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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-QSB



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the quarter ended September 30, 2005



or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -----------------------------------------------------------------------------------------



Commission File Number 001-16185



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GEOPHARMA, INC.

(Name of small business issuer as specified in its charter)



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|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|STATE OF FLORIDA                                               |  | 59-2600232                       
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)
|                                                               | 
|6950 Bryan Dairy Road, Largo, Florida                          |  | 33777                            
|(Address of principal executive offices)                       |  | (Zip Code)                       



Issuers
telephone number, including area code: (727) 544-8866



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Indicate by check mark whether the issuer (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.    x  Yes ̈No



The number of shares outstanding of
the Issuers common stock at $.01 par value as of November 10, 2005 was 8,951,711 net of 339,617 treasury shares.



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act.):    Yes ̈No  x



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PART I  FINANCIAL INFORMATION



Item 1. CONSOLIDATED FINANCIAL STATEMENTS.



GEOPHARMA, INC. AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS



ASSETS



|                                               |  |                                |            |                          |   |           
|---------------------------------------------- |  | ------------------------------ | ---------- | ------------------------ | - | ----------
|                                               |  | (unaudited) September 30, 2005 |            | (audited) March 31, 2005
|Current assets:                                |  |                                |            |                          |   |           
|Cash and cash equivalents                      |  | $                              | 5,415,159  |                          | $ | 6,433,011 
|Certificate of deposit                         |  |                                | 432,501    |                          |   | 425,927   
|Accounts receivable, net                       |  |                                | 4,342,008  |                          |   | 2,256,189 
|Accounts receivable, other                     |  |                                | 194,170    |                          |   | 586,164   
|Inventories, net                               |  |                                | 5,018,364  |                          |   | 3,743,063 
|Prepaid expenses and other current assets      |  |                                | 857,238    |                          |   | 655,786   
|Due from affiliates                            |  |                                | 1,113,589  |                          |   | 867,007   
|Deferred tax asset                             |  |                                |           |                          |   | 38,000    
|                                               |  |                                |            |                          |   |           
|Total current assets                           |  | $                              | 17,373,029 |                          | $ | 15,005,147
|Property, plant, leaseholds and equipment, net |  |                                | 8,302,365  |                          |   | 4,485,767 
|Goodwill, net                                  |  |                                | 728,896    |                          |   | 728,896   
|Intangible assets, net                         |  |                                | 483,435    |                          |   | 521,499   
|Media credits, net                             |  |                                | 799,748    |                          |   | 799,748   
|Other assets, net                              |  |                                | 137,223    |                          |   | 130,886   
|                                               |  |                                |            |                          |   |           
|Total assets                                   |  | $                              | 27,824,696 |                          | $ | 21,671,943
|                                               |  |                                |            |                          |   |           



See accompanying notes
to condensed consolidated financial statements



2



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LIABILITIES AND SHAREHOLDERS EQUITY



|                                                                                                                                                           |  |                                |             |   |                          |   |             |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ----------- | - | ------------------------ | - | ----------- | -
|                                                                                                                                                           |  | (unaudited) September 30, 2005 |             |   | (audited) March 31, 2005 |  
|Current liabilities:                                                                                                                                       |  |                                |             |   |                          |   |             |  
|Accounts payable                                                                                                                                           |  | $                              | 2,600,212   |   |                          | $ | 1,759,512   |  
|Current portion of long-term obligations                                                                                                                   |  |                                | 2,649,397   |   |                          |   | 1,972,792   |  
|Accrued expenses and related party obligations                                                                                                             |  |                                | 2,069,788   |   |                          |   | 701,384     |  
|Deferred tax liability                                                                                                                                     |  |                                | 131,000     |   |                          |   |            |  
|                                                                                                                                                           |  |                                |             |   |                          |   |             |  
|Total current liabilities                                                                                                                                  |  | $                              | 7,450,397   |   |                          | $ | 4,433,688   |  
|                                                                                                                                                           |  |                               
|Long-term obligations, less current portion                                                                                                                |  |                                | 2,474,374   |   |                          |   | 1,562,569   |  
|                                                                                                                                                           |  |                                |             |   |                          |   |             |  
|Total liabilities                                                                                                                                          |  | $                              | 9,924,771   |   |                          | $ | 5,996,257   |  
|Minority interest                                                                                                                                          |  |                                | (84,961     | ) |                          |   |             |  
|                                                                                                                                                           |  |                               
|Commitments and contingencies                                                                                                                              |  |                                |             |   |                          |   |             |  
|                                                                                                                                                           |  |                               
|Shareholders equity:                                                                                                                                      |  |                                |             |   |                          |   |             |  
|                                                                                                                                                           |  |                               
|6% convertible preferred stock, Series B, $.01 par value (5,000 shares authorized, 5,000 shares issued and outstanding (liquidation preference
$5,000,000) |  | $                              | 50          |   |                          | $ | 50          |  
|Common stock, $.01 par value; 24,000,000 shares authorized; 9,291,025 and 9,181,551 shares issued and outstanding                                          |  |                                | 92,910      |   |                          |   | 91,815      |  
|Treasury stock (339,920 and 483,020 common shares, $.01 par value)                                                                                         |  |                                | (3,399      | ) |                          |   | (4,830      | )
|Additional paid-in capital                                                                                                                                 |  |                                | 43,622,542  |   |                          |   | 42,367,115  |  
|Retained earnings (deficit)                                                                                                                                |  |                                | (25,727,219 | ) |                          |   | (26,778,464 | )
|                                                                                                                                                           |  |                                |             |   |                          |   |             |  
|Total shareholders equity                                                                                                                                 |  | $                              | 17,984,885  |   |                          | $ | 15,675,686  |  
|                                                                                                                                                           |  |                                |             |   |                          |   |             |  
|Total liabilities and shareholders equity                                                                                                                 |  | $                              | 27,824,696  |   |                          | $ | 21,671,943  |  
|                                                                                                                                                           |  |                                |             |   |                          |   |             |  



See accompanying notes
to condensed consolidated financial statements.



3



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GEOPHARMA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)



|                                                                        |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  
|----------------------------------------------------------------------- |  | ------------------------------- | ---------- | - | ----------------------------- | - | --------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                                        |  | Three Months EndedSeptember 30, |            |   | Six Months EndedSeptember 30, |  
|                                                                        |  | 2005                            |            |   | 2004                          |   |           | 2005 |  |   | 2004       |  
|Revenues:                                                               |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  
|PBM (a related party activity)                                          |  | $                               | 4,060,596  |   |                               | $ | 2,479,638 |      |  | $ | 8,184,406  |   |  | $ | 4,619,526  |  
|Distribution                                                            |  |                                 | 3,280,712  |   |                               |   | 719,317   |      |  |   | 6,938,670  |   |  |   | 2,282,131  |  
|Manufacturing                                                           |  |                                 | 4,671,474  |   |                               |   | 2,798,737 |      |  |   | 8,653,787  |   |  |   | 6,101,270  |  
|Pharmaceutical                                                          |  |                                 | 208,926    |   |                               |   | 41,660    |      |  |   | 218,902    |   |  |   | 90,466     |  
|                                                                        |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  
|Total revenues                                                          |  | $                               | 12,221,708 |   |                               | $ | 6,039,352 |      |  | $ | 23,995,765 |   |  | $ | 13,093,393 |  
|                                                                        |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  
|Cost of goods sold:                                                     |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  
|PBM                                                                     |  |                                 | 4,026,858  |   |                               |   | 2,254,214 |      |  |   | 8,121,925  |   |  |   | 4,363,828  |  
|Distribution                                                            |  |                                 | 2,457,026  |   |                               |   | 575,133   |      |  |   | 4,554,642  |   |  |   | 1,540,427  |  
|Manufacturing (excluding depreciation and amortization presented below) |  |                                 | 2,836,381  |   |                               |   | 1,830,050 |      |  |   | 5,126,551  |   |  |   | 4,019,187  |  
|Pharmaceutical                                                          |  |                                 | 122,103    |   |                               |   | 28,500    |      |  |   | 124,697    |   |  |   | 50,696     |  
|                                                                        |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  
|Total cost of goods sold                                                |  | $                               | 9,442,368  |   |                               | $ | 4,687,897 |      |  | $ | 17,927,815 |   |  | $ | 9,974,138  |  
|                                                                        |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  
|Gross profit:                                                           |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  
|PBM                                                                     |  |                                 | 33,738     |   |                               |   | 225,424   |      |  |   | 62,481     |   |  |   | 255,698    |  
|Distribution                                                            |  |                                 | 823,686    |   |                               |   | 144,184   |      |  |   | 2,384,028  |   |  |   | 741,704    |  
|Manufacturing                                                           |  |                                 | 1,835,093  |   |                               |   | 968,687   |      |  |   | 3,527,236  |   |  |   | 2,082,083  |  
|Pharmaceutical                                                          |  |                                 | 86,823     |   |                               |   | 13,160    |      |  |   | 94,205     |   |  |   | 39,770     |  
|                                                                        |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  
|Total gross profit                                                      |  | $                               | 2,779,340  |   |                               | $ | 1,351,455 |      |  | $ | 6,067,950  |   |  | $ | 3,119,255  |  
|                                                                        |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  
|Selling, general and administrative expenses:                           |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  
|Selling, general and administrative expenses                            |  |                                 | 2,594,337  |   |                               |   | 1,321,911 |      |  |   | 5,034,795  |   |  |   | 2,660,251  |  
|Depreciation and amortization                                           |  |                                 | 172,926    |   |                               |   | 147,230   |      |  |   | 334,562    |   |  |   | 292,205    |  
|                                                                        |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  
|Selling, general and administrative expenses                            |  |                                 | 2,767,263  |   |                               |   | 1,469,141 |      |  |   | 5,369,357  |   |  |   | 2,952,456  |  
|                                                                        |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  
|Operating income (loss) before other income and expense                 |  | $                               | 12,077     |   |                               | $ | (117,686  | )    |  | $ | 698,593    |   |  | $ | 166,799    |  
|Other income (expense), net:                                            |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  
|Other income (expense), net                                             |  |                                 | 824,123    |   |                               |   | 196,529   |      |  |   | 877,365    |   |  |   | 215,688    |  
|Interest expense, net                                                   |  |                                 | (111,922   | ) |                               |   | (119,796  | )    |  |   | (175,675   | ) |  |   | (242,089   | )
|                                                                        |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  
|Total other income (expense), net                                       |  | $                               | 712,201    |   |                               | $ | 76,733    |      |  | $ | 701,690    |   |  | $ | (26,401    | )
|                                                                        |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  
|Income (loss) before income taxes                                       |  | $                               | 724,278    |   |                               | $ | (40,953   | )    |  | $ | 1,400,283  |   |  | $ | 140,398    |  
|Minority interest benefit (expense)                                     |  |                                 | 76,326     |   |                               |   |           |      |  |   | 84,861     |   |  |   |            |  
|Income tax expense                                                      |  |                                 | (212,000   | ) |                               |   |          |      |  |   | (284,000   | ) |  |   | (14,440    | )
|                                                                        |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  
|Net income (loss)                                                       |  | $                               | 588,604    |   |                               | $ | (40,953   | )    |  | $ | 1,201,144  |   |  | $ | 125,958    |  
|Preferred stock dividends                                               |  |                                 | 75,000     |   |                               |   | 170,095   |      |  |   | 150,000    |   |  |   | 320,929    |  
|                                                                        |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  
|Net income (loss) available to common shareholders                      |  | $                               | 513,604    |   |                               | $ | (211,048  | )    |  | $ | 1,051,244  |   |  | $ | (194,971   | )
|                                                                        |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  
|Basic income (loss) per share                                           |  | $                               | .06        |   |                               | $ | (.03      | )    |  | $ | .12        |   |  | $ | (.02       | )
|                                                                        |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  
|Basic weighted average Number of common shares outstanding              |  |                                 | 8,901,724  |   |                               |   | 7,724,475 |      |  |   | 8,824,381  |   |  |   | 7,719,216  |  
|                                                                        |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  
|Diluted income (loss) per share                                         |  | $                               | .04        |   |                               | $ | (.03      | )    |  | $ | .08        |   |  | $ | (.02       | )
|                                                                        |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  
|Diluted weighted average number of common shares outstanding            |  |                                 | 12,747,697 |   |                               |   | 7,724,475 |      |  |   | 12,685,900 |   |  |   | 7,719,216  |  
|                                                                        |  |                                 |            |   |                               |   |           |      |  |   |            |   |  |   |            |  



See accompanying notes
to condensed consolidated financial statements.



4



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GEOPHARMA, INC. AND SUBSIDIARIES

STATEMENTS OF CASH FLOWS



|                                                                           |  |                                |            |   |             |   |            |  
|-------------------------------------------------------------------------- |  | ------------------------------ | ---------- | - | ----------- | - | ---------- | -
|                                                                           |  | Six Months Ended September 30, |           
|                                                                           |  | 2005                           |            |   | 2004        |  
|                                                                           |  | (Unaudited)                    |            |   | (Unaudited) |  
|Cash flows from operating activities:                                      |  |                                |            |   |             |   |            |  
|Net income                                                                 |  | $                              | 1,201,244  |   |             | $ | 125,958    |  
|Adjustments to reconcile net income to net cash from operating activities: |  |                                |            |   |             |   |            |  
|Depreciation and amortization                                              |  |                                | 334,562    |   |             |   | 292,205    |  
|Accrued interest income                                                    |  |                                | (6,574     | ) |             |   |           |  
|Amortization of stock option deferred compensation                         |  |                                | 22,395     |   |             |   | 36,006     |  
|Change in net deferred taxes                                               |  |                                | 284,000    |   |             |   | 14,442     |  
|Changes in operating assets and liabilities:                               |  |                                |            |   |             |   |            |  
|Accounts receivable, net                                                   |  |                                | (2,085,818 | ) |             |   | (81,346    | )
|Accounts receivable, other                                                 |  |                                | 391,994    |   |             |   | (237,200   | )
|Inventory, net                                                             |  |                                | (1,275,301 | ) |             |   | (1,305,857 | )
|Prepaid expenses and other current assets                                  |  |                                | (163,452   | ) |             |   | (48,520    | )
|Other assets                                                               |  |                                | (1,775     | ) |             |   | (4,361     | )
|Accounts payable                                                           |  |                                | 840,701    |   |             |   | (301,639   | )
|Accrued expenses                                                           |  |                                | 1,350,817  |   |             |   | 150,379    |  
|Due from affiliates, net                                                   |  |                                | (246,288   | ) |             |   | (210,623   | )
|                                                                           |  |                                |            |   |             |   |            |  
|Net cash provided by (used in) operating activities                        |  | $                              | 646,505    |   |             | $ | (1,455,928 | )
|                                                                           |  |                                |            |   |             |   |            |  
|Cash flows from investing activities:                                      |  |                                |            |   |             |   |            |  
|Purchases of property, leaseholds and equipment                            |  | $                              | (4,117,655 | ) |             | $ | (394,584   | )
|Proceeds from minority interest investment, net                            |  |                                | 895,039    |   |             |   |           |  
|                                                                           |  |                                |            |   |             |   |            |  
|Net cash used in investing activities                                      |  | $                              | (3,222,616 | ) |             | $ | (394,584   | )
|                                                                           |  |                                |            |   |             |   |            |  
|Cash flows from financing activities:                                      |  |                                |            |   |             |   |            |  
|Proceeds from issuance of long-term obligations                            |  | $                              | 3,000,000  |   |             | $ |           |  
|Payments of long-term obligations                                          |  |                                | (1,632,624 | ) |             |   | (173,365   | )
|Payments of preferred stock dividends                                      |  |                                |           |   |             |   | (76,666    | )
|Amortization of debt discount to interest expense                          |  |                                | 110,745    |   |             |   | 154,227    |  
|Payments for private placement fees                                        |  |                                |           |   |             |   | (6,000     | )
|Proceeds from stock option exercise                                        |  |                                | 80,138     |   |             |   | 204,551    |  
|                                                                           |  |                                |           |   |             |   |           |  
|                                                                           |  |                                |            |   |             |   |            |  
|Net cash provided by (used in) financing activities                        |  | $                              | 1,558,259  |   |             | $ | 102,747    |  
|                                                                           |  |                                |            |   |             |   |            |  
|Net increase (decrease) in cash                                            |  |                                | (1,017,852 | ) |             |   | (1,747,765 | )
|Cash at beginning of period                                                |  |                                | 6,433,011  |   |             |   | 13,167,765 |  
|                                                                           |  |                                |            |   |             |   |            |  
|Cash at end of period                                                      |  | $                              | 5,415,159  |   |             | $ | 11,420,786 |  
|                                                                           |  |                                |            |   |             |   |            |  
|SUPPLEMENTAL INFORMATION:                                                  |  |                                |            |   |             |   |            |  
|Cash paid during the period for interest                                   |  | $                              | 56,662     |   |             | $ | 71,534     |  
|                                                                           |  |                                |            |   |             |   |            |  
|Cash paid during the period for income taxes                               |  | $                              |           |   |             | $ | 40,000     |  
|                                                                           |  |                                |            |   |             |   |            |  



5



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|                                                               |  |                                  |         |                                  |   |        
|-------------------------------------------------------------- |  | -------------------------------- | ------- | -------------------------------- | - | -------
|                                                               |  | Six monthsendedSeptember 30,2005 |         | Six monthsendedSeptember 30,2004
|NON-CASH INVESTING AND FINANCING ACTIVITIES:                   |  |                                  |         |                                  |   |        
|Value of common stock issued to pay preferred stock dividend   |  | $                                | 150,000 |                                  | $ | 194,262
|Value of common stock issued as 401(k) match                   |  | $                                | 47,815  |                                  | $ |       
|Value of common stock issued to pay convertible debt principle |  | $                                |        |                                  | $ | 262,500
|Value of common stock issued to pay debt interest              |  | $                                |        |                                  | $ | 49,477 



See accompanying notes
to condensed consolidated financial statements.



6



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GEOPHARMA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2005 AND 2004



NOTE 1-BASIS OF PRESENTATION



The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles
for interim financial information and with the instruction to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete
consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended
September 30, 2005 and 2004 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2006. For further information, refer to the consolidated financial statements and footnotes included in the
Companys Form-10KSB as of and for the years ended March 31, 2005 and 2004 as filed with the Securities and Exchange Commission on June 29, 2005.



NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



a. Principles of Consolidation



The condensed consolidated financial statements as of September 30, and March 31, 2005 and for the three and six months ended September 30,
2005 and 2004 include the accounts of GeoPharma, Inc. (the Company), (GeoPharma), which is continuing to do manufacturing business as Innovative Health Products, Inc. (Innovative), and its Florida wholly-owned
subsidiaries Breakthrough Engineered Nutrition, Inc. (Breakthrough), Belcher Pharmaceuticals, Inc., (Belcher), Breakthrough Marketing Inc., (B-Marketing), IHP Marketing, Inc., (IHP-Marketing), and
Go2PBM Services, Inc. (PBM) and its Delaware wholly-owned subsidiary, Belcher Capital Corporation, (Belcher Capital). Effective August 2005, the Company has a 51% controlling interest in our new Florida-incorporated
subsidiary, American Antibiotics, LLC ( American), which is accounted for given the consideration of the 49% minority interest. All transactions relating to Significant intercompany balances and transactions have been eliminated in
consolidation.



b. Industry Segment



In accordance with the provisions of Statement of Financial Accounting Standards
No. 131, (SFAS 131), Disclosures about Segments of an Enterprise and Related Information, a company is required to disclose selected financial and other related information about its operating segments. Operating segments are components of an
enterprise about which separate financial information is available and is utilized by the chief operating decision maker related to the allocation of resources and in the resulting assessment of the segments overall performance. As of
September 30, 2005 and March 31, 2005, the Company had four industry segments in addition to corporate: manufacturing, distribution, pharmacy benefit management and pharmaceutical. The $27,824,696 of total assets as of September 30,
2005 were comprised of $747,448 attributable to corporate, $14,876,122 attributable to manufacturing, $6,738,434 attributable to distribution, $883,344 attributable to pharmacy benefit management and $4,579,348 attributable to pharmaceutical. The
$21,671,943 of total assets as of March 31, 2005 were comprised of $6,352,631 attributable to corporate, $11,853,060 attributable to manufacturing, $2,573,787 attributable to distribution, $817,099 attributable to pharmacy benefit management
and $75,366 attributable to pharmaceutical.



c. Cash and Cash Equivalents



For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.



d. Inventories



Inventories are stated at lower of cost or market. Cost is determined using the first-in, first-out method.



e. Property, Leasehold Improvements and Equipment



Depreciation is provided for using the straight-line method, in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service
lives (asset categories range from three to seven years). Leasehold improvements are amortized using the straight-line method over the lives of the respective leases or the service lives of the improvements, whichever is shorter. Leased equipment
under capital leases is amortized using the straight-line method over the lives of the respective leases or over the service lives of the assets, whichever is shorter, for those leases that substantially transfer ownership. Accelerated depreciation
methods are used for tax purposes.



7



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NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)



f. Intangible Assets



Intangible assets consist primarily of goodwill and intellectual property. FAS 142 requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually. The Company has selected January 1 as the annual date to test these assets for impairment. FAS 142 also requires the intangible assets with
definite useful lives be amortized over their respective estimated useful lives, and reviewed for impairment in accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of.



For the three and six months ended September 30, 2005 and 2004,
amortization expense associated with goodwill was $0. The unamortized balance of goodwill at September 30, and March 31, 2005 was $728,896 with the unamortized balance of intellectual property for the same periods was $228,305. No
impairment loss was required to be recorded.



h. Impairment of Assets



In accordance with the provisions of Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Companys policy is to evaluate whether there has been a permanent impairment in the value of long-lived assets, certain identifiable intangibles and
goodwill when certain events have taken place that indicate the remaining unamortized balance may not be recoverable. When factors indicate that the intangible assets should be evaluated for possible impairment, the Company uses an estimate of
related undiscounted cash flows. There have been no impairment losses recorded.



i. Income Taxes



The Company utilizes the guidance provided by
Statement of Financial Accounting Standards No. 109 (SFAS 109), Accounting for Income Taxes. Under the liability method specified by SFAS 109, deferred tax assets and liabilities are determined based on the difference between the financial
statement and tax basis of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. Deferred tax expense is the result of changes in deferred tax assets and liabilities.



j. Earnings (Loss) Per Common Share



Earnings (loss) per share are computed using the basic and diluted calculations on the face
of the statement of operations. Basic earnings (loss) per share are calculated by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted earnings
(loss) per share is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period, adjusted for the dilutive effect of common stock equivalents, using the treasury stock method.
Convertible debt and preferred stock warrants, officer, employee and nonemployee stock options that are considered potentially dilutive are included in the fully diluted share calculation at September 30, 2005 and 2004. The reconciliation
between basic and fully diluted shares are as follows:



|                                              |  |                                             |            |                                             |   |           |                                           |  |                                           |            |  |   |           |  
|--------------------------------------------- |  | ------------------------------------------- | ---------- | ------------------------------------------- | - | --------- | ----------------------------------------- |  | ----------------------------------------- | ---------- |  | - | --------- | -
|                                              |  | For the ThreeMonths EndedSeptember 30, 2005 |            | For the ThreeMonths EndedSeptember 30, 2004 |   |           | For the SixMonths EndedSeptember 30, 2005 |  | For the SixMonths EndedSeptember 30, 2004 |           
|Net income (loss) per share  basic:          |  |                                             |            |                                             |   |           |                                           |  |                                           |            |  |   |           |  
|Net income (loss)                             |  | $                                           | 513,604    |                                             | $ | (211,048  | )                                         |  | $                                         | 1,051,244  |  | $ | (194,971  | )
|Weighted average shares  basic               |  |                                             | 8,901,724  |                                             |   | 7,724,475 |                                           |  |                                           | 8,824,381  |  |   | 7,719,216 |  
|Net income (loss) per share  basic           |  | $                                           | .06        |                                             | $ | (.03      | )                                         |  | $                                         | .12        |  | $ | (.02      | )
|Net income (loss) per share  diluted:        |  |                                             |            |                                             |   |           |                                           |  |                                           |            |  |   |           |  
|Net income (loss)                             |  | $                                           | 513,604    |                                             | $ | (211,048  | )                                         |  | $                                         | 1,051,244  |  | $ | (194,971  | )
|Preferred Stock                               |  |                                             | 75,000     |                                             |   |          |                                           |  |                                           | 150,000    |  |   |          |  
|                                              |  |                                             |            |                                             |   |           |                                           |  |                                           |            |  |   |           |  
|                                              |  |                                             | 588,604    |                                             |   |           |                                           |  |                                           | 1,201,244  |  |   |           |  
|Weighted average shares  basic               |  |                                             | 8,901,724  |                                             |   | 7,724,475 |                                           |  |                                           | 8,824,381  |  |   | 7,719,216 |  
|Effect of preferred stock prior to conversion |  |                                             | 833,333    |                                             |   |          |                                           |  |                                           | 833,333    |  |   |          |  
|Effect of warrants prior to conversion        |  |                                             | 562,500    |                                             |   |          |                                           |  |                                           | 562,500    |  |   |          |  
|Effect of stock options                       |  |                                             | 2,450,140  |                                             |   |          |                                           |  |                                           | 2,465,686  |  |   |          |  
|Effect of convertible term note               |  |                                             |           |                                             |   |          |                                           |  |                                           |           |  |   |          |  
|Weighted average shares-diluted               |  |                                             | 12,747,697 |                                             |   | 7,724,475 |                                           |  |                                           | 12,685,900 |  |   | 7,719,216 |  
|Net income (loss) per share  diluted         |  | $                                           | .04        |                                             | $ | (.03      | )                                         |  | $                                         | .08        |  | $ | (.02      | )
|Antidilutive items not included               |  |                                             | 1,170,000  |                                             |   | 2,565,833 |                                           |  |                                           | 1,170,000  |  |   | 2,565,833 |  



8



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k. Use of Estimates



The preparation of financial statements in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at September 30 and March 31, 2005, as well as the reported amounts of revenues and expenses for the three and six months ended
September 30, 2005 and 2004. The actual outcome of the estimates could differ from the estimates made in the preparation of the financial statements.



l. Concentration of Credit and Sales Risk



Concentrations of credit risk with respect to trade accounts receivable are limited due to the distribution of sales over a large customer base as of September 30,
and March 31, 2005. For the three months ended September 30, 2005, four customers accounted for 33.2%, CarePlus, a related party, 13.5%, Spectrum Group, 7.2% Berkeley Premium Nutraceuticals, and 7.2%, Direct Marketing Concepts. For the six
months ended September 30, 2005, three customers accounted for 34.1%, CarePlus, a related party, 14.5%, Spectrum Group, and 5.6%, Direct Marketing Concepts.



The Company has no concentration of customers within specific geographic areas outside the United States that would give rise to significant
geographic credit risk.



m. Revenue Recognition



In accordance with SAB 101, Revenue Recognition, revenues are recognized by the Company when
the merchandise is shipped to the customer which is when title and risk of loss has passed to the customer. Revenues from sales of inventory on consignment are recognized when consigned inventory is sold with title and risk of loss passing to the
ultimate customer.



n. Advertising Costs



The Company charges advertising costs to expense as incurred. Advertising expense was
$608,025 and $76,858 for the three months ended September 30, 2005 and 2004 and $1,257,853 and $111,239 for the six months ended September 30, 2005 and 2004, respectively.



o. Research and Development Costs



Costs incurred to develop our generic pharmaceutical products are expensed as incurred and charged to research and development
(R&D). R&D expensed for the three and six months ended September 30, 2005 were $132,849 and $229,851, respectively.



p. Fair Value of Financial Instruments



The Company, in estimating its fair value disclosures for financial instruments, uses the following methods and assumptions:



Cash, Accounts Receivable, Accounts Payable and Accrued Expenses: The carrying amounts
reported in the balance sheet for cash, accounts receivable, accounts payable and accrued expenses approximate their fair value due to their relatively short maturity.



Long-term Obligations: The fair value of the Companys fixed-rate long-term obligations is estimated using discounted cash flow
analyses, based on the Companys current incremental borrowing rates for similar types of borrowing arrangements. At June 30 and March 31, 2005, the fair value of the Companys long-term obligations approximated its carrying
value.



Credit Lines Payable: The carrying amount of the Companys credit
lines payable approximates fair market value since the interest rate on these instruments corresponds to market interest rates.



q. Reclassifications



Certain reclassifications have been made to the financial statements for the three and six months ended September 30, 2004 to conform to the presentation for the three and six months ended September 30,
2005.



9



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NOTE 3INCOME TAXES



Income taxes for the six months ended September 30, 2005 differ from the amounts computed by applying the effective income tax rates to income
before income taxes as a result of the following:



|                                                    |  |   |          |  
|--------------------------------------------------- |  | - | -------- | -
|Computed tax expense at the statutory rate (37.63%) |  | $ | 558,000  |  
|Increase (decrease) in taxes resulting from:        |  |   |          |  
|Effect of permanent differences:                    |  |   |          |  
|Non deductible                                      |  |   | 36,000   |  
|Other, net                                          |  |   | (210,000 | )
|Change in valuation allowance                       |  |   | (100,000 | )
|                                                    |  |   |          |  
|Income tax (benefit) expense                        |  | $ | 284,000  |  
|                                                    |  |   |          |  



10



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GEOPHARMA, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Temporary differences that give rise to deferred tax assets
and liabilities are as follows:



|                                            |  |   |          |  
|------------------------------------------- |  | - | -------- | -
|Deferred tax assets:                        |  |   |          |  
|Bad debts                                   |  | $ | 47,000   |  
|Inventories                                 |  |   | 13,200   |  
|Accrued vacation                            |  |   | 26,000   |  
|Deposits                                    |  |   | 170,000  |  
|Amortization                                |  |   |         |  
|Net operating loss carryforwards            |  |   | 26,000   |  
|                                            |  |   |          |  
|Deferred tax asset                          |  | $ | 282,200  |  
|                                            |  |   |          |  
|Deferred tax liabilities:                   |  |   |          |  
|Fixed asset basis differences               |  | $ | (362,000 | )
|Amortization                                |  |   | (51,200  | )
|                                            |  |   |          |  
|                                            |  | $ | (413,200 | )
|                                            |  |   |          |  
|Net deferred tax asset (liability) recorded |  | $ | (131,000 | )
|                                            |  |   |          |  



At September 30,
2005, the Company has a tax net operating loss carryforward of approximately $100,000 to offset future taxable income. The tax net operating loss carryforwards begin to expire in 2021.



NOTE 4-STOCK OPTION PLANS



The proforma net earnings (loss) per common share is presented below as if the Company had elected to account for its stock option plan consistent with
the methodology prescribed by SFAS No. 123:



|                                    |  |                    |         |                   |                  |          |                   |  |                   |           |  |   |          |  
|----------------------------------- |  | ------------------ | ------- | ----------------- | ---------------- | -------- | ----------------- |  | ----------------- | --------- |  | - | -------- | -
|                                    |  | Three months ended |         |                   | Six months ended |         
|                                    |  | September 30,2005  |         | September 30,2004 |                  |          | September 30,2005 |  | September 30,2004 |          
|Net income (loss)                   |  |                    |         |                   |                  |          |                   |  |                   |           |  |   |          |  
|As reported                         |  | $                  | 513,604 |                   | $                | (211,048 | )                 |  | $                 | 1,051,244 |  | $ | (194,971 | )
|                                    |  |                    |         |                   |                  |          |                   |  |                   |           |  |   |          |  
|Pro forma                           |  | $                  | 47,897  |                   | $                | (377,584 | )                 |  | $                 | 585,537   |  | $ | (361,507 | )
|                                    |  |                    |         |                   |                  |          |                   |  |                   |           |  |   |          |  
|Net income (loss) per common share: |  |                    |         |                   |                  |          |                   |  |                   |           |  |   |          |  
|Basic income (loss) per share:      |  |                    |         |                   |                  |          |                   |  |                   |           |  |   |          |  
|As reported                         |  | $                  | .06     |                   | $                | (.03     | )                 |  | $                 | .12       |  | $ | (.02     | )
|                                    |  |                    |         |                   |                  |          |                   |  |                   |           |  |   |          |  
|Pro forma                           |  | $                  | .01     |                   | $                | (.05     | )                 |  | $                 | .07       |  | $ | (.05     | )
|                                    |  |                    |         |                   |                  |          |                   |  |                   |           |  |   |          |  
|Diluted income (loss) per share:    |  |                    |         |                   |                  |          |                   |  |                   |           |  |   |          |  
|As reported                         |  | $                  | .04     |                   | $                | (.03     | )                 |  | $                 | .08       |  | $ | (.02     | )
|                                    |  |                    |         |                   |                  |          |                   |  |                   |           |  |   |          |  
|Pro forma                           |  | $                  | .00     |                   | $                | (.05     | )                 |  | $                 | .05       |  | $ | (.05     | )
|                                    |  |                    |         |                   |                  |          |                   |  |                   |           |  |   |          |  



NOTE 5-RELATED PARTY TRANSACTIONS



Revenues: For the three months ended September 30, 2005 and 2004,
manufacturing revenues of approximately $18,806 and $181,257 respectively, were recorded from sales by the Company to subsidiaries of Dynamic Health Products, an affiliate of the Company, and of which Jugal K. Taneja, the Chairman of the Board of
the Company, is a principal shareholder. For the three months ended September 30, 2005 and 2004, manufacturing revenues of $0 and $41,660, respectively, were recorded from sales by the Company to DrugMax, Inc., an affiliate of the Company, and
of which Jugal K. Taneja, the Chairman of the Board of the Company, is a principal shareholder. For the three months ended September 30, 2005 and 2004, manufacturing revenues of $119,931 and $127,334, respectively, were recorded from sales by
the Company to VerticalHealth Inc., an affiliate of the Company, and of which Jugal K. Taneja, the Chairman of the Board of the Company, is a shareholder.



For the three months ended September 30, 2005 and 2004, pharmacy benefit management revenues of approximately $4,060,000 and $2,479,000 respectively, were recorded
from sales by the Company to CarePlus Health Plan, an affiliate of the Companys former board member Mssr. Zappala. Our wholly-owned subsidiary, Go2PBMServices, Inc., derives 100% of its revenues from this contract.



Revenues: For the six months ended September 30, 2005 and 2004, manufacturing revenues
of approximately $102,275 and $318,944 respectively, were recorded from sales by the Company to subsidiaries of Dynamic Health Products, an affiliate of the Company, and of which Jugal K. Taneja, the Chairman of the Board of the Company, is a
principal shareholder. For the six months ended September 30, 2005 and 2004, manufacturing revenues of $0 and $90,466, respectively, were recorded from sales by the Company to DrugMax, Inc., an affiliate of the Company, and of which Jugal K.
Taneja, the Chairman of the Board of the Company, is a principal shareholder. For the six months ended September 30, 2005 and 2004, manufacturing revenues of $303,984 and $215,937, respectively, were recorded from sales by the Company to
VerticalHealth Inc., an affiliate of the Company, and of which Jugal K. Taneja, the Chairman of the Board of the Company, is a shareholder.



For the six months ended September 30, 2005 and 2004, pharmacy benefit management revenues of approximately $8,184,000 and $4,619,000 respectively, were recorded
from sales by the Company to CarePlus Health Plan, an affiliate of the Companys former board member Mssr. Zappala. Our wholly-owned subsidiary, Go2PBMServices, Inc., derives 100% of its revenues from this contract.



11



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Trade Accounts Receivable/ Trade Accounts Payable: Amounts due to affiliates and amounts due from affiliates represent
balances owed by or amounts owed to the Company for sales occurring in the normal course of business. Amounts due to and amounts due from these affiliates are in the nature of trade payables or receivables and fluctuate based on sales volume and
payments received.



As of September 30, and March 31, 2005, for the
manufacturing segment, $50,268 and $51,460 was due from subsidiaries of Dynamic Health Products. $190,453 and $57,363 was due from VerticalHealth, Inc.



As of September 30, and March 31, 2005, for the pharmacy benefit management segment, $872,868 and $743,801 was due from CarePlus Health.



NOTE 6- LEGAL PROCEEDINGS



In December 2004 and January 2005 five securities class action lawsuits were
filed in the Federal District Court, Southern District of New York against GeoPharma and certain of its officers, alleging violations of federal securities laws in connection with certain press releases issued by the Company relating to Belcher
Pharmaceuticals planned introduction of Mucotrol: Mat eVentures v. Kotha Sekharam and GeoPharma, Inc. (SDNY 04 Civ. 9463); Moshayedi v. GeoPharma, Inc., Jugal Taneja, Mihir Taneja, and Kotha Sekharam (SDNY 04 Civ. 9736); Sarno v. Mihir Taneja,
Kotha Sekharam, and GeoPharma, Inc. (SDNY 04 Civ. 9975); Farwell v. Kotha Sekharam and GeoPharma, Inc. (SDNY 05 Civ. 188); and Taylor v. Kotha Sekharam and GeoPharma, Inc. (SDNY 05 Civ. 258). Plaintiffs, on behalf of themselves and all others
similarly situated, seek unspecified damages allegedly suffered in connection with their respective purchases and sales of the Companys securities during the Class period. On March 9, 2005 the Court consolidated the actions and appointed
lead plaintiff and lead counsel. On April 18, 2005 plaintiffs filed a Consolidated Amended Class Action Complaint. On June 6, 2005 defendants filed a Motion to Dismiss the action. By Opinion and Order dated September 30, 2005 the
Court granted defendents motion and dismissed the action without prejudice, with leave to replead. On October 24, 2005 plaintiffs filed a Consolidated Second Amended Class Action Complaint in the action. Defendents again plan to move to
dismiss the action; their motion is scheduled to be filed on November 21, 2005. It is not possible to predict with certainty the ultimate outcome of these lawsuits. Although the Company has certain insurance, if these matters are resolved
unfavorably, they could have a material adverse effect on the Companys operating results or cash flows.



The company received a letter dated April 11, 2005 addressed to its Board of Directors, constituting a shareholder demand pursuant to Florida Statute
Sec. 607.07401 from a San Diego law firm representing an alleged shareholder of GeoPharma, Inc. Such letter demanded that the company commence legal proceedings against each Board member and each officer of the company for alleged breaches of
fiduciary duty arising out of and/or evidenced by the same actions and circumstances involved in the class action referred to above. At its Board meeting of June 7, 2005, the Board of Directors appointed a committee of independent directors to
investigate the allegations outlined in such letter and as such, the investigation is currently underway.



NOTE 7-AMERICAN ANTIBIOTICS LLC



On
Friday, August 12, 2005, the Company, through American Antibiotics LLC, a newly-formed subsidiary which is 51% owned by the Company, acquired substantially all of the assets of Consolidated Pharmaceutical Group, Inc., an antibiotic manufacturer
located in Baltimore, Maryland. The acquisition was made through American Antibiotics LLC, a newly formed Florida limited liability company. GeoPharma has a 51% controlling interest in American Antibiotics LLC in exhange for $3,000,000. In
accordance with the Purchase Agreemenrt, the $3,000,000 note was immediately reduced based on a $500,000 cash down payment with the balance due of $2,500,000 note amortized over three years at 5% interest with principal and interest serviced
annually. In addition, the manufacturing facility located Baltimore, Maryland remains rent free for the longer of twelve months or until the Sellers have brought the Facility to current FDA and cGMP standards.



Commercial production is expected to commence during the second quarter of 2006. American
Antibiotics will begin production with five ANDAs in 10 dosage forms; Amoxicillin 250mg and 500mg oral capsule, Amoxicillin 125mg / 5ml and 250mg / 5ml suspensions, Ampicillin 250mg and 500mg oral capsule, Ampicillin 125mg / 5ml and 250mg / 5ml
suspensions, and Penicillin V. Potassium 125mg / 5ml and 250mg / 5ml suspension.



12



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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.



The statements contained in this Report that are not
historical are forward-looking statements, including statements regarding the Companys expectations, intentions, beliefs or strategies regarding the future. Forward- looking statements include the Companys statements regarding liquidity,
anticipated cash needs and availability and anticipated expense levels. All forward-looking statements included in this Report are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any
such forward-looking statement. It is important to note that the Companys actual results could differ materially from those in such forward-looking statements. Additionally, the following discussion and analysis should be read in conjunction
with the Financial Statements and notes thereto appearing elsewhere in this Report. The discussion is based upon such financial statements which have been prepared in accordance with U.S. Generally Accepted Accounting Principles and the Standards of
the Public Company Accounting Oversight Board (United States).



Managements Discussion and Analysis of Financial Condition and Results of Operations



We derive our revenues from developing, manufacturing and distributing a wide variety of cosmetics, over-the-counter, pharmaceutical and generic drugs,
and prescription and non-prescription products. We also derive revenues from the distribution of our branded product lines, CarbSlim, Lean Protein and from our branded dietary supplement product lines that this year include Oxylene and Hoodia DEX
L-10. Revenues are billed and recognized as product is produced and shipped, net of discounts, allowances, returns and credits. In addition, we derive revenues from the services provided in connection with pharmacy benefit management. Service
revenues are billed and recognized once the service has been provided. The PBMs revenues are comprised of amounts billed and recognized based on the number of eligible plan members enrolled in the HMO insurance programs, plan member claims
caused by the fulfillment of an eligible HMO members drug prescription and related administration costs for pharmacys fulfilling drug prescriptions for the number of members and the number of claims for the period.



Cost of goods sold is comprised of direct manufacturing and manufacturing and
distribution material product costs, contracted service fees, direct personnel compensation and other statutory benefits and indirect costs relating to labor to support product manufacture, distribution and the warehousing of production and other
manufacturing overhead. In addition, for the distribution segment, the cost of all free goods for the purpose of product introduction or other incentive-based product costs are also charged. The PBM cost of sales amounts recognized represent the
direct and indirect costs of the prescription drug claims arising from the pharmacys fulfillment of HMO member drug prescriptions that were filled, completed and received by eligible HMO insurance plan members for the period.



Research and development expenses that benefit us and that benefit our
customers are charged against either cost of goods sold or included within selling, general and administrative expenses as incurred dependent upon whether the R&D relates to direct product materials expended, direct laboratory and manufacturing
production costs or whether it relates to indirect or more facility and administrative type costs representing indirect salaries.



Selling, general and administrative expenses include management and general office salaries, advertising and promotional expenses, depreciation and
amortization, insurance expenses, legal and accounting costs, sales and marketing and other indirect operating costs.



Interest expense, net, consists primarily of interest expense associated with borrowings to finance capital equipment expenditures and other working
capital needs as partially offset by interest income earned on our funds held at banks.



Three Months Ended September 30, 2005 Compared to Three Months Ended September 30, 2004



Revenues. Total consolidated revenues increased approximately $6.2 million, or 102.4%, to approximately $12,222,000 for the three
months ended September 30, 2005, as compared to approximately $6,039,000 for the three months ended September 30, 2004.



Manufacturing revenues increased approximately $1.87 million, or 66.9%, to approximately $4,671,000 for the three months ended September 30, 2005, as
compared to approximately $2,799,000 for the corresponding period. The increase was primarily due to the increased order volumes and orders frequencies from our larger customers based on their new product introductions. Overall, manufacturing
capacities and capabilities continue to be increased as we have added additional more advanced, higher speed production equipment.



Distribution revenues increased approximately $2,561,000 or 356.1% to approximately $3,281,000 for the three months ended September 30, 2005, as
compared to $719,000 for the three months ended September 30, 2004. Overall, sales



13



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prices vary for all product lines dependent upon the size of the retail outlet as related to individual as well as
aggregate purchase volumes in addition to the potential future expansion of the number of distribution points of sale as well as advertising dollars projected to be spent. For the three months ended September 30, 2005 as compared to the
corresponding period in 2004 where no sales were consummated, two new branded products were sold, both of which are dietary supplements, Oxylene and Hoodia DEX L-10 where 312 and 1,782 cases were sold respectively. For the three months ended
September 30, 2005, 1,782 cases of CarbSlim were sold versus 11,207 cases sold for the three months ended September 30, 2004. The decrease in case sales are due to the decline in the low-carb category and a decrease in the number of
national and regional distribution points. CarbSlim is comprised of ten SKUs, two sizes of: peanut butter crunch, chocolate caramel crunch, mint, peanut butter cookie dough, chocolate chip cookie dough. The Lean Protein Bites product line is
comprised of four SKUs, milk chocolate, white chocolate, peanut butter and lemon. For the three months ended September 30, 2005, 812 total cases were sold as compared to the three months ended September 30, 2004, where 1,173 total cases
were sold. The decline in sales was primarily due to the Company spending higher advertising dollars on the Companys other product lines.



Pharmacy benefit management revenues increased 63.8% or approximately $1,581,000 to $4,060,000 for the three months ended September 30, 2005, as
compared to $2,479,000 for the three months ended September 30, 2004. The increase results from the increase in overall membership and prescriptions filled in the two health plans as compared to the three months ended September 30, 2004.
Revenue per member remained constant for both of the fiscal periods.



Pharmaceutical revenues increased $167,000 or approximately 400% to $209,000 as compared to $42,000. The increase is based on the introduction in July 2005 of Levothyroxine Sodium for animals.



Gross Profit. Total gross profit increased approximately
$1,400,000 or 105.7%, to $2,779,000 for the three months ended September 30, 2005, as compared to $1,351,000 for the three months ended September 30, 2004. Total gross margins remained consistant increasing slightly to 22.7% for the three
months ended September 30, 2005 from 22.4% for the three months ended September 30, 2004.



Manufacturing gross profit increased approximately $866,000, or 89.4%, to approximately $1,835,000 for the three months ended September 30, 2005, as
compared to approximately $969,000 in the corresponding period in 2004. For the three months ended September 30, 2005 manufacturing gross margin increased to 39.3%, from 34.6% in the corresponding period in 2004. Sales and gross profits have
increased due to increased orders in addition to maintaining reduced costs due more efficient manufacturing equipment as partially offset by increased labor costs due to increases in the number of direct-labor personnel. Current increases in these
type of labor-based direct overhead costs are in line with the Companys planned improvements surrounding enhanced standard operating and manufacturing procedures in both its manufacturing plants. The Company expects that these improvements
will continue to increase the Companys visibility in the marketplaces that the Company competes in for new and expanded business.



Distribution gross profits increased 471.3% or approximately $680,000 to approximately $824,000 for the three months ended September 30, 2005, as
compared to approximately $144,000 for the corresponding period ended September 30, 2004, with distribution gross margins increasing to 25.1% for the three months in 2005 as compared to 20.0% for the three months in 2004. The increases were
primarily due to the new dietary supplement brands sold in 2005 that were not sold in 2004 that have a higher sales price and a better gross profit margin.



Pharmacy Benefit Management gross profit decreased approximately $192,500 or 85.0% to approximately $34,000 for the three months ended September 30,
2005, as compared to approximately $225,000 for the corresponding period in 2004. Pharmacy benefit management gross margin was 0.8% for three months in 2005 as compared to 9.1% for the three months ended 2004. Gross profit and margin decreased based
on continued industry pressure on controlling per member and per claim revenues coupled with growing membership, rising number of claims in addition to the rising prescription costs. In addition to the 2004 corresponding period includes a $225,000
nonrecurring service consulting fee that is not included nor due within the three month period ended September 30, 2005.



Pharmaceutical gross profits increased $73,000 or approximately 558% to $87,000 as compared to $13,000. The increase is based on the introduction in July
2005 of Levothyroxine Sodium for animals. The gross margin was 42.7% for three months ended September 2005 as compared to 31.6% for the three months ended September 2004 as based on the introduction of the Levethyroxine in July 2005 as compared to
the corresponding period in 2004 where the gross margins and profits were lower due to gross profits attributable only to customers pharmaceutical repackaging.



Selling, General and Administrative Expenses. Selling, general and administrative (SGA) expenses
consist of advertising and promotional expenses; insurance costs, research and development costs associated with the generic drug segment, personnel costs related to general management functions, finance, accounting and information systems, payroll
and bonus expenses and sales commissions; professional fees related to legal, audit and tax matters; and depreciation and



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amortization expenses. Selling, general and administrative expenses, inclusive of depreciation and amortization,
increased approximately $1,298,000, or 88.4%, to approximately $2,767,000 for the three months ended September 30, 2005, as compared to approximately $1,469,000 in the corresponding 2004 period. The increase is primarily attributable to
increased legal and insurance costs, rents, salary expenses and additional advertising and promotional expenses. The advertising and promotional increases are associated with promoting our distribution segment and related branded product lines,
including CarbSlim, Lean Protein, Hoodia DEX L-10 and Oxylene; additional legal expenses associated with our outstanding class action lawsuit. All insurance costs have increased, including health, general and product liability insurances; health
insurance increased primarily due to an increase in the cost per employee and the number of employees; in addition to external insurance market influences surrounding higher premium costs for all of the Companys business segments based on our
increasing sales revenues. Officer and employee salaries have increased in total based on increases in the number of personnel in addition to merit increases and bonuses. Rents increased based on the additional warehousing and distribution square
footage required with growing manufacturing and distribution segments. As a percentage of sales, selling, general and administrative expenses decreased to 22.6% for the three months ended September 30, 2005 from 24.3% in the corresponding
period in 2004.



Interest Expense, net. For the
three months ended September 30, 2005, interest expense, net, has decreased approximately $8,000 primarily due to total debt balance declining based on continued principal payments in addition to decreased interest expense charged due $17,000
interest that was capitalized as a cost of construction due to manufacturing construction that is in progress during the three month period ended September 30, 2005 that was not in progress in the corresponding 2004 period.



Income Taxes. For the three months ended September 30,
2005, the Company has recorded $212,000 of income tax expense based on the effective tax rate as applied to earnings for the 2005 period.



Management believes that there was no material effect on operations or the financial condition of the Company as a result of inflation as of and for the
three months ended September 30, 2005. Management also believes that its business is not seasonal, however significant promotional activities can have a direct impact on sales volume in any given quarter.



Six Months Ended September 30, 2005 Compared to Six
Months Ended September 30, 2004



Revenues. Total consolidated revenues increased approximately $10.9 million, or 83.3%, to approximately $23,996,000 for the six months ended September 30, 2005, as compared to approximately $13,093,000 for the six
months ended September 30, 2004.



Manufacturing revenues
increased approximately $2.55 million, or 41.8%, to approximately $8.65 million for the six months ended September 30, 2005, as compared to approximately $6.1 million for the corresponding period. The increase was primarily due to the increased
order volumes and orders frequencies from our larger customers based on their new product introductions. Overall, manufacturing capacities and capabilities continue to be increased as we have added additional more advanced, higher speed production
equipment.



Distribution revenues increased approximately $4.66
million or 204% to approximately $6,939,000 for the six months ended September 30, 2005, as compared to $2.28 million for the six months ended September 30, 2004. Overall, sales prices vary for all product lines dependent upon the size of
the retail outlet as related to individual as well as aggregate purchase volumes in addition to the potential future expansion of the number of distribution points of sale as well as advertising dollars projected to be spent. For the six months
ended September 30, 2005 as compared to the corresponding period in 2004 where no sales were consummated, two new branded products were sold, both of which are dietary supplements, Oxylene and Hoodia DEX L-10 where 367 and 1836 cases were sold
respectively. For the six months ended September 30, 2005, 7,330 cases of CarbSlim were sold versus 43,783 cases sold for the six months ended September 30, 2004. The decrease in case sales are due to the decline in the low-carb category
and a decrease in the number of national and regional distribution points. CarbSlim is comprised of ten SKUs, two sizes of: peanut butter crunch, chocolate caramel crunch, mint, peanut butter cookie dough, chocolate chip cookie dough. The Lean
Protein Bites product line is comprised of four SKUs, milk chocolate, white chocolate, peanut butter and lemon. For the six months ended September 30, 2005, 2,412 total cases were sold as compared to the six months ended September 30,
2004, where 3,409 total cases were sold. The decline in sales was primarily due to the Company spending higher advertising dollars on the Companys other product lines.



Pharmacy benefit management revenues increased 77.2% or approximately $3,565,000 to $8,184,000 for the six months ended
September 30, 2005, as compared to $4,619,000 for the six months ended September 30, 2004. The increase results from the increase in overall membership and prescriptions filled in the two health plans as compared to the six months ended
September 30, 2004. Revenue per member remained constant for both of the fiscal periods.



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Pharmaceutical revenues increased $128,000 or approximately 142% to $219,000 as compared to $90,000. The
increase is based on the introduction in July 2005 of Levothyroxine Sodium for animals where during the six months ended September 30, 2004, revenues were only derived from customer repackages pharmaceuticals.



Gross Profit. Total gross profit increased approximately
$2.9 million or 94.5%, to $6.1 million for the six months ended September 30, 2005, as compared to $3.12 million for the six months ended September 30, 2004. Total gross margins remained consistant increasing slightly to 25.3% for the six
months ended September 30, 2005 from 23.8% for the six months ended September 30, 2004.



Manufacturing gross profit increased approximately $1.44 million, or 69.4%, to approximately $3.5 million for the six months ended September 30,
2005, as compared to approximately $2.1 million in the corresponding period in 2004. For the six months ended September 30, 2005 manufacturing gross margin increased to 40.7%, from 34.1% in the corresponding period in 2004. Sales and gross
profits have increased due to increased orders in addition to maintaining reduced costs due more efficient manufacturing equipment as partially offset by increased labor costs due to increases in the number of direct-labor personnel. Current
increases in these type of labor-based direct overhead costs are in line with the Companys planned improvements surrounding enhanced standard operating and manufacturing procedures in both its manufacturing plants. The Company expects that
these improvements will continue to increase the Companys visibility in the marketplaces that the Company competes in for new and expanded business.



Distribution gross profits increased 221.4% or approximately $1.6 million to approximately $2.38 million for the six months ended September 30, 2005,
as compared to approximately $742,000 for the corresponding period ended September 30, 2004, with distribution gross margins increasing to 34.4% for the six months in 2005 as compared to 32.5% for the six months in 2004. The increases were
primarily due to the new dietary supplement brands sold in 2005 that were not sold in 2004 that have a higher sales price and a better gross profit margin.



Pharmacy Benefit Management gross profit decreased approximately $193,000 or 75.6% to approximately $62,000 for the six months ended September 30,
2005, as compared to approximately $255,000 for the corresponding period in 2004. Pharmacy benefit management gross margin was 0.8% for six months in 2005 as compared to 5.5% for the six months ended 2004. Gross profit and margin decreased based on
continued industry pressure on controlling per member and per claim revenues coupled with growing membership, rising number of claims in addition to the rising prescription costs. In addition to the 2004 corresponding period includes a $225,000
nonrecurring service consulting fee that is not included nor due within the six month period ended September 30, 2005.



Pharmaceutical gross profits increased $54,000 or approximately 136.8% to $94,000 as compared to $40,000. The increase is based on the introduction in
July 2005 of Levothyroxine Sodium for animals. The gross margin was consistant for both the 2005 and 2004 periods although comprised of two different pharmaceutical products. The 2005 period included shipments of the Levothyroxine for animals which
we manufacture versus repackaged pharmaceuticals in the 2004 period. The margins for the six-month period 2004 were comparable to the six-month period 2005 as the 2004 repackaging volume did not meet the Companys minimum order thus a higher
price was able to be charged.



Selling, General and
Administrative Expenses. Selling, general and administrative (SGA) expenses consist of advertising and promotional expenses; insurance costs, research and development costs associated with the generic drug segment, personnel
costs related to general management functions, finance, accounting and information systems, payroll and bonus expenses and sales commissions; professional fees related to legal, audit and tax matters; and depreciation and amortization expenses.
Selling, general and administrative expenses, inclusive of depreciation and amortization, increased approximately $2,417,000, or 81.9%, to approximately $5,369,000 for the six months ended September 30, 2005, as compared to approximately
$2,952,000 in the corresponding 2004 period. The increase is primarily attributable to increased legal and insurance costs, rents, salary expenses and additional advertising and promotional expenses. The advertising and promotional increases are
associated with promoting our distribution segment and related branded product lines, including CarbSlim, Lean Protein, Hoodia DEX L-10 and Oxylene; additional legal expenses associated with our outstanding class action lawsuit. All insurance costs
have increased, including health, general and product liability insurances; health insurance increased primarily due to an increase in the cost per employee and the number of employees; in addition to external insurance market influences surrounding
higher premium costs for all of the Companys business segments based on our increasing sales revenues. Officer and employee salaries have increased in total based on increases in the number of personnel in addition to merit increases and
bonuses. Rents increased based on the additional warehousing and distribution square footage required with growing manufacturing and distribution segments. As a percentage of sales, selling, general and administrative expenses decreased slightly to
22.4% for the six months ended September 30, 2005 from 22.6% in the corresponding period in 2004.



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Interest Expense, net. For the six months ended September 30, 2005, interest expense,
net, has decreased approximately $66,000 primarily due to total debt balance declining based on continued principal payments in addition to decreased interest expense charged due to $74,000 of interest that was capitalized as a cost of construction
due to manufacturing construction that is in progress during the six month period ended September 30, 2005 that was not in progress in the corresponding 2004 period.



Income Taxes. For the three months ended September 30, 2005, the Company has recorded $284,000 of income
tax expense based on the effective tax rate as applied to earnings for the 2005 period.



Financial Condition, Liquidity and Capital Resources



The Company had working capital of approximately $9,922,000 at September 30, 2005, inclusive of current portion of long-term obligations and credit facilities, as compared to working capital of approximately
$10,571,000 at March 31, 2005. The decrease in working capital is primarily attributable to net increases in inventories based on increases in purchasing activity in order to support our distribution product available to meet open national
chain and mass retail purchase orders and increases in accounts receivable based on increased credit sales as offset by increases in accounts payable and accrued expenses associated with increased purchases and increases in accruals surrounding
legal and salary-related expenses including wages, taxes, fringe benefits, insurances and commissions and as offset by the increase in current portion of long-term obligations directly associated with our controlling interest investment in American
Antibiotics LLC.



Net cash provided by operating activities was
approximately $646,000 for the six months ended September 30, 2005, as compared to net cash used by operating activities of $(1,456,000) for the six months ended September 30, 2004. Cash provided was primarily attributable to net income of
$1,201,000 based on consolidated gross profit increases of approximately $2.9 million, increases in trade accounts payable representing net credit purchases of approximately $800,000, increases in accrued expenses of $1.5 million, changes in
deferred taxes of $284,000, decreases of other accounts receivable of $392,000 directly attributable to the $1.2 million net proceeds received from the final insurance settlement relating to the Companys August 2002 fire, depreciation and
amortization of $334,000 all of which is partially offset by increases in trade accounts receivable of approximately $2.1 million based on increases in credit sales, and increases in inventory of $1.3 million in order to meet manufacturing and
distribution open orders and prepaid and other asset purchases of approximately $165,000.



Net cash used in investing activities was $(3,223,000) for the six months ended September 30, 2005 as compared to the net cash used of $(394,000) for the six months ended September 30, 2004. Investing
activities represented purchases and upgrades of plant and laboratory equipment for generic drug manufacturing and distribution plant, Belcher Pharmaceuticals as offset by $895,000 of net proceeds received from the American Antibiotics 49% minority
interest.



Net cash provided by financing activities was
approximately $1.5 million for the six months ended September 30, 2005 as compared to cash provided by financing activities of approximately $102,000 for the corresponding 2004 period. The cash provided was primarily due to issuance of $3
million of long-term obligations directly relating to the Companys purchasing the majority interest in the American Antibiotic Beta-Lactum manufacturing plant located in Baltimore, Maryland.



Management believes that cash expected to be generated from operations,
current cash reserves, and existing financial arrangements will be sufficient for the Company to meet its capital expenditures and working capital needs for its operations as presently conducted. The Companys future liquidity and cash
requirements will depend on a wide range of factors, including the level of business in existing operations, expansion of facilities, expected results from recent procedural changes surrounding the acceptance of manufacturing sales orders, and
possible acquisitions. In particular, we have added additional manufacturing lines and have purchased additional fully automated manufacturing equipment to meet our present and future growth. Our plans may require the leasing of additional
facilities and/or the leasing or purchase of additional equipment in the future to accommodate further expansion of our manufacturing, warehousing and related storage needs. If cash flows from operations, current cash reserves and available credit
facilities are not sufficient, it will be necessary for the Company to seek additional financing. There can be no assurance that such financing would be available in amounts and on terms acceptable to the Company.



Item 3. CONTROLS AND PROCEDURES.



Evaluation of disclosure controls and procedures. An evaluation was
performed under the supervision and with the participation of our management, including the chief executive officer or CEO, and the chief financial officer, or CFO, of the effectiveness of the design and operation of our disclosure procedures. Based
on managements evaluation as the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that the Companys disclosure



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controls and procedures (an defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the Exchange Act), were effective to ensure that the information required to the disclosed by us in the reports that we filed under the Exchange Act gathered, analyzed and disclosed with adequate timelines, accuracy and
completeness and to ensure that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.



Changes in internal controls. There have been no significant changes in our
internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referred to above, nor were there any significant deficiencies or material weaknesses in our internal controls.
Accordingly, no corrective actions were required or undertaken.



Part II - OTHER INFORMATION



Item 1. LEGAL PROCEEDINGS.



In December 2004 and January 2005 five securities class
action lawsuits were filed in the Federal District Court, Southern District of New York against GeoPharma and certain of its officers, alleging violations of federal securities laws in connection with certain press releases issued by the Company
relating to Belcher Pharmaceuticals planned introduction of Mucotrol: Mat eVentures v. Kotha Sekharam and GeoPharma, Inc. (SDNY 04 Civ. 9463); Moshayedi v. GeoPharma, Inc., Jugal Taneja, Mihir Taneja, and Kotha Sekharam (SDNY 04 Civ. 9736);
Sarno v. Mihir Taneja, Kotha Sekharam, and GeoPharma, Inc. (SDNY 04 Civ. 9975); Farwell v. Kotha Sekharam and GeoPharma, Inc. (SDNY 05 Civ. 188); and Taylor v. Kotha Sekharam and GeoPharma, Inc. (SDNY 05 Civ. 258). Plaintiffs, on behalf of
themselves and all others similarly situated, seek unspecified damages allegedly suffered in connection with their respective purchases and sales of the Companys securities during the Class period. On March 9, 2005 the Court consolidated
the actions and appointed lead plaintiff and lead counsel. On April 18, 2005 plaintiffs filed a Consolidated Amended Class Action Complaint. On June 6, 2005 defendants filed a Motion to Dismiss the action. By Opinion and Order dated
September 30, 2005 the Court granted defendents motion and dismissed the action without prejudice, with leave to replead. On October 24, 2005 plaintiffs filed a Consolidated Second Amended Class Action Complaint in the action.
Defendents again plan to move to dismiss the action; their motion is scheduled to be filed on November 21, 2005. It is not possible to predict with certainty the ultimate outcome of these lawsuits. Although the Company has certain insurance, if
these matters are resolved unfavorably, they could have a material adverse effect on the Companys operating results or cash flows.



The company received a letter dated April 11, 2005 addressed to its Board of Directors, constituting a shareholder demand pursuant to Florida Statute
Sec. 607.07401 from a San Diego law firm representing an alleged shareholder of GeoPharma, Inc. Such letter demanded that the company commence legal proceedings against each Board member and each officer of the company for alleged breaches of
fiduciary duty arising out of and/or evidenced by the same actions and circumstances involved in the class action referred to above. At its Board meeting of June 7, 2005, the Board of Directors appointed a committee of independent directors to
investigate the allegations outlined in such letter and as such, the investigation is currently underway.



From time to time the Company is subject to litigation incidental to its business. Such claims, if successful, could exceed applicable insurance coverage.
The Company is not currently a party to any material legal proceedings other than what is currently disclosed herein.



Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.



None.



Item 3. DEFAULTS UPON SENIOR SECURITIES.



Not applicable.



Item 4. SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS.



Not applicable.



Item 5. OTHER INFORMATION.



Not applicable.



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Item 6. EXHIBITS



Exhibits.



Exhibit 31.1 Certification of Principal Financial Officer

Exhibit 31.2 Certification of Principal Executive Officer

Exhibit 32.1 Certification Pursuant to 18 U.S.C.
Section 1350

Exhibit 32.2 Certification Pursuant to 18 U.S.C. Section 1350



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SIGNATURES



In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                        |  |                 |  |                                                
|----------------------- |  | --------------- |  | -----------------------------------------------
|                        |  | GeoPharma, Inc.
|                        |  |                
|Date: November 14, 2005 |  | By:             |  | /s/ Mihir K. Taneja                            
|                        |  |                 |  | Mihir K. Taneja                                
|                        |  |                 |  | Chief Executive Officer, Secretary and Director
|                        |  |                
|Date: November 14, 2005 |  | By:             |  | /s/ Carol Dore-Falcone                         
|                        |  |                 |  | Carol Dore-Falcone                             
|                        |  |                 |  | Vice President and Chief Financial Officer     



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