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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The following table provides selected financial information for each of the last three years: NM - Not meaningful Financial Performance Changes in Revenues Total revenues increased $1,282.2 million, or 109%, to $2,463.5 million in 2011, compared with $1,181.2 million in 2010, primarily due to: •incremental revenues from Valeant products and services of $860.1 million in 2011; •the inclusion of PharmaSwiss revenues from the acquisition date of $199.9 million in 2011; •the inclusion of Sanitas revenues from the Sanitas Acquisition Date of $49.6 million in 2011; •the inclusion of Elidel® and Xerese® revenues of $46.0 million in 2011; •alliance revenue of $40.0 million recognized in the second quarter of 2011, related to the milestone payment from GSK in connection with the launch of Trobalt™; •alliance revenue of $36.0 million recognized in the first quarter of 2011 on the out-license of the Cloderm® product rights in March 2011; and •the inclusion of Dermik, Ortho Dermatologics and Afexa revenues from the acquisition dates of $7.6 million, $9.6 million and $12.6 million, respectively, in the fourth quarter of 2011. |
The U.S. has the highest statutory rate relative to all other tax jurisdictions in which we do business, resulting in an overall net tax recovery for the worldwide income tax provision; •an increase in alliance and royalty revenue of $137.4 million, mainly related to the incremental royalty (IDP-111) and service revenue from Valeant of $64.3 million, alliance revenue of $40.0 million in the second quarter of 2011 related to the milestone payment from GSK in connection with the launch of Trobalt™ and the alliance revenue of $36.0 million recognized in the first quarter of 2011 on the out-license of the Cloderm® product rights in March 2011; •decreases of $43.2 million in restructuring charges and integration costs, as described below under "Results of Operations - Operating Expenses - Restructuring and Integration Costs"; •decreases of $40.8 million in legal settlements, as described below under "Results of Operations - Operating Expenses - Legal Settlements"; •a $21.3 million net realized gain on the disposal of our equity investment in Cephalon, Inc. ("Cephalon"), which was realized in the second quarter of 2011 (as described below under "Results of Operations - Non-Operating Income (Expense) - Gain (Loss) on Investments, Net"); and •a $19.1 million net gain realized on foreign currency forward contracts entered in connection with the acquisitions of iNova and PharmaSwiss in 2011, as described below under "Results of Operations - Non-Operating Income (Expense) - Foreign Exchange and Other". |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) intangible assets, respectively, to their estimated fair values, less costs to sell, as well as an impairment of intangible assets of $12.8 million related to certain OTC products sold in Brazil; •an increase of $295.9 million in selling, general and administrative expense, as described below under "Results of Operations - Operating Expenses - Selling, general and administrative"; •increases of $248.7 million in interest expense, reflecting $243.4 million related to the legacy Valeant debt assumed as of the Merger Date (partially reduced by the repayment of the Term Loan A Facility in the first quarter of 2011) and the post-Merger issuances of senior notes in the fourth quarter of 2010 and first quarter of 2011, $25.3 million related to the borrowings under our senior secured term loan facility in the third quarter of 2011 and the borrowings under our senior secured credit facilities in the fourth quarter of 2011, partially offset by a decrease of $19.2 million in interest expense related to the repurchases of 5.375% Convertible Notes (as described below under "Financial Condition, Liquidity and Capital Resources - Financial Assets (Liabilities)"); and •increases of $20.0 million in acquired IPR&D costs. |
Net income declined $384.6 million to a net loss of $208.2 million (basic and diluted loss per share of $1.06) in 2010, compared with net income of $176.5 million (basic and diluted EPS of $1.11) in 2009, reflecting the following factors: •the inclusion of $134.8 million of Merger-related restructuring charges and $38.3 million of Merger-related transaction costs in 2010; •a $115.0 million increase in amortization expense, primarily related to the identifiable intangible assets of Valeant ($86.4 million) and the Wellbutrin XL® and tetrabenazine intangible assets (combined $28.5 million) acquired in May and June 2009, respectively; •a $59.4 million increase in interest expense, reflecting $47.8 million related to the assumed Valeant debt and the issuance of 6.875% Senior Notes due December 1, 2018 (the "2018 Notes") by Valeant in November 2010, and $12.1 million related to the issuance of 5.375% Convertible Notes in June 2009; •the inclusion of a $52.6 million legal settlement charge in 2010, in connection with agreements or agreements in principle to settle certain Biovail legacy litigation matters; •the recognition of a $45.5 million valuation allowance against a portion of U.S. operating loss carryforwards as of the Merger Date (as described below under "Results of Operations - Income Taxes"); •an increase of $42.9 million in non-restructuring-related share-based compensation, including $20.9 million recognized as of the Merger Date for the excess of the fair value of Biovail stock options and time-based RSUs over the fair value of converted Valeant awards, and approximately $17.0 million related to the amortization of the fair value increment on Valeant stock options and RSUs converted into Biovail awards; •a $32.4 million charge on the extinguishment of debt in 2010, mainly related to the repurchase of a portion of the 5.375% Convertible Notes and the cash settlement of the written call options on our common shares (as described below under "Results of Operations - Non-Operating Income (Expense) - Loss on Extinguishment of Debt"); •a $29.9 million increase in acquired IPR&D, reflecting a $89.2 million charge in 2010 related to the istradefylline, Ampakine® and Staccato® loxapine acquisitions and the write-off of the BVF-018 acquired IPR&D asset, compared with a $59.4 million charge in 2009 related to the acquisitions of the U.S. and Canadian rights to develop and commercialize fipamezole, pimavanserin and GDNF and the write-off of the acquired IPR&D asset related to the development of an isomer of tetrabenazine (RUS-350); and Item 7. |
A substantial portion of the increase in 2010 was due to incremental revenues from Valeant products and services of $274.6 million, while the remaining year-over-year increase in 2010 was mainly attributable to the effect of the following factors: •in the U.S. Neurology and Other segment: •an increase in Xenazine® product sales of $27.2 million, or 61%, to $71.8 million in 2010, compared with $44.6 million in 2009, reflecting year-over-year increases in patient enrollment in the U.S., following the product's launch in December 2008; •an increase in Wellbutrin XL® product sales of $25.8 million, or 16%, to $188.0 million in 2010, compared with $162.2 million in 2009, reflecting incremental revenue of approximately $50.0 million in 2010, following the acquisition of the full U.S. commercialization rights in May 2009, and the positive effect of subsequent price increases, partially offset by the declines in prescription volumes due to generic competition; and •an increase in sales of generic Tiazac® of $20.6 million, or 118%, to $38.0 million in 2010, compared with $17.4 million in 2009, which was attributable to competitors' manufacturing issues. |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Selling, general and administrative expenses increased $295.9 million, or 107%, to $572.5 million in 2011, compared with $276.5 million in 2010, primarily due to: •the addition of Valeant's selling, general and administrative expenses, including incremental advertising costs of $64.4 million, partially offset by the realization of operating synergies and cost savings from the Merger; •the addition of selling, general and administrative expenses relating to PharmaSwiss ($60.8 million), Sanitas ($13.4 million), Elidel®/Xerese® ($2.5 million) and Afexa ($2.4 million); and •increases of $45.6 million in share-based compensation expense charged to selling, general and administrative expenses in 2011, including an increase of approximately $21.5 million related to the amortization of the fair value increment on Valeant stock options and RSUs converted into the Company awards and the equitable adjustment to certain vested stock option awards, in connection with the post-Merger special dividend of $1.00 per common share declared and paid in the fourth quarter of 2010. |
The impairment charges were triggered in the fourth quarter of 2011 due to unfavorable study results, feedback received from the FDA which would result in the incurrence of higher costs to perform additional studies, reassessment of risk and the probability of success, and/or pipeline prioritization decisions resulting in the re-allocation of our resources to other R&D programs; •an increase in amortization expense of $75.1 million, primarily related to the identifiable intangible assets of Elidel®/Xerese® ($13.2 million), Sanitas ($7.7 million) Zovirax® ($6.8 million) and PharmaSwiss ($4.9 million) and $7.9 million and $19.8 million of impairment charges related to the write-down of the carrying values of the IDP-111 and 5-FU intangible assets, respectively, to their estimated fair values, less costs to sell; and •an increase of $40.4 million in interest expense, mainly related to the issuances of senior notes in the first quarter of 2011 and the borrowings under our senior secured credit facilities, partially reduced by the repayment of the Term Loan A Facility in the first quarter of 2011 (as described below under "Financial Condition, Liquidity and Capital Resources - Financial Assets (Liabilities)"). |
Cash and Cash Equivalents Cash and cash equivalents declined $230.2 million, or 58%, to $164.1 million as of December 31, 2011, compared with $394.3 million at December 31, 2010, which primarily reflected the following uses of cash: •$2,791.5 million paid, in the aggregate, in connection with the purchases of businesses and intangible assets, mainly in respect of the PharmaSwiss, Sanitas, Zovirax®, Elidel®/Xerese®, Dermik, Ortho Dermatologics, Afexa and iNova acquisitions; •$499.6 million related to the purchase of common shares from ValueAct Capital Master Fund, L.P. ("ValueAct"), $623.3 million in cash paid to repurchase a portion of the 5.375% Convertible Notes, which included the payment of accreted interest of $9.8 million (as described below under "Financial Condition, Liquidity and Capital Resources - Securities Repurchase Program and New Securities Repurchase Program"), $139.6 million related to the repurchase of our common shares and $66.9 million paid to settle written call options; •$975.0 million repayment of the Term Loan A Facility (as described below under "Financial Condition, Liquidity and Capital Resources - Financial Assets (Liabilities)"); •$54.9 million, $34.2 million and $9.5 million paid on the redemption of a portion of the 6.875% senior notes due 2018 (the "2018 Notes"), 6.50% senior notes due 2016 (the "2016 Notes") and 7.00% senior notes due 2020 (the "2020 Notes"), respectively; •$59.7 million of employee withholding taxes paid in connection with the exercise of share-based awards; •purchases of property, plant and equipment of $58.5 million; •payments of $40.7 million of debt issuance costs; •payments of $31.8 million primarily related to Elidel®/Xerese® contingent consideration; •payments of $28.5 million related to the acquisition of Sanitas's noncontrolling interest in 2011; and •payments of $24.0 million related to the acquisition of Afexa's noncontrolling interest in the fourth quarter of 2011. |
Shareholders' Equity Shareholders' equity declined $904.1 million, or 18%, to $4,007.0 million as of December 31, 2011, compared with $4,911.1 million at December 31, 2010, primarily due to: •a charge for the excess of $666.0 million of the fair value of the common shares issued to effect the settlement of the 4.0% Convertible Notes over the estimated fair value of the liability component (as described below under "Financial Condition, Liquidity and Capital Resources - Financial Assets (Liabilities)"); •a decrease of $499.6 million related to the repurchase of common shares from ValueAct, and a decrease of $139.6 million related to open-market repurchases of our common shares in 2011; •a charge for the excess of $414.1 million of the repurchase price of the 5.375% Convertible Notes over the estimated fair value of the liability component (as described below under "Financial Condition, Liquidity and Capital Resources - Securities Repurchase Program and New Securities Repurchase Program"); and •a negative foreign currency translation adjustment of $304.4 million to other comprehensive income, mainly due to the impact of a strengthening of the U.S. dollar relative to a number of other currencies, including the Polish zloty, Mexican peso, euro, Brazilian real and Canadian dollar, which decreased the reported value of our net assets denominated in those currencies. |
Those factors were partially offset by: •a decrease of $84.5 million, in the aggregate, mainly in respect of the ribavirin, Hamilton brands, istradefylline, Ampakine® and Staccato® loxapine acquisitions in 2010. Financing Activities Net cash provided by financing activities was $1,948.2 million in 2011, compared with net cash used in financing activities of $213.3 million in 2010, reflecting an increase of $2,161.5 million, primarily due to: •an increase related to net proceeds of $2,139.7 million from the issuance of senior notes in the first quarter of 2011 (as described below under "Financial Condition, Liquidity and Capital Resources - Financial Assets (Liabilities)"); •an increase of $2,405.5 million in net borrowings under our senior secured credit facilities in the fourth quarter of 2011 (as described below under "Financial Condition, Liquidity and Capital Resources - Financial Assets (Liabilities)"); •an increase of $537.5 million related to the repayments of the Term Loan B Facility, Term Loan A Facility and Cambridge obligation in 2010; and Item 7. |
Those factors were partially offset by: •a decrease of $975.0 million related to the repayment of the Term Loan A Facility in the first quarter of 2011; •a decrease related to net proceeds of $992.4 million from the issuance of the 2018 Notes in 2010; •a decrease of $359.2 million related to the repurchase of a portion of the 5.375% Convertible Notes (exclusive of the payment of accreted interest reflected as an operating activity) in 2011; •a decrease of $499.6 million related to the purchase of common shares from ValueAct in 2011; •a decrease of $79.5 million related to the repurchase of our common shares in 2011; •$54.9 million, $34.2 million and $9.5 million paid on the redemption of a portion of the 2018 Notes, the 2016 Notes and the 2020 Notes, respectively; •a decrease of $45.2 million related to higher employee withholding taxes paid on the exercise of employee share-based awards; •a decrease of $36.1 million related to higher payments of debt issuance costs; •a decrease of $29.2 million related to higher payments on call option settlements; •payments of $28.5 million related to the acquisition of Sanitas's noncontrolling interest in 2011; •payments of $31.8 million primarily related to Elidel®/Xerese® contingent consideration; and •payments of $24.0 million related to the acquisition of Afexa's noncontrolling interest in the fourth quarter of 2011. |
Important factors that could cause actual results to differ materially from these expectations include, among other things, the following: •our ability to compete against companies that are larger and have greater financial, technical and human resources than we do, as well as other competitive factors, such as technological advances achieved, patents obtained and new products introduced by our competitors; •the challenges and difficulties associated with managing the rapid growth of our Company and a large, complex business; •our ability to identify, acquire and integrate acquisition targets and to secure and maintain third-party research, development, manufacturing, marketing or distribution arrangements; •our ability to close transactions on a timely basis or at all; •factors relating to the integration of the companies, businesses and products acquired by the Company (including the integration relating to the Merger), such as the time and resources required to integrate such companies, businesses and products, the difficulties associated with such integrations, and the achievement of the anticipated benefits from such integrations; •our eligibility for benefits under tax treaties and the continued availability of low effective tax rates for the business profits of our significant operating subsidiary in Barbados, as well as the low tax rate for the profits of our PharmaSwiss S.A. subsidiary based in Switzerland; •our future cash flow, our ability to service and repay our existing debt and our ability to raise additional funds, if needed, in light of our current and projected levels of operations, acquisition activity and general economic conditions; Item 7. |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) •the uncertainties associated with the acquisition and launch of new products, including, but not limited to, the acceptance and demand for new pharmaceutical products, and the impact of competitive products and pricing; •the difficulty in predicting the expense, timing and outcome within our legal and regulatory environment, including, but not limited to, the U.S. Food and Drug Administration, the Canadian Therapeutic Products Directorate and European, Brazilian and Australian regulatory approvals, legal and regulatory proceedings and settlements thereof, the protection afforded by our patents and other intellectual and proprietary property, successful generic challenges to our products and infringement or alleged infringement of the intellectual property of others; •the success of preclinical and clinical trials for our drug development pipeline or delays in clinical trials that adversely impact the timely commercialization of our pipeline products; •the results of continuing safety and efficacy studies by industry and government agencies; •our ability to obtain components, raw materials or finished products supplied by third parties; •the disruption of delivery of our products and the routine flow of manufactured goods; •the introduction of products that compete against our products that do not have patent or data exclusivity rights, which products represent a significant portion of our revenues; •the risks associated with the international scope of our operations, including our presence in emerging markets; •adverse global economic conditions and credit market uncertainty in European and other countries in which we do business; •economic factors over which the Company has no control, including changes in inflation, interest rates, foreign currency rates, and the potential effect of such factors on revenues, expenses and resulting margins; •our ability to retain, motivate and recruit executives and other key employees; •the outcome of legal proceedings, investigations and regulatory proceedings; •the risk that our products could cause, or be alleged to cause, personal injury, leading to withdrawals of products from the market; •the impacts of the Patient Protection and Affordable Care Act in the U.S. and other legislative and regulatory reforms in the countries in which we operate; and •other risks detailed from time to time in our filings with the U.S. Securities and Exchange Commission (the "SEC") and the Canadian Securities Administrators (the "CSA"), as well as our ability to anticipate and manage the risks associated with the foregoing. |
The unaudited pro forma information reflects primarily adjustments consistent with the unaudited pro forma information related to the Merger and the following unaudited pro forma adjustments related to PharmaSwiss, Sanitas, Ortho Dermatologics, iNova and Afexa: •elimination of Valeant, PharmaSwiss's, Sanitas's, Ortho Dermatologics's, iNova's and Afexa's historical intangible asset amortization expense; •additional amortization expense related to the provisional fair value of identifiable intangible assets acquired; •additional depreciation expense related to fair value adjustment to property, plant and equipment acquired; •elimination of interest expense related to Valeant's legacy 8.375% and 7.625% senior unsecured notes and senior secured term loan that were repaid as part of the Merger transaction; •additional interest expense associated with the financing obtained by Valeant in connection with the various acquisitions; •reduced non-cash interest expense related to the accretion of the principal amount of the 4.0% Convertible Notes as a result of the fair value adjustment; •elimination of the amortization of deferred financing costs recorded by Biovail related to its senior secured credit facility, which was terminated in connection with the Merger; •additional share-based compensation expense related to unvested stock options and RSUs issued by Biovail to replace Valeant's stock options and RSUs; •elimination of Valeant's acquisition-related costs and Merger-related restructuring charges, which will not have a continuing impact on the Company's operations; and VALEANT PHARMACEUTICALS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (All tabular dollar amounts expressed in thousands of U.S. dollars, except per share data) 3. BUSINESS COMBINATIONS (Continued) •the exclusion from pro forma earnings in the year ended December 31, 2011 of the acquisition accounting adjustments on Valeant's, PharmaSwiss', Sanitas', Ortho Dermatologics', iNova's and Afexa's inventories that were sold subsequent to the acquisition date of $27.3 million, $18.8 million, $5.2 million, $0.7 million, $1.2 million and $2.1 million, respectively, and the exclusion of PharmaSwiss', Sanitas', Ortho Dermatologics', iNova's and Afexa's acquisition-related costs of $2.1 million, $8.4 million, $5.3 million, $3.7 million and $3.3 million, respectively, in the year ended December 31, 2011, and the inclusion of those amounts in pro forma earnings for the corresponding periods of 2010. |
FAIR VALUE MEASUREMENTS Assets Measured at Fair Value on a Recurring Basis The following fair value hierarchy table presents the components and classification of the Company's financial assets measured at fair value as of December 31, 2011 and 2010: Fair value measurements are estimated based on valuation techniques and inputs categorized as follows: •Level 1 - Quoted prices in active markets for identical assets or liabilities; •Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and •Level 3 - Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using discounted cash flow methodologies, pricing models, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. |
Potential difficulties that may be encountered in the integration process include the following: •integrating the research and development, manufacturing, distribution, sales, marketing and promotion activities and financial and information technology systems of Valeant and Biovail; •challenges and difficulties associated with managing the larger, more complex, combined business; •identifying and eliminating redundant and underperforming operations and assets; •consolidating sales and marketing operations and corporate and administrative infrastructures; •conforming standards, controls, procedures and policies, business cultures and compensation structures between the companies; •integrating personnel from the two companies while maintaining focus on producing and delivering consistent, high quality products; •distracting employees from operations; •retaining existing customers and attracting new customers; •coordinating geographically dispersed organizations; •managing inefficiencies associated with integrating the operations of the Company; •complying with the terms of the corporate integrity agreement dated September 11, 2009, between the Office of Inspector General of the Department of Health and Human Services and Biovail (the "CIA"); •the ability of the Company to deliver on its strategy going forward; and •making any necessary modifications to operating control standards to comply with the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder and National Instrument 52-107 Certification of Disclosure in Issuers' Annual Report and Interim Filings. |
This indebtedness may restrict the manner in which the Company conducts business and limit the Company's ability to implement elements of its growth strategy, including with respect to: •limitations on our ability to obtain additional debt financing; •instances in which we are unable to meet the financial covenants contained in our debt agreements or to generate cash sufficient to make required debt payments, which circumstances would have the potential of resulting in the acceleration of the maturity of some or all of our outstanding indebtedness; •the allocation of a substantial portion of our cash flow from operations to service our debt, thus reducing the amount of our cash flow available for other purposes; •requiring us to issue debt or equity securities or to sell some of our core assets, possibly on unfavorable terms, to meet payment obligations; •compromising our flexibility to plan for, or react to, competitive challenges in our business; •the possibility that we are put at a competitive disadvantage relative to competitors that do not have as much debt as us, and competitors that may be in a more favorable position to access additional capital resources; and •limitations on our ability to execute business development activities to support our strategies. |
As long as the common shares are then listed on a "designated stock exchange", which currently includes the NYSE and TSX, the common shares generally will not constitute taxable Canadian property of a U.S. Holder, unless (a) at any time during the 60-month period preceding the disposition, the U.S. Holder, persons not dealing at arm's length with such U.S. Holder or the U.S. Holder together with all such persons, owned 25% or more of the issued shares of any class or series of the capital stock of the Company and more than 50% of the fair market value of the common shares was derived, directly or indirectly, from a combination of (i) real or immoveable property situated in Canada, (ii) "Canadian resource property" (as such term is defined in the Tax Act), (iii) "timber resource property" (as such terms are defined in the Tax Act), or (iv) options in respect of interests in, or for civil law rights in, any such properties whether or not the property exists, or (b) the common shares are otherwise deemed to be taxable Canadian property. |
Changes in Net Income Net income declined $384.6 million to a net loss of $208.2 million (basic and diluted loss per share of $1.06) in 2010, compared with net income of $176.5 million (basic and diluted earnings per share ("EPS") of $1.11) in 2009, reflecting the following factors: •the inclusion of $134.8 million of Merger-related restructuring charges and $38.3 million of Merger-related transaction costs in 2010; •a $115.0 million increase in amortization expense, primarily related to the identifiable intangible assets of Valeant ($86.4 million) and the Wellbutrin XL® and tetrabenazine intangible assets (combined $28.5 million) acquired in May and June 2009, respectively; •a $59.4 million increase in interest expense, reflecting $47.8 million related to the assumed Valeant debt and the issuance of 6.875% Senior Notes due December 1, 2018 (the "2018 Notes") by Valeant in November 2010 (as described below under "Financial Condition, Liquidity and Capital Resources - Financial Assets (Liabilities)"), and $12.1 million related to the issuance of 5.375% senior convertible notes due 2014 (the "5.375% Convertible Notes" and, together with the 4.0% Convertible Notes, the "Convertible Notes") in June 2009; Item 7. |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) •the inclusion of a $52.6 million legal settlement charge in 2010, in connection with agreements or agreements in principle to settle certain Biovail legacy litigation matters; •the recognition of a $45.5 million valuation allowance against a portion of U.S. operating loss carryforwards as of the Merger Date (as described below under "Results of Operations - Income Taxes"); •an increase of $42.9 million in non-restructuring-related share-based compensation, including $20.9 million recognized as of the Merger Date for the excess of the fair value of Biovail stock options and time-based RSUs over the fair value of converted Valeant awards, and approximately $17.0 million related to the amortization of the fair value increment on Valeant stock options and RSUs converted into Biovail awards; •a $32.4 million charge on the extinguishment of debt in 2010, mainly related to the repurchase of a portion of the 5.375% Convertible Notes and the cash settlement of the written call options on our common shares (as described below under "Results of Operations - Non-Operating Income (Expense) - Loss on Extinguishment of Debt"). |
Those factors were partially offset by: •an increased contribution from product sales of $67.3 million in 2009, mainly related to the incremental revenue from Wellbutrin XL®, following the May 2009 acquisition of the full U.S. commercialization rights, and reduced costs and improved capacity utilization of our manufacturing operations; •a decline of $40.2 million in restructuring costs in 2009, mainly due to lower asset impairment charges; •a decline of $26.4 million in legal settlement charges in 2009, primarily related to the resolution of certain Biovail legacy governmental and regulatory inquiries in 2008, partially offset by $6.2 million accrued in 2009 in connection with the settlement of certain other litigation matters; •a decline of $22.2 million in internal research and development program expenses in 2009, reflecting reduced direct project spending as we transitioned from reformulation opportunities to the in-licensing, acquisition and development of specialty CNS products, and cost savings resulting from the closure of our Dublin, Ireland research and development facility; and •the auction rate security settlement gain of $22.0 million realized in 2009. |
A substantial portion of the increase in 2010 was due to incremental revenues from Valeant products and services of $274.6 million, while the remaining year-over-year increase in 2010 and the year-over-year increase in 2009 reflected the following results from other of our products: •in the U.S. Neurology and Other segment: •an increase in Xenazine® product sales of $27.2 million, or 61%, to $71.8 million in 2010, compared with $44.6 million in 2009, and an increase of $40.9 million in 2009, compared with $3.7 million in 2008, reflecting year-over-year increases in patient enrollment in the U.S., following the product's launch in December 2008; •an increase in Wellbutrin XL® product sales of $25.8 million, or 16%, to $188.0 million in 2010, compared with $162.2 million in 2009, and an increase of $48.3 million, or 42%, in 2009, compared with $113.9 million in 2008, reflecting incremental revenue of approximately $50.0 million and $109.0 million in 2010 and 2009, respectively, following the acquisition of the full U.S. commercialization rights in May 2009, and the positive effect of subsequent price increases, partially offset by the declines in prescription volumes due to generic competition; and •an increase in sales of generic Tiazac® of $20.6 million, or 118%, to $38.0 million in 2010, compared with $17.4 million in 2009, and an increase of $10.2 million, or 140%, in 2009, compared with $7.3 million in 2008, which was attributable to competitors' manufacturing issues. |
Net income declined $104.1 million, or 143%, to a net loss of $31.1 million in the fourth quarter of 2010, compared with net income of $73.0 million in the fourth quarter of 2009, reflecting the following factors: •an increase in amortization expense of $83.3 million, reflecting amortization of the Valeant identifiable intangible assets ($84.1 million); •an increase of $43.3 million in interest expense, mainly related to the assumed Valeant debt and the issuance of the 2018 Notes in November 2010; •the charge of $32.4 million on extinguishment of debt in the fourth quarter of 2010, related to the repurchase of a portion of the 5.375% Convertible Notes and the cash settlement of the written call options on our common shares; •an increase in restructuring charges of $26.5 million, mainly in connection with Merger-related cost-rationalization and integration initiatives; •the reduction in the valuation allowance against a portion of U.S. operating loss carryforwards of $26.0 million recorded in the fourth quarter of 2009; and •an increase of $21.0 million in non-restructuring-related share-based compensation expense, including approximately $17.0 million related to the amortization of the fair value increment on Valeant stock options and RSUs converted into Biovail awards. |
That factor was partially offset by: •a decrease related to an amount of $101.9 million paid in 2008 to acquire Prestwick Pharmaceuticals, Inc. that did not similarly occur in 2009. Financing Activities Net cash used in financing activities was $213.3 million in 2010, compared with cash provided of $177.0 million in 2009, reflecting a decline of $390.3 million, primarily due to: •a decrease of $537.5 million related to the repayments of the Term Loan B Facility, Term Loan A Facility and Cambridge obligation in 2010; •a decrease of $350.0 million related to the issuance of the 5.375% Convertible Notes in 2009 that did not similarly occur in 2010; •a decrease of $254.3 million related to the repurchase of a portion of the 5.375% Convertible Notes (exclusive of the payment of accreted interest reflected as an operating activity); •a decrease of $209.1 million related to the change in dividends paid, mainly due to the payment of the post-Merger special dividend in 2010; and •a decrease of $60.1 million related to the repurchase of common shares in 2010. |
Important factors that could cause actual results to differ materially from these expectations include, among other things, the following: •our ability to compete against companies that are larger and have greater financial, technical and human resources than we do, as well as other competitive factors, such as technological advances achieved, patents obtained and new products introduced by our competitors; •factors relating to the integration of the businesses of Valeant and Biovail, including: our ability to integrate the business in the expected time frame, including the integration of the research and development, manufacturing, distribution, sales, marketing and promotion activities and financial and information technology systems of Valeant and Biovail; the difficulties of integrating personnel while maintaining focus on producing and delivering consistent, high quality products and retaining existing customers and attracting new customers; and the realization of the anticipated benefits, including cost savings, from such integration; •the challenges and difficulties associated with managing a larger, more complex, combined business; •our eligibility for benefits under tax treaties and the continued availability of low effective tax rates for the business profits of our significant operating subsidiary in Barbados; •our ability to retain, motivate and recruit executives and other key employees; •our future cash flows, our ability to service and repay our existing debt, and our ability to raise additional funds, if needed, in light of our current and projected levels of operations, acquisition activity and general economic conditions; •our ability to identify, acquire and integrate acquisition targets and to secure and maintain third-party research, development, manufacturing, marketing or distribution arrangements; •the risks associated with the international scope of our operations; •the impacts of the Patient Protection and Affordable Care Act in the U.S. and other legislative and regulatory reforms in the countries in which we operate; •the uncertainties associated with the acquisition and launch of new products, including, but not limited to, the acceptance and demand for new pharmaceutical products, and the impact of competitive products and pricing; •the difficulty in predicting the expense, timing and outcome within our legal and regulatory environment, including, but not limited to, the FDA, the Canadian Therapeutic Products Directorate and European regulatory approvals, legal and regulatory proceedings and settlements thereof, the protection afforded Item 7. |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) by our patents and other intellectual and proprietary property, successful challenges to our generic products and infringement or alleged infringement of the intellectual property of others; •the success of preclinical and clinical trials for our drug development pipeline or delays in clinical trials that adversely impact the timely commercialization of our pipeline products; •the results of continuing safety and efficacy studies by industry and government agencies; •the risk that our products could cause, or be alleged to cause, personal injury, leading to withdrawals of products from the market; •our ability to obtain components, raw materials or other products supplied by third-parties; •the outcome of legal proceedings, investigations and regulatory proceedings; •economic factors over which the Company has no control, including changes in inflation, interest rates, foreign currency rates, and the potential effect of such factors on revenues, expenses and resulting margins; •the disruption of delivery of our products and the routine flow of manufactured goods across the U.S. border; and •other risks detailed from time to time in our filings with the SEC and the CSA, as well as our ability to anticipate and manage the risks associated with the foregoing. |
VALEANT PHARMACEUTICALS INTERNATIONAL, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Management on Financial Statements and Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting Consolidated Balance Sheets as of December 31, 2010 and 2009 Consolidated Statements of Income (Loss) for the years ended December 31, 2010, 2009 and 2008 Consolidated Statements of Shareholders' Equity for the years ended December 31, 2010, 2009 and 2008 Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008 Notes to Consolidated Financial Statements REPORT OF MANAGEMENT ON FINANCIAL STATEMENTS AND INTERNAL CONTROL OVER FINANCIAL REPORTING Financial Statements The Company's management is responsible for preparing the accompanying consolidated financial statements in conformity with United States generally accepted accounting principles ("U.S. GAAP"). |
Subject to certain exceptions and customary baskets set forth in the Credit Agreement, Valeant will be required to make mandatory prepayments of the loans under the Term Loan A Facility and the Term Loan B Facility, on a pro rata basis, under certain circumstances, including from (1) 100% of net cash proceeds from asset sales outside the ordinary course of business (subject to the right to reinvest these proceeds in real estate, equipment and other tangible assets useful in the business of the Company and its subsidiaries ("reinvestment rights"), (2) 100% of the net cash proceeds of insurance and condemnation proceeds for property or asset losses (subject to reinvestment rights and net proceeds threshold), (3) 50% (with a step down to 25% based on achievement of a specified leverage ratio) of the net cash proceeds received from certain issuances of equity interests, (4) 100% of the net cash proceeds from the incurrence of debt not otherwise permitted by the terms of the Credit Agreement and (5) 50% of annual excess cash flow (with a step down to 25% based on achievement of a specified leverage ratio), with any excess amounts after the prepayment of the loans under the Term Loan A Facility and the Term Loan B Facility to be applied against the outstanding amounts under the Revolving Credit Facility. |
In addition, the possibility exists that: •the results from early preclinical or clinical trials may not be statistically significant or predictive of results that will be obtained from expanded, advanced clinical trials; •a pipeline product may not exhibit the expected therapeutic results in humans, may cause harmful side effects or have other unexpected characteristics that may delay or preclude regulatory approval or limit commercial use if approved; •institutional review boards or regulators, including the FDA and TPD, may hold, suspend or terminate our preclinical or clinical research or the preclinical or clinical trials of our pipeline products for various reasons, including noncompliance with regulatory requirements or if, in their opinion, the participating subjects are being exposed to unacceptable health risks; •subjects may drop out of our clinical trials; •our preclinical or clinical trials may produce negative, inconsistent or inconclusive results, and we may decide, or regulators may require us, to conduct additional preclinical or clinical trials; •the cost of our preclinical or clinical trials may be greater than we currently anticipate; and •the difficulties and risks associated with preclinical and clinical trials may result in the failure to receive regulatory approval to continue to test or to sell our pipeline products or the inability to commercialize any of our pipeline products. |
Clinical trials can be delayed for a variety of reasons, including delays related to: •obtaining an effective investigational new drug application, or IND application, or regulatory approval to commence a clinical trial; •identifying and engaging a sufficient number of clinical trial sites; •negotiating acceptable clinical trial agreement terms with prospective trial sites; •obtaining institutional review board approval to conduct a clinical trial at a prospective site; •recruiting qualified subjects to participate in clinical trials in a timely manner; •competition in recruiting clinical investigators; •shortage or lack of availability of supplies of drugs for clinical trials; •the need to repeat clinical trials as a result of inconclusive results or poorly executed testing; •the placement of a clinical hold on a study; •the failure of third parties conducting and overseeing the operations of our clinical trials to perform their contractual or regulatory obligations in a timely fashion; and •exposure of clinical trial subjects to unexpected and unacceptable health risks or noncompliance with regulatory requirements, which may result in suspension of the trial. |
The thresholds applicable to the acquisition of the shares of a public corporation, or the acquisition of the assets of a corporation, are as follows: •Size of Parties: the parties to the transaction, together with their affiliates (as defined under the Act), must have assets in Canada that exceed C$400 million in aggregate value, or have gross annual revenues from sales in, from or into Canada, that exceed C$400 million in aggregate value; •Size of Transaction: generally, the aggregate value of the assets in Canada that are acquired through the transaction, or the gross revenues generated from sales in or from Canada from those assets, exceed C$70 million (this threshold may increase annually by the Minister of Industry in accordance with an index formula set out in the Competition Act); and •Size of Equity (in the case of a share transaction): the acquisition of more than 20% of the voting shares of a public corporation or, where this threshold has been exceeded but the acquirer owns less than a majority of the voting shares of a public corporation, the acquisition of more than 50% of the voting shares of a public corporation. |
Holders may convert their Notes into common shares at the applicable conversion rate, prior to the close of business on the business day immediately preceding the maturity date, in multiples of $1,000 principal amount, under the following circumstances: •during any fiscal quarter (and only during that quarter) commencing after June 30, 2009, if the closing sale price of our common shares is greater than or equal to 130% of the applicable conversion price then in effect for at least 20 trading days in the period of 30 consecutive trading days ending on, and including, the last trading day of the preceding fiscal quarter; during the five business day period after any five consecutive trading day period, or the measurement period, in which the trading price per $1,000 principal amount of notes for each day of such measurement period was less than 98% of the product of the closing price of our common shares and the applicable conversion rate for the Notes; •if such Notes have been called for redemption; •upon the occurrence of specified corporate transactions; or •during the period beginning 25 trading days prior to maturity. |
These forward-looking statements relate to, among other things, our objectives, goals, strategies, beliefs, intentions, plans, estimates, and outlook, including, without limitation: •our intent and ability to implement and effectively execute plans and initiatives associated with our strategic focus on products targeting specialty central nervous system ("CNS") disorders and the anticipated impact of such strategy, including, but not limited to, the amount and timing of expected contribution(s) from our product development pipeline; •our intent to complete in-license agreements and acquisitions and to successfully integrate such in-license agreements and acquisitions into our business and operations and to achieve the anticipated benefits of such in-license agreements and acquisitions; •our intent and ability to invest approximately $600 million in research and development between 2008 and 2012; •the competitive landscape in the markets in which we compete, including, but not limited to, the prescription trends, pricing and the formulary or Medicare/Medicaid utilization and positioning for our products, the opportunities present in the market for therapies for specialty CNS disorders, the anticipated level of demand for our products and the availability or introduction of generic formulations of our products; •our intent, timing and ability to complete the planned disposals of certain non-core assets, including, but not limited to, our Carolina, Puerto Rico manufacturing facility and operations and the anticipated costs, impacts and proceeds of such disposition; •anticipated level of demand for generic Tiazac® and generic Cardizem® CD products; •our intent and related success or failure regarding the defence of our intellectual property against infringement; •our views, beliefs and positions related to, results of, and costs associated with, certain litigation and regulatory proceedings and the timing, costs and expected impact of the resolution of certain litigation and regulatory proceedings; •the timing, results, and progress of research and development efforts, including, but not limited to, the estimated costs and expected timing to complete the development of BVF-018 (tetrabenazine), and efforts related to the development of AZ-004 (Staccato® loxapine), BVF-014 (glial cell line-derived MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) (All dollar amounts expressed in U.S. dollars) neurotrophic factor ("GDNF")); BVF-025 (fipamezole), BVF-036, BVF-040 and BVF-048 (pimavanserin), and BVF-324 (tramadol), including the expected potential milestone and royalty payments in connection with pimavanserin, fipamezole, GDNF, Staccato® loxapine, and other research and development arrangements; •our intent to deploy a specialty U.S. sales force to support our specialty CNS strategy, and the timing and amount of costs associated with establishing such sales force; •our ability to secure other development partners for, and to share development costs associated with, certain product development programs; •our intent and ability to make future dividend payments or to repurchase our common shares under our share repurchase program; •the sufficiency of cash resources, including those available under the accordion feature of our credit facility, to support future spending and business development requirements; •the expected future taxable income in determining any required deferred tax asset valuation allowance; •the impact of market conditions on our ability to access additional funding at reasonable rates, and our ability to manage exposure to foreign currency exchange rate changes and interest rate changes; •our intent and ability to use a net share settlement approach upon conversion of our 5.375% Senior Convertible Notes due 2014 ("Convertible Notes"); •additional expected charges and anticipated annual savings related to ongoing or planned efficiency initiatives; •expected timing and impact on revenues and earnings of the introduction of generic versions of Ultram® ER (300mg dosage strength), Glumetza® (500mg dosage strength), Cardizem® LA and Cardizem® CD products; •timing regarding the Zovirax® price allowance; •investment recovery, liquidity, valuation, impairment and other conclusions associated with our investment in auction rate securities; •expected timing and amount of principal and interest payments related to long-term obligations; •the impact of short-term fluctuations in our share price on the fair value of our reporting unit for purposes of testing goodwill for impairment; •availability of benefits under tax treaties and the continued availability of low effective tax rates for our operations; •our expected capital expenditures; and •expected impact of the adoption of new accounting guidance. |
Important factors that could cause actual results to differ materially from these expectations include, among other things: •the successful execution of our specialty CNS strategy, including our ability to successfully identify, evaluate, acquire, obtain regulatory approval for, develop, manufacture and commercialize pipeline products; •the success of preclinical and clinical trials for our drug development pipeline or delays in clinical trials which adversely impact the timely commercialization of our pipeline products; •the results of continuing safety and efficacy studies by industry and government agencies; •the uncertainties associated with the development, acquisition and launch of new products, including, but not limited to, the acceptance and demand for new pharmaceutical products, and the impact of competitive products and pricing; •our reliance on key strategic alliances, our ability to secure and maintain third-party research, development, manufacturing, marketing or distribution arrangements and securing other development partners for, and to share development costs associated with, certain product development programs; •the availability of capital and our ability to generate operating cash flows to support our growth strategy; •the continuation of the recent market turmoil, which could result in fluctuations in currency exchange rates and interest rates; •our eligibility for benefits under tax treaties and the continued availability of low effective tax rates for the business profits of our principal operating subsidiary; •the difficulty of predicting the expense, timing and outcome within our legal and regulatory environment, including, but not limited to, U.S. Food and Drug Administration ("FDA"), Canadian Therapeutic Products Directorate and European regulatory approvals, legal and regulatory proceedings and settlements thereof, the protection afforded by our patents and other intellectual and proprietary property, successful challenges to our generic products, and infringement or alleged infringement of the intellectual property rights of others; •our ability to establish or acquire a specialty U.S. sales force to support our specialty CNS strategy; •our ability to attract and retain key personnel; •the reduction in the level of reimbursement for, or acceptance of, pharmaceutical products by governmental authorities, health maintenance organizations or other third-party payors; •our ability to satisfy the financial and non-financial covenants of our credit facility and Convertible Notes' indenture; •our ability to repay or refinance the principal amount under the Convertible Notes' indenture at maturity; •the disruption of delivery of our products and the routine flow of manufactured goods across the U.S. border; and •other risks detailed from time to time in our filings with the SEC and the Canadian Securities Administrators ("CSA"), as well as our ability to anticipate and manage the risks associated with the foregoing. |
Resolution of Legacy Litigation and Regulatory Matters Since December 2007, we have resolved the following six legacy litigation and regulatory proceedings relating to matters which arose during the period from 2001 to March 2004: •an investigation by the U.S. Attorney's Office ("USAO") for the District of Massachusetts regarding promotional and marketing activities surrounding the 2003 commercial launch of Cardizem® LA; •an investigation and subsequent proceeding commenced by the Ontario Securities Commission ("OSC") related to specific accounting and financial disclosure practices that occurred between 2001 and March 2004; •an SEC complaint in connection with similar accounting and financial disclosure practices as described in the OSC proceeding for the period of 2001 to March 2004; •a securities class action lawsuit in the U.S. relating to statements made by our Company and certain former officers and directors between February 7, 2003 and March 2, 2004; •a Canadian securities class action lawsuit in respect of similar issues alleged in the U.S. class action; and •litigation involving former Banc of America Securities LLC analyst Jerry Treppel. |
Changes in Net Income Net income declined $23.4 million, or 12%, to $176.5 million (basic and diluted earnings per share ("EPS") of $1.11) in 2009, compared with $199.9 million (basic and diluted EPS of $1.25) in 2008, primarily due to: •a decline of $64.0 million in recognized net deferred income tax benefits, related to reductions in the valuation allowance recorded against U.S. operating loss carryforwards of $26.0 million and $90.0 million in the fourth quarters of 2009 and 2008, respectively (as described below under "Results of Operations - Income Taxes"); •a $59.4 million IPR&D charge in 2009 in connection with the acquisitions of the various rights to pimavanserin, fipamezole and GDNF, as well as the write-off of the $8.0 million IPR&D intangible asset related to RUS-350; •a $53.4 million increase in amortization expense in 2009, primarily related to the acquired Wellbutrin XL® and tetrabenazine intangible assets; and •a $24.4 million increase in interest expense in 2009, which included incremental cash interest of $10.5 million, and non-cash amortization of debt discount of $5.0 million, on the Convertible Notes. |
Those factors were partially offset by: •an increased contribution from product sales of $67.3 million in 2009, mainly related to the incremental revenue from Wellbutrin XL®, following the May 2009 acquisition of the full U.S. commercialization rights, and reduced costs and improved capacity utilization of our manufacturing operations; •a decline of $51.1 million in restructuring costs in 2009, mainly due to lower asset impairment charges; •a decline of $26.4 million in legal settlement charges in 2009, primarily related to the resolution of the USAO and OSC investigations in 2008, partially offset by $6.2 million accrued in 2009 in connection with the settlement of certain other litigation matters; •a decline of $22.3 million in internal research and development program expenses in 2009, reflecting reduced direct project spending as we transitioned from reformulation opportunities to the in-licensing, acquisition and development of specialty CNS products, and cost savings resulting from the closure of our Dublin, Ireland research and development facility; and •a settlement gain of $22.0 million in 2009, in respect of our investment in auction rate securities (as described below under "Results of Operations - Non-Operating Income (Expense) - Gain on Auction Rate Security Settlement"). |
The percentage increase in cost of goods sold was less than the corresponding 10% increase in total product sales in 2009, primarily due to: •lower labour and overhead costs at our Puerto Rico manufacturing facilities, and higher absorption at our Steinbach, Manitoba manufacturing facility, as a result of the transfer of certain manufacturing activities from the Puerto Rico facilities to the Steinbach facility; •an increased contribution from higher margin Wellbutrin XL® product sales following the acquisition of the full U.S. commercialization rights in May 2009; •the positive impact of price increases we implemented for Wellbutrin XL®, Zovirax® and certain Legacy products during 2009, and the positive effect on our supply prices for Wellbutrin XL® (prior to the acquisition of the full U.S. commercialization rights), Ultram® ER and Cardizem® LA of the price increases implemented in 2009 by GSK, PriCara and Abbott, respectively; and •the positive impact on labour and overhead costs at the Steinbach facility as a result of the weakening of the Canadian dollar relative to the U.S. dollar. |
The percentage decline in cost of goods sold was greater than the corresponding 11% decline in total product sales in 2008, primarily due to: •a lower absorption of overhead costs that was mainly due to excess manufacturing capacity associated with decreased production volumes for Wellbutrin XL®, Cardizem® LA and Generic products; •the reduced contribution from higher margin 150mg Wellbutrin XL® product sales as a result of the introduction of generic competition, and the inclusion of lower margin Xenazine® and Nitoman® product sales; •the $6.5 million provision for returns of recalled Ultram® ER 100mg tablets in 2008, and the write-off to cost of goods sold of $0.6 million of affected Ultram® ER product remaining in our inventory; •an increase in amortization expense of $6.4 million in 2008, compared with 2007, related to the $40.7 million deferred charge for payments we made to GSK in consideration for the Zovirax® price allowance; and •the inclusion of $2.4 million of costs associated with the transfer of certain manufacturing and packaging processes from the Puerto Rico facilities to the Steinbach facility, partially reduced by lower depreciation expense. |
The decline in selling, general and administrative expenses in 2009, compared with 2008, was primarily due to: •a decrease of $14.5 million in payments due to Sciele Pharma, Inc. ("Sciele"), as a result of the termination of our Zovirax® promotional services agreement with Sciele in October 2008; •a decrease of $10.1 million related to a reversal in the fourth quarter of 2009 of a potential voluntary compliance undertaking ("VCU") liability, as a result of the closure of an investigation into the introductory pricing of Glumetza® in Canada, which determined that our prices for the 500mg and 1000mg dosage strengths were appropriate; •a decrease of $7.4 million related to management succession costs, associated primarily with a change in our Chief Executive Officer in May 2008; •a decrease in proxy contest costs of $5.2 million, primarily reflecting expenses incurred in 2008 in connection with the contested election of our nominees to the Board of Directors at our 2008 annual meeting of shareholders; •a decrease of $4.1 million related to consulting costs incurred in 2008 related to the development and implementation of our specialty CNS strategy; and •the positive effects of the weakening of the Canadian dollar relative to the U.S. dollar and overall cost containment initiatives. |
Those factors were partially offset by: •the inclusion of the $11.0 million loss on the sale and leaseback of our Mississauga, Ontario corporate headquarters; MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) (All dollar amounts expressed in U.S. dollars) •the inclusion of $8.8 million in fees owed to Publicis and an increase of $6.4 million in other costs related to the promotion of Zovirax®; •an increase in legal fees of $3.8 million, primarily related to indemnification obligations to certain former officers and directors, primarily in connection with enforcement proceedings against these former officers and directors by the SEC and OSC; •the inclusion of $2.9 million in costs related to an examination of our accounting and related functions by independent consultants retained by us pursuant to the settlement agreements we entered into with the OSC and SEC; and •an increase in compensation expense of $1.4 million related to deferred share units ("DSUs") granted to directors, primarily due to the impact of a year-over-year increase in the underlying trading price of our common shares. |
The increase in selling, general and administrative expenses in 2008, compared with 2007, was primarily due to: •a decrease in insurance recoveries related to legal costs of $20.5 million in 2008, as we had exhausted our director and officer liability insurance for claims related to the legacy litigation and regulatory matters in respect of our 2002 to 2004 policy period; •the inclusion of management succession costs of $7.4 million and proxy contest costs of $6.2 million; •the inclusion of consulting costs of $4.1 million in connection with the development of our specialty CNS strategy; •an increase in promotional spending related to the launch of Ralivia™ in Canada of $3.6 million; •an increase in DSU-related compensation expense of $1.5 million, as the cost of the annual grant of DSUs in 2007 was more than offset by a decline in the fair value of outstanding DSUs, due to a decline in the underlying trading price of our common shares during 2007; and •the inclusion of $1.0 million of third-party administrative costs associated with the recall of Ultram® ER 100mg tablets in 2008. |
Fourth Quarter of 2009 Compared to Fourth Quarter of 2008 Results of Operations Revenue Total revenue increased $59.6 million, or 33%, to $241.1 million in the fourth quarter of 2009, compared with $181.5 million in the fourth quarter of 2008, primarily due to: •incremental revenue of approximately $42.0 million from Wellbutrin XL® product sales, as a result of the acquisition of the full U.S. commercialization rights in May 2009; •an increase of $13.7 million in Xenazine® product sales, reflecting a growth in prescription volumes in the U.S. since the product's launch in November 2008, and incremental revenue from the inclusion of worldwide sales of the product; •the recognition in the fourth quarter of 2009 of $4.4 million of product intended for sale to Teva in the third quarter of 2009 but delayed due to customs clearance issues; and •a strengthening of the Canadian dollar relative to the U.S. dollar in the fourth quarter of 2009, compared with the fourth quarter of 2008, which positively impacted BPC product sales by approximately $3.3 million. |
Net Income Net income declined $47.4 million, or 39%, to $73.0 million in the fourth quarter of 2009, compared with $120.4 million in the fourth quarter of 2008, primarily due to: •a decrease of $64.0 million in deferred income tax benefits, related to the reductions in the valuation allowance recorded against U.S. operating loss carryforwards of $26.0 million and $90.0 million in the fourth quarters of 2009 and 2008, respectively; •a decrease of $20.8 million related to IPR&D charges in the fourth quarter of 2009, comprising $4.0 million for the additional payment related to fipamezole and $8.8 million for GDNF, as well as the write-off of the $8.0 million IPR&D intangible asset related to RUS-350; •incremental amortization expense of $18.7 million related to the acquisition of the various rights to Wellbutrin XL® and tetrabenazine; •the inclusion in selling, general and administrative expenses of the $11.0 million loss on the sale and leaseback of our corporate headquarters; and •an increase of $9.7 million in interest expense, primarily related to the Convertible Notes. |
Working Capital Working capital declined $129.5 million, or 58%, to $93.7 million at December 31, 2009, compared with $223.2 million at December 31, 2008, primarily due to: •a net decline in cash and cash equivalents of $203.1 million, which primarily reflected: $761.8 million paid in the aggregate to acquire the various rights to Wellbutrin XL®, tetrabenazine, pimavanserin, fipamezole and GDNF, and $147.1 million paid in dividends; partially offset by $373.1 million received in the aggregate through the issuance of the Convertible Notes and the sale and leaseback of certain corporate assets, and $360.9 million in operating cash flows; MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) (All dollar amounts expressed in U.S. dollars) •an increase in accrued liabilities of $36.7 million, mainly due to the inclusion of interest payable on the Convertible Notes, the addition of product return, rebate and chargeback provisions related to Wellbutrin XL® sales occurring after the May 2009 acquisition of the full U.S. commercialization rights (including a balance owed to GSK for governmental rebate claims administered and paid by GSK on our behalf), and the assumption of the royalty obligations on worldwide sales of tetrabenazine, partially offset by the release of the Glumetza® VCU liability; •an increase in accounts payable of $31.0 million, mainly due to the increased supply price for Zovirax® inventory and purchases of tetrabenazine inventory, the addition of clinical trial costs associated with BVF-324, and the inclusion of the amount owing to Teva in respect of Generic product sales provisions (offset by a corresponding decrease in deferred revenue); and •the inclusion of $12.1 million in current portion of long-term obligations, related to the payment due to Cambridge in June 2010 in connection with the acquisition of the worldwide development and commercialization rights to tetrabenazine. |
The following table displays cash flow information for each of the last three years: MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) (All dollar amounts expressed in U.S. dollars) Operating Activities Net cash provided by operating activities increased $156.6 million, or 77%, to $360.9 million in 2009, compared with $204.3 million in 2008, attributable to the net effect of the following factors: •an increase in income from operations before changes in operating assets and liabilities of $201.7 million, or 125%, to $362.4 million in 2009, compared with $160.8 million in 2008, primarily due to: •an increase of $93.0 million related to payments made in 2008 to fund the settlement of the U.S. and Canadian securities class actions ($83.0 million) and to settle the SEC investigation ($10.0 million); •an increased contribution from product sales of $67.3 million, mainly related to the incremental revenue from Wellbutrin XL® and Xenazine® (partially offset by lower Ultram® ER product sales), together with the reduced costs and improved capacity utilization of our manufacturing operations; •an increase of $45.1 million related to a contractual payment made to GSK in 2008 in connection with the introduction of generic competition to Wellbutrin XL®; and •an increase related to the $22.0 million gain realized on the auction rate security settlement in the second quarter of 2009. |
The following table provides the unrealized gains and losses on equity securities at the reporting date: The scheduled contractual maturities of debt securities available for sale at December 31, 2018 are presented as follows: The following table summarizes the carrying value of securities pledged as collateral to secure public deposits, borrowings and other purposes as permitted or required by law: The following tables show the gross unrealized losses and fair value of the Company’s debt securities available for sale with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2018 and 2017: At December 31, 2018, there were 442 U.S. government agency and government-sponsored enterprise mortgage-backed securities and collateralized mortgage obligations securities in an unrealized loss position, of which 397 were in a continuous loss position for 12 months or more. |
The following table summarizes the amortized cost, gross unrealized gains and losses and the resulting fair value of securities available for sale: The following table provides the proceeds and gross realized gains and losses on the sales and calls of securities for the periods indicated: The scheduled contractual maturities of investment securities available for sale at December 31, 2017 are presented as follows: The following table summarizes the carrying value of securities pledged as collateral to secure public deposits, borrowings and other purposes as permitted or required by law: The following tables show the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2017 and 2016: At December 31, 2017, there were 396 U.S. government agency and government-sponsored enterprise mortgage-backed securities and collateralized mortgage obligations securities in an unrealized loss position, of which 120 were in a continuous loss position for 12 months or more. |
The following table provides the gross realized gains and losses on the sales and calls of securities for the periods indicated: The scheduled contractual maturities of investment securities available for sale at December 31, 2016 are presented as follows: The following table summarizes the carrying value of securities pledged as collateral to secure public deposits, borrowings and other purposes as permitted or required by law: The following tables show the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2016 and 2015: At December 31, 2016, there were 192 U.S. government agency and government-sponsored enterprise mortgage-backed securities and collateralized mortgage obligations securities in an unrealized loss position, of which 50 were in a continuous loss position for 12 months or more. |
The following table provides the gross realized gains and losses on the sales and calls of securities for the periods indicated: The scheduled contractual maturities of investment securities available for sale at December 31, 2015 are presented as follows: The following table summarizes the carrying value of securities pledged as collateral to secure public deposits, borrowings and other purposes as permitted or required by law: The following tables show the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2015 and 2014: At December 31, 2015, there were 143 U.S. government agency and government-sponsored enterprise mortgage-backed securities and collateralized mortgage obligations securities in an unrealized loss position, of which 49 were in a continuous loss position for 12 months or more. |
The following table provides the gross realized gains and losses on the sales and calls of securities for the periods indicated: The scheduled contractual maturities of investment securities available for sale at December 31, 2014 are presented as follows: The following table summarizes the carrying value of securities pledged as collateral to secure public deposits, borrowings and other purposes as permitted or required by law: The following tables show the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2014 and 2013: At December 31, 2014, there were 125 U.S. government agency and government-sponsored enterprise mortgage-backed securities and collateralized mortgage obligations securities in an unrealized loss position, of which 43 were in a continuous loss position for 12 months or more. |
333-160370) filed July 1, 2009 (5) Incorporated by reference to Exhibits 10.2-10.5, 10.10 and 10.16 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 (6) Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed January 5, 2010 (7) Incorporated by reference to Exhibit 10.7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2010 (8) Incorporated by reference to Exhibit 10.5 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2000 (9) Incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 (10) Incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 (11) Incorporated by reference to Exhibits 10.1, 10.2 and 10.3 of the Company’s Current Report on Form 8-K filed on June 2, 2009 (12) Incorporated by reference to Exhibits 10.1 and 10.2 of the Company’s S-8 Registration Statement (File No. |
Among other things, the legislation (i) centralizes responsibility for consumer financial protection by creating a new agency responsible for implementing, examining and enforcing compliance with federal consumer financial laws; (ii) applies the same leverage and risk-based capital requirements that apply to insured depository institutions to bank holding companies; (iii) requires the FDIC to seek to make its capital requirements for banks countercyclical so that the amount of capital required to be maintained increases in times of economic expansion and decreases in times of economic contraction; (iv) changes the assessment base for federal deposit insurance from the amount of insured deposits to consolidated assets less tangible capital; (v) requires the SEC to complete studies and develop rules or approve stock exchange rules regarding various investor protection issues, including shareholder access to the proxy process, and various matters pertaining to executive compensation and compensation committee oversight; (vi) makes permanent the $250,000 limit for federal deposit insurance and provides unlimited federal deposit insurance until December 31, 2012, for non-interest bearing transaction accounts; (vii) removes prior restrictions on interstate de novo branching; and (viii) repeals the federal prohibitions on the payment of interest on demand deposits, thereby permitting depository institutions to pay interest on business transaction and other accounts. |
333-160370) filed July 1, 2009 (6) Incorporated by reference to Exhibits 10.2-10.5, 10,10 and 10.16 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 (7) Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed January 5, 2010 (8) Incorporated by reference to Exhibit 10.5 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2000 (9) Incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 (10) Incorporated by reference to Exhibit 10.11 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 (11) Incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 (12) Incorporated by reference to Exhibits 10.1, 10.2 and 10.3 of the Company’s Current Report on Form 8-K filed on June 2, 2009 (13) Incorporated by reference to Exhibits 10.1-10.5 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009 (14) Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (15) Incorporated by reference to Exhibits 10.1 and 10.2 of the Company’s S-8 Registration Statement (File No. |
333-160371) filed July 1, 2009 (10) Incorporated by reference to Exhibit 10.5 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2000 (11) Incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 (12) Incorporated by reference to Exhibit 10.11 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 (13) Incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 (14) Incorporated by reference to Exhibits 10.1, 10.2 and 10.3 of the Company’s Current Report on Form 8-K filed on June 2, 2009 (15) Incorporated by reference to Exhibits 10.1-10.5 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009 (16) Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (17) Incorporated by reference to Exhibits 10.1 and 10.2 of the Company’s S-8 Registration Statement (File No. |
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations in the forward-looking statements, including those set forth in this prospectus, any accompanying prospectus supplement or the documents incorporated by reference, including the “Risk Factors,” “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our reports and other documents filed with the SEC: the risks associated with lending and potential adverse changes in credit quality; increased delinquency rates; competition from other financial services companies in our markets; the risks presented by a continuing economic slowdown, which could adversely affect credit quality, collateral values, including real estate collateral, investment values, liquidity and loan originations; demand for banking products and services may decline; legislative or regulatory changes that adversely affect our business or our ability to complete prospective future acquisitions; the risks presented by a continued economic slowdown and the public stock market volatility, which could adversely affect our stock value and our ability to raise capital in the future; and our success in managing risks involved in the foregoing. |
The Company agrees to furnish a copy thereof to the Securities and Exchange Commission upon request 4.4 Warrant to Purchase Common Stock of Columbia (2) 10.1 Amended and Restated Stock Option and Equity Compensation Plan (3) 10.2 Form of Stock Option Agreement (4) 10.3 Form of Restricted Stock Agreement (4) 10.4 Form of Stock Appreciation Right Agreement (4) 10.5 Form of Restricted Stock Unit Agreement (4) 10.6 Amended and Restated Employee Stock Purchase Plan (5) 10.7 Office Lease, dated as of December 15, 1999, between the Company and Haub Brothers Enterprises Trust (6) 10.8 Employment Agreement between the Bank, the Company and Melanie J. Dressel effective August 1, 2004 (7) 10.9 Severance Agreement between the Company and Mr. Gary R. Schminkey effective November 15, 2005 (8) 10.10 Form of Change in Control Agreement between the Bank , and Mr. Mark W. Nelson and Mr. Andrew McDonald (4) 10.11 Form of Long-Term Care Agreement between the Bank, the Company, and each of the following directors: Mr. Folsom, Mr. Hulbert, Mr. Matson, Mr. Rodman, Mr. Weyerhaeuser and Mr. Will (9) 10.12 Form of Supplemental Executive Retirement Plan between Columbia Banking System, Inc., Columbia State Bank, its wholly owned banking subsidiary, and each of the following executive officers effective August 1, 2001: Melanie J. Dressel and Gary R. Schminkey, and for Mark W. Nelson, whose agreement is effective July 1, 2003 (9) 10.13 Deferred Compensation Plan (401 Plus Plan) dated December 17, 2003 for directors and key employees (10) 10.14 Change in Control Agreement between the Bank and Mr. Kent L. Roberts dated December 4, 2006 (11) 10.15 Form of Supplemental Compensation Agreement between the Bank and Mr. Andrew McDonald (4) 10.16 Town Center Bancorp 2004 Stock Incentive Plan (12) 10.17 Town Center Bancorp Form of Restricted Stock Award Agreement (12) 10.18 Mountain Bank Holding Company Director Stock Option Plan (13) 10.19 Mountain Bank Holding Company Form of Non-employee Director Stock Option Agreement (13) Exhibit No. |
In addition to discussions about risks and uncertainties set forth from time to time in our filings with the SEC, factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) local and national economic conditions are less favorable than expected or have a more direct and pronounced effect on us than expected and adversely affect our ability to continue internal growth at historical rates and maintain the quality of our earning assets; (2) a continued decline in the housing/real estate market; (3) changes in interest rates significantly reduce interest margins and negatively affect funding sources; (4) deterioration of credit quality that could, among other things, increase defaults and delinquency risks in the Banks’ loan portfolios (5) projected business increases following strategic expansion or opening or acquiring new branches are lower than expected; (6) competitive pressure among financial institutions increases significantly; (7) legislation or regulatory requirements or changes adversely affect the businesses in which we are engaged; and (8) our ability to realize the efficiencies we expect to receive from our investments in personnel, acquisitions and infrastructure. |
In addition to discussions about risks and uncertainties set forth from time to time in our filings with the SEC, factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) local, national, and international economic conditions are less favorable than expected or have a more direct and pronounced effect on us than expected and adversely affect our ability to continue internal growth at historical rates and maintain the quality of our earning assets; (2) changes in interest rates reduce interest margins more than expected and negatively affect funding sources; (3) projected business increases following strategic expansion or opening or acquiring new branches are lower than expected; (4) costs or difficulties related to the integration of acquisitions are greater than expected; (5) competitive pressure among financial institutions increases significantly; (6) legislation or regulatory requirements or changes adversely affect the businesses in which we are engaged; and (7) our ability to realize the efficiencies we expect to receive from our investments in personnel and infrastructure. |
In addition to discussions about risks and uncertainties set forth from time to time in our filings with the SEC, factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) local, national, and international economic conditions are less favorable than expected or have a more direct and pronounced effect on us than expected and adversely affect our ability to continue internal growth at historical rates and maintain the quality of our earning assets; (2) changes in interest rates reduce interest margins more than expected and negatively affect funding sources; (3) projected business increases following strategic expansion or opening or acquiring new branches are lower than expected; (4) costs or difficulties related to the integration of acquisitions are greater than expected; (5) competitive pressure among financial institutions increases significantly; (6) legislation or regulatory requirements or changes adversely affect the businesses in which we’re engaged; and (7) our ability to realize the efficiencies we expect to receive from our investments in personnel and infrastructure. |
Risk Elements Risk elements consist of: (i) nonaccrual loans, which are loans placed on a nonaccrual basis generally when the loan becomes past due 90 days or when there are otherwise serious doubts about the collectibility of principal or interest; (ii) restructured loans, for which concessions, including the reduction of interest rates below a rate otherwise available to that borrower or the deferral of interest or principal, have been granted due to the borrower's weakened financial condition (interest on restructured loans is accrued at the restructured rates when it is anticipated that no loss of original principal will occur); (iii) accruing loans which are contractually past due ninety days or more as to interest or principal payments; and (iv) potential problem loans, which are currently performing and are not included in nonaccrual or restructured loans, but about which there are serious doubts as to the borrower's ability to comply with present repayment terms and, therefore, will likely be included later in nonaccrual, past due or restructured loans. |
Risk Elements Risk elements consist of: (i) nonaccrual loans, which are loans placed on a nonaccrual basis generally when the loan becomes past due 90 days or when there are otherwise serious doubts about the collectibility of principal or interest; (ii) restructured loans, for which concessions, including the reduction of interest rates below a rate otherwise available to that borrower or the deferral of interest or principal, have been granted due to the borrower's weakened financial condition (interest on restructured loans is accrued at the restructured rates when it is anticipated that no loss of original principal will occur); (iii) accruing loans which are contractually past due ninety days or more as to interest or principal payments; and (iv) potential problem loans, which are currently performing and are not included in nonaccrual or restructured loans, but about which there are serious doubts as to the borrower's ability to comply with present repayment terms and, therefore, will likely be included later in nonaccrual, past due or restructured loans. |
We are subject to the following risks, among others: ● greater difficulty in accounts receivable collection and longer collection periods; ● potentially different pricing environments and longer sales cycles; ● the impact of recessions in economies outside the U.S.; ● unexpected changes in foreign regulatory requirements; ● the burdens of complying with a wide variety of foreign laws and different legal standards; ● certification requirements; ● reduced protection for intellectual property rights in some countries; ● difficulties in managing the staffing of international operations, including labor unrest and current and changing regulatory environments; ● potentially adverse tax consequences, including the complexities of foreign value-added tax systems, restrictions on the repatriation of earnings, and changes in tax rates; ● price controls and exchange controls; ● government embargoes or foreign trade restrictions; ● imposition of duties and tariffs and other trade barriers; ● import and export controls; ● transportation delays and interruptions; ● terrorist attacks and security concerns in general; and ● political, social, economic instability and disruptions. |
Of the 5,000,000 shares of preferred stock authorized, the board of directors has previously designated: ● 250 shares of preferred stock as Series A Preferred Stock, all previously outstanding shares of which have been previously redeemed or converted into shares of our Class A common stock and may not be reissued; ● 300 shares of preferred stock as Series B Preferred Stock, all previously outstanding shares of which have been previously redeemed or converted into shares of our Class A common stock and may not be reissued; ● 500 shares of preferred stock as Series C Preferred Stock, all previously outstanding shares of which have been previously redeemed or converted into shares of our Class A common stock and may not be reissued; ● 500,000 shares of preferred stock as Series D Preferred Stock, none of which have been issued; however, in 1998, the board of directors declared a dividend distribution as a right to purchase one share of Series D Preferred Stock for each outstanding share of Class A common stock upon occurrence of certain events. |
We are subject to the following risks, among others: ● greater difficulty in accounts receivable collection and longer collection periods; ● potentially different pricing environments and longer sales cycles; ● the impact of recessions in economies outside the U.S.; ● unexpected changes in foreign regulatory requirements; ● the burdens of complying with a wide variety of foreign laws and different legal standards; ● certification requirements; ● reduced protection for intellectual property rights in some countries; ● difficulties in managing the staffing of international operations, including labor unrest and current and changing regulatory environments; ● potentially adverse tax consequences, including the complexities of foreign value-added tax systems, restrictions on the repatriation of earnings, and changes in tax rates; ● price controls and exchange controls; ● government embargoes or foreign trade restrictions; ● imposition of duties and tariffs and other trade barriers; ● import and export controls; ● transportation delays and interruptions; ● terrorist attacks and security concerns in general; and ● political, social, economic instability and disruptions. |
Of the 5,000,000 shares of preferred stock authorized, the board of directors has previously designated: ● 250 shares of preferred stock as Series A Preferred Stock, all previously outstanding shares of which have been previously redeemed or converted into shares of our Class A common stock and may not be reissued; ● 300 shares of preferred stock as Series B Preferred Stock, all previously outstanding shares of which have been previously redeemed or converted into shares of our Class A common stock and may not be reissued; ● 500 shares of preferred stock as Series C Preferred Stock, all previously outstanding shares of which have been previously redeemed or converted into shares of our Class A common stock and may not be reissued; ● 500,000 shares of preferred stock as Series D Preferred Stock, none of which have been issued; however, in 1998, the board of directors declared a dividend distribution as a right to purchase one share of Series D Preferred Stock for each outstanding share of Class A common stock upon occurrence of certain events. |
We are subject to the following risks, among others: ● greater difficulty in accounts receivable collection and longer collection periods; ● potentially different pricing environments and longer sales cycles; ● the impact of recessions in economies outside the United States; ● unexpected changes in foreign regulatory requirements; ● the burdens of complying with a wide variety of foreign laws and different legal standards; ● certification requirements; ● reduced protection for intellectual property rights in some countries; ● difficulties in managing the staffing of international operations, including labor unrest and current and changing regulatory environments; ● potentially adverse tax consequences, including the complexities of foreign value-added tax systems, restrictions on the repatriation of earnings, and changes in tax rates; ● price controls and exchange controls; ● government embargoes or foreign trade restrictions; ● imposition of duties and tariffs and other trade barriers; ● import and export controls; ● transportation delays and interruptions; ● terrorist attacks and security concerns in general; and ● political, social, economic instability and disruptions. |
Of the 5,000,000 shares of preferred stock authorized, the board of directors has previously designated: ● 250 shares of preferred stock as Series A Preferred Stock, all previously outstanding shares of which have been previously redeemed or converted into shares of our Class A common stock and may not be reissued; ● 300 shares of our preferred stock as Series B Preferred Stock, all previously outstanding shares of which have been previously redeemed or converted into shares of our Class A common stock and may not be reissued; ● 500 shares of our preferred stock as Series C Preferred Stock, all previously outstanding shares of which have been previously redeemed or converted into shares of our Class A common stock and may not be reissued; ● 500,000 shares of our preferred stock as Series D Preferred Stock, none of which have been issued; however, in 1998, our board of directors declared a dividend distribution as a right to purchase one share of Series D Preferred Stock for each outstanding share of Class A common stock upon occurrence of certain events. |
We are subject to the following risks, among others: ●greater difficulty in accounts receivable collection and longer collection periods; ●potentially different pricing environments and longer sales cycles; ●the impact of recessions in economies outside the United States; ●unexpected changes in foreign regulatory requirements; ●the burdens of complying with a wide variety of foreign laws and different legal standards; ●certification requirements; ●reduced protection for intellectual property rights in some countries; ●difficulties in managing the staffing of international operations, including labor unrest and current and changing regulatory environments; ●potentially adverse tax consequences, including the complexities of foreign value-added tax systems, restrictions on the repatriation of earnings, and changes in tax rates; ●price controls and exchange controls; ●government embargoes or foreign trade restrictions; ●imposition of duties and tariffs and other trade barriers; ●import and export controls; ●transportation delays and interruptions; ●terrorist attacks and security concerns in general; and ●political, social, economic instability and disruptions. |
Employee Stock Purchase Plan effective January 30, 2015 10.4 Form of Common Stock Purchase Warrant dated as of June 11, 2012, issued by LightPath Technologies, Inc. to certain investors 10.5 Second Amended and Restated Loan and Security Agreement dated December 21, 2016 by and between LightPath Technologies, Inc. and AvidBank Corporate Finance, a division of AvidBank 10.6 Sixth Amendment to Lease dated as of July 2, 2014 between LightPath Technologies, Inc. and Challenger Discovery LLC 10.7 First Amendment to Amended and Restated Loan and Security Agreement dated as of December 23, 2015 between LightPath Technologies, Inc. and AvidBank Corporate Finance, a division of AvidBank 10.8 Stock Purchase Agreement dated August 3, 2016 by and among LightPath Technologies, Inc., ISP Optics Corporation, Mark Lifshotz, and Joseph Menaker** 10.9 Unsecured Promissory Note dated December 21, 2016 in favor of Joseph Menaker and Mark Lifshotz 10.10 Affirmation of Guarantee of Geltech, Inc. 10.11 Joinder Agreement dated December 22, 2016 by and between ISP Optics Corporation and AvidBank Corporate Finance, a division of AvidBank 10.12 Underwriting Agreement dated December 16, 2016, between LightPath Technologies, Inc. and Roth Capital Partners, LLC, as representative of the several underwriters 14.1 Code of Business Conduct and Ethics 14.2 Code of Business Conduct and Ethics for Senior Financial Officers 21.1 Subsidiaries of the Registrant * 23.1 Consent of BDO USA LLP * Power of Attorney * 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 * 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 * 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. |
Of the 5,000,000 shares of preferred stock authorized, the board of directors has previously designated: ●250 shares of preferred stock as Series A Preferred Stock, all previously outstanding shares of which have been previously redeemed or converted into shares of our Class A common stock and may not be reissued; ●300 shares of our preferred stock as Series B Preferred Stock, all previously outstanding shares of which have been previously redeemed or converted into shares of our Class A common stock and may not be reissued; ●500 shares of our preferred stock as Series C Preferred Stock, all previously outstanding shares of which have been previously redeemed or converted into shares of our Class A common stock and may not be reissued; ●100,000 shares of our preferred stock as Series D Preferred Stock, none of which have been issued; however in 1998, our board of directors declared a dividend distribution as a right to purchase one share of Series D Preferred Stock for each outstanding share of Class A common stock. |
(a) The following documents are filed as part of this Annual Report on Form 10-K: (1) Financial Statements - See Index on page of this report (b) The following exhibits are filed herewith as a part of this report Exhibit Number Description Notes 3.1.1 Certificate of Incorporation of Registrant, filed June 15, 1992 with the Secretary of State of Delaware 3.1.2 Certificate of Amendment to Certificate of Incorporation of Registrant, filed October 2, 1995 with the Secretary of State of Delaware 3.1.3 Certificate of Designations of Class A common stock and Class E-1 common stock, Class E-2 common stock, and Class E-3 common stock of Registrant, filed November 9, 1995 with the Secretary of State of Delaware 3.1.4 Certificate of Designation of Series A Preferred Stock of Registrant, filed July 9, 1997 with the Secretary of State of Delaware 3.1.5 Certificate of Designation of Series B Stock of Registrant, filed October 2, 1997 with the Secretary of State of Delaware 3.1.6 Certificate of Amendment of Certificate of Incorporation of Registrant, filed November 12, 1997 with the Secretary of State of Delaware 3.1.7 Certificate of Designation of Series C Preferred Stock of Registrant, filed February 6, 1998 with the Secretary of State of Delaware 3.1.8 Certificate of Designation, Preferences and Rights of Series D Participating Preferred Stock of Registrant filed April 29, 1998 with the Secretary of State of Delaware 3.1.9 Certificate of Designation of Series F Preferred Stock of Registrant, filed November 2, 1999 with the Secretary of State of Delaware 3.1.10 Certificate of Amendment of Certificate of Incorporation of Registrant, filed February 28, 2003 with the Secretary of State of Delaware 3.2 Amended and Restated Bylaws of Registrant 4.1 Rights Agreement dated May 1, 1998, between Registrant and Continental Stock Transfer & Trust Company 4.2 First Amendment to Rights Agreement dated as of February 28, 2008, between LightPath Technologies, Inc. and Continental Stock Transfer & Trust Company 10.1 Amended and Restated Omnibus Incentive Plan dated October 15, 2002 10.2 Employee Letter Agreement dated June 12, 2008, between LightPath Technologies, Inc., and J. James Gaynor, its Chief Executive Officer & President 10.3 LightPath Technologies, Inc. |
Employee Stock Purchase Plan effective January 30, 2015 10.4 Form of Common Stock Purchase Warrant dated as of June 11, 2012, issued by LightPath Technologies, Inc. to certain investors 10.5 Amended and Restated Loan and Security Agreement dated as of December 23, 2014 between LightPath Technologies, Inc. and AvidBank Corporate Finance, a division of AvidBank 10.6 Sixth Amendment to Lease dated as of July 2, 2014 between LightPath Technologies, Inc. and Challenger Discovery LLC 10.7 First Amendment to Amended and Restated Loan and Security Agreement dated as of December 23, 2015 between LightPath Technologies, Inc. and Avidbank Corporate Finance, a division of Avidbank 10.8 Stock Purchase Agreement dated August 3, 2016 by and among LightPath Technologies, Inc, ISP Optics Corporation, Mark Lifshotz and Joseph Menaker** * 14.1 Code of Business Conduct and Ethics 14.2 Code of Business Conduct and Ethics for Senior Financial Officers 21.1 Subsidiaries of the Registrant * 23.1 Consent of Independent Registered Public Accounting Firm * Power of Attorney * 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 * 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 * 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. |
(a) The following documents are filed as part of this Annual Report on Form 10-K: (1) Financial Statements - See Index on page of this report (b) The following exhibits are filed herewith as a part of this report Exhibit Number Description Notes 3.1.1 Certificate of Incorporation of Registrant, filed June 15, 1992 with the Secretary of State of Delaware 3.1.2 Certificate of Amendment to Certificate of Incorporation of Registrant, filed October 2, 1995 with the Secretary of State of Delaware 3.1.3 Certificate of Designations of Class A common stock and Class E-1 common stock, Class E-2 common stock, and Class E-3 common stock of Registrant, filed November 9, 1995 with the Secretary of State of Delaware 3.1.4 Certificate of Designation of Series A Preferred Stock of Registrant, filed July 9, 1997 with the Secretary of State of Delaware 3.1.5 Certificate of Designation of Series B Stock of Registrant, filed October 2, 1997 with the Secretary of State of Delaware 3.1.6 Certificate of Amendment of Certificate of Incorporation of Registrant, filed November 12, 1997 with the Secretary of State of Delaware 3.1.7 Certificate of Designation of Series C Preferred Stock of Registrant, filed February 6, 1998 with the Secretary of State of Delaware 3.1.8 Certificate of Designation, Preferences and Rights of Series D Participating Preferred Stock of Registrant filed April 29, 1998 with the Secretary of State of Delaware 3.1.9 Certificate of Designation of Series F Preferred Stock of Registrant, filed November 2, 1999 with the Secretary of State of Delaware 3.1.10 Certificate of Amendment of Certificate of Incorporation of Registrant, filed February 28, 2003 with the Secretary of State of Delaware 3.2 Amended and Restated Bylaws of Registrant 4.1 Rights Agreement dated May 1, 1998, between Registrant and Continental Stock Transfer & Trust Company 4.2 First Amendment to Rights Agreement dated as of February 28, 2008, between LightPath Technologies, Inc. and Continental Stock Transfer & Trust Company 10. |
Employee Stock Purchase Plan effective January 30, 2015 10.5 Form of Common Stock Purchase Warrant dated as of June 11, 2012, issued by LightPath Technologies, Inc. to certain investors 10.6 Amended and Restated Loan and Security Agreement dated as of December 23, 2014 between LightPath Technologies, Inc. and Avidbank Corporate Finance, a division of Avidbank 10.7 Securities Purchase Agreement dated April 15, 2014 between LightPath Technologies, Inc. and Pudong Science & Technology (Cayman) Co., Ltd. 10.8 Amendment and Assignment of Securities Purchase Agreement dated September 25, 2014 between LightPath Technologies, Inc, Pudong Science & Technology (Cayman) Co., Ltd. and Pudong Science & Technology Investment (Cayman) Co., Ltd. 10.9 Sixth Amendment to Lease dated as of July 2, 2014 between LightPath Technologies, Inc. and Challenger Discovery LLC 14.1 Code of Ethics 21.1 Subsidiaries of the Registrant * 23.1 23.2 Consent of Cross, Fernandez & Riley, LLP Consent of BDO USA, LLP * * Power of Attorney * 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 * 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 * 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. |
(1)A change-of-control is defined as any of the following transactions occurring: ·The dissolution or liquidation of the Company, ·The stockholders of the Company approve an agreement providing for a sale, lease or other disposition of all or substantially all of the assets of the Company and the transactions contemplated by such agreement are consummated, ·A merger or a consolidation in which the Company is not the surviving entity, ·Any person acquires the beneficial ownership of securities of the Company representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors, and ·The individuals who, prior to the transaction, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at lease fifty percent (50%) of the Board, except that if the election of or nomination for election by the stockholders of any new director was approved by a vote of at least fifty percent (50%) of the Incumbent Board, such new director shall be deemed to be a member of the Incumbent Board. |
Exhibit Number Description Notes 3.1.1 Certificate of Incorporation of Registrant, filed June 15, 1992 with the Secretary of State of Delaware 3.1.2 Certificate of Amendment to Certificate of Incorporation of Registrant, filed October 2, 1995 with the Secretary of State of Delaware 3.1.3 Certificate of Designations of Class A common stock and Class E-1 common stock, Class E-2 common stock, and Class E-3 common stock of Registrant, filed November 9, 1995 with the Secretary of State of Delaware 3.1.4 Certificate of Designation of Series A Preferred Stock of Registrant, filed July 9, 1997 with the Secretary of State of Delaware 3.1.5 Certificate of Designation of Series B Stock of Registrant, filed October 2, 1997 with the Secretary of State of Delaware 3.1.6 Certificate of Amendment of Certificate of Incorporation of Registrant, filed November 12, 1997 with the Secretary of State of Delaware 3.1.7 Certificate of Designation of Series C Preferred Stock of Registrant, filed February 6, 1998 with the Secretary of State of Delaware 3.1.8 Certificate of Designation, Preferences and Rights of Series D Participating Preferred Stock of Registrant filed April 29, 1998 with the Secretary of State of Delaware 3.1.9 Certificate of Designation of Series F Preferred Stock of Registrant, filed November 2, 1999 with the Secretary of State of Delaware 3.1.10 Certificate of Amendment of Certificate of Incorporation of Registrant, filed February 28, 2003 with the Secretary of State of Delaware 3.2 Bylaws of Registrant 4.1 Rights Agreement dated May 1, 1998, between Registrant and Continental Stock Transfer & Trust Company 4.2 First Amendment to Rights Agreement dated as of February 28, 2008, between LightPath Technologies, Inc. and Continental Stock Transfer & Trust Company 10.1 Directors Compensation Agreement dated November 11, 1999 between Robert Ripp and LightPath Technologies, Inc. and First Amendment thereto 10.2 Amended and Restated Omnibus Incentive Plan dated October 15, 2002 10.3 Employee Letter Agreement dated June 12, 2008, between LightPath Technologies, Inc., and J. James Gaynor, its Chief Executive Officer & President 10.4 Form of Common Stock Purchase Warrant dated as of April 8, 2010, issued by LightPath Technologies, Inc. to certain investors 10.5 2004 Employee Stock Purchase Plan dated December 6, 2004 10.6 Form of Common Stock Purchase Warrant dated as of June 11, 2012, issued by LightPath Technologies, Inc. to certain investors 10.7 Loan and Security Agreement dated as of September 30, 2013 between LightPath Technologies, Inc. and Avidbank Corporate Finance, a division of Avidbank 10.8 Intellectual Property Security Agreement dated as of September 30, 2013 between LightPath Technologies, Inc. and Avidbank Corporate Finance, a division of Avidbank 10.9 Securities Purchase Agreement dated April 15, 2014 betweeen LightPath Technologies, Inc. and Pudong Science & Technology (Cayman) Cp. |
Warrants Warrants shares outstanding at June 30, 2014 equal 2,127,230 and include: ·warrants to purchase up to 582,229 shares of Class A common stock at $1.73 per share at any time through February 19, 2015 issued in connection with a private placement financing in fiscal 2010; ·warrants to purchase up to 101,549 shares of Class A common stock at $2.48 per share at any time through October 8, 2015 issued in connection with a private placement financing in fiscal 2010; ·warrants to purchase up to 1,393,452 shares of Class A common stock at $1.26 per share at any time through December 11, 2017 issued in connection with a private placement financing in fiscal 2012; ·warrants to purchase up to 25,000 shares of Class A common stock at $1.03 per share at any time through December 29, 2015 issued in connection with an investor relations contract in fiscal 2012; and ·warrants to purchase up to 25,000 shares of Class A common stock at $0.95 per share at any time through April 30, 2016 issued in connection with an investor relations contract in fiscal 2012. |
(1) A change-of-control is defined as any of the following transactions occurring: · The dissolution or liquidation of the Company, · The stockholders of the Company approve an agreement providing for a sale, lease or other disposition of all or substantially all of the assets of the Company and the transactions contemplated by such agreement are consummated, · A merger or a consolidation in which the Company is not the surviving entity, · Any person acquires the beneficial ownership of securities of the Company representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors, and · The individuals who, prior to the transaction, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at lease fifty percent (50%) of the Board, except that if the election of or nomination for election by the stockholders of any new director was approved by a vote of at least fifty percent (50%) of the Incumbent Board, such new director shall be deemed to be a member of the Incumbent Board. |
Exhibit Number Description Notes 3.1.1 Certificate of Incorporation of Registrant, filed June 15, 1992 with the Secretary of State of Delaware 3.1.2 Certificate of Amendment to Certificate of Incorporation of Registrant, filed October 2, 1995 with the Secretary of State of Delaware 3.1.3 Certificate of Designations of Class A common stock and Class E-1 common stock, Class E-2 common stock, and Class E-3 common stock of Registrant, filed November 9, 1995 with the Secretary of State of Delaware 3.1.4 Certificate of Designation of Series A Preferred Stock of Registrant, filed July 9, 1997 with the Secretary of State of Delaware 3.1.5 Certificate of Designation of Series B Stock of Registrant, filed October 2, 1997 with the Secretary of State of Delaware 3.1.6 Certificate of Amendment of Certificate of Incorporation of Registrant, filed November 12, 1997 with the Secretary of State of Delaware 3.1.7 Certificate of Designation of Series C Preferred Stock of Registrant, filed February 6, 1998 with the Secretary of State of Delaware 3.1.8 Certificate of Designation, Preferences and Rights of Series D Participating Preferred Stock of Registrant filed April 29, 1998 with the Secretary of State of Delaware 3.1.9 Certificate of Designation of Series F Preferred Stock of Registrant, filed November 2, 1999 with the Secretary of State of Delaware 3.1.10 Certificate of Amendment of Certificate of Incorporation of Registrant, filed February 28, 2003 with the Secretary of State of Delaware 3.2 Bylaws of Registrant 4.1 Rights Agreement dated May 1, 1998, between Registrant and Continental Stock Transfer & Trust Company 4.2 First Amendment to Rights Agreement dated as of February 28, 2008, between LightPath Technologies, Inc. and Continental Stock Transfer & Trust Company 10.1 Directors Compensation Agreement dated November 11, 1999 between Robert Ripp and LightPath Technologies, Inc. and First Amendment thereto 10.2 Amended and Restated Omnibus Incentive Plan dated October 15, 2002 10.3 Employee Letter Agreement dated June 12, 2008, between LightPath Technologies, Inc., and J. James Gaynor, its Chief Executive Officer & President 10.4 Form of Common Stock Purchase Warrant dated as of December 31, 2008, issued by LightPath Technologies, Inc., to certain investors 10.5 Form of Common Stock Purchase Warrant dated August 19, 2009 issued by LightPath Technologies, Inc., to certain investors 10.6 Form of Common Stock Purchase Warrant dated as of April 8, 2010, issued by LightPath Technologies, Inc. to certain investors 10.7 2004 Employee Stock Purchase Plan dated December 6, 2004 10.8 Form of Common Stock Purchase Warrant dated as of June 11, 2012, issued by LightPath Technologies, Inc. to certain investors 10.9 Securities Purchase Agreement dated as of June 11, 2012, by and among LightPath Technologies, Inc. and certain investors 10.10 Registration Rights Agreement dated as of June 11, 2012, by and among LightPath Technologies, Inc., and certain investors 10.11 Memorandum of Understanding Governing the License of Intellectual Property and Manufacturing, Sales and Distribution of Gradium dated as of September 11, 2012, by and among LightPath Technologies, Inc., and Hubei, New HuaGuang Information Materials Company, Ltd. (NHG) 10.12 Conversion Agreement dated March 25, 2013 between the Company and certain debenture holders of our 8% convertible debentures 14.1 Code of Ethics 21.1 Subsidiaries of the Registrant * 23.1 Consent of Independent Registered Public Accounting Firm * Power of Attorney * 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 * 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 * 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. |
Warrants Warrants shares outstanding at June 30, 2013 equal 3,756,771 and include: ● a warrant to purchase up to 100,000 shares of Class A common stock at $3.20 per share at any time through September 29, 2013 issued to Robert Ripp on September 29, 2003 issued in connection with his providing a line of credit to the Company; ● warrants to purchase up to 605,771 shares of Class A common stock at $1.68 per share and warrants to purchase up to 332,843 shares of Class A common stock at $1.89 at any time through August 1, 2013 issued in connection with the sale of convertible debentures in fiscal 2009; ● warrants to purchase up to 332,102 shares of Class A common stock at $0.87 per share at any time through December 31, 2013 issued in connection with the conversion of 25% of the convertible debentures in fiscal 2009; ● warrants to purchase up to 582,229 shares of Class A common stock at $1.73 per share at any time through February 19, 2015 issued in connection with a private placement financing in fiscal 2010; ● warrants to purchase up to 101,549 shares of Class A common stock at $2.48 per share at any time through October 8, 2015 issued in connection with a private placement financing in fiscal 2010; ● warrants to purchase up to 1,652,277 shares of Class A common stock at $1.26 per share at any time through December 11, 2017 issued in connection with a private placement financing in fiscal 2012; and ● warrants to purchase up to 25,000 shares of Class A common stock at $1.03 per share at any time through December 29, 2015 and warrants to purchase up to 25,000 shares of Class A common stock at $0.95 per share at any time through April 30, 2016 issued in connection with an investor relations contract in fiscal 2012. |
(1) A change-of-control is defined as any of the following transactions occurring: · The dissolution or liquidation of the Company, · The stockholders of the Company approve an agreement providing for a sale, lease or other disposition of all or substantially all of the assets of the Company and the transactions contemplated by such agreement are consummated, · A merger or a consolidation in which the Company is not the surviving entity, · Any person acquires the beneficial ownership of securities of the Company representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors, and · The individuals who, prior to the transaction, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at lease fifty percent (50%) of the Board, except that if the election of or nomination for election by the Stockholders of any new director was approved by a vote of at least fifty percent (50%) of the Incumbent Board, such new director shall be deemed to be a member of the Incumbent Board. |
Exhibit Number Description Notes 3.1.1 Certificate of Incorporation of Registrant, filed June 15, 1992 with the Secretary of State of Delaware 3.1.2 Certificate of Amendment to Certificate of Incorporation of Registrant, filed October 2, 1995 with the Secretary of State of Delaware 3.1.3 Certificate of Designations of Class A common stock and Class E-1 common stock, Class E-2 common stock, and Class E-3 common stock of Registrant, filed November 9, 1995 with the Secretary of State of Delaware 3.1.4 Certificate of Designation of Series A Preferred Stock of Registrant, filed July 9, 1997 with the Secretary of State of Delaware 3.1.5 Certificate of Designation of Series B Stock of Registrant, filed October 2, 1997 with the Secretary of State of Delaware 3.1.6 Certificate of Amendment of Certificate of Incorporation of Registrant, filed November 12, 1997 with the Secretary of State of Delaware 3.1.7 Certificate of Designation of Series C Preferred Stock of Registrant, filed February 6, 1998 with the Secretary of State of Delaware 3.1.8 Certificate of Designation, Preferences and Rights of Series D Participating Preferred Stock of Registrant filed April 29, 1998 with the Secretary of State of Delaware 3.1.9 Certificate of Designation of Series F Preferred Stock of Registrant, filed November 2, 1999 with the Secretary of State of Delaware 3.1.10 Certificate of Amendment of Certificate of Incorporation of Registrant, filed February 28, 2003 with the Secretary of State of Delaware 3.2 Bylaws of Registrant 4.1 Rights Agreement dated May 1, 1998, between Registrant and Continental Stock Transfer & Trust Company 4.2 First Amendment to Rights Agreement dated as of February 28, 2008, between LightPath Technologies, Inc. and Continental Stock Transfer & Trust Company 10.1 Directors Compensation Agreement dated November 11, 1999 between Robert Ripp and LightPath Technologies, Inc. and First Amendment thereto 10.2 Amended and Restated Omnibus Incentive Plan dated October 15, 2002 10.3 Employee Letter Agreement dated June 12, 2008, between LightPath Technologies, Inc., and J. James Gaynor, its Chief Executive Officer & President 10.4 Form of Common Stock Purchase Warrant dated as of August 1, 2008, issued by LightPath Technologies, Inc., to certain investors 10.5 Securities Purchase Agreement dated as of August 1, 2008, by and among LightPath Technologies, Inc., and certain investors 10.6 Registration Rights Agreement dated as of August 1, 2008, by and among LightPath Technologies, Inc., and certain investors 10.7 Security Agreement dated as of August 1, 2008, by and among LightPath Technologies, Inc. and certain investors 10.8 Form of Subsidiary Guarantee dated as of August 1, 2008, by Geltech Inc., and LightPath Optical Instrumentation (Shanghai), Ltd., in favor of certain investors 10.9 Form of 8% Senior Secured Convertible Debenture dated as of August 1, 2008, issued by LightPath Technologies, Inc., to certain investors 10.10 First Amendment to the 8% Senior Secured Convertible Debenture, dated as of December 31, 2008 10.11 Amendment No. |
Omnibus Incentive Plan, dated as of December 30, 2008 10.12 Form of Common Stock Purchase Warrant dated as of August 19, 2009, issued by LightPath Technologies, Inc., to certain investors 10.13 Securities Purchase Agreement dated as of August 19, 2009, by and among LightPath Technologies, Inc. and certain investors 10.14 Registration Rights Agreement dated as of August 19, 2009, by and among LightPath Technologies, Inc., and certain investors 10.15 Form of Common Stock Purchase Warrant dated as of April 8, 2010, issued by LightPath Technologies, Inc. to certain investors 10.16 Securities Purchase Agreement dated as of April 8, 2010, by and among LightPath Technologies, Inc. and certain investors 10.17 Registration Rights Agreement dated as of April 8, 2010, by and among LightPath Technologies, Inc., and certain investors 10.18 Second Amendment to the 8% Senior Secured Convertible Debentures, dated as of March 30, 2011 10.19 2004 Employee Stock Purchase Plan dated December 6, 2004 10.20 Form of Common Stock Purchase Warrant dated as of June 11, 2012, issued by LightPath Technologies, Inc. to certain investors 10.21 Securities Purchase Agreement dated as of June 11, 2012, by and among LightPath Technologies, Inc. and certain investors 10.22 Registration Rights Agreement dated as of June 11, 2012, by and among LightPath Technologies, Inc., and certain investors 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 * 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 * 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. |
Warrants Warrants shares outstanding at June 30, 2012 equal 4,041,771 and include: · a warrant to purchase up to 100,000 shares of Class A common stock at $3.20 per share at any time through September 29, 2013 issued to Robert Ripp on September 29, 2003 in connection with his providing a line of credit to the Company; · warrants to purchase up to 238,750 shares of Class A common stock at $5.50 per share and warrants to purchase up to 71,250 shares of Class A common stock at $2.61 at any time through January 26, 2013 in connection with a private placement financing in fiscal 2008; · warrants to purchase up to 605,771 shares of Class A common stock at $1.68 per share and warrants to purchase up to 332,843 shares of Class A common stock at $1.89 at any time through August 1, 2013 in connection with the sale of convertible debentures in fiscal 2009; · warrants to purchase up to 332,102 shares of Class A common stock at $0.87 per share at any time through December 31, 2013 in connection with a conversion of 25% of the convertible debentures in fiscal 2009; · warrants to purchase up to 582,229 shares of Class A common stock at $1.73 per share at any time through February 19, 2015 in connection with a private placement financing in fiscal 2010; · warrants to purchase up to 101,549 shares of Class A common stock at $2.48 per share at any time through October 8, 2015 in connection with a private placement financing in fiscal 2010; · warrants to purchase up to 1,652,277 shares of Class A common stock at $1.32 per share at any time through December 11, 2017 in connection with a private placement financing in fiscal 2012; and · warrants to purchase up to 25,000 shares of Class A common stock at $1.03 per share at any time through June 29, 2015 in connection with an investor relations contract in fiscal 2012. |
(1) A change of control is defined as any of the following transactions occurring: • the dissolution or liquidation of the Company, • the stockholders of the Company approve an agreement providing for a sale, lease or other disposition of all or substantially all of the assets of the Company and the transactions contemplated by such agreement are consummated, • a merger or a consolidation in which the Company is not the surviving entity, • Any person acquires the beneficial ownership of securities of the Company representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors, and • The individuals who, prior to the transaction, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least fifty percent (50%) of the Board, except that if the election of or nomination for election by the Stockholders of any new director was approved by a vote of at least fifty percent (50%) of the Incumbent Board, such new director shall be deemed to be a member of the Incumbent Board. |
Warrants Warrants shares outstanding at June 30, 2011 equal 2,656,492 and include: · a warrant to purchase up to 100,000 shares of Class A common stock at $3.20 per share at any time through September 29, 2013 issued to Robert Ripp on September 29, 2003 in connection with his providing a line of credit to the Company; · warrants to purchase up to 219,000 shares of Class A common stock at $7.41 per share at any time through September 20, 2011 in connection with a private placement financing in fiscal 2006; · warrants to purchase up to 73,000 shares of Class A common stock at $7.41 per share at any time through September 20, 2011 issued to Dawson James and its designees as partial compensation for acting as placement agent in connection with a private placement financing in fiscal 2006; · warrants to purchase up to 238,750 shares of Class A common stock at $5.50 per share and warrants to purchase up to 71,250 shares of Class A common stock at $2.61 at any time through January 26, 2013 in connection with a private placement financing in fiscal 2008; · warrants to purchase up to 605,771 shares of Class A common stock at $1.68 per share and warrants to purchase up to 332,841 shares of Class A common stock at $1.89 at any time through August 1, 2013 in connection with the sale of convertible debentures in fiscal 2009; · warrants to purchase up to 332,102 shares of Class A common stock at $0.87 per share at any time through December 31, 2013 in connection with a conversion of 25% of the convertible debentures in fiscal 2009; · warrants to purchase up to 582,229 shares of Class A common stock at $1.73 per share at any time through February 19, 2015 in connection with a private placement financing in fiscal 2010; and · warrants to purchase up to 101,549 shares of Class A common stock at $2.48 per share at any time through October 8, 2015 in connection with a private placement financing in fiscal 2010. |
Amount of Payment Upon Executive Officer A Change of Control (1) J. James Gaynor (2) $ 450,000 Dorothy Cipolla (3) $ 41,250 (1) A change of control is defined as any of the following transactions occurring: · the dissolution or liquidation of the Company, · the stockholders of the Company approve an agreement providing for a sale, lease or other disposition of all or substantially all of the assets of the Company and the transactions contemplated by such agreement are consummated, · a merger or a consolidation in which the Company is not the surviving entity, - 29 - · Any person acquires the beneficial ownership of securities of the Company representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors, and The individuals who, prior to the transaction, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least fifty percent (50%) of the Board, except that if the election of or nomination for election by the Stockholders of any new director was approved by a vote of at least fifty percent (50%) of the Incumbent Board, such new director shall be deemed to be a member of the Incumbent Board. |
See note 20 for more details on this transaction Warrants Warrants outstanding at June 30, 2010 equal 2,901,286 and include: · a warrant to purchase up to 100,000 shares of Class A common stock at $3.20 per share at any time through September 29, 2013 issued to Robert Ripp on September 29, 2003 in connection with his providing a line of credit to the Company; · warrants to purchase up to 219,000 shares of Class A common stock at $7.41 per share at any time through September 20, 2011 in connection with a private placement financing in fiscal 2006; · warrants to purchase up to 73,000 shares of Class A common stock at $7.41 per share at any time through September 20, 2011 issued to Dawson James and its designees as partial compensation for acting as placement agent in connection with a private placement financing in fiscal 2006; · warrants to purchase up to 238,750 shares of Class A common stock at $5.50 per share and warrants to purchase up to 81,250 shares of Class A common stock at $2.61 at any time through January 26, 2013 in connection with a private placement financing in fiscal 2008; · warrants to purchase up to 617,511 shares of Class A common stock at $1.68 per share and warrants to purchase up to 332,841 shares of Class A common stock at $1.89 at any time through August 1, 2013 in connection with the sale of convertible debentures in fiscal 2009; · warrants to purchase up to 332,102 shares of Class A common stock at $0.87 per share at any time through December 31, 2013 in connection with a conversion of 25% of the convertible debentures in fiscal 2009; · warrants to purchase up to 805,283 shares of Class A common stock at $1.73 per share at any time through February 19, 2015 in connection with a private placement financing in fiscal 2010; and · warrants to purchase up to 101,549 shares of Class A common stock at $2.48 per share at any time through October 4, 2015 in connection with a private placement financing in fiscal 2010. |
A change of control is defined as any of the following transactions occurring: · the dissolution or liquidation of the Company, · the stockholders of the Company approve an agreement providing for a sale, lease or other disposition of all or substantially all of the assets of the Company and the transactions contemplated by such agreement are consummated, · a merger or a consolidation in which the Company is not the surviving entity, · any person acquires the beneficial ownership of securities of the Company representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors, and · the individuals who, prior to the transaction, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least fifty percent (50%) of the Board, except that if the election of or nomination for election by the Stockholders of any new director was approved by a vote of at least fifty percent (50%) of the Incumbent Board, such new director shall be deemed to be a member of the Incumbent Board. |
(1) A change of control is defined as any of the following transactions occurring: • the dissolution or liquidation of the Company, • the stockholders of the Company approve an agreement providing for a sale, lease or other disposition of all or substantially all of the assets of the Company and the transactions contemplated by such agreement are consummated, • a merger or a consolidation in which the Company is not the surviving entity, • any person acquires the beneficial ownership of securities of the Company representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors, and• the individuals who, prior to the transaction, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least fifty percent (50%) of the Board, except that if the election of or nomination for election by the Stockholders of any new director was approved by a vote of at least fifty percent (50%) of the Incumbent Board, such new director shall be deemed to be a member of the Incumbent Board. |
- 40 - Exhibit Number Description Notes 3.1.1 Certificate of Incorporation of Registrant, filed June 15, 1992 with the Secretary of State of Delaware 3.1.2 Certificate of Amendment to Certificate of Incorporation of Registrant, filed October 2, 1995 with the Secretary of State of Delaware 3.1.3 Certificate of Designations of Class A common stock and Class E-1 common stock, Class E-2 common stock, and Class E-3 common stock of Registrant, filed November 9, 1995 with the Secretary of State of Delaware 3.1.4 Certificate of Designation of Series A Preferred Stock of Registrant, filed July 9, 1997 with the Secretary of State of Delaware 3.1.5 Certificate of Designation of Series B Stock of Registrant, filed October 2, 1997 with the Secretary of State of Delaware 3.1.6 Certificate of Amendment of Certificate of Incorporation of Registrant, filed November 12, 1997 with the Secretary of State of Delaware 3.1.7 Certificate of Designation of Series C Preferred Stock of Registrant, filed February 6, 1998 with the Secretary of State of Delaware 3.1.8 Certificate of Designation, Preferences and Rights of Series D Participating Preferred Stock of Registrant filed April 29, 1998 with the Secretary of State of Delaware 3.1.9 Certificate of Designation of Series F Preferred Stock of Registrant, filed November 2, 1999 with the Secretary of State of Delaware 3.1.10 Certificate of Amendment of Certificate of Incorporation of Registrant, filed February 28, 2003 with the Secretary of State of Delaware 3.2 Bylaws of Registrant 4.1 Rights Agreement dated May 1, 1998, between Registrant and Continental Stock Transfer & Trust Company, First 4.2 Amendment to Rights Agreement dated as of February 28, 2008, between LightPath Technologies, Inc. and Continental Stock Transfer & Trust Company 10.1 Directors Compensation Agreement with Amendment for Robert Ripp 10.2 Amended and Restated Omnibus Incentive Plan dated October 15, 2002 10.3 Employee Letter Agreement dated June 12, 2008, between LightPath Technologies, Inc., and J. James Gaynor, its CEO & President 10.4 Form of Common Stock Purchase Warrant dated as of August 1, 2008, issued by LightPath Technologies, Inc., to certain investors 10.5 Securities Purchase Agreement dated as of August 1, 2008, by and among LightPath Technologies, Inc., and certain investors 10.6 Registration Rights Agreement dated as of August 1, 2008, by and among LightPath Technologies, Inc., and certain investors 10.7 Security Agreement dated as of August 1, 2008, by and among LightPath Technologies, Inc. 10.8 Form of Subsidiary Guarantee dated as of August 1, 2008, by Geltech Inc., and LightPath Optical Instrumentation (Shanghai), Ltd., in favor of certain investors 10.9 Form of 8% Senior Secured Convertible Debenture dated as of August 1, 2008, issued by LightPath Technologies, Inc. to certain investors 10.10 Termination of Joint Venture Contract, dated as of September 28, 2008 between CDGM Glass Company, Ltd. and LightPath Technologies, Inc. - 41 - Exhibit Number Description Notes 10.11 First Amendment to the 8% Senior Secured Convertible Debenture, dated as of December 31, 2008 10.12 Amendment No. |
Form of Common Stock Purchase Warrant dated as of August 1, 2008, issued by LightPath Technologies, Inc., to certain investors 10.14 Securities Purchase Agreement dated as of August 1, 2008, by and among LightPath Technologies, Inc., and certain investors 10.15 Registration Rights Agreement dated as of August 1, 2008, by and among LightPath Technologies, Inc., and certain investors 10.16 Form of Common Stock Purchase Warrant dated as of August 19, 2009, issued by LightPath Technologies, Inc. to certain investors 10.17 Securities Purchase Agreement dated as of August 19, 2009, by and among LightPath Technologies, Inc. and certain investors 10.18 Registration Rights Agreement dated as of August 19, 2009, by and among LightPath Technologies, Inc., and certain investors 14.1 Code of Ethics * 23.1 Consent of Independent Registered Public Accounting Firm * Power of Attorney * 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 * 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 * 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. |
Warrants Warrants outstanding at June 30, 2009 of 2,258,324 include: · warrants to purchase up to 35,156 shares of Class A common stock at $48.00 per share at any time through November 10, 2009 issued to Robert Ripp, on November 5, 1999 in connection with his election to serve as Chairman of the Board of Directors; · a warrant to purchase up to 100,000 shares of Class A common stock at $3.20 per share at any time through September 29, 2013 issued to Robert Ripp on September 29, 2003 in connection with his providing a line of credit to the Company · warrants to purchase up to 219,000 shares of Class A common stock at $7.41 per share at any time through September 20, 2011 in connection with a private placement financing in fiscal 2006; · warrants to purchase up to 73,000 shares of Class A common stock at $7.41 per share at any time through September 20, 2011 issued to Dawson James and its designees as partial compensation for acting as placement agent in connection with a private placement financing in fiscal 2006; · warrants to purchase up to 238,750 shares of Class A common stock at $5.50 per share and warrants to purchase up to 81,250 shares of Class A common stock at $2.61 at any time through January 26, 2013 in connection with a private placement financing in fiscal 2008; · warrants to purchase up to 808,328 shares of Class A common stock at $1.68 per share and warrants to purchase up to 332,841 shares of Class A common stock at $1.89 at any time through August 1, 2013 in connection with the sale of convertible debentures in fiscal 2009; · warrants to purchase up to 369,999 shares of Class A common stock at $0.87 per share at any time through December 31, 2013 in connection with a conversion of 25% of the convertible debentures in fiscal 2009; 8. |
Warrants Warrants outstanding at June 30, 2008 of 784,156 include: • warrants to purchase up to 35,156 shares of Class A common stock at $48.00 per share at any time through November 10, 2009 issued to Robert Ripp, on November 5, 1999 in connection with his election to serve as Chairman of the Board of Directors • warrants to purchase up to 110,000 shares of Class A common stock at $4.30 per share at any time through February 23, 2009 in connection with a private placement financing in fiscal 2004, • a warrant to purchase up to 100,000 shares of Class A common stock at $3.20 per share at any time through September 29, 2013 issued to Robert Ripp on September 29, 2003 in connection with his providing a line of credit to the Company • warrants to purchase up to 219,000 shares of Class A common stock at $7.41 per share at any time through September 20, 2011 in connection with a private placement financing in fiscal 2006 • warrants to purchase up to 320,000 shares of Class A common stock at $5.50 per share at any time through January 26, 2013 in connection with a private placement financing in fiscal 2008 8. |
Other warrants include: • warrants to purchase up to 35,156 shares of Class A common stock at $48.00 per share at any time through November 10, 2009 issued to Robert Ripp, on November 5, 1999 in connection with his election to serve as Chairman of the Board of Directors • warrants to purchase up to 110,000 shares of Class A common stock at $4.30 per share at any time through February 23, 2009 in connection with a private placement financing in fiscal 2004 • a warrant to purchase up to 100,000 shares of Class A common stock at $3.20 per share at any time through September 29, 2013 issued to Robert Ripp on September 29, 2003 in connection with his providing a line of credit to the Company • warrants to purchase up to 140,000 shares of Class A common stock at $4.30 per share at any time through June 1, 2010 in connection with a private placement financing in fiscal 2005 • warrants to purchase up to 219,000 shares of Class A common stock at $7.41 per share at any time through September 20, 2011 in connection with a private placement financing in fiscal 2006 The following table provides information on warrants during fiscal 2006, 2005, and 2004. |
Operating loss during fiscal 2002 included the following non-cash charges: asset impairment charges of $1.5 million, recorded in the second quarter, due to adjustments to the carrying value of a customer supply agreement, associated with the acquisition of Horizon Photonics Inc. in April 2000; asset impairment charges of $4.9 million, recorded in the second quarter, due to adjustments to the carrying value of certain intangible assets, associated with the acquisition of Geltech Inc. in September 2000; asset impairment charges of $0.6 million, recorded in the second quarter, related to the write down of certain excess manufacturing equipment held for disposal; asset impairment charges of $3.2 million, recorded in the fourth quarter, related to the write down of certain manufacturing and other equipment and leasehold improvements held for disposal in connection with the Company’s plan to relocate manufacturing operations and corporate headquarters to Florida during fiscal 2003; a write down in the carrying value of our investment in LightChip of $6.3 million, recorded in the fourth quarter, due to the per share price of a third party round of financing completed in May 2002; a restructuring charge of $1.1 million, recorded in the fourth quarter, related to severance charges for involuntary employee terminations and certain lease related costs in connection with the Company’s plan to relocate manufacturing operations and corporate headquarters to Florida during fiscal 2003; and stock-based compensation charges of $4.8 million. |
The Company's operating loss during fiscal 2002 includes the following: * Asset impairment charges of $1.5 million, recorded in the second quarter, due to adjustments to the carrying value of a customer supply agreement, associated with the acquisition of Horizon Photonics Inc. in April 2000; * Asset impairment charges of $4.9 million, recorded in the second quarter, due to adjustments to the carrying value of certain intangible assets, associated with the acquisition of Geltech Inc. in September 2000; * Asset impairment charges of $0.6 million, recorded in the second quarter, related to the write down of certain excess manufacturing equipment held for disposal; * Asset impairment charges of $3.2 million, recorded in the fourth quarter, due to certain manufacturing and other equipment and leasehold improvements held for disposal in connection with the Company's plan to relocate manufacturing operations and corporate headquarters to Florida during fiscal 2003; * A write down in the carrying value of our investment in LightChip of $6.3 million, recorded in the fourth quarter, due to a decline in the per share price of a subsequent third party round of financing completed in May 2002; * A restructuring charge of $1.1 million, recorded in the fourth quarter, related to severance charges for involuntary employee terminations and certain lease related costs in connection with the LightPath Technologies, Inc. - Form 10K, June 30, 2002 Company's plan to relocate manufacturing operations and corporate headquarters to Florida during fiscal 2003; and * Stock-based compensation charges of $4.8 million. |
The Company's operating loss during fiscal 2002 includes the following non-cash charges: asset impairment charges of $1.5 million, recorded in the second quarter, due to adjustments to the carrying value of a customer supply agreement, associated with the acquisition of Horizon Photonics Inc. in April 2000; asset impairment charges of $4.9 million, recorded in the second quarter, due to adjustments to the carrying value of certain intangible assets, associated with the acquisition of Geltech Inc. in September 2000; asset impairment charges of $0.6 million, recorded in the second quarter, related to the write down of certain excess manufacturing equipment held for disposal; asset impairment charges of $3.2 million, recorded in the fourth quarter, related to the write down of certain manufacturing and other equipment and leasehold improvements held for disposal in connection with the Company's plan to relocate manufacturing operations and corporate headquarters to Florida during fiscal 2003; a write down in the carrying value of our investment in LightChip of $6.3 million, recorded in the fourth quarter, due to the per share price of a third party round of financing completed in May 2002; a restructuring charge of $1.1 million, recorded in the fourth quarter, related to severance charges for involuntary employee terminations and certain lease related costs in connection with the Company's plan to relocate manufacturing operations and corporate headquarters to Florida during fiscal 2003; and stock-based compensation charges of $4.8 million. |
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) Financial Statements - Index page Independent Auditors' Report on Consolidated Financial Statements Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Stockholders' Equity Consolidated Statements of Cash Flows (b) Exhibits Exhibit Number Description ------ ----------- 3.1 Certificate of Incorporation of Registrant, as amended 1 3.2 Certificate of Designations filed November 10, 1995 with the Secretary of State of the State of Delaware 1 3.3 Bylaws of Registrant 1 3.4 Certificate of Designation filed November 2, 1999 with the Secretary of State of the State of Delaware 2 9.1 Rights Agreement dated May 1, 1998 3 10.4 Directors Compensation Agreement with Amendment for Robert Ripp 6 10.6 Omnibus Incentive Plan 4 10.7 Directors Stock Option Plan 5 10.8 Amended Omnibus Incentive Plan 6 10.9 Merger Agreement dated April 14, 2000 between Registrant and Horizon Photonics, Inc. 7 10.10 Merger Agreement dated August 9, 2000 between Registrant and Geltech, Inc. 8 23.1 Consent of KPMG LLP * 99.1 Certification * 1. |
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