **Consolidated**Net
                sales
            
            $
            46,255
            
            
            $
            30,732
            
            
            $
            7,046
            
            
            $
            84,033Other
                revenues
            
            
            --
            
            
            
            518
            
            
            
            --
            
            
            
            518Total
                revenues
            
            
            46,255
            
            
            
            31,250
            
            
            
            7,046
            
            
            
            84,551Cost
                of sales
            
            
            18,001
            
            
            
            18,941
            
            
            
            4,317
            
            
            
            41,259Gross
                profit
            
            
            28,254
            
            
            
            12,309
            
            
            
            2,729
            
            
            
            43,292Advertising
                and promotion
            
            
            7,058
            
            
            
            2,020
            
            
            
            377
            
            
            
            9,455Contribution
                margin
            
            $
            21,196
            
            
            $
            10,289
            
            
            $
            2,352
            
            
            
            33,837Other
                operating expenses
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            9,671Operating
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            24,166Other
                (income) expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            9,743Provision
                for income taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            5,639Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            8,784








-22-


**Six
                Months Ended September 30, 2006****Over-the-Counter**
              **Healthcare**
            
            
            **Household**
              **Cleaning**
            
            
            **Personal**
              **Care**
            
            
            **Consolidated**Net
                sales
            
            $
            85,853
            
            
            $
            60,470
            
            
            $
            13,277
            
            
            $
            159,600Other
                revenues
            
            
            --
            
            
            
            874
            
            
            
            --
            
            
            
            874Total
                revenues
            
            
            85,853
            
            
            
            61,344
            
            
            
            13,277
            
            
            
            160,474Cost
                of sales
            
            
            32,398
            
            
            
            37,095
            
            
            
            8,091
            
            
            
            77,584Gross
                profit
            
            
            53,455
            
            
            
            24,249
            
            
            
            5,186
            
            
            
            82,890Advertising
                and promotion
            
            
            12,483
            
            
            
            3,710
            
            
            
            664
            
            
            
            16,857Contribution
                margin
            
            $
            40,972
            
            
            $
            20,539
            
            
            $
            4,522
            
            
            
            66,033Other
                operating expenses
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            18,518Operating
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            47,515Other
                (income) expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            19,535Provision
                for income taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            10,940Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            17,040





During
      the three month periods ended September 30, 2007 and 2006, approximately 96.6%
      and 96.4%, respectively, of the Company’s sales were made to customers in the
      United States and Canada while during the six month periods ended September
      30,
      2007 and 2006, approximately 95.7% and 96.2%, respectively, of sales were made
      to customers in the US and Canada.  At September 30, 2007,
      substantially all of the Company’s long-term assets were located in the United
      States of America and have been allocated to the operating segments as
      follows:





**Over-the-Counter**
            
            
            **Household**
            
            
            **Personal****Healthcare**
            
            
            **Cleaning**
            
            
            **Care**
            
            
            **Consolidated**Goodwill
            
            $
            233,615
            
            
            $
            72,549
            
            
            $
            2,751
            
            
            $
            308,915Intangible
                assetsIndefinite
                lived
            
            
            374,070
            
            
            
            170,893
            
            
            
            --
            
            
            
            544,963Finite
                lived
            
            
            90,986
            
            
            
            15
            
            
            
            15,939
            
            
            
            106,940465,056
            
            
            
            170,908
            
            
            
            15,939
            
            
            
            651,903$
            698,671
            
            
            $
            243,457
            
            
            $
            18,690
            
            
            $
            960,818











-23-


**ITEM
                2.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS**








The
      following discussion of our financial condition and results of operations should
      be read together with the consolidated financial statements and the related
      notes included in our Annual Report on Form 10-K for the fiscal year ended
      March
      31, 2007.  This discussion and analysis may contain forward-looking
      statements that involve certain risks, assumptions and
      uncertainties.  Future results could differ materially from the
      discussion that follows for many reasons, including the factors described in
      Part I, Item 1A., “Risk Factors” in our Annual Report on Form 10-K for the
      fiscal year ended March 31, 2007, as well as those described in future reports
      filed with the SEC.  See also “Cautionary Statements Regarding Forward
      Looking Statements” on page 40 of this Quarterly Report on Form
      10-Q.





***General***


We
      are
      engaged in the marketing, sales and distribution of brand name over-the-counter
      healthcare, household cleaning and personal care products to mass merchandisers,
      drug stores, supermarkets and club stores primarily in the United States and
      Canada.  We operate in niche segments of these categories where we can
      use the strength of our brands, our established retail distribution network,
      a
      low-cost operating model and our experienced management team as a competitive
      advantage to grow our presence in these categories and, as a result, grow our
      sales and profits.





We
      have
      grown our brand portfolio by acquiring strong and well-recognized brands from
      larger consumer products and pharmaceutical companies, as well as other brands
      from smaller private companies.  While the brands we have purchased
      from larger consumer products and pharmaceutical companies have long histories
      of support and brand development, we believe that at the time we acquired them
      they were considered “non-core” by their previous owners and did not benefit
      from the focus of senior level management or strong marketing
      support.  We believe that the brands we have purchased from smaller
      private companies have been constrained by the limited resources of their prior
      owners.  After acquiring a brand, we seek to increase its sales,
      market share and distribution in both existing and new channels.  We
      pursue this growth through increased spending on advertising and promotion,
      new
      marketing strategies, improved packaging and formulations and innovative new
      products.





In
      October 2005, we completed the acquisition of the “Chore Boy®” brand of cleaning
      pads and sponges.  The purchase price of this acquisition was $22.6
      million, including direct costs of $400,000.  We purchased the Chore
      Boy brand with funds generated from operations.





In
      November 2005, we completed the acquisition of Dental Concepts LLC, a marketer
      of therapeutic oral care products sold under “The Doctor’s®”
brand.  The purchase price of the ownership interests was
      approximately $30.2 million, including fees and expenses of the acquisition
      of
      $1.3 million.  We financed the acquisition price through the
      utilization of our Revolving Credit Facility in the amount of $30.0 million
      and
      cash on hand.





In
      September 2006, we completed the acquisition of Wartner USA B.V., a privately
      held Netherlands limited liability company, which owned the intellectual
      property associated with the “Wartner®”
      brand of
      over-the-counter wart treatment products.  The purchase price of this
      acquisition was $31.2 million, inclusive of direct costs of the acquisition
      of
      $216,000.  We purchased the Wartner brand with funds generated from
      operations and the assumption of approximately $5.0 million of contingent
      payments to the former owner of the Wartner brand.





-24-


**Three
                Month Period Ended September 30, 2007 compared to
                the**


**Three
                Month Period Ended September 30,
                2006**








**Revenues**


**2007**
              **Revenues**
            
            
            **%**
            
            
            **2006**
              **Revenues**
            
            
            **%**
            
            
            **Increase**
              **(Decrease)**
            
            
            **%**OTC
                Healthcare
            
            $
            50,003
            
            
            
            57.2
            
            
            $
            46,255
            
            
            
            54.7
            
            
            $
            3,748
            
            
            
            8.1Household
                Cleaning
            
            
            31,422
            
            
            
            36.0
            
            
            
            31,250
            
            
            
            37.0
            
            
            
            172
            
            
            
            0.6Personal
                Care
            
            
            5,912
            
            
            
            6.8
            
            
            
            7,046
            
            
            
            8.3
            
            
            
            (1,134
            )
            
            
            (16.1
            )$
            87,337
            
            
            
            100.0
            
            
            $
            84,551
            
            
            
            100.0
            
            
            $
            2,786
            
            
            
            3.3





Revenues
      for the three month period ended September 30, 2007 increased $2.8 million,
      or
      3.3%, versus the comparable period in 2006, primarily as a result of the
      acquisition of the Wartner brand in September of 2006.  Excluding the
      impact of the Wartner acquisition, revenues increased 0.6% versus the comparable
      period in 2006.  Revenues to customers outside of North America, which
      represents 3.4% of total revenues, decreased 18% in 2007 versus the comparable
      period in 2006.





During
      the three month period ended September 30, 2007, the Company increased its
      allowance for returns by $1.1 million as a result of the voluntary withdrawal
      from the marketplace of two medicated pediatric cough and cold products marketed
      under the Little Remedies brand.  This action was part of an industry
      wide voluntary withdrawal of these items pending the final results of an FDA
      safety and efficacy review.  Excluding the impact of the withdrawal,
      total revenues for the Company would have been $88.4 million, or 4.6% greater
      than the comparable period in 2006, and up 1.8% excluding the Wartner
      acquisition.





***Over-the-Counter
      Healthcare Segment***


Revenues
      of the
      Over-the-Counter Healthcare segment increased by $3.7 million, or 8.1%, for
      2007
      versus the comparable period in 2006.  The increase was primarily due
      to the acquisition of the Wartner brand in September 2006 and the launch of
      MurineTM
      EarigateTM,
      a new product
      that helps prevent earwax build-up with its patented reverse spray
      technology.  Excluding the impact of the Wartner acquisition, revenues
      increased by3.2%for
      the
      period.  In addition to Murine, Clear eyes®, New Skin and Dermoplast®
      revenues increased for the period.  Clear eyes and New Skin revenue
      increased as a result of increased consumption, and Dermoplast revenue increased
      as a result of strong shipments to wholesale distributors of the institutional
      size item.  These revenue increases were partially offset by an
      increase in the allowance for returns of $1.1 million in connection with the
      voluntary withdrawal of Little Remedies medicated pediatric cough and cold
      products, lower shipments to the trade of Chloraseptic cough and cold products
      in advance of the flu season, softer consumption of Compound
      W
      Freeze-off® as a result of a contraction in the cryogenic sub-segment of the
      wart removal category and lower consumption of The Doctor’s®
      NightGuardTMdental protector
      as a result of increased competition in the bruxism
      category.





***Household
      Cleaning Segment***


Revenues
      of the Household Cleaning segment were substantially unchanged at $31.4 million,
      increasing only 0.6% during the quarter versus the comparable period in
      2006.   Revenues of the Comet® brand were
      essentially flat for the period and declines in Spic and Span were offset by
      increased revenue of Chore Boy.  Revenue of Comet Mildew SprayGel,
      which was launched in the last quarter of fiscal 2007, was mostly offset by
      weakfactory sales of Comet powder due to inventory reductions taken at a
      key
      mass merchandiser customer.  The decline in Spic and Span’s revenue
      reflected a decline in consumer sales.  The increase of Chore Boy
      sales were a result of strong shipments to small grocer wholesale accounts;
      however, consumption declined during the period.





***Personal
      Care Segment***


Revenues
      of the Personal Care segment declined $1.1 million or 16.1% for the period
      versus the comparable period in 2006.  All major brands in this
      segment, except for Prell, experienced revenue declines during the
      period.  The decrease in revenue of Cutex®
      and
      Denorex® were
      a result of declining consumption.Prell’s revenue increased
      slightly for the period, in line with consumption.








-25-


**Gross
      Profit**


**2007**
              **Gross
                Profit**
            
            
            **%**
            
            
            **2006**
              **Gross
                Profit**
            
            
            **%**
            
            
            **Increase**
              **(Decrease)**
            
            
            **%**OTC
                Healthcare
            
            $
            30,315
            
            
            
            60.6
            
            
            $
            28,254
            
            
            
            61.1
            
            
            $
            2,061
            
            
            
            7.3Household
                Cleaning
            
            
            11,835
            
            
            
            37.7
            
            
            
            12,309
            
            
            
            39.4
            
            
            
            (474
            )
            
            
            (3.9
            )Personal
                Care
            
            
            2,417
            
            
            
            40.9
            
            
            
            2,729
            
            
            
            38.7
            
            
            
            (312
            )
            
            
            (11.4
            )$
            44,567
            
            
            
            51.0
            
            
            $
            43,292
            
            
            
            51.2
            
            
            $
            1,275
            
            
            
            2.9





Gross
      profit for 2007 increased by $1.3 million, or 2.9%, versus the comparable period
      in 2006.  As a percent of total revenue, gross profit decreased
      slightly from 51.2% in 2006 to 51.0% during 2007.  The decrease in
      gross profit as a percent of revenues is a result of a $1.1 million increase
      in
      the allowance for returns in connection with the voluntary withdrawal of the
      two
      Little Remedies medicated products discussed above and related obsolescence
      charges of $800,000.





***Over-the-Counter
      Healthcare Segment***


Gross
      profit of the Over-the-Counter Healthcare segment increased $2.1 million, or
      7.3%, for 2007 versus the comparable period in 2006.  As a percent of
      OTC revenue, gross profit decreased from 61.1% for 2006 to 60.6% during
      2007.  The decrease in gross profit as a percent of revenues is a
      result of the $1.1 million increase in the allowance for returns for the
      voluntary withdrawal of the Little Remedies medicated products discussed above
      and related obsolescence charges of $800,000.





***Household
      Cleaning Segment***


Gross
      profit of the Household Cleaning segment decreased by $474,000, or 3.9%, for
      2007 versus the comparable period in 2006.  As a percent of household
      cleaning revenue, gross profit decreased from 39.4% for 2006 to 37.7% during
      2007.  The decrease in gross profit percentage is primarily a result
      of higher product costs partially offset by lower distribution
      costs.





***Personal
      Care Segment***


Gross
      profit of the Personal Care segment decreased $312,000, or 11.4%, for 2007
      versus the comparable period in 2006.  As a percent of personal care
      revenue, gross profit increased from 38.7% for 2006 to 40.9% during
      2007.  The increase in gross profit percentage was primarily a result
      of the favorable product mix toward the higher margin shampoo
      businesses.








**Contribution
      Margin**


**2007**
              **Contribution
                Margin**
            
            
            **%**
            
            
            **2006**
              **Contribution
                Margin**
            
            
            **%**
            
            
            **Increase**
              **(Decrease)**
            
            
            **%**OTC
                Healthcare
            
            $
            22,161
            
            
            
            44.3
            
            
            $
            21,196
            
            
            
            45.8
            
            
            $
            965
            
            
            
            4.6Household
                Cleaning
            
            
            9,260
            
            
            
            29.5
            
            
            
            10,289
            
            
            
            32.9
            
            
            
            (1,029
            )
            
            
            (10.0
            )Personal
                Care
            
            
            2,129
            
            
            
            36.0
            
            
            
            2,352
            
            
            
            33.4
            
            
            
            (223
            )
            
            
            (9.5
            )$
            33,550
            
            
            
            38.4
            
            
            $
            33,837
            
            
            
            40.0
            
            
            $
            (287
            )
            
            
            (0.8
            )





Contribution
      margin, defined as gross profit less advertising and promotional expenses,
      decreased $287,000, or 0.8%, for 2007 versus the comparable period in
      2006.  The contribution margin decrease was a result of the increase
      in sales and gross profit as previously discussed, offset by a $1.6 million,
      or
      a 16.6% increase in advertising and promotional spending.  The
      increased advertising and promotional spending was primarily attributable to
      support behind the launches of Murine Earigate and Comet Mildew
      SprayGel.





-26-


***Over-the-Counter
      Healthcare Segment***


Contribution
      margin for the Over-the-Counter Healthcare segment increased by $1.0 million,
      or
      4.6%, for 2007 versus the comparable period in 2006.  The contribution
      margin increase was a result of the increase in sales and gross profit as
      previously discussed, partially offset by a $1.1 million, or a 15.5% increase
      in
      advertising and promotional spending.  The increase in advertising and
      promotional spending was primarily a result of television media support behind
      the launch of Murine Earigate.





***Household
      Cleaning Segment***


Contribution
      margin for the Household Cleaning segment decreased by $1.0 million, or 10.0%,
      for 2007 versus the comparable period in 2006.  The contribution
      margin decrease was a result of a decrease in gross profit as previously
      discussed and $600,000, or a 27.4% increase of advertising and promotional
      spending.  The increase was principally a result of increased
      television media support behind Comet Mildew SprayGel.





***Personal
      Care Segment***


Contribution
      margin for the Personal Care segment decreased $223,000, or 9.5%, for 2007
      versus the comparable period in 2006.  The contribution margin
      decrease was primarily a result of the sales and gross profit decrease
      previously discussed.





**General
      and Administrative**


General
      and administrative expenses were $10.2 million for 2007 versus $7.3 million
      for
      2006.  The increase was primarily related to higher legal costs
      associated with the OraSure arbitration and four intellectual property legal
      actions initiated by the Company associated with The Doctor’s® NightGuardTM dental
      protector.





**Depreciation
      and Amortization**


Depreciation
      and amortization expense was $2.8 million for 2007 versus $2.4 million for
      2006.  The increase in amortization of intangible assets is related to
      the Wartner acquisition, which was partially offset by a slight reduction in
      depreciation expense.





**Interest
      Expense**


Net
      interest expense was $9.6 million for 2007 versus $9.7 million for
      2006.  The reduction in interest expenses was the result of a lower
      level of indebtedness partially offset by higher interest rates on our variable
      rate indebtedness.  The average cost of funds increased from 7.9% for
      2006 to 8.7% for 2007.





**Income
      Taxes**


The
      income tax provision for 2007 was $4.2 million, with an effective rate of 38.0%,
      compared to $5.6 million, with an effective rate of 39.1% for
      2006.  During the fiscal year ended March 31, 2007, the Company
      implemented various initiatives to obtain operational, as well as tax,
      efficiencies.








-27-


**Six
                Month Period Ended September 30, 2007 compared to
                the**


**Six
                Month Period Ended September 30,
                2006**








**Revenues**


**2007**
              **Revenues**
            
            
            **%**
            
            
            **2006**
              **Revenues**
            
            
            **%**
            
            
            **Increase**
              **(Decrease)**
            
            
            **%**OTC
                Healthcare
            
            $
            92,429
            
            
            
            55.7
            
            
            $
            85,853
            
            
            
            53.5
            
            
            $
            6,576
            
            
            
            7.7Household
                Cleaning
            
            
            61,309
            
            
            
            36.9
            
            
            
            61,344
            
            
            
            38.2
            
            
            
            (35
            )
            
            
            (0.1
            )Personal
                Care
            
            
            12,210
            
            
            
            7.4
            
            
            
            13,277
            
            
            
            8.3
            
            
            
            (1,067
            )
            
            
            (8.0
            )$
            165,948
            
            
            
            100.0
            
            
            $
            160,474
            
            
            
            100.0
            
            
            $
            5,474
            
            
            
            3.4





Revenues
      for the six month period ended September 30, 2007 increased $5.5 million, or
      3.4%, versus the comparable period in 2006, primarily as a result of the
      acquisition of the Wartner brand in September of 2006.  Excluding the
      impact of the Wartner acquisition, revenues were essentially flat versus the
      comparable period in 2006.  Revenues to customers outside of North
      America, which represented 4.3% of total revenues, were flat in 2007 versus
      the
      comparable period in 2006.





During
      the period the Company increased its allowance for returns by $1.1 million
      in
      connection with the voluntary withdrawal from the marketplace of two medicated
      pediatric cough and cold products marketed under the Little Remedies
      brand.  This action was part of an industry wide voluntary withdrawal
      of these items pending the final results of an FDA safety and efficacy
      review.  Excluding the impact of the withdrawal, total revenues for
      the Company would have been $167.0 million, or 4.0% greater than the same period
      last year and up 0.7% excluding the Wartner acquisition.





***Over-the-Counter
      Healthcare Segment***


Revenues
      of the Over-the-Counter Healthcare segment increased by $6.6 million, or 7.7%,
      for 2007 versus the comparable period in 2006.  The revenue increases
      were primarily due to the acquisition of the Wartner brand in September 2006
      and
      the launch of Murine EarigateTM, a new
      product
      that helps prevent earwax build-up with its patented reverse spray
      technology.  Excluding the impact of the Wartner acquisition, revenues
      increased by 1.4% for the period.  Revenue increases from Murine
      EarigateTM,
      Dermoplast and New Skin were partially offset by decreases in Chloraseptic,
      Clear eyes®,
      The Doctor’s® and Little Remedies.  New Skin’s revenue increased as a
      result of higher consumption and market share gains in the liquid bandage
      category.   Dermoplast’s revenue increased as a result of strong
      shipments of the institutional size to wholesale
      distributors.  Chloraseptic’s revenue decreased as a result of weaker
      consumption and lower shipments to the trade in advance of the flu
      season.**The Clear eyes revenue declined as a result of
      comparisons to strong pipeline sales of new items during the six month period
      ended September 30, 2006.  The Doctor’s® revenue decreased as a result
      of increased competition in the bruxism category.  Little Remedies’
revenue declined due to a$1.1 million
      increase in the allowance for returns in connection with the voluntary
      withdrawal from the marketplace of Little Remedies medicated pediatric cough
      and
      cold products.  Compound W®
revenues
      were down
      slightly primarily due to softer trends in the cryogenic sub-segment of the
      wart
      removal category.





***Household
      Cleaning Segment***


Revenues
      of the Household Cleaning segment were essentially flat during the period versus
      the comparable period in 2006.   Revenues of the Comet® brand were
      flat
      for the period and declines in Spic and Span were offset by increased revenue
      from Chore Boy.  Revenue of Comet Mildew SprayGel, which launched in
      the last quarter of fiscal 2007, was offset by weaker factory sales of
      Comet powder and bathroom sprays.  Comet was negatively
      affected by inventory reductions taken at a key mass merchandiser customer
      while
      bathroom sprays reflect declining consumption trends.  The decline in
      Spic and Span’s revenue was a result weaker consumption and in line with overall
      declines in the all purpose cleaning category.  Chore Boy’s revenue
      increases were a result of strong shipments to small grocery wholesale accounts;
      however, Chore Boy’s consumption declined during the period.





-28-


***Personal
      Care Segment***


Revenues
      of the Personal Care segment declined $1.1 million or 8.0% for 2007 versus
      the
      comparable period in 2006.  All major brands in this segment, except
      for Prell, experienced revenue declines during the period.  The
      decrease in revenues of Cutex®
      and
      Denorex® were
      a result of declining consumption.Prell’s revenue increased
      for the period primarily due to improved consumption.








**Gross
      Profit**


**2007**
              **Gross
                Profit**
            
            
            **%**
            
            
            **2006**
              **Gross
                Profit**
            
            
            **%**
            
            
            **Increase**
              **(Decrease)**
            
            
            **%**OTC
                Healthcare
            
            $
            57,355
            
            
            
            62.1
            
            
            
            53,455
            
            
            
            62.3
            
            
            $
            3,900
            
            
            
            7.3Household
                Cleaning
            
            
            23,329
            
            
            
            38.1
            
            
            
            24,249
            
            
            
            39.5
            
            
            
            (920
            )
            
            
            (3.8
            )Personal
                Care
            
            
            5,172
            
            
            
            42.4
            
            
            
            5,186
            
            
            
            39.1
            
            
            
            (14
            )
            
            
            (0.3
            )$
            85,856
            
            
            
            51.7
            
            
            $
            82,890
            
            
            
            51.1
            
            
            $
            2,966
            
            
            
            3.6





Gross
      profit for 2007 increased by $3.0 million, or 3.6%, versus the comparable period
      in 2006.  As a percent of total revenue, gross profit increased from
      51.1% in 2006 to 51.7% during 2007.  The increase in gross profit as a
      percent of revenues was a result of favorable sales mix to higher margin
      products partially offset by a $1.1 million increase in the allowance for
      returns in connection with the voluntary withdrawal of the two Little Remedies
      medicated products discussed above and related obsolescence charges of
      $800,000.





***Over-the-Counter
      Healthcare Segment***


Gross
      profit of the Over-the-Counter Healthcare segment increased $3.9 million, or
      7.3%, for 2007 versus the comparable period in 2006.  As a percent of
      OTC revenue, gross profit decreased from 62.3% for 2006 to 62.1% during
      2007.  The decrease in gross profit as a percent of revenues was a
      result of a $1.1 million increase in the allowance for returns in connection
      with the voluntary withdrawal of Little Remedies medicated product discussed
      above and related obsolescence charges of $800,000.





***Household
      Cleaning Segment***


Gross
      profit of the Household Cleaning segment decreased by $920,000, or 3.8%, for
      2007 versus the comparable period in 2006.  As a percent of household
      cleaning revenue, gross profit decreased from 39.5% for 2006 to 38.1% during
      2007.  The decrease in gross profit percentage was primarily a result
      of higher product costs partially offset by lower distribution
      costs.  The product cost increases were a result of higher raw
      material costs.





***Personal
      Care Segment***


Gross
      profit of the Personal Care segment was flat for 2007 versus the comparable
      period in 2006.  As a percent of personal care revenue, gross profit
      increased from 39.1% for 2006 to 42.4% during 2007.  The increase in
      gross profit percentage was primarily a result of favorable product mix, lower
      returns and a reduction in promotional pricing allowances.








**Contribution
      Margin**


**2007**
              **Contribution
                Margin**
            
            
            **%**
            
            
            **2006**
              **Contribution
                Margin**
            
            
            **%**
            
            
            **Increase**
              **(Decrease)**
            
            
            **%**OTC
                Healthcare
            
            $
            43,320
            
            
            
            46.9
            
            
            $
            40,972
            
            
            
            47.7
            
            
            $
            2,348
            
            
            
            5.7Household
                Cleaning
            
            
            19,126
            
            
            
            31.2
            
            
            
            20,539
            
            
            
            32.5
            
            
            
            (1,413
            )
            
            
            (6.9
            )Personal
                Care
            
            
            4,607
            
            
            
            37.7
            
            
            
            4,522
            
            
            
            34.1
            
            
            
            85
            
            
            
            1.9$
            67,053
            
            
            
            40.4
            
            
            $
            66,033
            
            
            
            41.1
            
            
            $
            1,020
            
            
            
            1.5





Contribution
      margin, defined as gross profit less advertising and promotional expenses,
      increased $1.0 million, or 1.5%, for 2007 versus the comparable period in
      2006.  The contribution margin increase was a result of the




-29-


increase
      in sales and gross profit as previously discussed, offset by a $1.9 million
      or
      11.5% increase in advertising and promotional spending.  The increase
      in advertising and promotional spending was primarily attributable to support
      behind the launches of Murine Earigate and Comet Mildew SprayGel, and increased
      television media support of The Doctor’s® NightGuardTM dental
      protector.





***Over-the-Counter
      Healthcare Segment***


Contribution
      margin for the Over-the-Counter Healthcare segment increased by $2.3 million,
      or
      5.7%, for 2007 versus the comparable period in 2006.  The contribution
      margin increase was a result of the increase in sales and gross profit as
      previously discussed, partially offset by a $1.6 million, or a 5.7% increase
      in
      advertising and promotional spending.  The increase in advertising and
      promotional spending was primarily a result of television media support behind
      the launch of Murine Earigate and The Doctor’s® NightGuardTM dental
      protector.





***Household
      Cleaning Segment***


Contribution
      margin for the Household Cleaning segment decreased by $1.4 million, or 6.9%,
      for 2007 versus the comparable period in 2006.  The contribution
      margin decrease was a result of flat sales and a decrease in gross profit as
      previously discussed and $500,000, or a 13.3% increase of advertising and
      promotional spending.  The increase was a result of an increase in
      television media support behind Comet Mildew SprayGel.





***Personal
      Care Segment***


Contribution
      margin for the Personal Care segment increased $85,000, or 1.9%, for 2007 versus
      the comparable period in 2006.  The contribution margin increase was
      primarily the result of the sales and gross profit decrease previously discussed
      offset by a $99,000 reduction in advertising and promotional
      spending.





**General
      and Administrative**


General
      and administrative expenses were $17.8 million for 2007 versus $13.7 million
      for
      2006.  The increase was primarily related to higher legal and
      stock-based compensation costs.





**Depreciation
      and Amortization**


Depreciation
      and amortization expense was $5.5 million for 2007 versus $4.8 million for
      2006.  The increase in amortization of intangible assets is related to
      the Wartner acquisition, which was partially offset by a slight reduction in
      depreciation expense.





**Interest
      Expense**


Net
      interest expense was $19.3 million for 2007 versus $19.5 million for
      2006.  The reduction in interest expenses was the result of a lower
      level of indebtedness partially offset by higher interest rates on our variable
      rate indebtedness.  The average cost of funds increased from 7.9% for
      2006 to 8.7% for 2007.





**Income
      Taxes**


The
      income tax provision for 2007 was $9.3 million, with an effective rate of 38.0%,
      compared to $10.9 million, with an effective rate of 39.1% for
      2006.  During the fiscal year ended March 31, 2007, the Company
      implemented various initiatives to obtain operational, as well as tax,
      efficiencies.





-30-


**Liquidity
      and Capital Resources**





**Liquidity**


We
      have
      financed and expect to continue to finance our operations with a combination
      of
      internally generated funds and borrowings.  Pursuant to the terms of
      the Senior Credit Facility, we may borrow an additional $200.0 million under
      our
      Tranche B Term Loan Facility and up to a maximum of $60.0 million under our
      Revolving Credit Facility.  Our principal uses of cash are for
      operating expenses, debt service, acquisitions, working capital and capital
      expenditures.





**Six
                Months Ended September 30*****(In
                thousands)***
            
            **2007**
            
            
            **2006**Cash
                provided by (used for):Operating
                Activities
            
            $
            21,492
            
            
            $
            42,734Investing
                Activities
            
            
            (210
            )
            
            
            (31,555
            )Financing
                Activities
            
            
            (26,241
            )
            
            
            (8,871
            )





***Operating
      Activities***


Net
      cash
      provided by operating activities was $21.5 million for 2007 compared to $42.7
      million 2006.  The $21.2 million decrease in net cash provided by
      operating activities was primarily the result of the following:





·
            A
                decrease of net income of $1.9 million from $17.0 million for 2006
                to
                $15.1 million for 2007, and


·
            An
                increase in the components of working capital caused primarily by
                an
                increase in accounts receivable resulting from the timing of sales
                in
                advance of the cough/cold season, as well as an increase in accrued
                liabilities resulting from the recognition of costs associated with
                the
                voluntary withdrawal from the marketplace of two medicated pediatric
                cough and cold products marketed under the Little Remedies
                brand.





***Investing
      Activities***


Net
      cash
      used for investing activities was $210,000 for 2007 compared to $31.6 million
      for 2006.  The net cash used for investing activities for 2007 was
      primarily for the acquisition of machinery, computers and office equipment,
      while for 2006, net cash was used primarily for the acquisition of Wartner
      USA
      B.V.





***Financing
      Activities***


Net
      cash
      used for financing activities was $26.2 million for 2007 compared to $8.9
      million for 2006.  During 2007, the Company repaid $24.5 million of
      indebtedness in excess of normal maturities with cash generated from
      operations.  This reduced our outstanding indebtedness to $437.1
      million from $463.4 million at March 31, 2007.  During 2006, the
      Company repaid the remaining $7.0 million indebtedness related to our Revolving
      Credit Facility which was drawn upon in connection with the November 2005
      acquisition of Dental Concepts LLC.





The
      Company’s cash flow from operations is normally expected to exceed net income
      due to the substantial non-cash charges related to depreciation and amortization
      of intangibles, increases in deferred income tax liabilities resulting from
      differences in the amortization of intangible assets and goodwill for income
      tax
      and financial reporting purposes, the amortization of certain deferred financing
      costs and stock-based compensation.








**Capital
      Resources**


As
      of
      September 30, 2007, we had an aggregate of $437.1 million of outstanding
      indebtedness, which consisted of the following:





·
            $311.1
                million of borrowings under the Tranche B Term Loan Facility,
                and





·
            $126.0
                million of 9.25% Senior Subordinated Notes due
                2012.





-31-


We
      had
      $60.0 million of borrowing capacity available under the Revolving Credit
      Facility at September 30, 2007, as well as $200.0 million available under the
      Tranche B Term Loan Facility.





All
      loans
      under the Senior Credit Facility bear interest at floating rates, based on
      either the prime rate, or at our option, the LIBOR rate, plus an applicable
      margin.  As of September 30, 2007, an aggregate of $311.1 million was
      outstanding under the Senior Credit Facility at a weighted average interest
      rate
      of 7.74%.





In
      June
      2004, we purchased a 5% interest rate cap agreement with a notional amount
      of
      $20.0 million which expired in June 2006.  In March 2005, we purchased
      interest rate cap agreements that became effective August 30, 2005, with a
      total
      notional amount of $180.0 million and LIBOR cap rates ranging from 3.25% to
      3.75%.  On May 31, 2006, an interest rate cap agreement with a
      notional amount of $50.0 million and a 3.25% cap rate
      expired.  Additionally, an interest rate cap agreement with a notional
      amount of $80.0 million and a 3.50% cap rate expired on May 30,
      2007.  The remaining agreement, with a notional amount of $50.0
      million and a cap rate of 3.75%, terminates on May 30, 2008.  The fair
      value of the interest rate cap agreement was $486,000 at September 30,
      2007.





The
      Tranche B Term Loan Facility matures in October 2011.  We must make
      quarterly principal payments on the Tranche B Term Loan Facility equal to
      $887,500, representing 0.25% of the initial principal amount of the term
      loan.  The Revolving Credit Facility matures and the commitments
      relating to the Revolving Credit Facility terminate in April 2009.





The
      Senior Credit Facility contains various financial covenants, including
      provisions that require us to maintain certain leverage ratios, interest
      coverage ratios and fixed charge coverage ratios.  In addition, the
      Senior Credit Facility, as well as the Indenture governing the Senior
      Subordinated Notes, contain provisions that accelerate our indebtedness on
      certain changes in control and restrict us from undertaking specified corporate
      actions, including asset dispositions, acquisitions, payment of dividends and
      other specified payments, repurchasing the Company’s equity securities in the
      public markets, incurrence of indebtedness, creation of liens, making loans
      and
      investments and transactions with affiliates.  Specifically, we
      must:





·
            Have
                a leverage ratio of less than 4.5 to 1.0 for the quarter ended September
                30, 2007, decreasing over time to 3.75 to 1.0 for the quarter ending
                September 30, 2010, and remaining level
                thereafter,





·
            Have
                an interest coverage ratio of greater than 2.75 to 1.0 for the quarter
                ended September 30, 2007, increasing over time to 3.25 to 1.0 for
                the
                quarter ending March 31, 2010, and





·
            Have
                a fixed charge coverage ratio of greater than 1.5 to 1.0 for the
                quarter
                ended September 30, 2007, and for each quarter thereafter until the
                quarter ending March 31, 2011.





At
      September 30, 2007, we were in compliance with the applicable financial and
      restrictive covenants under the Senior Credit Facility and the Indenture
      governing the Senior Subordinated Notes.





Our
      principal sources of funds are anticipated to be cash flows from operating
      activities and available borrowings under the Senior Credit
      Facility.  We believe that these funds will provide us with sufficient
      liquidity and capital resources for us to meet our current and future financial
      obligations, as well as to provide funds for working capital, capital
      expenditures and other needs for at least the next 12 months.  As part
      of our growth strategy, we regularly review acquisition opportunities and other
      potential strategic transactions, which may require additional debt or equity
      financing.  If additional financing is required, there are no
      assurances that it will be available, or if available, that it can be obtained
      on terms favorable to us or on a basis that is not dilutive to our
      stockholders.





-32-


**Off-Balance
      Sheet Arrangements**





We
      do not
      have any off-balance sheet arrangements or financing activities with
      special-purpose entities.





**Inflation**





Inflationary
      factors such as increases in the costs of raw materials, packaging materials,
      purchased product and overhead may adversely affect our operating
      results.  Although we do not believe that inflation has had a material
      impact on our financial condition or results from operations for the periods
      referred to above, a high rate of inflation in the future could have a material
      adverse effect on our business, financial condition or results from
      operations.  The current volatility of the crude oil markets will
      continue to impact, at times favorably and at times unfavorably, our
      transportation costs, as well as, certain petroleum based raw materials and
      packaging materials.  Although the Company takes efforts to minimize
      the impact of inflationary factors, including raising prices to our customers,
      a
      sustained rate of pricing increases associated with crude oil supplies may
      have
      an adverse effect on our operating results.





**Seasonality**





The
      first
      quarter of our fiscal year typically has the lowest level of revenue due to
      the
      seasonal nature of certain of our brands relative to the summer and winter
      months.  In addition, the first quarter is the least profitable
      quarter due to the increased advertising and promotional spending to support
      those brands with a summer selling season, such as Compound W, Wartner, Cutex
      and New Skin.  The Company’s advertising and promotional campaign in
      the third quarter influence sales in the fourth quarter winter
      months.  Additionally, the fourth quarter typically has the lowest
      level of advertising and promotional spending as a percent of
      revenue.





-33-


**Critical
      Accounting Policies and Estimates**


The
      Company’s significant accounting policies are described in the notes to the
      unaudited financial statements included elsewhere in this Quarterly Report
      on
      Form 10-Q, as well as in our Annual Report on Form 10-K for the year ended
      March
      31, 2007. While all significant accounting policies are important to our
      consolidated financial statements, certain of these policies may be viewed
      as
      being critical.  Such policies are those that are both most important to
      the portrayal of our financial condition and results from operations and require
      our most difficult, subjective and complex estimates and assumptions that affect
      the reported amounts of assets, liabilities, revenues, expenses or the related
      disclosure of contingent assets and liabilities.  These estimates are based
      upon our historical experience and on various other assumptions that we believe
      to be reasonable under the circumstances.  Actual results may differ
      materially from these estimates under different conditions.  The most
      critical accounting policies are as follows:





***Revenue
      Recognition***


We
      comply
      with the provisions of Securities and Exchange Commission Staff Accounting
      Bulletin 104 “Revenue Recognition,” which states that revenue should be
      recognized when the following revenue recognition criteria are met: (1)
      persuasive evidence of an arrangement exists; (2) the product has been shipped
      and the customer takes ownership and assumes the risk of loss; (3) the selling
      price is fixed or determinable; and (4) collection of the resulting receivable
      is reasonably assured.  We have determined that the transfer of risk
      of loss occurs when product is received by the customer, and, accordingly
      recognize revenue at that time. Provision is made for estimated
      discounts related to customer payment terms and estimated product returns at
      the
      time of sale based on our historical experience.





As
      is
      customary in the consumer products industry, we participate in the promotional
      programs of our customers to enhance the sale of our products.  The
      cost of these promotional programs is recorded in accordance with Emerging
      Issues Task Force 01-09, *“Accounting for Consideration Given by a Vendor to
      a Customer (Including a Reseller of the Vendor’s Products)”* as either
      advertising and promotional expenses or as a reduction of sales.  Such
      costs vary from period-to-period based on the actual number of units sold during
      a finite period of time.  We estimate the cost of such promotional
      programs at their inception based on historical experience and current market
      conditions and reduce sales by such estimates.  These promotional
      programs consist of direct to consumer incentives such as coupons and temporary
      price reductions, as well as incentives to our customers, such as slotting
      fees
      and cooperative advertising.  We do not provide incentives to
      customers for the acquisition of product in excess of normal inventory
      quantities since such incentives increase the potential for future returns,
      as
      well as reduce sales in the subsequent fiscal periods.





Estimates
      of costs of promotional programs are based on (i) historical sales experience,
      (ii) the current offering, (iii) forecasted data, (iv) current market
      conditions, and (v) communication with customer purchasing/marketing
      personnel.  At the completion of the promotional program, the
      estimated amounts are adjusted to actual results.  While our
      promotional expense for the year ended March 31, 2007 was $16.5 million, we
      participated in 5,900 promotional campaigns, resulting in an average cost of
      $2,800 per campaign.  Of such amount, only 582 payments were in excess
      of $5,000.  We believe that the estimation methodologies
      employed, combined with the nature of the promotional campaigns, makes the
      likelihood remote that our obligation would be misstated by a material
      amount.  However, for illustrative purposes, had we underestimated the
      promotional program rate by 10% for the three and six month periods ended
      September 30, 2007, our sales and operating income would have been
      adversely affected by approximately $529,00 and $993,000,
      respectively.





We
      also
      periodically run coupon programs in Sunday newspaper inserts or as on-package
      instant redeemable coupons.  We utilize a national clearing house to
      process coupons redeemed by customers.  At the time a coupon is
      distributed, a provision is made based upon historical redemption rates for
      that
      particular product, information provided as a result of the clearing house’s
      experience with coupons of similar dollar value, the length of time the coupon
      is valid, and the seasonality of the coupon drop, among other
      factors.  During the year ended March 31, 2007, we had 17 coupon
      events.  The amount recorded against revenues and accrued for these
      events during the year was $2.7 million, of which $2.3 million was redeemed
      during the year.  During the six month period ended September 30,
      2007, we had 16 coupon events.  The amount recorded against revenues
      and accrued for these events during the three and six month periods ended
      September 30, 2007 was $602,000 and $1.1 million,




-34-


respectively.  Redemptions
      during the three and six month periods ended September 30, 2007 were $696,000
      and $1.1 million, respectively.





***Allowances
      for Product Returns***


Due
      to
      the nature of the consumer products industry, we are required to estimate
      future product returns.  Accordingly, we record an estimate of
      product returns concurrent with the recording of sales.  Such
      estimates are made after analyzing (i) historical return rates, (ii) current
      economic trends, (iii) changes in customer demand, (iv) product acceptance,
      (v)
      seasonality of our product offerings, and (vi) the impact of changes in
      product formulation, packaging and advertising.





We
      construct our returns analysis by looking at the previous year’s return history
      for each brand.  Subsequently, each month, we estimate our current
      return rate based upon an average of the previous six months’ return rate and
      review that calculated rate for reasonableness giving consideration to the
      other
      factors described above.  Our historical return rate has been relatively
      stable; for example, for the years ended March 31, 2007, 2006 and 2005, returns
      represented 3.7%, 3.5%, and 3.6%, respectively, of gross sales.  At
      September 30, 2007 and March 31, 2007, the allowances for sales returns were
      $2.1 million and $1.8 million, respectively.





While
      we
      utilize the methodology described above to estimate product returns, actual
      results may differ materially from our estimates, causing our future financial
      results to be adversely affected.  Among the factors that could cause
      a material change in the estimated return rate would be significant unexpected
      returns with respect to a product or products that comprise a significant
      portion of our revenues.  Based upon the methodology described above
      and our actual returns’ experience, management believes the likelihood of such a
      material occurrence is remote.  As noted, over the last three years,
      our actual product return rate has stayed within a range of 3.5% to 3.7% of
      gross sales.  An increase of 0.1% in our estimated return rate as a
      percentage of gross sales would have adversely affected our reported sales
      and
      operating income for the three and six month periods ended September 30,
      2007 by approximately $102,000 and $193,000, respectively.





***Allowances
      for Obsolete and Damaged Inventory***


We
      value
      our inventory at the lower of cost or market value.  Accordingly, we
      reduce our inventories for the diminution of value resulting from product
      obsolescence, damage or other issues affecting marketability equal to the
      difference between the cost of the inventory and its estimated market
      value.  Factors utilized in the determination of estimated market
      value include (i) current sales data and historical return rates, (ii) estimates
      of future demand, (iii) competitive pricing pressures, (iv) new product
      introductions, (v) product expiration dates, and (vi) component and packaging
      obsolescence.





Many
      of
      our products are subject to expiration dating.  As a general rule our
      customers will not accept goods with expiration dating of less than 12 months
      from the date of delivery.  To monitor this risk, management utilizes
      a detailed compilation of inventory with expiration dating between zero and
      15
      months and reserves for 100% of the cost of any item with expiration dating
      of
      12 months or less.  At September 30, 2007 and March 31, 2007, the
      allowance for obsolete and slow moving inventory represented 4.4% and 5.8%,
      respectively, of total inventory.  Inventory obsolescence costs
      charged to operations for the three and six month periods ended September 30,
      2007 were $872,000 and $583,000, respectively.  During the three month
      period ended June 30, 2007, the Company recorded a credit of $289,000 to
      operations for obsolescence due to the settlement of a claim from a
      vendor.  A 1.0% increase in our allowance for obsolescence at
      September 30, 2007 would have adversely affected our reported operating income
      for the three and six month periods ended September 30, 2007 by approximately
      $291,000.





***Allowance
      for Doubtful Accounts***


In
      the
      ordinary course of business, we grant non-interest bearing trade credit to
      our customers on normal credit terms.  We maintain an allowance for
      doubtful accounts receivable which is based upon our historical collection
      experience and expected collectibility of the accounts receivable.  In
      an effort to reduce our credit risk, we (i) establish credit limits for all
      of
      our customer relationships, (ii) perform ongoing credit evaluations of our
      customers’ financial condition, (iii) monitor the payment history and aging of
      our customers’ receivables, and (iv) monitor open orders against an individual
      customer’s outstanding receivable balance.





-35-


We
      establish specific reserves for those accounts which file for bankruptcy, have
      no payment activity for 180 days or have reported major negative changes to
      their financial condition.  The allowance for bad debts at September
      30, 2007 and March 31, 2007 amounted to 0.12% and 0.10%, respectively, of
      accounts receivable.  For the three and six months ended September 30,
      2007 we recorded bad debt expense of $15,000 and $99,000, respectively, while
      during the three and six month periods ended September 30, 2006 we recorded
      bad
      debt recoveries of $67,000 and $12,000, respectively.





While
      management believes that it is diligent in its evaluation of the adequacy of
      the
      allowance for doubtful accounts, an unexpected event, such as the bankruptcy
      filing of a major customer, could have an adverse effect on our future financial
      results.  A 0.1% increase in our bad debt expense as a percentage of
      net sales would have resulted in a decrease in operating income for the three
      and six month periods ended September 30, 2007 of approximately $87,000 and
      $165,000, respectively.





***Valuation
      of Intangible Assets and Goodwill***


Goodwill
      and intangible assets amounted to $960.8 million and $968.1 million at September
      30, 2007 and March 31, 2007, respectively.  As of September 30,
      2007, goodwill and intangible assets were apportioned among our three operating
      segments as follows:





**Over-the-Counter**
              **Healthcare**
            
            
            **Household**
              **Cleaning**
            
            
            **Personal**
              **Care**
            
            
            **Consolidated**Goodwill
            
            $
            233,615
            
            
            $
            72,549
            
            
            $
            2,751
            
            
            $
            308,915Intangible
                assetsIndefinite
                lived
            
            
            374,070
            
            
            
            170,893
            
            
            
            --
            
            
            
            544,963Finite
                lived
            
            
            90,986
            
            
            
            15
            
            
            
            15,939
            
            
            
            106,940465,056
            
            
            
            170,908
            
            
            
            15,939
            
            
            
            651,903$
            698,671
            
            
            $
            243,457
            
            
            $
            18,690
            
            
            $
            960,818








Our
      Clear
      Eyes, New-Skin, Chloraseptic, Compound W and Wartner brands comprise the
      majority of the value of the intangible assets within the Over-The-Counter
      Healthcare segment.  The Comet, Spic and Span and Chore Boy brands
      comprise substantially all of the intangible asset value within the Household
      Cleaning segment. Denorex, Cutex and Prell comprised substantially all of
      the intangible asset value within the Personal Care segment.





Goodwill
      and intangible assets comprise substantially all of our
      assets.  Goodwill represents the excess of the purchase price over the
      fair value of assets acquired and liabilities assumed in a purchase business
      combination.  Intangible assets generally represent our trademarks,
      brand names and patents.  When we acquire a brand, we are required to
      make judgments regarding the value assigned to the associated intangible
      assets, as well as their respective useful lives.  Management
      considers many factors, both prior to and after, the acquisition of an
      intangible asset in determining the value, as well as the useful life, assigned
      to each intangible asset that the Company acquires or continues to own and
      promote.  The most significant factors are:





**·**
            **Brand
                History**


A
      brand
      that has been in existence for a long period of time (*e.g.,*25, 50 or
      100 years) generally warrants a higher valuation and longer life (sometimes
      indefinite) than a brand that has been in existence for a very short period
      of
      time.  A brand that has been in existence for an extended period of
      time generally has been the subject of considerable investment by its previous
      owner(s) to support product innovation and advertising and
      promotion.





-36-


**·**
            **Market
                Position**


Consumer
      products that rank number one or two in their respective market generally have
      greater name recognition and are known as quality product offerings, which
      warrant a higher valuation and longer life than products that lag in the
      marketplace.





**·**
            **Recent
                and Projected Sales Growth**


Recent
      sales results present a snapshot as to how the brand has performed in the most
      recent time periods and represent another factor in the determination of brand
      value.  In addition, projected sales growth provides information about
      the strength and potential longevity of the brand.  A brand that has
      both strong current and projected sales generally warrants a higher valuation
      and a longer life than a brand that has weak or declining
      sales.  Similarly, consideration is given to the potential investment,
      in the form of advertising and promotion, that is required to reinvigorate
      a
      brand that has fallen from favor.





**·**
            **History
                of and Potential for Product
                Extensions**


Consideration
      also is given to the product innovation that has occurred during the brand’s
      history and the potential for continued product innovation that will determine
      the brand’s future.  Brands that can be continually enhanced by new
      product offerings generally warrant a higher valuation and longer life than
      a
      brand that has always “followed the leader”.





After
      consideration of the factors described above, as well as current economic
      conditions and changing consumer behavior, management prepares a determination
      of the intangible’s value and useful life based on its analysis of the
      requirements of Statements No. 141 and No. 142.  Under Statement No.
      142, goodwill and indefinite-lived intangible assets are no longer amortized,
      but must be tested for impairment at least annually.  Intangible
      assets with finite lives are amortized over their respective estimated useful
      lives and must also be tested for impairment.





On
      an
      annual basis, or more frequently if conditions indicate that the carrying value
      of the asset may not be recovered, management performs a review of both the
      values and useful lives assigned to goodwill and intangible assets and tests
      for
      impairment.





*Finite-Lived
      Intangible Assets*


As
      mentioned above, management performs an annual review or more frequently if
      necessary, to ascertain the impact of events and circumstances on the estimated
      useful lives and carrying values of our trademarks and trade
      names.  In connection with this analysis, management:





·
            Reviews
                period-to-period sales and profitability by
                brand,


·
            Analyzes
                industry trends and projects brand growth
                rates,


·
            Prepares
                annual sales forecasts,


·
            Evaluates
                advertising effectiveness,


·
            Analyzes
                gross margins,


·
            Reviews
                contractual benefits or
                limitations,


·
            Monitors
                competitors’ advertising spend and product
                innovation,


·
            Prepares
                projections to measure brand viability over the estimated useful
                life of
                the intangible asset, and


·
            Considers
                the regulatory environment, as well as industry
                litigation.





Should
      analysis of any of the aforementioned factors warrant a change in the estimated
      useful life of the intangible asset, management will reduce the estimated useful
      life and amortize the carrying value prospectively over the shorter remaining
      useful life.  Management’s projections are utilized to assimilate all
      of the facts, circumstances and expectations related to the trademark or trade
      name and estimate the cash flows over its useful life.  In the event
      that the long-term projections indicate that the carrying value is in excess
      of
      the undiscounted cash flows expected to result from the use of the intangible
      assets, management is required to record an impairment charge.  Once
      that analysis is completed, a discount rate is applied to the cash flows to
      estimate fair value.  The impairment charge is measured as the excess
      of the carrying amount of the intangible asset over fair




-37-


value
      as
      calculated using the discounted cash flow analysis.  Future events,
      such as competition, technological advances and reductions in advertising
      support for our trademarks and trade names could cause subsequent evaluations
      to
      utilize different assumptions.





*Indefinite-Lived
      Intangible Assets*


In
      a
      manner similar to finite-lived intangible assets, on an annual basis, or more
      frequently if necessary, management analyzes current events and circumstances
      to
      determine whether the indefinite life classification for a trademark or trade
      name continues to be valid.  Should circumstance warrant a finite
      life, the carrying value of the intangible asset would then be amortized
      prospectively over the estimated remaining useful life.





In
      connection with this analysis, management also tests the indefinite-lived
      intangible assets for impairment by comparing the carrying value of the
      intangible asset to its estimated fair value.  Since quoted market
      prices are seldom available for trademarks and trade names such as ours, we
      utilize present value techniques to estimate fair value.  Accordingly,
      management’s projections are utilized to assimilate all of the facts,
      circumstances and expectations related to the trademark or trade name and
      estimate the cash flows over its useful life.  In performing this
      analysis, management considers the same types of information as listed above
      in
      regards to finite-lived intangible assets.  Once that analysis is
      completed, a discount rate is applied to the cash flows to estimate fair
      value.  Future events, such as competition, technological advances and
      reductions in advertising support for our trademarks and trade names could
      cause
      subsequent evaluations to utilize different assumptions.





*Goodwill*


As
      part
      of its annual test for impairment of goodwill, management estimates the
      discounted cash flows of each reporting unit, which is at the brand level,
      and
      one level below the operating segment level, to estimate their respective fair
      values.  In performing this analysis, management considers the same
      types of information as listed above in regards to finite-lived intangible
      assets.  In the event that the carrying amount of the reporting unit
      exceeds the fair value, management would then be required to allocate the
      estimated fair value of the assets and liabilities of the reporting unit as
      if
      the unit was acquired in a business combination, thereby revaluing the carrying
      amount of goodwill.  In a manner similar to indefinite-lived assets,
      future events, such as competition, technological advances and reductions in
      advertising support for our trademarks and trade names could cause subsequent
      evaluations to utilize different assumptions.





In
      estimating the value of trademarks and trade names, as well as goodwill, at
      March 31, 2007, management applied a discount rate of 9.5%, the Company’s then
      current weighted-average cost of funds, to the estimated cash flows; however
      that rate, as well as future cash flows may be influenced by such factors,
      including (i) changes in interest rates, (ii) rates of inflation, or (iii)
      sales
      or contribution margin reductions.  In the event that the carrying
      value exceeded the estimated fair value of either intangible assets or goodwill,
      we would be required to recognize an impairment charge.  Additionally,
      continued decline of the fair value ascribed to an intangible asset or a
      reporting unit caused by external factors may require future impairment
      charges.





During
      the three month period ended March 31, 2006, we recorded non-cash charges
      related to the impairment of intangible assets and goodwill of the Personal
      Care
      segment of $7.4 million and $1.9 million, respectively, because the
      carrying amounts of these “branded” assets exceeded their fair market
      values primarily as a result of declining sales caused by product
      competition.  Should the related fair values of goodwill and
      intangible assets continue to be adversely affected as a result of declining
      sales or margins caused by competition, technological advances or reductions
      in
      advertising and promotional expenses, the Company may be required to record
      additional impairment charges.





***Stock-Based
      Compensation***


During
      2006, we
      adopted FASB Statement No. 123(R), “Share-Based Payment” (“Statement No.
      123(R)”) with the initial grants of restricted stock and options to purchase
      common stock to employees and directors in accordance with the provisions of
      the
      Plan.Statement No. 123(R) requires us to measure the cost of
      services to be rendered based on the grant-date fair value of the equity
      award.  Compensation expense is to be recognized over the period which
      an employee is required to provide service in exchange for the award, generally
      referred to




-38-


as
      the
      requisite service period.  Information utilized in the determination
      of fair value includes the following:





·
            Type
                of instrument (i.e.: restricted shares vs. an option, warrant or
                performance shares),


·
            Strike
                price of the instrument,


·
            Market
                price of the Company’s common stock on the date of
                grant,


·
            Discount
                rates,


·
            Duration
                of the instrument, and


·
            Volatility
                of the Company’s common stock in the public
                market.





Additionally,
      management must estimate the expected attrition rate of the recipients to enable
      it to estimate the amount of non-cash compensation expense to be recorded in
      our
      financial statements.  While management uses diligent analysis to
      estimate the respective variables, a change in assumptions or market conditions,
      as well as changes in the anticipated attrition rates, could have a significant
      impact on the future amounts recorded as non-cash compensation
      expense.  The Company recorded stock-based compensation costs of
      $655,000 and $383,000 during the fiscal years ended March 31, 2007 and 2006,
      respectively.  During the three and six month periods ended September
      30, 2007, the Company recorded stock-based compensation costs of $685,000 and
      $1.1 million, respectively.  During the three and six month periods
      ended September 30, 2006, the Company recorded stock-based compensation costs
      of
      $233,000 and $224,000, respectively.  The period-to-period decrease
      resulted from the recording of a net stock-based compensation credit of $9,000
      during the three month period ended June 30, 2006 due to the reversal of
      stock-based compensation costs in the amount of $142,000 associated with the
      departure of a former member of management.





***Loss
      Contingencies***


Loss
      contingencies are recorded as liabilities when it is probable that a liability
      has been incurred and the amount of such loss is reasonable
      estimable.  Contingent losses are often resolved over longer periods
      of time and involve many factors including:





·
            Rules
                and regulations promulgated by regulatory
                agencies,


·
            Sufficiency
                of the evidence in support of our
                position,


·
            Anticipated
                costs to support our position, and


·
            Likelihood
                of a positive outcome.





***Recent
      Accounting Pronouncements***


In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities - Including an amendment of FASB
      Statement No. 115” (“Statement No. 159”).  Statement No. 159 permits
      companies to choose to measure certain financial instruments and certain other
      items at fair value.  Unrealized gains and losses on items for which
      the fair value option has been elected will be recognized in earnings at each
      subsequent reporting date.  Statement No. 159 is effective for interim
      financial statements issued during the fiscal year beginning after November
      15,
      2007.  The Company is evaluating the impact that the adoption of
      Statement No. 159 will have on its consolidated financial
      statements.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”
(“Statement No. 157”) to address inconsistencies in the definition and
      determination of fair value pursuant to generally accepted accounting principles
      (“GAAP”).  Statement No. 157 provides a single definition of fair
      value, establishes a framework for measuring fair value in GAAP and expands
      disclosures about fair value measurements in an effort to increase comparability
      related to the recognition of market-based assets and liabilities and their
      impact on earnings.  Statement No. 157 is effective for interim
      financial statements issued during the fiscal year beginning after November
      15,
      2007.





Management
      has reviewed and continues to monitor the actions of the various financial
      and
      regulatory reporting agencies and is currently not aware of any other
      pronouncement that could have a material impact on the
      Company’s consolidated financial position, results of operations or cash
      flows.




-39-


**CAUTIONARY
      STATEMENT REGARDING FORWARD-LOOKING STATEMENTS**





This
      Quarterly Report on Form 10-Q contains “forward-looking statements” within
      the meaning of the Private Securities Litigation Reform Act of 1995 (the “PSLR
      Act”), including, without limitation, information within Management’s Discussion
      and Analysis of Financial Condition and Results of Operations.  The
      following cautionary statements are being made pursuant to the provisions of
      the
      PSLR Act and with the intention of obtaining the benefits of the “safe harbor”
provisions of the PSLR Act.  Although we believe that our expectations
      are based on reasonable assumptions, actual results may differ materially from
      those in our forward-looking statements.





Forward-looking
      statements speak only as of the date of this Quarterly Report on Form 10-Q.
       Except as required under federal securities laws and the rules and
      regulations of the SEC, we do not have any intention to update any
      forward-looking statements to reflect events or circumstances arising after the
      date of this Quarterly Report on Form 10-Q, whether as a result of new
      information, future events or otherwise.





Our
      forward-looking statements generally can be identified by the use of words
      or
      phrases such as “believe,” “anticipate,” “expect,” “estimate,” “project,” “will
      be,” “will continue,” “will likely result,” or other similar words and
      phrases.  Forward-looking statements and our plans and expectations
      are subject to a number of risks and uncertainties that could cause actual
      results to differ materially from those anticipated, and our business in general
      is subject to such risks.  As a result
      of these
      risks and uncertainties, readers are cautioned not to place undue reliance
      on
      forward-looking statements included in thisQuarterly
      Report on
      Form10-Qor that may be made
      elsewhere from time to time by, or on behalf of, us.All
      forward-looking
      statements attributable to us are expressly qualifiedby
      these cautionary
      statements.For more information, see “Risk Factors” contained
      in Part I, Item 1A of our Annual Report on Form 10-K for the year ended March
      31, 2007.  In addition, our expectations or beliefs concerning future
      events involve risks and uncertainties, including, without
      limitation:





·
            General
                economic conditions affecting our products and their respective
                markets,





·
            The
                high level of competition in our industry and
                markets,





·
            Our
                dependence on a limited number of customers for a large portion of
                our
                sales,





·
            Disruptions
                in our distribution center,





·
            Acquisitions
                or other strategic transactions diverting managerial resources, or
                incurrence of additional liabilities or integration problems associated
                with such transactions,





·
            Changing
                consumer trends or pricing pressures which may cause us to lower
                our
                prices,





·
            Increases
                in supplier prices,





·
            Increases
                in transportation fees and fuel
                charges,





·
            Changes
                in our senior management team,





·
            Our
                ability to protect our intellectual property
                rights,





·
            Our
                dependency on the reputation of our brand
                names,





·
            Shortages
                of supply of sourced goods or interruptions in the manufacturing
                of our
                products,





·
            Our
                level of debt, and ability to service our
                debt,





·
            Any
                adverse judgment rendered in any pending litigation or
                arbitration,





·
            Our
                ability to obtain additional financing,
                and





·
            The
                restrictions imposed by our financing agreements on our
                operations.




-40-




**ITEM
                3.**
              **QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISK**


****


We
      are
      exposed to changes in interest rates because our Senior Credit Facility is
      variable rate debt.  Interest rate changes, therefore, generally do not
      affect the market value of our senior secured financing, but do impact the
      amount of our interest payments and, therefore, our future earnings and cash
      flows, assuming other factors are held constant.  At September 30,
      2007, we had variable rate debt of approximately $311.1 million related to
      our
      Tranche B term loan.





In
      an
      effort to protect the Company from the adverse impact that rising interest
      rates
      would have on our variable rate debt, we have entered into various interest
      rate
      cap agreements to hedge this exposure.  In June 2004, we
      purchased a 5% interest rate cap agreement with a notional amount of $20.0
      million which terminated in June 2006.  In March 2005, we purchased
      interest rate cap agreements that became effective August 30, 2005, with a
      total notional amount of $180.0 million and LIBOR cap rates ranging from 3.25%
      to 3.75%.  On May 31, 2006, an interest rate cap agreement with a
      notional amount of $50.0 million and a 3.25% cap rate
      expired.  Additionally, an interest rate cap agreement with a notional
      amount of $80.0 million and a 3.5% cap rate expired on May 31,
      2007.  The remaining agreement, with a notional amount of $50.0
      million and a cap rate of 3.75% terminates on May 31, 2008.





Holding
      other variables constant, including levels of indebtedness, a one percentage
      point increase in interest rates on our variable rate debt would have an adverse
      impact on pre-tax earnings and cash flows for fiscal 2008 of approximately
      $3.1
      million.  However, given the protection afforded by the interest rate
      cap agreements, the impact of a one percentage point increase would be limited
      to $2.8 million.  The fair value of the interest rate cap agreement
      was $486,000 at September 30, 2007.








**ITEM
              4.**
            **CONTROLS
              AND PROCEDURES**


****


**Disclosure
      Controls and Procedures**


The
      Company’s management, with the participation of its Chief
      Executive Officer and the Chief Financial Officer, evaluated the effectiveness
      of the Company’s disclosure controls and procedures, as defined in Rule
      13a–15(e) of the Securities Exchange Act of 1934 (“Exchange Act”), as of
      September 30, 2007.  Based upon that evaluation, the Chief Executive
      Officer and Chief Financial Officer have concluded that, as of September 30,
      2007, the Company’s disclosure controls and procedures were effective to ensure
      that information required to be disclosed by the Company in the reports the
      Company files or submits under the Exchange Act is recorded, processed,
      summarized and reported, within the time periods specified in the SEC’s rules
      and forms, and that such information is accumulated and communicated to the
      Company’s management, including the Company’s Chief Executive Officer and Chief
      Financial Officer, as appropriate to allow timely decisions regarding required
      disclosure.





**Changes
      in Internal Control over Financial Reporting**


There
      have been no changes during the quarter ended September 30, 2007 in the
      Company’s internal control over financial reporting that have materially
      affected, or are reasonably likely to materially affect, the Company’s internal
      control over financial reporting.





-41-


**PART
                II.**
            **OTHER
                INFORMATION**





**ITEM
                1.**
            **LEGAL
                PROCEEDINGS**





The
      legal
      proceedings in which we are involved have been disclosed previously in our
      Annual Report on Form 10-K for the fiscal year ended March 31, 2007, our
      Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2007 and
      our
      Current Report on Form 8-K filed with the SEC on October 24,
      2007.  The following disclosure contains recent developments in our
      pending legal proceedings and should be read in conjunction with the legal
      proceedings disclosure contained in Part I, Item 3 of our Annual Report on
      Form
      10-K for the fiscal year ended March 31, 2007, Part II, Item 1 of our Quarterly
      Report on Form 10-Q for the fiscal quarter ended June 30, 2007 and our Current
      Report on Form 8-K filed with the SEC on October 24, 2007.





*Securities
      Class Action Litigation*


On
      September 4, 2007, the United States District Court for the Southern District
      of
      New York issued an Order certifying a class consisting of all persons who
      purchased the common stock of the Company pursuant to, or traceable to, the
      Company’s initial public offering on or about February 9, 2005 through November
      15, 2005 and were damaged thereby.  The Company’s management continues
      to believe that the remaining claims in the case are legally deficient and
      that
      it has meritorious defenses to the claims that remain.  The Company
      intends to vigorously defend against the claims remaining in the case; however,
      the Company cannot reasonably estimate the potential range of loss, if
      any.





*OraSure
      Technologies Arbitration*


At
        the
        end of August 2007, the Company and OraSure Technologies, Inc. (“OraSure”)
        participated in an arbitration hearing at which each party presented its
        case to
        the arbitration panel.  On October 22, 2007, the Company received
        notification from the arbitrators that they had issued a Partial Final Award
        (the “Award”) in the pending arbitration with OraSure.  The
        arbitrators acknowledged that there was a technical breach of the non-compete
        clause in the Distribution Agreement between the parties but OraSure’s proof of
        damages was speculative and not supported by credible
        evidence.  Therefore, the arbitrators awarded nominal damages to
        OraSure in the amount of One Dollar ($1.00).  In addition, the
        arbitrators awarded to OraSure counsel fees and arbitrator compensation in
        an
        amount to be determined pursuant to further proceedings.  The Company
        will vigorously contest the award of fees to OraSure as the Company believes
        that OraSure should only be entitled to a modest award in light of the
        arbitrators’ rejection of OraSure’s asserted damages and claims beyond the One
        Dollar ($1.00) nominal award.





The
        arbitration panel also dismissed with prejudice OraSure’s remaining claims for
        breach of the Distribution Agreement, OraSure’s request for injunctive relief
        and the Company’s counterclaims, respectively.  Furthermore, the
        arbitrators confirmed the Company's position that the Distribution Agreement
        will terminate on December 31, 2007.  The Company does not expect any
        interruptions in supply of its Compound W Freeze Off® branded cryosurgical wart
        remover as it transitions to a new supplier after December 31,
        2007.





*DenTek
      Oral Care, Inc. Litigation*


In
      April
      2007, the Company filed a lawsuit in the U.S. District Court in the Southern
      District of New York against DenTek Oral Care, Inc. (“DenTek”) alleging (i)
      infringement of intellectual property associated with The Doctor’s®
NightGuardTMdental protector
      which is used for the protection of teeth from
      nighttime teeth grinding; and (ii) the violation of unfair competition and
      consumer protection laws.  On October 4, 2007, the Company filed a
      Second Amended Complaint in which it named Kelly M. Kaplan, Raymond Duane and
      C.D.S. Associates, Inc. as additional defendants in the action against DenTek
      and added other claims to the previously filed complaint.  Ms. Kaplan
      and Mr. Duane were formerly employed by the Company and C.D.S. Associates,
      Inc.
      is a corporation controlled by Mr. Duane.  In the Second Amended
      Complaint, the Company has alleged patent, trademark and copyright infringement,
      unfair competition, unjust enrichment, violation of New York’s Consumer
      Protection Act, breach of contract, tortuous interference with contractual
      and
      business relations, civil conspiracy and trade secret
      misappropriation.  On October 19, 2007, the Company filed a motion for
      preliminary injunction with the Court in which the Company has asked the Court
      to enjoin the defendants from (i) continuing to improperly use the Company’s
      trade secrets; (ii) continuing to breach any contractual agreements with the
      Company; and (iii) marketing and selling any dental protector products or other
      products in which Ray Duane or Kelly Kaplan has had any involvement or provided
      any assistance to DenTek.  A hearing date for the motion for
      preliminary




-42-


injunction
      has not yet been set by the Court.  Discovery requests have been
      served by the parties and discovery is ongoing.





In
      addition to the matters described above, the Company is involved from time
      to time in other routine legal matters and other claims incidental to its
      business.  The Company reviews outstanding claims and proceedings
      internally and with external counsel as necessary to assess probability and
      amount of potential loss.  These assessments are re-evaluated at each
      reporting period and as new information becomes available to determine whether
      a
      reserve should be established or if any existing reserve should be
      adjusted.  The actual cost of resolving a claim or proceeding
      ultimately may be substantially different than the amount of the recorded
      reserve.  In addition, because it is not permissible under GAAP to
      establish a litigation reserve until the loss is both probable and estimable,
      in
      some cases there may be insufficient time to establish a reserve prior to the
      actual incurrence of the loss (upon verdict and judgment at trial, for example,
      or in the case of a quickly negotiated settlement).  The Company
      believes the resolution of routine matters and other incidental claims, taking
      into account reserves and insurance, will not have a material adverse effect
      on
      its business, financial condition or results from operations.





**ITEM
              1A.**
            **RISK
              FACTORS**


****


There
      have been no material changes to the risk factors previously disclosed in Part
      I, Item 1A, of our Annual Report on Form 10-K for the year ended March 31,
      2007,
      which is incorporated herein by reference.








**ITEM
                2.**
            **UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF
                PROCEEDS**





There
      were no purchases of shares of the Company’s common stock during the quarter
      ended September 30, 2007, by or on behalf of the Company or any “affiliated
      purchaser,” as defined by Rule 10b-18(a)(3) of the Exchange Act.








**ITEM
                4.**
            **SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY
                HOLDERS**





The
      Company’s 2007 Annual Meeting of Stockholders was held on July 31, 2007 (the
“Annual Meeting).  Proxies for the Annual Meeting were solicited in
      accordance with Regulation 14 of the Exchange Act to elect directors to serve
      until the 2008 Annual Meeting of Stockholders or until their earlier removal
      or
      resignation and to ratify the appointment of PricewaterhouseCoopers LLP as
      the
      independent registered public accounting firm for the fiscal year ending March
      31, 2008.  The following nominees were elected to the Company’s Board
      of Directors to serve until the 2008 Annual Meeting of Stockholders or until
      their respective successors have been elected and qualified, or until their
      earlier death, resignation or retirement.  The voting information for
      each elected nominee




-43-


is
      set
      forth below:





**For**
            
            
            **Withheld**Mark
              Pettie
            
            47,678,543
            
            
            
            428,426L.
              Dick Buell
            
            47,813,986
            
            
            
            292,983John
              E. Byom
            
            47,723,268
            
            
            
            383,701Gary
              E. Costley
            
            47,783,333
            
            
            
            323,636David
              A. Donnini
            
            26,036,225
            
            
            
            22,070,744Ronald
              Gordon
            
            47,659,068
            
            
            
            447,901Vincent
              J. Hemmer
            
            47,609,448
            
            
            
            497,521Patrick
              Lonergan
            
            47,723,173
            
            
            
            383,796Peter
              C. Mann
            
            47,609,948
            
            
            
            497,021Raymond
              P. Silcock
            
            47,701,121
            
            
            
            405,848








The
      votes
      for the ratification of the appointment of PricewaterhouseCoopers LLP as the
      Company’s independent registered public accounting firm for the audit of the
      Company’s financial statements for the fiscal year ending March 31, 2008 were as
      follows:





**For**
            
            **Against**
            
            **Withheld**47,598,174
            
            
            506,149
            
            
            2,646








**ITEM
              6.**
            **EXHIBITS**


****


See
      Exhibit Index immediately following signature page.





-44-


**SIGNATURES**











Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.




**Prestige
              Brands Holdings, Inc.**RegistrantDate:
            November
              8, 2007
            By:   **/s/
              PETER J. AN****DERSON**Peter
              J. AndersonChief
              Financial Officer(Principal
              Financial Officer andDuly
              Authorized Officer)





****




-45-





**Exhibit
      Index**











31.1
            Certification
                of Principal Executive Officer of Prestige Brands Holdings, Inc.
                pursuant
                to Rule 13a-14(a) of the Securities Exchange Act of 1934.31.2
            Certification
                of Principal Financial Officer of Prestige Brands Holdings, Inc.
                pursuant
                to Rule 13a-14(a) of the Securities Exchange Act of 1934.32.1
            Certification
                of Principal Executive Officer of Prestige Brands Holdings, Inc.
                pursuant
                to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the
                United
                States Code.32.2
            Certification
                of Principal Financial Officer of Prestige Brands Holdings, Inc.
                pursuant
                to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the
                United
                States Code.


-46-