(Mark
One)
|
|
x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT
OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008
|
Or
|
|
o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the transition period from _____ to
_____
|
New
York
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11-0853640
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(State
or other jurisdiction of Incorporation or organization)
|
(I.R.S.
Employer Identification No.)
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616
N. North Court, Suite 120, Palatine, Illinois
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60067
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(Address
of principal executive office)
|
(Zip
code)
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PAGE
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|||
PART
I
|
|||
Item
1.
|
Business
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3
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|
Item
1A.
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Risk
Factors
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20
|
|
Item
1B.
|
Unresolved
Staff Comments
|
30
|
|
Item
2.
|
Properties
|
31
|
|
Item
3.
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Legal
Proceedings
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31
|
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Item
4.
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Submission
of Matters to a Vote of Security Holders
|
31
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PART
II
|
|||
Item
5.
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Market
for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
31
|
|
Item
6.
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Selected
Financial Data
|
32
|
|
Item
7.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
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33
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|
Item
7A.
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Quantitative
and Qualitative Disclosures About Market Risk
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41
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|
Item
8.
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Financial
Statements and Supplementary Data
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41
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|
Item
9.
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Changes
in and Disagreement with Accountants on Accounting and Financial
Disclosure
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41
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Item
9A.
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Controls
and Procedures
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41
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Item
9B.
|
Other
Information
|
44
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PART
III
|
|||
Item
10.
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Directors,
Executive Officers and Corporate Governance
|
44
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Item
11.
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Executive
Compensation
|
48
|
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
66
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|
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
68
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|
Item
14.
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Principal
Accountant Fees and Services
|
71
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PART
IV
|
|||
Item
15.
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Exhibits
and Financial Statement Schedules
|
72
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|
Signatures
|
73
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||
Index
to Financial Statements
|
F-1
|
|
·
|
intravenous
injection of dissolved tablets or
capsules;
|
|
·
|
nasal
snorting of crushed tablets or capsules;
and
|
|
·
|
intentional
swallowing of excess quantities of tablets or
capsules.
|
|
·
|
Capitalize on our Experience
and Expertise in the Research and Development of Pharmaceutical Products
with Abuse Deterrent Features and Benefits. Our strategy
is to facilitate rapid product development and minimize risk by utilizing
active pharmaceutical ingredients with proven safety and efficacy profiles
with known potential for abuse, and develop new products utilizing our
proprietary Aversion®
Technology using the FDA’s 505(b)(2) regulatory
process.
|
|
·
|
Emerge as a Leader in
Developing and Commercializing Products with Abuse Deterrent Features and
Benefits Able to Uniquely Address the Growing Problem of Abuse of
Prescription Drugs. We believe that Acurox®
and our other product candidates in development have demonstrated
that Aversion®
Technology allows products to provide the analgesic benefit they were
intended to deliver, while simultaneously having features that are
intended to deter misuse and abuse. We believe these benefits
will be attractive to physicians, third party payors, and advocacy groups
sensitive to the problem of prescription drug
abuse.
|
|
·
|
Optimize Shareholder Value and
Temper Risk by Licensing our Product Candidates to Strategically Focused
Pharmaceutical Companies in the U.S. and Other Geographic
Territories. On October 30, 2007, we and King Research
and Development, Inc., a wholly-owned subsidiary of King Pharmaceuticals,
Inc., entered into a License, Development and Commercialization Agreement
to develop and commercialize in the United States, Canada and Mexico
opioid analgesic products utilizing Aversion®
Technology, including Acurox ®
Tablets and Acuracet®
Tablets. We believe opportunities exist to enter into similar
agreements with other partners for these same opioid products outside the
King Territory, and in the United States and worldwide for developing
additional Aversion®
Technology product candidates for other abuseable drugs such as
tranquilizers, stimulants and sedatives. By licensing our product
candidates to strategically focused companies with expertise and
infrastructure in commercialization of pharmaceuticals, we are able to
leverage our expertise, intellectual property rights and Aversion®
Technology without the need to build costly sales and manufacturing
infrastructure. We anticipate that our future revenue, if any,
will be derived from milestone and royalty payments related to the
commercialization of products utilizing our Aversion®
Technology.
|
|
·
|
Apply our Aversion® Technology to Non-Opioid
Products that are Subject to Abuse. We intend to first
develop a broad pipeline of opioid analgesic products, and thereafter we
intend to expand our portfolio to other pharmaceutical product categories
containing potentially abuseable active ingredients such as tranquillizers
(brand products such as Valium®,
Xanax®,
Halcion®
and Ativan®),
stimulants (brand products such as Dexedrine®,
Adderall®,
Ritalin®
and Concerta®)
and sedatives (brand products such as Nembutal®,
Butisol®,
and Seconal®). These
products, like the opioid analgesics on which we are currently focused,
are prone to similar forms of misuse and abuse. While we do not
currently focus significant resources on this area, we believe that the
application of Aversion®
Technology to these non-opioid products may have a similar regulatory
process and could result in a significant market opportunity for
us.
|
|
·
|
Maintain our Efficient
Internal Cost Structure. We maintain a streamlined corporate
infrastructure focused on: (i) selection, formulation development,
laboratory evaluation, manufacture, quality assurance and stability
testing of certain finished dosage form product candidates; (ii)
development and prosecution of our patent applications; and (iii)
negotiation and execution of license and development agreements with
strategically focused pharmaceutical companies. By outsourcing
the high cost elements of our product development and commercialization
process, we believe that we substantially reduce required fixed overhead
and capital investment and thereby reduce our business risk. We
currently do not, nor do we intend to, use a sales force to commercialize
products on our own.
|
Our Product Candidates
|
Stage of Development
|
|
Acurox®
(oxycodone HCl/niacin) Tablets
|
New
Drug Application ("NDA") submitted to FDA 12-30-08 with a request for
priority review
|
|
Acuracet®
(oxycodone HCl/niacin/APAP) Tablets
|
Investigational
New Drug Application ("IND") filed with FDA and active beginning
6-1-08. Testing for NDA submission in
progress
|
|
Vycavert™
(hydrocodone bitartrate/niacin/APAP) Tablets
|
Proof
of Concept complete. Testing for IND filing in
progress
|
|
4th
(undisclosed opioid analgesic) Tablets
|
Proof
of Concept complete
|
|
5th
(undisclosed opioid analgesic) Tablets
|
Proof
of Concept
complete
|
|
·
|
The
282 physicians surveyed estimated on average that about one out of six
prescriptions for oxycodone and hydrocodone containing products are
abused.
|
|
·
|
94%
of the 435 physicians surveyed experienced at least one suspicious
incident regarding opioid abuse in the past month, while nearly 64%
experienced four or more discretely different incidents regarding opioid
abuse in the past month.
|
|
·
|
Following the survey of 282
physicians, the researchers concluded, “abuse [of opioid
analgesics] is a
particular problem for physicians because many are not fully sure who is
abusing these opioids, and they view such abuse as a legal threat to their
practice.” “More than half [of the physicians surveyed] believe
their physician colleagues are more concerned about avoiding state review
[of their opioid prescribing habits] than meeting [professional
association] pain
guidelines [for their patients]”.
|
|
·
|
After
the survey of 435 physicians the researchers concluded “the primary motive
for prescribing the Aversion®
Technology product[s] is the concern
physicians have about opioid abuse and the threat it represents to their
practice.”
|
|
·
|
94%
of the 401 physicians surveyed indicated that they would either prescribe
one of the Aversion®
Technology products profiled in the market research questionnaire for one
of their last five patients receiving an opioid prescription or they are
aware of a patient in their practice for whom Aversion®
Technology products would be an appropriate
choice.
|
|
·
|
57%
of the 435 physicians indicated that their opioid analgesic prescribing
would increase if they were more certain they were not aiding
abusers.
|
|
·
|
Following
the survey of 401 physicians, the researchers concluded “these [Aversion®
Technology oxycodone products] would disproportionately replace current
immediate release oxycodone [and oxycodone/acetaminophen] prescriptions,
but would also draw substantial volume from hydrocodone/acetaminophen
products.”
|
Studies in the Acurox® Tablets 505(b)(2) NDA Submission
|
Summary of Results
|
|||
AP-ADF-101
Phase I
|
Niacin
dose-response (0-75mg)
|
Identified
appropriate niacin dose in each Acurox® Tablet
|
||
AP-ADF-104
Phase I
|
Bioequivalence
to non Aversion® Technology Reference Listed Drug
|
Acurox®
Tablets are bioequivalent to the Reference Listed Drug
|
||
AP-ADF-108
Phase I
|
Single
dose linearity and food effect
|
Acurox®
Tablets demonstrate single dose linearity. Absorption is
delayed by food.
|
||
AP-ADF-109
Phase I
|
Multi-dose
linearity
|
Acurox®
Tablets demonstrate multi-dose linearity
|
||
AP-ADF-106
Phase I
|
Evaluate
effects of nasal snorting in subjects with a history of snorting and nasal
drug abuse
|
Refer
to summary in this Report
|
||
AP-ADF-103
Phase II
|
Repeat
dose safety and tolerability
|
Confirmed
appropriate niacin dose in each Acurox® Tablet
|
||
AP-ADF-107
Phase II
|
Niacin
dose-response (0-600mg)
|
Confirmed
appropriate niacin dose in each Acurox® Tablet
|
||
AP-ADF-102
Phase II
|
Evaluate
relative dislike of oxycodone HCl/niacin versus oxycodone HCl
alone
|
Refer
to summary in this Report
|
||
AP-ADF-111
Phase II
|
Evaluate
abuse liability of oxycodone HCl/niacin versus oxycodone HCl
alone
|
Refer
to summary in this Report
|
||
AP-ADF-105
Phase III
|
Evaluate
safety and efficacy in relief of moderate to severe pain
|
Refer
to summary in this Report
|
||
Extraction Test
|
Laboratory
test quantifying I.V. abuse deterrent properties
|
Refer
to summary in this Report
|
||
Syringe Test
|
|
Laboratory
test quantifying I.V. abuse deterrent properties
|
|
Refer
to summary in this
Report
|
|
·
|
In
the fasting state, all three doses of niacin in combination with oxycodone
HCl 40mg produced significant (p ≤ .05) Disliking Scores compared to
oxycodone HCl 40mg alone. No other subjective measure was
significantly affected by the niacin addition to
oxycodone.
|
|
·
|
The
high fat meal eliminated the niacin effect and also delayed the time to
oxycodone peak blood levels.
|
|
·
|
The
addition of niacin to oxycodone HCl alters the subjective response to
oxycodone HCl as indicated by the significant responses on the Disliking
Score. This observation in conjunction with the results from the Treatment
Enjoyment Questionnaire indicates that the addition of niacin reduces the
attractiveness of oxycodone to opiate
abusers.
|
|
·
|
There
were no serious adverse events. Niacin produced a dose related attenuation
of pupillary constriction, diastolic blood pressure increase and probably
systolic blood pressure increase produced by oxycodone HCl. The
alterations by niacin on the vital sign responses to oxycodone 40 mg were
minimal, were seen primarily with the 600 mg niacin dose and were not
clinically significant.
|
|
·
|
our
receipt of milestone payments and royalties relating to products developed
and commercialized under our license agreement with King (as more fully
described under the caption “Item 1. Business — King Agreement”);
and
|
|
·
|
the
successful commercialization by King and other future licensees (if any)
of products utilizing our Aversion®
Technology without infringing the patents and other intellectual property
rights of third parties.
|
|
·
|
the
relative advantages and disadvantages of products utilizing Aversion®
Technology compared to competitive
products;
|
|
·
|
the
relative timing to commercial launch of products utilizing Aversion®
Technology compared to competitive
products;
|
|
·
|
the
relative safety and efficacy of products utilizing Aversion®
Technology compared to competitive
products;
|
|
·
|
the
product labeling approved by the FDA for products utilizing Aversion®
Technology; and
|
·
|
the willingness of third party payors to reimburse for or otherwise pay for products utilizing Aversion® Technology. |
|
·
|
litigation
or other proceedings we may initiate against third parties to enforce our
patent rights or other intellectual property
rights;
|
|
·
|
litigation
or other proceedings we may initiate against third parties seeking to
invalidate the patents held by such third parties or to obtain a judgment
that our products do not infringe such third parties’
patents;
|
|
·
|
litigation
or other proceedings third parties may initiate against us to seek to
invalidate our patents or to obtain a judgment that third party products
do not infringe our patents;
|
|
·
|
if
our competitors file patent applications that claim technology also
claimed by us, we may be forced to participate in interference or
opposition proceedings to determine the priority of invention and whether
we are entitled to patent rights on such invention;
and
|
|
·
|
if
third parties initiate litigation claiming that our products infringe
their patent or other intellectual property rights, we will need to defend
against such proceedings.
|
PERIOD
|
Bid
Prices
|
|
2007
Fiscal Year
|
High
$
|
Low
$
|
First
Quarter
|
9.50
|
6.90
|
Second
Quarter
|
11.50
|
7.60
|
Third
Quarter
|
28.40
|
9.30
|
Fourth
Quarter
|
22.40
|
6.00
|
2008
Fiscal Year
|
||
First
Quarter (through February 1, 2008)
|
8.60
|
5.90
|
PERIOD
|
Sale
Prices
|
|
2008
Fiscal Year
|
High
$
|
Low
$
|
Fiscal
Quarter (commencing February 4, 2008)
|
10.50
|
6.75
|
Second
Quarter
|
10.00
|
7.49
|
Third
Quarter
|
8.97
|
5.79
|
Fourth
Quarter
|
7.89
|
3.43
|
2009
Fiscal Year
|
||
First
Quarter (through February 24, 2009)
|
7.75
|
4.07
|
OPERATING DATA (in
thousands) except per
share data
|
2008
|
2007
|
2006
|
2005
|
2004
|
|||||||||||||||
Net
revenues
|
$ | 44,437 | $ | 6,404 | — | — | $ | 838 | ||||||||||||
Operating
costs:
|
||||||||||||||||||||
Cost
of manufacturing
|
— | — | — | — | 1,435 | |||||||||||||||
Research
and development
|
14,322 | 7,169 | 5,172 | 6,265 | 4,130 | |||||||||||||||
Selling,
marketing, general and administrative expenses
|
9,133 | 4,141 | 5,654 | 5,296 | 5,238 | |||||||||||||||
Interest
expense
|
(2 | ) | (1,207 | ) | (1,140 | ) | (636 | ) | (2,962 | ) | ||||||||||
Interest
income
|
780 | 268 | 18 | 36 | 59 | |||||||||||||||
Write-off
of debt discount & deferred private debt offering
costs
|
— | — | — | — | (41,807 | ) | ||||||||||||||
Amortization
of debt discount & deferred private debt offering
costs
|
— | (2,700 | ) | (183 | ) | — |
(30,684)
|
(1)
|
||||||||||||
Gain
on debt restructuring
|
— | — | — | — | 12,401 | |||||||||||||||
(Loss)
gain on fair value change of conversion features
|
— | (3,483 | ) | 4,235 | — | — | ||||||||||||||
(Loss)
gain on fair value change of common stock warrants
|
— | (1,905 | ) | 2,164 | — | — | ||||||||||||||
(Loss)
gain on asset disposals
|
(1 | ) | 22 | (22 | ) | 81 | 2,359 | |||||||||||||
Other
(expense) income
|
— | (3 | ) | (213 | ) | 5 | 603 | |||||||||||||
Income
(loss) before income tax
|
21,759 | (13,914 | ) | (5,967 | ) | (12,075 | ) | (69,996 | ) | |||||||||||
Income
tax benefit (expense)
|
(7,285 | ) | 9,600 | — | — | — | ||||||||||||||
Net
income (loss)
|
$ | 14,474 | $ | (4,314 | ) | $ | (5,967 | ) | $ | (12,075 | ) | $ | (69,996 | ) | ||||||
Net
income (loss) per share: Basic
|
$ | 0.32 | $ | (0.11 | ) | $ | (0.75 | ) | $ | (1.81 | ) | $ | (32.00 | ) | ||||||
Net
income (loss) per share: Diluted
|
$ | 0.29 | $ | (0.11 | ) | $ | (0.75 | ) | $ | (1.81 | ) | $ | (32.00 | ) | ||||||
Weighted
average shares used in computing net income (loss) per
share: Basic
|
45,675 | 39,157 | 34,496 | 6,680 | 2,186 | |||||||||||||||
Weighted
average shares used in computing net income (loss) per
share: Diluted
|
49,416 | 39,157 | 34,496 | 6,680 | 2,186 |
BALANCE SHEET DATA(3)
(in
thousands)
|
2008
|
2007
|
2006
|
2005
|
2004
|
|||||||||||||||
Working
capital (deficiency)
|
$ | 35,991 | $ | 22,306 | $ | (28,641 | ) | $ | (2,478 | ) | $ | 2,423 | ||||||||
Total
assets
|
42,961 | 45,628 | 1,619 | 1,792 | 4,967 | |||||||||||||||
Total
debt, net (2)
|
— | — | 28,787 | 7,613 | 5,093 | |||||||||||||||
Total
liabilities
|
5,897 | 26,908 | 39,899 | 7,954 | 6,052 | |||||||||||||||
Accumulated
deficit
|
(307,386 | ) | (321,860 | ) | (317,543 | ) | (291,616 | ) | (279,541 | ) | ||||||||||
Stockholders'
equity (deficit)
|
$ | 37,064 | $ | 18,720 | $ | (38,280 | ) | $ | (6,162 | ) | $ | (1,085 | ) |
(1)
Reflects the impact of significant corporate and financing restructuring
in 2004.
|
(2)
Includes estimated fair value of conversion features of convertible debt
outstanding as of December 31, 2006.
|
(3)
Reflects impact of $30 million received from King in December,
2007.
|
|
·
|
intravenous
injection of dissolved tablets or
capsules;
|
|
·
|
nasal
snorting of crushed tablets or capsules;
and
|
|
·
|
intentional
swallowing of excess quantities of tablets or
capsules.
|
December
31,
|
Change
|
|||||||||||||||
($ in thousands):
|
2008
|
2007
|
Dollars
|
%
|
||||||||||||
Revenue
|
||||||||||||||||
Program
fee revenue
|
$ | 27,941 | $ | 3,427 | $ | 24,514 | 715 | % | ||||||||
Milestone
revenue
|
5,000 | - | 5,000 | * | ||||||||||||
Collaboration
fee revenue
|
11,496 | 2,977 | 8,519 | 286 | % | |||||||||||
Revenue
|
44,437 | 6,404 | 38,033 | 594 | % | |||||||||||
Operating
Expenses
|
||||||||||||||||
Research
and development expenses
|
14,322 | 7,169 | 7,153 | 100 | % | |||||||||||
Marketing,
general and administrative expenses
|
9,133 | 4,141 | 4,992 | 121 | % | |||||||||||
Total
operating expenses
|
23,455 | 11,310 | 12,145 | 107 | % | |||||||||||
Operating
income (loss)
|
20,982 | (4,906 | ) | 25,888 | 528 | % | ||||||||||
Other
Income (Expense)
|
||||||||||||||||
Interest
income (expense), net
|
780 | (939 | ) | 1,719 | 183 | % | ||||||||||
Amortization
of debt discount
|
- | (2,700 | ) | 2,700 | 100 | % | ||||||||||
Loss
(gain) on fair value change of conversion features
|
- | (3,483 | ) | 3,483 | 100 | % | ||||||||||
Loss
(gain) on fair value change of common stock warrants
|
- | (1,905 | ) | 1,904 | 100 | % | ||||||||||
Gain
(loss) on asset disposals
|
(2 | ) | 22 | (24 | ) | (109 | )% | |||||||||
Other
expense
|
(1 | ) | (3 | ) | 2 | 67 | % | |||||||||
Total
other income (expense)
|
777 | (9,008 | ) | 9,785 | 109 | % | ||||||||||
Income
(loss) before income tax expense
|
21,759 | (13,914 | ) | 35,673 | 256 | % | ||||||||||
Income
tax expense (benefit)
|
7,285 | (9,600 | ) | (16,885 | ) | (176 | )% | |||||||||
Net
income (loss)
|
$ | 14,474 | $ | (4,314 | ) | $ | 18,788 | 436 | % |
December 31,
|
Change
|
|||||||||||||||
($ in thousands)
|
2007
|
2006
|
Dollars
|
%
|
||||||||||||
Revenue
|
||||||||||||||||
Program
fee revenue
|
$ | 3,427 | $ | - | $ | 3,427 | * | % | ||||||||
Collaboration
fee revenue
|
2,977 | - | 2,977 | * | % | |||||||||||
Revenue
|
6,404 | - | 6,404 | * | % | |||||||||||
Operating
Expenses
|
||||||||||||||||
Research
and development expenses
|
7,169 | 5,172 | 1,997 | 38 | % | |||||||||||
Marketing,
general and administrative expenses
|
4,141 | 5,654 | (1,513 | ) | (26 | )% | ||||||||||
Total
operating expenses
|
11,310 | 10,826 | 484 | 5 | % | |||||||||||
Operating
income (loss)
|
(4,906 | ) | (10,826 | ) | 5,920 | 55 | % | |||||||||
Other
Income (Expense)
|
||||||||||||||||
Interest
income (expense), net
|
(939 | ) | (1,122 | ) | 183 | 16 | % | |||||||||
Amortization
of debt discount
|
(2,700 | ) | (183 | ) | (2,517 | ) | (1,375 | )% | ||||||||
(Loss)
gain on fair value change of conversion features
|
(3,483 | ) | 4,235 | (7,718 | ) | (182 | )% | |||||||||
(Loss)
gain on fair value change of common stock warrants
|
(1,905 | ) | 2,164 | (4,069 | ) | (188 | )% | |||||||||
Gain
(loss) on asset disposals
|
22 | (22 | ) | 44 | 200 | % | ||||||||||
Other
expense
|
(3 | ) | (213 | ) | 210 | 99 | % | |||||||||
Total
other income (expense)
|
(9,008 | ) | 4,859 | (13,867 | ) | (285 | )% | |||||||||
Loss
before income tax expense
|
(13,914 | ) | (5,967 | ) | (7,947 | ) | (133 | )% | ||||||||
Income
tax benefit
|
(9,600 | ) | - | 9,600 | * | % | ||||||||||
Net
loss
|
$ | (4,314 | ) | $ | (5,967 | ) | $ | 1,653 | 28 | % |
Payments due by period
|
||||||||||||||||||||
(in thousands)
|
Total
|
Less than 1
year
|
1-3 years
|
3-5 years
|
More than 5
years
|
|||||||||||||||
Operating
leases
|
9 | 8 | 1 | — | — | |||||||||||||||
Clinical
studies(1)
|
1,003 | 1,003 | — | — | — | |||||||||||||||
Employment
agreements
|
1,100 | 980 | 120 | — | — | |||||||||||||||
Total
|
$ | 2,112 | $ | 1,991 | $ | 121 | — | — |
|
(1)
Approximately $802 expected to be reimbursed to us by King under the
provisions of the King Agreement.
|
|
·
|
Pertain
to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and disposition of our
assets;
|
|
·
|
Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being
made only in accordance with authorizations of our management and
directors; and
|
|
·
|
Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have
a material effect on the financial
statements.
|
Chicago,
Illinois
|
/s/
BDO Seidman, LLP
|
February
27, 2009
|
NAME
|
AGE
|
POSITION
|
||
Andrew
D. Reddick
|
56
|
President,
Chief Executive Officer and Director
|
||
Robert
B. Jones
|
50
|
Senior
Vice President and Chief Operating Officer
|
||
Peter
A. Clemens
|
56
|
Senior
Vice President, Chief Financial Officer and Secretary
|
||
James
F. Emigh
|
53
|
Vice
President of Marketing and Administration
|
||
Robert
A. Seiser
|
45
|
Vice
President, Treasurer and Corporate Controller
|
||
Albert
W. Brzeczko
|
52
|
Vice
President, Technical Affairs
|
||
Bruce
F. Wesson
|
66
|
Director
|
||
William
A. Sumner
|
71
|
Director
|
||
Richard
J. Markham
|
58
|
Director
|
||
William
G. Skelly
|
58
|
Director
|
||
Immanuel
Thangaraj
|
38
|
Director
|
||
George
K. Ross
|
67
|
Director
|
Name
and Principal
Position
|
Year
|
Base
Salary
($)
|
Bonus
($)
|
Stock
Awards1
($)
|
Option
Awards2
($)
|
Total
($)
|
||||||||||||||||
Andrew
D. Reddick
|
2006
|
300,000 | — | 1,375,000 | $ | 77,000 | 1,752,000 | |||||||||||||||
President
& CEO
|
2007
|
300,000 | 850,000 | 264,000 | 0 | 1,414,000 | ||||||||||||||||
2008
|
365,000 | 328,500 | — | 691,000 | 1,385,000 | |||||||||||||||||
Peter
A. Clemens
|
2006
|
180,000 | — | 733,000 | 23,000 | 936,000 | ||||||||||||||||
SVP
& CFO
|
2007
|
180,000 | 180,000 | 141,000 | 11,000 | 512,000 | ||||||||||||||||
2008
|
205,000 | 102,500 | — | 276,000 | 583,500 | |||||||||||||||||
Ron
J. Spivey
|
2006
|
260,000 | — | 1,110,000 | 166,000 | 1,536,000 | ||||||||||||||||
SVP
and Chief Scientific
|
2007
|
260,000 | 650,000 | 211,000 | 0 | 1,121,000 | ||||||||||||||||
Officer |
2008
|
315,000 | 630,000 | — | 442,000 | 1,387,000 | ||||||||||||||||
Robert
B. Jones,
|
||||||||||||||||||||||
SVP
& COO (commenced
|
2008
|
211,923 | 130,500 | 173,000 | 544,000 | 1,059,423 | ||||||||||||||||
employment
April 7, 2008)
|
||||||||||||||||||||||
Robert
A. Seiser
|
2006
|
133,000 | — | 275,000 | 16,000 | 424,000 | ||||||||||||||||
VP,
Treasurer & Corporate
|
2007
|
133,000 | 140,000 | 53,000 | 7,000 | 333,000 | ||||||||||||||||
Controller
|
2008
|
160,000 | 56,000 | — | 221,000 | 437,000 |
Vesting of All
Options (Options
not Subject to
Section 409A are
exercisable upon
vesting)
|
Exercisability of Options
not subject to Section
409A (including options
granted on May 23,
2008)
|
Exercisability of Options Subject
to Section 409A
|
||||
Termination
due to Death
|
No
additional vesting
|
Vested
options immediately exercisable for one year following
termination
|
Vested
options immediately exercisable for the lesser of (a) one year following
termination or (b) the last day of the year in which they become
exercisable
|
|||
Termination
by Company Without Cause or by Employee for Good Reason or
following Change of Control (not qualifying under Section
409A)
|
All
options fully vest for Messrs. Reddick and Jones. Mr. Clemens’s options
vest upon termination after Change of Control.
|
Vested
options immediately exercisable for one year following
termination
|
Vested
options exercisable commencing six months after termination for the lesser
of (a) one year following termination or (b) the last day of the year in
which they become exercisable
|
|||
Termination
due to Disability
|
No
additional vesting
|
Vested
options immediately exercisable for one year following
termination
|
Vested
options exercisable commencing six months after termination for the lesser
of (a) one year following termination or (b) the last day of the year in
which they become exercisable
|
|||
Termination
by the Company for Cause or by executive other than for Good
Reason
|
No
additional vesting
|
Vested
options immediately exercisable for 40 days following
termination
|
Vested
options exercisable commencing six months after termination for the lesser
of (a) 40 days thereafter or (b) the last day of the calendar year in
which they first become exercisable
|
|||
Change
of Control
|
Options
fully vest
|
Vested
options immediately exercisable
|
Vested
options exercisable upon Change of Control qualifying under Section 409A
during the year in which the Change of Control
occurs
|
Stock Option Awards
|
Restricted Stock Unit Awards
|
||||||||||||||||||||
Name
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number of Shares
or Units of Stock
That Have Not
Vested
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(1)
|
|||||||||||||||
Andrew
D.
|
875,000 | — | $ | 1.30 |
08/12/2014
|
||||||||||||||||
Reddick
|
72,916 | 177,084 | $ | 9.87 |
05/23/2018
|
||||||||||||||||
Peter
A.
|
10,000 | — | $ | 11.25 |
03/08/2009
|
||||||||||||||||
Clemens
|
12,500 | — | $ | 18.75 |
02/17/2010
|
||||||||||||||||
|
10,000 | — | $ | 11.125 |
06/29/2010
|
||||||||||||||||
|
37,500 | — | $ | 1.30 |
03/09/2014
|
||||||||||||||||
29,166 | 70,834 | $ | 9.87 |
05/23/2018
|
|||||||||||||||||
Ron
J.
|
300,000 | — | $ | 1.30 |
04/15/2014
|
||||||||||||||||
Spivey
|
400,000 | — | $ | 1.30 |
12/09/2015
|
||||||||||||||||
46.666 | 113,334 | $ | 9.87 |
05/23/2018
|
|||||||||||||||||
Robert
B.
|
12,000 | 18,000 | $ | 8.64 |
04/06/2018
|
30,000 | $ | 220,200 | |||||||||||||
Jones
|
46,666 | 113,334 | $ | 9.87 |
05/23/2018
|
||||||||||||||||
Robert
A.
|
1,600 | — | $ | 11.25 |
03/08/2009
|
||||||||||||||||
Seiser
|
3,000 | — | $ | 18.75 |
02/17/2010
|
||||||||||||||||
4,000 | — | $ | 11.125 |
06/29/2010
|
|||||||||||||||||
2,500 | — | $ | 24.60 |
11/15/2011
|
|||||||||||||||||
24,900 | — | $ | 1.30 |
03/09/2014
|
|||||||||||||||||
23,334 | 56,666 | $ | 9.87 |
05/23/2018
|
Stock
Awards
|
||||||||
Name
|
Number of Shares Vested (#)(1)
|
Value Realized on Vesting ($)(2)
|
||||||
Andrew D.
Reddick
|
0 | — | ||||||
Peter
A. Clemens
|
0 | — | ||||||
Ron
J. Spivey
|
0 | — | ||||||
Robert
B. Jones
|
20,000 | $ | 127,850 | |||||
Robert
A. Seiser
|
0 | — |
Plan Category
|
Number Of Securities
to Be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
(Column a)
|
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(Column b)
|
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans.
(Excluding Securities
Reflected in Column a
(Column c)
|
|||||||||
Stock
Option Equity Compensation Plans Approved by Security
Holders
|
2,968,864 | $ | 4.93 | 4,960,000 | ||||||||
Stock
Option Equity Compensation Plans Not Approved by Security
Holders
|
0 | 0 | 0 | |||||||||
Restricted
Stock Unit Equity Compensation Plans Approved by Security
Holders
|
3,000,000 | $ | 0.01 | 500,000 | ||||||||
Restricted
Stock Unit Equity Compensation Plans Not Approved by Security
Holders
|
0 | 0 | 0 | |||||||||
TOTAL
|
5,968,864 | $ |
2.46
|
5,460,000 |
Triggering
Event
|
Executive
|
Severance
|
Bonus
|
Value of Options
Vesting
(4)
|
Value of
RSUs
Vesting
(5)
|
Medical,
Dental,
Health,
Disability
and Life
Insurance
Benefits
|
Total (7)
|
||||||||||||
Termination
by
|
Andrew
D. Reddick
|
365,000
|
(1)(8)
|
—
|
(3)
|
1,678,000
|
—
|
26,270
|
(6)
|
$
|
2,068,270
|
||||||||
Company
|
Robert
B. Jones
|
290,000
|
(1)(8)
|
—
|
(3)
|
1,227,000
|
301,000
|
26,270
|
(6)
|
$
|
1,844,270
|
||||||||
without
Cause
or
by Employee
for
Good
Reason
or after
a
Change of
Control
(12)
|
Peter
A. Clemens
|
410,000
|
(2)(10)
|
—
|
(3)
|
671,000
(only
payable upon termination after Change of Control)
|
—
|
52,540
|
(11)
|
$
|
1,133,540
|
||||||||
Termination
for
|
Andrew
D. Reddick
|
—
|
—
|
(3)
|
—
|
—
|
—
|
—
|
|||||||||||
Death
|
Robert
B. Jones
|
—
|
—
|
—
|
301,000
|
26,270
|
$
|
327,270
|
|||||||||||
Peter
A. Clemens
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||
Termination
for
|
Andrew
D. Reddick
|
—
|
—
|
(3)
|
—
|
—
|
—
|
—
|
|||||||||||
Disability |
Robert
B. Jones
|
—
|
—
|
—
|
—
|
26,270
|
$
|
26,270
|
|||||||||||
Peter
A. Clemens
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||
Termination
|
Andrew
D. Reddick
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||
with Cause |
Robert
B. Jones
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||
Peter
A. Clemens
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||
Change
of
|
Andrew
D. Reddick
|
—
|
—
|
1,678,000
|
—
|
—
|
$
|
1,678,000
|
|||||||||||
Control
|
Robert
B. Jones
|
—
|
—
|
1,227,000
|
301,000
|
—
|
$
|
1,527,000
|
|||||||||||
Without Termination |
Peter
A. Clemens
|
—
|
—
|
671,000
|
—
|
—
|
$
|
671,000
|
Director
|
Fees Earned or Paid in
Cash ($)
|
Stock Awards
($)(1)
|
Option Awards ($)(2)
|
Total ($)
|
||||||||||||
William
G. Skelly
|
29,250 | — | 95,240 | 124,490 | ||||||||||||
William
A. Sumner
|
28,500 | — | 95,240 | 123,740 | ||||||||||||
Bruce
F. Wesson
|
27,750 | — | 95,240 | 122,990 | ||||||||||||
Richard
J. Markham
|
30,750 | — | 95,240 | 125,990 | ||||||||||||
Immanuel
Thangaraj
|
20,000 |
(3)
|
— | 95,240 | 115,240 | |||||||||||
George
K. Ross
|
33,500 | — | 95,240 | 128,740 |
NAME OF BENEFICIAL OWNER
|
AMOUNT
OWNED
|
PERCENT
OF
CLASS (1)
|
||||||
GCE
Holdings LLC,
c/o
Galen Partners III, L.P.
680
Washington Boulevard, Stamford, CT 06901
|
34,564,956 |
(2)
|
77.6 | % | ||||
Vivo
Ventures Fund VI, L.P.
575
High St, Suite 201
Palo
Alto, CA 9430131
|
2,450,000 |
(3)
|
5.7 | % | ||||
Andrew
D. Reddick
|
979,167 |
(4)
|
2.2 | % | ||||
Ron
J. Spivey
|
766,667 |
(5)
|
1.8 | % | ||||
Robert
B. Jones
|
83,167 |
(6)
|
* | |||||
William
G. Skelly
|
37,250 |
(7)
|
* | |||||
Bruce
F. Wesson
|
32,750 |
(2)(8)
|
* | |||||
William
A. Sumner
|
42,750 |
(9)
|
* | |||||
Peter
A. Clemens
|
116,747 |
(10)
|
* | |||||
Richard
J. Markham
|
18,750 |
(2)(11)
|
* | |||||
Immanuel
Thangaraj
|
28,750 |
(2)(12)
|
* | |||||
Robert
A. Seiser
|
69,333 |
(13)
|
* | |||||
George
K. Ross
|
18.750 |
(14)
|
* | |||||
All
Officers and Directors as a Group (12 persons)
|
2,269,913 |
(15)
|
5.1 | % |
(1)
|
Shows
percentage ownership assuming (i) such party converts all of its currently
convertible securities or securities convertible within 60 days of
February 1, 2009 into the Company's common stock, and (ii) no other
Company security holder converts any of its convertible
securities. No shares held by any Director or named executive
officer has been pledged as collateral
security.
|
(2)
|
GCE
Holdings LLC, a Delaware limited liability company, was the assignee of
all of the our preferred stock (prior to its conversion into common stock)
and bridge loans entered into in 2005, 2006 and 2007 (prior to their
conversion into common stock and warrants) formerly held by each of Galen
Partners III, L.P., Galen Partners International III, L.P., Galen Employee
Fund III, L.P. (collectively, “Galen”), Care Capital Investments II, LP,
Care Capital Offshore Investments II, LP (collectively, “Care Capital”)
and Essex Woodlands Health Ventures Fund V, L.P. (“Essex”). Galen, Care
Capital and Essex own approximately 39.8%, 30.6% and 29.6%, respectively,
of the membership interests in GCE Holdings LLC. The following natural
persons exercise voting, investment and dispositive rights over our
securities held of record by GCE Holdings LLC: (i) Galen Partners III,
L.P., Galen Partners International III, L.P. and Galen Employee Fund III,
L.P.: Bruce F. Wesson, L. John Wilkenson, David W. Jahns, and Zubeen
Shroff; (ii) Care Capital Investments II, LP and Care Capital Offshore
Investments II, LP: Jan Leschly, Richard Markham, Argeris Karabelas and
David Ramsay; and (iii) Essex Woodlands Health Ventures Fund V, L.P.:
Immanuel Thangaraj, James L. Currie and Martin P. Sutter. Pursuant to a
Voting Agreement among us, GCE Holdings LLC and certain other
shareholders, GCE Holdings LLC has the right to designate three of the
seven members of the Company’s Board of Directors. The Board
designees of GCE Holdings LLC are Immanuel Thangaraj, Richard Markham and
Bruce Wesson. Amounts for GCE Holdings, LLC include 1,786,481
shares underlying warrants, exercisable at $3.40 per
share. Excludes 195,574 shares and warrants to purchase 400,210
shares held by Galen; 136,178 shares and warrants to purchase 34,500
shares held by Essex; and 111,689 shares and warrants to purchase 15,000
shares held by Care Capital.
|
(3)
|
Includes
shares held by an affiliated fund. Includes warrants to
purchase 450,000 shares exercisable at $3.40 per share held by Vivo
Ventures Fund VI, L.P. and an affiliated fund (collectively,
“Vivo”). Number of shares give effect to the
transfer of warrants to purchase 496,364 and 3,636 shares from Vivo
Ventures Fund VI, L.P. and Vivo Ventures VI Affiliates Fund, L.P.,
respectively, to Warrant Strategies Fund, LLC on November 30, 2007 but are
otherwise current as of November 20, 2007. The information with
respect to Vivo is based solely on our knowledge of our sale of securities
to them and our knowledge of the warrant transfer stated
above.
|
(4)
|
Includes
979,167 shares subject to stock options exercisable within 60 days of
February 1, 2009. Excludes 825,000 restricted stock unit awards (“RSUs”)
granted to Mr. Reddick. Mr. Reddick has no rights as a
stockholder, including no dividend or voting rights, with respect to the
shares underlying the RSUs until the shares are issued by the Company
pursuant to the terms of Company’s 2005 Restricted Stock Unit
Plan.
|
(5)
|
Includes
766,667 shares subject to stock options exercisable within 60 days of
February 1, 2009. Excludes 660,000 RSUs granted to Dr.
Spivey. Dr. Spivey has no rights as a stockholder, including no
dividend or voting rights, with respect to the shares underlying the RSUs
until the shares are issued by the Company pursuant to the terms of
Company’s 2005 Restricted Stock Unit
Plan.
|
(6)
|
Includes
83,167 shares subject to stock options exercisable within 60 days of
February 1, 2009. Excludes 50,000 RSUs granted to Mr. Jones
(25,000 of which will have vested within 60 days of February 1,
2008). Mr. Jones has no rights as a stockholder, including no
dividend or voting rights, with respect to the shares underlying the RSUs
until the shares are issued by the Company pursuant to the terms of
Company’s 2005 Restricted Stock Unit
Plan.
|
(7)
|
Includes
36,250 shares subject to stock options exercisable within 60 days of
February 1, 2009. Excludes 100,000 RSUs granted to Mr.
Skelly. Mr. Skelly has no rights as a stockholder, including no
dividend or voting rights, with respect to the shares underlying the RSUs
until the shares are issued by the Company pursuant to the terms of the
Company’s 2005 Restricted Stock Unit
Plan.
|
(8)
|
Includes
32,750 shares subject to stock options exercisable within 60 days of
February 1, 2009. Mr. Wesson’s holdings do not include
securities held by GCE or by Galen.
|
(9)
|
Includes
22,750 shares subject to stock options exercisable within 60 days of
February 1, 2009. Excludes 100,000 RSUs granted to Mr.
Sumner. Mr. Sumner has no rights as a stockholder, including no
dividend or voting rights, with respect to the shares underlying the RSUs
until the shares are issued by the Company pursuant to the terms of the
Company’s 2005 Restricted Stock Unit
Plan.
|
(10)
|
Includes
111,667 shares subject to stock options exercisable with 60 days of
February 1, 2009. Excludes 440,000 RSUs granted to Mr.
Clemens. Mr. Clemens has no rights as a stockholder,
including no dividend or voting rights, with respect to the shares
underlying the RSUs until the shares are issued by the Company pursuant to
the terms of Company’s 2005 Restricted Stock Unit
Plan. Includes 4,780 shares held by minor
children.
|
(11)
|
Includes
18,750 shares subject to stock options exercisable within 60 days of
February 1, 2009. Mr. Markham’s holdings do not include amounts
held by GCE or Care Capital.
|
(12)
|
Includes
28,750 shares subject to stock options exercisable within 60 days of
February 1, 2009. Mr. Thangaraj’s holdings do not include
securities held by GCE or by Essex.
|
(13)
|
Includes
69,333 shares subject to stock options exercisable within 60 days of
February 1, 2009. Excludes 165,000 RSUs granted to Mr.
Seiser. Mr. Seiser has no rights as a stockholder, including no
dividend or voting rights, with respect to the shares underlying the RSUs
until the shares are issued by the Company pursuant to the terms of
Company’s 2005 Restricted Stock Unit
Plan.
|
(14)
|
Includes
18,750 shares subject to stock options exercisable within 60 days of
February 1, 2009.
|
(15)
|
Includes
2,239,333 shares which Directors and executive officers have the right to
acquire within 60 days of February 1, 2009 through exercise of outstanding
stock options. Includes securities held by James Emigh, our Vice
President, Marketing and Administration, in addition to the officers and
directors listed above.
|
2007
|
2008
|
|||||||
Audit
Fees
|
$ | 85,825 | $ | 131,764 | ||||
Audit-Related
Fees
|
- | - | ||||||
Total
Audit and Audit-Related Fees
|
85,825 | 131,764 | ||||||
Tax
Fees
|
30,168 | 180,677 | ||||||
All
Other Fees
|
- | - | ||||||
Total
for BDO Seidman, LLP
|
$ | 115,993 | $ | 312,431 |
Date: February
27, 2009
|
ACURA
PHARMACEUTICALS, INC.
|
|
By:
|
ANDREW D. REDDICK
|
|
Andrew
D. Reddick
President
and Chief Executive Officer
(Principal
Executive Officer)
|
Signature
|
Title(s)
|
Date
|
||
/s/ Andrew D. Reddick |
President,
Chief Executive Officer and Director
|
February
27, 2009
|
||
Andrew
D. Reddick
|
(Principal
Executive Officer)
|
|||
/s/
Peter A. Clemens
|
Senior
Vice President and Chief Financial Officer
|
February
27, 2009
|
||
Peter
A. Clemens
|
(Principal
Financial and Accounting Officer)
|
|||
/s/
William G. Skelly
|
Director
|
February
27, 2009
|
||
William
G. Skelly
|
||||
/s/
Bruce F. Wesson
|
Director
|
February
27, 2009
|
||
Bruce
F. Wesson
|
||||
/s/
William A. Sumner
|
Director
|
February
27, 2009
|
||
William
A. Sumner
|
||||
/s/
Richard J. Markham
|
Director
|
February
27, 2009
|
||
Richard
J. Markham
|
|
|
||
/s/
Immanuel Thangaraj
|
Director
|
February
27, 2009
|
||
Immanuel
Thangaraj
|
|
|
||
/s/
George K. Ross
|
Director
|
February
27, 2009
|
||
George
K. Ross
|
|
|
Page
|
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
Consolidated
Balance Sheets
|
F-3
|
Consolidated
Statements of Operations
|
F-4
|
Consolidated
Statements of Stockholders' Equity (Deficit)
|
F-5
|
Consolidated
Statements of Cash Flows
|
F-6
- F-7
|
Notes
to Consolidated Financial Statements
|
F-8
-
F-23
|
/s/
BDO Seidman, LLP
|
|
February
27, 2009
|
2008
|
2007
|
|||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
and cash equivalents
|
$ | 30,398 | $ | 31,368 | ||||
Short-term
investments
|
5,039 | - | ||||||
Collaboration
revenue receivable
|
3,529 | 2,977 | ||||||
Prepaid
clinical study costs
|
- | 388 | ||||||
Prepaid
insurance
|
283 | 202 | ||||||
Prepaid
expenses and other current assets
|
148 | 47 | ||||||
Deferred
income taxes
|
2,491 | 9,600 | ||||||
Total
current assets
|
41,888 | 44,582 | ||||||
Property,
plant and equipment, net
|
1,073 | 1,046 | ||||||
Total
assets
|
$ | 42,961 | $ | 45,628 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable
|
$ | 382 | $ | - | ||||
Deferred
program fee revenue – current portion
|
4,632 | 21,942 | ||||||
Accrued
expenses
|
883 | 334 | ||||||
Total
current liabilities
|
5,897 | 22,276 | ||||||
Non-current
liabilities
|
||||||||
Deferred
program fee revenue – non current portion
|
- | 4,632 | ||||||
Total liabilities
|
5,897 | 26,908 | ||||||
Commitments
and contingencies (Note J)
|
||||||||
Stockholders’
equity
|
||||||||
Common
stock - $.01 par value; 650,000,000 shares authorized; 42,723,070 and
42,706,466 shares issued and outstanding in 2008 and 2007,
respectively
|
427 | 427 | ||||||
Additional
paid-in capital
|
344,023 | 340,153 | ||||||
Accumulated
deficit
|
(307,386 | ) | (321,860 | ) | ||||
Total
stockholders’ equity
|
37,064 | 18,720 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 42,961 | $ | 45,628 |
2008
|
2007
|
2006
|
||||||||||
Revenues
|
||||||||||||
Program
fee revenue
|
$ | 27,941 | $ | 3,427 | $ | - | ||||||
Collaboration
revenue
|
11,496 | 2,977 | - | |||||||||
Milestone
revenue
|
5,000 | - | - | |||||||||
Total
revenue
|
44,437 | 6,404 | - | |||||||||
Operating
expenses
|
||||||||||||
Research
and development expense
|
14,322 | 7,169 | 5,172 | |||||||||
Marketing,
general and administrative expense
|
9,133 | 4,141 | 5,654 | |||||||||
Total
operating expenses
|
23,455 | 11,310 | 10,826 | |||||||||
Income
(loss) from operations
|
20,982 | (4,906 | ) | (10,826 | ) | |||||||
Other
income (expense)
|
||||||||||||
Interest
income
|
780 | 268 | 18 | |||||||||
Interest
expense
|
- | (1,207 | ) | (1,140 | ) | |||||||
Amortization
of debt discount
|
- | (2,700 | ) | (183 | ) | |||||||
(Loss)
gain on fair value change of conversion features
|
- | (3,483 | ) | 4,235 | ||||||||
(Loss)
gain on fair value change of common stock warrants
|
- | (1,905 | ) | 2,164 | ||||||||
Gain
(loss) on asset disposals
|
(2 | ) | 22 | (22 | ) | |||||||
Other
expense
|
(1 | ) | (3 | ) | (213 | ) | ||||||
Total
other income (expense)
|
777 | (9,008 | ) | 4,859 | ||||||||
Income
(loss) before income tax
|
21,759 | (13,914 | ) | (5,967 | ) | |||||||
Income
tax expense (benefit)
|
7,285 | (9,600 | ) | - | ||||||||
Net
income (loss)
|
14,474 | (4,314 | ) | (5,967 | ) | |||||||
Deemed
dividend from modification of debt
|
- | (3 | ) | (19,960 | ) | |||||||
Net
income (loss) applicable to common stockholders
|
$ | 14,474 | $ | (4,317 | ) | $ | (25,927 | ) | ||||
Earnings
(loss) per share
|
||||||||||||
Basic
|
$ | 0.32 | $ | (0.11 | ) | $ | (0.75 | ) | ||||
Diluted
|
$ | 0.29 | $ | (0.11 | ) | $ | (0.75 | ) | ||||
Weighted
average shares
|
||||||||||||
Basic
|
45,675 | 39,157 | 34,496 | |||||||||
Diluted
|
49,416 | 39,157 | 34,496 |
Common
Stock
$0.01
Par Value
|
Additional
Paid-in
|
Compen-
|
Accumu-
lated
|
|||||||||||||||||||||
Shares
|
$
Amount
|
Capital
|
sation
|
Deficit
|
Total
|
|||||||||||||||||||
Balance
at Dec. 31, 2005
|
32,929 | $ | 329 | $ | 290,849 | $ | (5,724 | ) | $ | (291,616 | ) | $ | (6,162 | ) | ||||||||||
Net
loss for the year ended Dec. 31, 2006
|
(5,967 | ) | (5,967 | ) | ||||||||||||||||||||
Deemed
dividend related to debt modification
|
(19,960 | ) | (19,960 | ) | ||||||||||||||||||||
Adoption
of FAS 123R
|
(5,724 | ) | 5,724 | - | ||||||||||||||||||||
Issuance
of restricted stock units
|
680 | 680 | ||||||||||||||||||||||
Other
stock-based compensation
|
5,046 | 5,046 | ||||||||||||||||||||||
Reclassification
of value of common stock warrants to liabilities
|
(12,948 | ) | (12,948 | ) | ||||||||||||||||||||
Issuance
of Common Shares for exercise of options
|
40 | 1 | 97 | 98 | ||||||||||||||||||||
Issuance
of Common Shares for interest
|
128 | 1 | 932 | 933 | ||||||||||||||||||||
Issuance
of Common Shares for cashless exercise of warrant
|
2 | - | ||||||||||||||||||||||
Balance
at Dec. 31, 2006
|
33,099 | $ | 331 | $ | 278,932 | $ | - | $ | (317,543 | ) | $ | (38,280 | ) | |||||||||||
Net
loss for the year ended Dec. 31, 2007
|
(4,314 | ) | (4,314 | ) | ||||||||||||||||||||
Deemed
dividend related to debt modification
|
(3 | ) | (3 | ) | ||||||||||||||||||||
Reclassification
of conversion feature value
|
21,086 | 21,086 | ||||||||||||||||||||||
Reclassification
of common stock warrant value
|
12,453 | 12,453 | ||||||||||||||||||||||
Conversion
feature value of issued debt
|
1,789 | 1,789 | ||||||||||||||||||||||
Other
stock-based compensation
|
915 | 915 | ||||||||||||||||||||||
Net
proceeds from unit offering
|
5,556 | 56 | 14,090 | 14,146 | ||||||||||||||||||||
Conversion
of bridge loan notes, net
|
3,905 | 39 | 9,961 | 10,000 | ||||||||||||||||||||
Issuance
of Common Shares for exercise of options
|
31 | - | 116 | 116 | ||||||||||||||||||||
Issuance
of Common Shares for interest
|
84 | 1 | 811 | 812 | ||||||||||||||||||||
Issuance
of Common Shares for cashless exercise of warrants
|
32 | - | - | - | ||||||||||||||||||||
Reverse
stock split
|
(1 | ) | - | - | - | |||||||||||||||||||
Balance
at Dec. 31, 2007
|
42,706 | $ | 427 | $ | 340,153 | $ | - | $ | (321,860 | ) | $ | 18,720 | ||||||||||||
Net
income for the year ended Dec. 31, 2008
|
14,474 | 14,474 | ||||||||||||||||||||||
Other
stock-based compensation
|
3,850 | 3,850 | ||||||||||||||||||||||
Issuance
of Common Shares for exercise of warrant
|
17 | - | 20 | 20 | ||||||||||||||||||||
Balance
at Dec. 31, 2008
|
42,723 | $ | 427 | $ | 344,023 | $ | - | $ | (307,386 | ) | $ | 37,064 |
2008
|
2007
|
2006
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
income (loss)
|
$ | 14,474 | $ | (4,314 | ) | $ | (5,967 | ) | ||||
Adjustments
to reconcile net income (loss) to net cash provided by (used in) operating
activities:
|
||||||||||||
Depreciation
and amortization
|
143 | 130 | 118 | |||||||||
Amortization
of debt discount
|
- | 2,700 | 183 | |||||||||
Loss
(gain) on the fair value change of conversion features
|
- | 3,483 | (4,235 | ) | ||||||||
Loss
(gain) on the fair value change of common stock warrants
|
- | 1,905 | (2,164 | ) | ||||||||
Non-cash
stock compensation expense
|
3,850 | 915 | 5,724 | |||||||||
Loss
(gain) on asset disposals
|
1 | (22 | ) | 22 | ||||||||
Common
stock issued for interest
|
- | 812 | 933 | |||||||||
Deferred
income taxes
|
7,109 | (9,600 | ) | - | ||||||||
Change
in fixed asset impairment reserve
|
(29 | ) | - | 71 | ||||||||
Changes
in assets and liabilities
|
||||||||||||
Collaboration
revenue receivable
|
(553 | ) | (2,977 | ) | - | |||||||
Prepaid
expenses and other current assets
|
207 | (398 | ) | (55 | ) | |||||||
Other
assets and deposits
|
- | 7 | - | |||||||||
Accounts
payable
|
382 | - | - | |||||||||
Accrued
expenses
|
549 | 5 | (13 | ) | ||||||||
Deferred
program fee revenue
|
(21,942 | ) | 26,574 | - | ||||||||
Net
cash provided by (used in) operating activities
|
4,191 | 19,220 | (5,383 | ) | ||||||||
Cash
flows from investing activities:
|
||||||||||||
Purchases
of short-term investments
|
(26,039 | ) | - | - | ||||||||
Maturities
of short-term investments
|
21,000 | - | - | |||||||||
Capital
expenditures
|
(143 | ) | (31 | ) | (85 | ) | ||||||
Proceeds
from asset disposals
|
1 | 22 | 70 | |||||||||
Net
cash used in investing activities
|
(5,181 | ) | (9 | ) | (15 | ) | ||||||
Cash
flows from financing activities:
|
||||||||||||
Proceeds
from issuance of senior secured bridge term notes
|
- | 2,696 | 5,298 | |||||||||
Repayments
on secured term note
|
- | (5,000 | ) | - | ||||||||
Net
proceeds from the unit offering
|
- | 14,146 | - | |||||||||
Proceeds
from exercise of stock options
|
- | 119 | 98 | |||||||||
Proceeds
from exercise of warrant
|
20 | - | - | |||||||||
Payments
on capital lease obligations
|
- | (32 | ) | (31 | ) | |||||||
Net
cash provided by financing activities
|
20 | 11,929 | 5,365 | |||||||||
Net
(decrease) increase in cash and cash equivalents
|
(970 | ) | 31,140 | (33 | ) | |||||||
Cash
and cash equivalents at beginning of period
|
31,368 | 228 | 260 | |||||||||
Cash
and cash equivalents at end of period
|
$ | 30,398 | $ | 31,368 | $ | 228 | ||||||
Cash
paid during the period:
|
||||||||||||
Interest
|
$ | 2 | $ | 395 | $ | 207 | ||||||
Income
taxes
|
$ | 82 | $ | - | $ | - |
1.
|
Impaired
fixed assets with a $52,000 net book value were disposed and a $29,000
reduction in the impairment allowance was favorably
recognized.
|
2.
|
A
$1,177,000 valuation allowance against deferred income tax assets was
removed which resulted in an equal amount recorded as a benefit against
current income tax expense.
|
3.
|
Deferred
income tax assets of $11,912,000 were used to offset an equal amount of
current income taxes payable.
|
1.
|
The
Company issued 47,552 shares of common stock valued at $460,000 as payment
of the accrued interest due on Senior Secured Convertible Bridge Term
Notes Payable.
|
2.
|
The
Company issued 36,150 shares of common stock valued at $352,000 as payment
of accrued interest due on Secured Term Note
Payable.
|
3.
|
Warrants
to purchase an aggregate 58,000 shares of common stock were exercised at
exercise prices between $1.20 and $6.60 per share in a series of cashless
exercise transactions resulting in the issuance of aggregate 31,361 shares
of common stock.
|
4.
|
The
issuance of $896,000 Senior Secured Convertible Bridge Term Notes during
the period January 1, 2007 through March 29, 2007 included conversion
features measured at $849,000, which resulted in the recording of an equal
amount of debt discount and conversion feature
liabilities.
|
5.
|
The
change in all separated conversion feature’s fair value through March 30,
2007 resulted in a loss of $3,483,000. Due to a debt agreement
modification on March 30, 2007, the then current conversion feature fair
value of $21,086,000 was reclassified from liabilities to
equity.
|
6.
|
The
issuance of $1,800,000 of Senior Secured Bridge Term Notes included
conversion features measured at $1,552,000, which resulted in a recording
of an equal amount of debt discount to
equity.
|
7.
|
The
change in the common stock warrants’ fair value through the earlier of
their exercise date or March 30, 2007 resulted in a loss of 1,668,000. Due
to a debt agreement modification on March 30, 2007, the then current fair
value of all 1,592,100 outstanding common stock warrants of $12,307,000
was reclassified from liabilities to equity, as was $146,000 of such value
related to warrants exercised during the
period.
|
8.
|
Anti-dilution
provisions in certain warrant grants were triggered resulting in a loss of
$236,000 with an equal amount recorded against
equity.
|
9.
|
Senior
Secured Convertible Bridge Term Notes Payable of $10,544,000, less
unamortized debt discount of $544,000 was converted into 3,905,184 shares
of common stock.
|
10.
|
A
$9,600,000 valuation allowance against deferred income tax assets was
removed which resulted in an equal amount recorded as a benefit against
current income tax expense.
|
1.
|
The
Company issued 85,464 shares of Common Stock as payment of $624,000 of
accrued interest due on Secured Term Note
Payable.
|
2.
|
The
Company issued 42,650 shares of Common Stock as payment of $309,000 of
accrued interest on Bridge Loan Notes
Payable.
|
3.
|
Warrants
to purchase 16,593 shares of Common Stock were exercised in March 2006 at
an exercise price of $4.80 per share in a cashless exercise transaction
resulting in the issuance of 19,065 shares of Common
Stock.
|
4.
|
Warrants
to purchase 3,069 shares of Common Stock were exercised in May 2006 at an
exercise price of $4.70 per share in a cashless exercise transaction
resulting in the issuance of 473 shares of Common
Stock.
|
5.
|
A
warrant to purchase 15,000 shares of Common Stock was modified due to its
anti-dilution clause resulting in a $142,000 stock compensation
expense.
|
6.
|
The
modification of conversion features embedded within Bridge Loan Notes
Payable was valued at $19,951,000 and the issuance of $1,104,000 of Bridge
Loan Notes Payable contained conversion features valued at $1,035,000. The
change in the conversion feature’s fair value through December 31, 2006
resulted in a gain of $4,235,000.
|
7.
|
Due
to certain debt conversion feature modifications, the then current fair
value of all 16,331,000 outstanding common stock warrants of $12,948,000
was reclassified from equity to liabilities. The change in the common
stock warrants fair value through December 31, 2006 resulted in a gain of
$2,164,000.
|
8.
|
Bridge
Loan Notes Payable of $1,104,000 contained $1,025,000 of debt
discount.
|
|
·
|
intravenous
injection of dissolved tablets or
capsules;
|
|
·
|
nasal
snorting of crushed tablets or capsules;
and
|
|
·
|
intentional
swallowing of excess quantities of tablets or
capsules.
|
Building
and building improvements
|
10 - 40 years
|
Land
improvements
|
20 - 40 years
|
Machinery
and equipment
|
7 - 10 years
|
Scientific
equipment
|
5 - 10 years
|
Computer
hardware and software
|
3 - 10 years
|
Office
equipment
|
5 - 10 years
|
Furniture
and fixtures
|
10 years
|
Year ended December 31,
|
||||||||||||
(in thousands except per share data)
|
2008
|
2007
|
2006
|
|||||||||
Basic
earnings per share
|
||||||||||||
Numerator:
|
||||||||||||
Net
income (loss)
|
$ | 14,474 | $ | (4,314 | ) | $ | (5,967 | ) | ||||
Deemed
dividend from modification of debt
|
- | (3 | ) | (19,960 | ) | |||||||
Net
income (loss) applicable to common stockholders
|
$ | 14,474 | $ | (4,317 | ) | $ | (25,927 | ) | ||||
Denominator:
|
||||||||||||
Common
shares (weighted)
|
42,719 | 36,656 | 32,986 | |||||||||
Vested
restricted stock units (weighted)
|
2,956 | 2,501 | 1,510 | |||||||||
Weighted
average number of shares outstanding
|
45,675 | 39,157 | 34,496 | |||||||||
Basic
earnings (loss) per common share
|
$ | 0.32 | $ | (0.11 | ) | $ | (0.75 | ) | ||||
Diluted
earnings per share
|
||||||||||||
Denominator:
|
||||||||||||
Common
shares (weighted)
|
42,719 | 36,656 | 32,986 | |||||||||
Vested
restricted stock units (weighted)
|
2,952 | 2,501 | 1,510 | |||||||||
Stock
options
|
1,443 | - | - | |||||||||
Common
stock warrants
|
2,302 | - | - | |||||||||
Weighted
average number of shares outstanding
|
49,416 | 39,157 | 34,496 | |||||||||
Diluted
earnings (loss) per common share
|
$ | 0.29 | $ | (0.11 | ) | $ | (0.75 | ) | ||||
Excluded
potentially dilutive securities:
|
||||||||||||
Common
stock issuable (1):
|
||||||||||||
Employee
and director stock options
|
1,149 | 1,858 | 1,900 | |||||||||
Common
stock warrants
|
- | 3,972 | 1,633 | |||||||||
Non-vested
restricted stock units
|
30 | - | 983 | |||||||||
Convertible
debt
|
- | - | 3,306 | |||||||||
Dilutive
shares
|
1,179 | 4,820 | 7,822 |
Convertible
Preferred Stock
|
Authorized and
Available for Issuance at
12/31/08 and 12/31/07
|
|||
Series
A
|
23,036 | |||
Series
B Junior
|
4,754 | |||
Series
C-1 Junior
|
13,577 | |||
Series
C-2 Junior
|
12,567 | |||
Series
C-3 Junior
|
18,093 | |||
Total
|
72,027 |
December 31,
|
||||||||
2008
|
2007
|
|||||||
Building
and building improvements
|
$ | 1,385 | $ | 1,391 | ||||
Land
and land improvements
|
161 | 161 | ||||||
Machinery
and equipment
|
23 | 598 | ||||||
Scientific
equipment
|
476 | 445 | ||||||
Computer
hardware and software
|
225 | 201 | ||||||
Office
equipment
|
52 | 42 | ||||||
Other
personal property
|
60 | 48 | ||||||
2,382 | 2,886 | |||||||
Less
accumulated depreciation and amortization
|
(1,309 | ) | (1,758 | ) | ||||
1,073 | 1,128 | |||||||
Less
impairment reserve
|
- | (82 | ) | |||||
Total
property, plant and equipment, net
|
$ | 1,073 | $ | 1,046 |
December 31,
|
||||||||
2008
|
2007
|
|||||||
Payroll,
payroll taxes and benefits
|
$ | 77 | $ | 63 | ||||
Legal
fees
|
35 | 35 | ||||||
Audit
examination and tax preparation fees
|
89 | 120 | ||||||
Franchise
taxes
|
144 | 15 | ||||||
Property
taxes
|
39 | 34 | ||||||
State
income taxes
|
94 | - | ||||||
Clinical,
regulatory, trademarks, and patent consulting fees
|
217 | 50 | ||||||
Other
fees and services
|
188 | 17 | ||||||
$ | 883 | $ | 334 |
Mar 30,
2007
|
Dec 31,
2006
|
|||||
Company
stock price
|
$
8.50
|
$
7.40
|
||||
Exercise
price
|
(see #1 below)
|
(see #1 below)
|
||||
Expected
dividend
|
0.0%
|
0.0%
|
||||
Risk
–free interest rate
|
5.07%
|
5.0%
|
||||
Expected
volatility
|
none
|
88.8%
|
||||
Contracted
term
|
1 day
|
3 months
|
November
Amendment Date
|
December 31, 2006
|
March 30, 2007
|
|||||||
Company
stock price
|
$
0.87
|
$
0.74
|
$
0.85
|
||||||
Exercise
price
|
$
0.12 - $ 0.66
|
$
0.12 - $ 0.66
|
$
0.12 - $ 0.34
|
||||||
Expected
dividend
|
0.0%
|
0.0%
|
0.0%
|
||||||
Risk-free
interest rate
|
4.5% - 5.0%
|
4.7% - 5.0%
|
4.54% - 4.70%
|
||||||
Expected
volatility
|
79.8% - 145.9%
|
48.4% - 143.5%
|
114.3% - 135.8%
|
||||||
Weighted
–average volatility
|
127.4%
|
127.7%
|
127.7%
|
||||||
Contractual
term
|
38 days – 5.4 years
|
38 days – 5.4 years
|
1.4 years – 6.8 years
|
December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Tax
(benefit) at U.S. 34% statutory rate
|
$ | 7,398 | $ | (4,731 | ) | $ | (2,029 | ) | ||||
Current
state tax (benefit), net of federal effect
|
1,518 | (413 | ) | (537 | ) | |||||||
Research
tax credits
|
(129 | ) | (220 | ) | (126 | ) | ||||||
Reduction
in NOL carryforward
|
- | 1,338 | - | |||||||||
Fair
value change of conversion feature fair value
|
- | 1,184 | (1,440 | ) | ||||||||
Fair
value change of warrant
|
- | 648 | (736 | ) | ||||||||
Debt
discount amortization
|
- | 918 | 62 | |||||||||
Financing
costs
|
311 | 320 | ||||||||||
Other
|
(325 | ) | (64 | ) | 26 | |||||||
8,462 | (1,029 | ) | (4,460 | ) | ||||||||
Change
in valuation allowance
|
(1,177 | ) | (8,571 | ) | 4,460 | |||||||
Provision
for income taxes
|
$ | 7,285 | $ | (9,600 | ) | $ | - |
December 31,
|
||||||||
2008
|
2007
|
|||||||
Deferred
tax assets:
|
||||||||
Estimated
future value of NOLs
|
||||||||
-
Federal
|
$ | 22,920 | $ | 32,439 | ||||
-
state
|
2,365 | 4,630 | ||||||
Research
tax credits
|
754 | 625 | ||||||
Deferred
program fee revenue
|
1,819 | - | ||||||
Stock-based
compensation
|
7,364 | 5,852 | ||||||
Other
|
98 | 76 | ||||||
35,320 | 43,622 | |||||||
Deferred
tax liabilities: depreciation
|
- | (16 | ) | |||||
Total
deferred taxes
|
35,320 | 43,606 | ||||||
Valuation
allowance
|
(32,829 | ) | (34,006 | ) | ||||
Net
deferred tax assets
|
$ | 2,491 | $ | 9,600 |
Years Ended December 31,
|
||||||||||||||||
2008
|
2007
|
2006
|
||||||||||||||
Number
of
Options
(000’s)
|
Weighted
Average
Exercise
Price
|
Number
of
Options
(000’s)
|
Weighted
Average
Exercise
Price
|
Number
of
Options
(000’s)
|
Weighted
Average
Exercise
Price
|
|||||||||||
Outstanding,
beginning
|
1,858
|
$
|
2.60
|
1,899
|
$
|
2.60
|
1,975
|
$
|
2.70
|
|||||||
Granted
|
1,160
|
9.58
|
-
|
-
|
-
|
-
|
||||||||||
Exercised
|
-
|
-
|
(31)
|
3.80
|
(40)
|
2.50
|
||||||||||
Forfeited
or expired
|
(50)
|
23.69
|
(10)
|
3.60
|
(36)
|
10.40
|
||||||||||
Outstanding,
ending
|
2,968
|
$
|
4.93
|
1,858
|
$
|
2.60
|
1,899
|
$
|
2.60
|
|||||||
Options
exercisable, end of year
|
2,215
|
$
|
3.26
|
1,827
|
$
|
2.56
|
1,837
|
$
|
2.60
|
Options Outstanding
|
Options Exercisable
|
|||||||||||||
Range of Exercise
Prices
|
Number of
Options
(000’s)
|
Weighted
Average
Remaining
Contractual
Life
|
Weighted
Average
Exercise
Price
|
Number of
Vested
Options
(000’s)
|
Weighted
Average
Exercise
Price
|
|||||||||
$1.30 to $10.00 |
2,888
|
7.11
|
$
|
4.65
|
2,135
|
$
|
2.81
|
|||||||
$10.01 to $20.00 |
69
|
1.07
|
14.18
|
69
|
14.18
|
|||||||||
$20.01 to $25.00 |
11
|
2.95
|
23.51
|
11
|
23.51
|
|||||||||
Total
|
2,968
|
6.95
|
$
|
4.93
|
2,215
|
$
|
3.26
|
|||||||
Number of
Options Not
Exercisable
(000)’s
|
Weighted
Average
Fair
Value
|
|||||||
Outstanding
at December 31, 2007
|
31 | $ | 3.10 | |||||
Granted
|
1,160 | 9.21 | ||||||
Vested
|
(437 | ) | 8.53 | |||||
Forfeited
or expired
|
- | - | ||||||
Outstanding
at December 31, 2008
|
754 | $ | 6.88 | |||||
2008
|
||||
Dividend
yield
|
- | |||
Average
risk-free interest rate used
|
3.63 | % | ||
Average
volatility used
|
141 | % | ||
Forfeitures
|
0.0 | % | ||
Expected
life of option
|
10
years
|
|||
Weighted
average grant date fair value
|
$ | 6.88 |
Three Month Period Ended
|
||||||||||||||||
Calendar Year 2008
|
Mar. 31
|
Jun. 30
|
Sept. 30
|
Dec. 31
|
||||||||||||
Total
revenue
|
$ | 17,084 | $ | 15,685 | $ | 3,880 | $ | 7,788 | ||||||||
Income
(loss) from operations
|
12,132 | 11,227 | (3,186 | ) | 809 | |||||||||||
Net
income (loss)
|
7,449 | 6,870 | 3,148 | (2,993 | ) | |||||||||||
Income
per common share
|
||||||||||||||||
Basic
|
$ | 0.16 | $ | 0.15 | $ | 0.07 | $ | (0.07 | ) | |||||||
Diluted
|
$ | 0.15 | $ | 0.13 | $ | 0.06 | $ | (0.07 | ) | |||||||
Calendar
Year 2007
|
Mar. 31
|
June 30
|
Sept. 30
|
Dec. 31
|
||||||||||||
Total
revenue
|
$ | - | $ | - | $ | - | $ | 6,404 | ||||||||
Loss
from operations
|
(1,974 | ) | (1,340 | ) | (1,420 | ) | ( 172 | ) | ||||||||
Net
income (loss)
|
(9,159 | ) | (2,199 | ) | (2,476 | ) | 9,521 | |||||||||
Income
(loss) per common share (after
deemed dividend) (Note A)
|
||||||||||||||||
Basic
|
$ | (0.26 | ) | $ | (0.06 | ) | $ | (0.06 | ) | $ | 0.21 | |||||
Diluted
|
$ | (0.26 | ) | $ | (0.06 | ) | $ | (0.06 | ) | $ | 0.20 |
Exhibit
Number
|
Exhibit Description
|
|
3.1
|
Restated
Certificate of Incorporation of the Registrant (incorporated by reference
to Appendix C to the Registrant's Proxy Statement filed on July 6,
2004).
|
|
3.2
|
Certificate
of Amendment Reverse Splitting Common Stock and restating but not changing
text of part of Article III of Restated Certificate of Incorporation
(incorporated by Reference to Exhibit 3.1 to the Form 8-K filed December
4, 2007).
|
|
3.3
|
Restated
Bylaws of the Registrant (incorporated by reference to Exhibit 3.1 to the
Form 8-K filed on October 12, 2007).
|
|
10.1
|
License,
Development and Commercialization Agreement by and between the Registrant
and King Pharmaceuticals Research and Development, Inc. (incorporated by
reference to Exhibit 10.1 of the Form 8-K filed on November 2, 2007).
(confidential treatment has been requested for portions of this
Exhibit).
|
|
10.2
|
Securities
Purchase Agreement dated as of August 20, 2007 (“PIPE SPA”) among the
Registrant, Vivo Ventures Fund VI, L.P., Vivo Ventures VI Affiliates Fund,
L.P. (collectively “Vivo”), GCE Holdings LLC, and certain other
signatories thereto (incorporated by reference to Exhibit 10.1 to the Form
8-K filed on August 21, 2007).
|
|
10.3
|
Form
of Warrant dated as of August 20, 2007 issued pursuant to the PIPE SPA
(incorporated by reference to Exhibit 4.1 to the Form 8-K filed on August
21, 2007).
|
|
10.4
|
Common
Stock Purchase Warrant issued to Watson Pharmaceuticals, Inc. (“WPI”)
dated December 20, 2002 (incorporated by reference to Exhibit 10.15 to the
Form 8-K filed on December 27, 2002).
|
|
10.5
|
Form
of Warrants dated August 15, 2001 issued to Galen Partners III, L.P.,
Galen Partners International, III, L.P. and Galen Employee Fund III, L.P.
(currently exercisable at $9.90 per share) (incorporated by reference to
Exhibit 10.3 to the Form S-3 filed on October 1, 2007 (the “October 2007
S-3”)).
|
|
10.6
|
Form
of Warrants dated January 9, 2002, February 1, 2002, March 1, 2002, and
April 5, 2002 issued to Galen Partners III, L.P., Galen Partners
International, III, L.P. and Galen Employee Fund III, L.P. (currently
exercisable at an exercise price of $3.40 per share) (incorporated by
reference to Exhibit 10.4 to the October 2007 S-3).
|
|
10.7
|
Form
of Warrants dated May 8, 2002, June 3, 2002, July 1, 2002, July 23, 2002,
August 5, 2002, September 3, 2002, October 1, 2002, November 4, 2002,
November 12, 2002, November 21, 2002 and December 5, 2002 issued to Galen
Partners III, L.P., Galen Partners International, III, L.P. and Galen
Employee Fund III, L.P. (currently exercisable at an exercise price of
$3.40 per share) (incorporated by reference to Exhibit 10.5 to the October
2007 S-3).
|
|
10.8
|
Form
of Warrants dated May 5, 2003 issued to Galen Partners III, L.P., Galen
Partners International, III, L.P., Galen Employee Fund III, L.P., Essex
Woodlands Health Ventures Fund V, L.P. and Care Capital Investments II, LP
and others (currently exercisable at an exercise price of $1.285 per
share) (incorporated by reference to Exhibit 10.6 to the October 2007
S-3).
|
Exhibit
Number
|
Exhibit Description
|
|
10.9
|
Amended
and Restated Voting Agreement dated as of February 6, 2004 among the
Registrant, Care Capital Investments II, LP, Essex Woodlands Health
Ventures Fund V, L.P., Galen Partners III, L.P., and others
(incorporated by reference to Exhibit 10.5 of the Form 8-K filed on
February 10, 2004 (the “February 2004 Form 8-K”)).
|
|
10.10
|
Joinder
and Amendment to Amended and Restated Voting Agreement dated November 9,
2005 between the Registrant, GCE Holdings, Essex Woodlands Health Ventures
Fund V, L.P., Care Capital Investments II, LP, Galen Partners III, L.P.
and others (incorporated by reference to Exhibit 10.1 to the Form 8-K
dated November 9, 2005).
|
|
10.11
|
Second
Amendment to Amended and Restated Voting Agreement dated as of January 24,
2008 between the Registrant and GCE Holdings, LLC (incorporated by
reference to Exhibit 10.1 to the Form 8-K filed January 28,
2008).
|
|
10.12
|
Amended
and Restated Registration Rights Agreement dated February 6, 2004 among
the Registrant, WPI, Care Capital Investments II, LP, Essex Woodlands
Health Ventures Fund V, L.P., Galen Partners III, L.P. and others
(incorporated by reference to Exhibit 10.6 of the February 2004 Form
8-K).
|
|
10.13
|
Registrant’s
1995 Stock Option and Restricted Stock Purchase Plan (incorporated by
reference to Exhibit 4.1 to the Registrant's Registration Statement on
Form S-8, File No. 33-98396).
|
|
10.14
|
Registrant’s
1998 Stock Option Plan, as amended (incorporated by reference to Appendix
C to the Registrant’s Proxy Statement filed on November 16,
2006).
|
|
10.15
|
Registrant’s
2005 Restricted Stock Unit Award Plan, as amended (incorporated by
reference to Appendix D to the Registrant’s Proxy Statement filed on
November 16, 2006).
|
|
10.16
|
Executive
Employment Agreement dated as of August 26, 2003 between the Registrant
and Andrew D. Reddick (“Reddick”) (incorporated by reference to Exhibit
10.2 to the Form 10-Q for the quarter ended June 30, 2004 (the “June 2004
10-Q”)).
|
|
10.17
|
Amendment
to Executive Employment Agreement between the Registrant and Reddick,
dated May 27, 2004 (incorporated by reference to Exhibit 10.4 to the June
2004 10-Q).
|
|
10.18
|
Second
Amendment to Executive Employment Agreement between the Registrant and
Reddick, dated May 24, 2005 incorporated by reference to Exhibit 10.116 to
the Form 10-K for the year ending December 31, 2005 filed on February 21,
2006 (the “2005 Form 10-K”)).
|
|
10.19
|
Third
Amendment to Executive Employment Agreement between the Registrant and
Reddick, dated December 22, 2005 (incorporated by reference to Exhibit
10.1 to the Form 8-K filed December 23, 2005 (the “December 2005 Form
8-K”)).
|
|
10.20
|
Fourth
Amendment to Executive Employment Agreement between the Registrant and
Reddick dated December 16, 2007 (incorporated by reference to Exhibit
10.20 to the Form 10-K for the year ending December 31, 2007, filed on
March 5, 2008).
|
|
10.21
|
Fifth
Amendment to Executive Employment Agreement between the Registrant and
Reddick executed July 9, 2008 (incorporated by reference to
Exhibit 10.1 to our Form 8-K filed on July 10,
2008)
|
|
10.22
|
Executive
Employment Agreement dated as of April 5, 2004 between the Registrant and
Ron J. Spivey (incorporated by reference to Exhibit 10.3 to the June 2004
10-Q).
|
|
10.23
|
Amendment
to Executive Employment Agreement dated December 22, 2005 between
Registrant and Ron J. Spivey (incorporated by reference to Exhibit 10.2 to
the December 2005 Form 8-K).
|
Exhibit
Number
|
Exhibit Description
|
|
10.24
|
Second
Amendment to Executive Employment Agreement dated December 19, 2007
between the Registrant and Ron J. Spivey (incorporated by reference to
Exhibit 10.23 to the Form 10-K for the year ending December 31, 2007,
filed on March 5, 2008).
|
|
10.25
|
Third
Amendment to Employment Amendment to Executive Employment Agreement
executed July 9, 2008 (incorporated by reference to Exhibit 10.2 to our
Form 8-K filed on July 10, 2008).
|
|
10.26
|
Amended
and Restate Employment Agreement effective as of January 1, 2009 between
the registrant and Ron J. Spivey (incorporated by reference to
Exhibit 10.3 to our Form 8-K filed on July 10,
2008)
|
|
10.27
|
Employment
Agreement dated as of March 10, 1998 between the Registrant and Peter
Clemens (“Clemens”) (incorporated by reference to Exhibit 10.44 to the
Form 10-K for the period ending December 31, 2007, filed on April 15,
1998).
|
|
10.28
|
First
Amendment to Employment Agreement made as of June 28, 2000 between the
Registrant and Clemens (incorporated by reference to Exhibit 10.44A to the
Registrant’s 2005 Form 10-K).
|
|
10.29
|
Second
Amendment to Executive Employment Agreement between Registrant and
Clemens, dated as of January 5, 2005 (incorporated by reference to Exhibit
99.1 to the Registrant's Form 8-K filed January 31,
2005).
|
|
10.30
|
Third
Amendment to Executive Employment Agreement dated December 22, 2005
between Registrant and Clemens (incorporated by reference to Exhibit 10.3
to the December 2005 Form 8-K).
|
|
10.31
|
Fourth
Amendment to Executive Employment Agreement dated December 16, 2007
between Registrant and Clemens (incorporated by reference to Exhibit 10.28
to the Form 10-K for the year ending December 31, 2007, filed on March 5,
2008).
|
|
10.32
|
Fifth
Amendment to Executive Employment Agreement executed July 9, 2008 between
Registrant and Clemens (incorporated by reference to Exhibit
10.4 to our Form 8-K filed on July 10, 2008)
|
|
10.33
|
Employment
Agreement dated as of March 18, 2008 between the Registrant and Robert B.
Jones (incorporated by reference to Exhibit 10.1 to our Form
8-K filed on March 24, 2008)
|
|
10.34
|
Loan
Agreement among the Registrant Essex Woodlands Health Ventures Fund V,
L.P., Care Capital Investments II, LP, Galen Partners III, L.P. and others
dated January 31, 2006 (the “Loan Agreement,” and together with certain
other bridge loan agreements, the “Loan Agreements”) (incorporated by
reference to Exhibit 10.1 to the Form 8-K filed on January 31,
2006).
|
|
10.35
|
Form
of Secured Promissory Note of the Registrant relating to January 31, 2006
Loan Agreement (incorporated by reference to Exhibit 10.2 to the Form 8-K
filed on January 31, 2006).
|
|
10.36
|
Subordination
Agreement among Essex Woodlands Health Ventures Fund V, L.P., Care Capital
Investments II, LP, Galen Partners III, L.P., and others dated January 31,
2006 (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on
January 31, 2006).
|
|
10.37
|
Company
General Security Agreement among the Registrant and Galen Partners III,
L.P., as Agent, dated January 31, 2006 (incorporated by reference to
Exhibit 10.4 to the Form 8-K filed on January 31,
2006)
|
Exhibit
Number
|
Exhibit Description
|
|
10.38
|
Guarantor
Security Agreement among Acura Pharmaceutical Technologies, Inc. (“APT”)
and Galen Partners III, L.P., as Agent, dated January 31, 2006
(incorporated by reference to Exhibit 10.6 to the Form 8-K
filed on January 31, 2006).
|
|
10.39
|
Omnibus
Amendment effective as of May 24, 2006 among the Registrant and APT and
certain lenders amending the Loan Agreements (incorporated by reference to
the Form 8-K filed on May 24, 2006).
|
|
10.40
|
Omnibus
Amendment effective as of August 16, 2006 among the Registrant, APT and
certain lenders, amending among other things, the Loan Agreements
(incorporated by reference to Exhibit 10.1 to the Form 8-K filed on August
16, 2006).
|
|
10.41
|
Omnibus
Amendment effective as of September 22, 2006 among the Registrant, APT and
certain lenders, amending among other things, the Loan Agreements
(incorporated by reference to Exhibit 10.1 to the Form 8-K filed on
September 25, 2006).
|
|
10.42
|
Omnibus
Amendment effective as of October 20, 2006 among the Registrant, APT and
certain lenders, amending among other things, the Loan Agreements
(incorporated by reference to Exhibit 10.1 to the Form 8-K filed on
October 20, 2006).
|
|
10.43
|
Omnibus
Amendment effective as of November 30, 2006 among the Registrant and APT
and certain lenders, amending among other things, the Loan Agreements
(incorporated by reference to Exhibit 10.1 to the Form 8-K filed on
December 4, 2006).
|
|
10.44
|
Omnibus
Amendment and Consent dated March 30, 2007 among the Registrant, Galen
Partners III, L.P., Care Capital Investments II, LP, Essex Woodlands
Health Ventures Fund V, L.P. and the other signatories thereto
(incorporated by referenced to Exhibit 10.1 of the Form 8-K filed April 2,
2007).
|
|
10.45
|
Omnibus
Amendment and Consent effective as of July 10, 2007 among the Registrant,
Galen Partners III, L.P., Care Capital Investments II, LP, Essex Woodlands
Health Ventures Fund V, L.P. and the other signatories thereto
(incorporated by reference to Exhibit 10.1 of the Form 8-K filed on July
10, 2007).
|
|
10.46
|
Fourth
Amendment, Waiver and Consent to Loan Agreement dated as of June 28, 2007
between the Registrant and Galen Partners III, LP, as agent (incorporated
by reference to Exhibit 10.1 of the Form 8-K filed on July 5, 2007 (the
“July 5, 2007 8-K”)).
|
Exhibit
Number
|
Exhibit Description
|
|
10.47
|
Consent
and Amendment to Noteholders Agreement among Essex Woodlands Health
Ventures Fund V, L.P., Galen Partners III, L.P. and Care Capital
Investments II, LP, and certain other signatories thereto (incorporated by
reference to Exhibit 10.2 of the July 5, 2007 8-K).
|
|
10.48
|
Amended
Secured Promissory Note dated as of December 20, 2002 in the principal
amount of $5,000,000 issued by the Registrant, as the maker, in favor of
Galen Partners III, L.P., as agent (incorporated by reference to Exhibit
10.3 of the July 5, 2007 8-K).
|
|
10.49
|
Fifth
Amendment, Waiver and Consent to Loan Agreement dated as of August 20,
2007 between the Registrant and Galen Partners III, L.P., as agent
(incorporated by reference to Exhibit 10.2 to the Form 8-K filed on August
21, 2007).
|
|
10.50
|
Amended
Secured Promissory Note dated as of December 20, 2002 in the principal
amount of $5,000,000 issued by the Registrant, as the maker, in favor of
Galen Partners III, L.P., as agent (incorporated by reference to Exhibit
10.3 of the Form 8-K filed on August 21, 2007).
|
|
10.51
|
Sixth
Amendment, Waiver and Consent to Loan Agreement dated as of September 27,
2007 between the Registrant and Galen Partners III, L.P., as agent
(incorporated by reference to Exhibit 10.1 to the Form 8-K filed on
September 24, 2007).
|
|
10.52
|
Amended
Secured Promissory Note originally issued as of December 20, 2002 in the
principal amount of $5,000,000 issued by the Registrant, as the maker, in
favor of Galen Partners III, L.P., as Agent (incorporated by reference to
Exhibit 10.2 of the Form 8-K filed on September 24,
2007).
|
|
14.1
|
Code
of Ethics (incorporated by reference to Exhibit 14.1 of the Form 8-K filed
on December 10, 2007).
|
|
21
|
Subsidiaries
of the Registrant (incorporated by reference to the Form 10-K for the
fiscal year ended December 31, 2006 filed on March 15,
2007).
|
|
*23.1
|
Consent
of Independent Registered Public Accounting Firm.
|
|
*31.1
|
Certification
of Periodic Report by Chief Executive Officer pursuant to Rule 13a-14 and
15d-14 of the Securities Exchange Act of 1934.
|
|
*31.2
|
Certification
of Periodic Report by Chief Financial Officer pursuant to Rule 13a-14 and
15d-14 of the Securities Exchange Act of 1934.
|
|
*32
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
Chicago,
Illinois
|
/s/
BDO Seidman, LLP
|
February
27, 2009
|
1.
|
I
have reviewed this Annual Report on Form 10-K of Acura Pharmaceuticals,
Inc.;
|
2.
|
Based
on my knowledge, this annual report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and
have:
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
(c)
|
Evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
(d)
|
Disclosed
in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent
fiscal quarter (its fourth fiscal quarter) that has materially affected,
or is reasonably likely to materially affect, the registrant's internal
control over financial reporting ;
and
|
5.
|
The
registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent
functions):
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
|
Date:
February 27, 2009
|
||
/s/ Andrew D. Reddick | ||
Andrew
D. Reddick
|
||
President
and Chief Executive
Officer
|
1.
|
I
have reviewed this Annual Report on Form 10-K of Acura Pharmaceuticals,
Inc.;
|
2.
|
Based
on my knowledge, this annual report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f) ) for the registrant and
have:
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
(c)
|
Evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
(d)
|
Disclosed
in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent
fiscal quarter (its fourth fiscal quarter) that has materially affected,
or is reasonably likely to materially affect, the registrant's internal
control over financial reporting ;
and
|
5.
|
The
registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent
functions):
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
|
Date:
February 27, 2009
|
||
/s/
Peter A. Clemens
|
||
Peter
A. Clemens
|
||
Senior
Vice President and Chief Financial
Officer
|
February
27, 2009
|
By:
|
/s/
Andrew D. Reddick
|
|
Andrew
D. Reddick
|
|||
President
and Chief Executive
Officer
|
February
27, 2009
|
By:
|
/s/
Peter A. Clemens
|
|
Peter
A. Clemens
|
|||
Senior
Vice President and Chief
Financial
Officer
|