United States
Delaware
|
88-0464853
|
Title of Each Class
|
Name of Each Exchange
On Which Registered
|
|
---|---|---|
Common Stock, $0.0001 par value | American Stock Exchange LLC |
Securities registered
pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES
þ
NO
o
Portions of the registrants proxy statement
for its 2004 annual meeting of stockholders to be held on June 18, 2004, are
incorporated by reference into Part III of this report.
PART I | 2 | ||
ITEM 1. BUSINESS | 2 | ||
ITEM 2. PROPERTY | 19 | ||
ITEM 3. LEGAL PROCEEDINGS | 19 | ||
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS | 20 | ||
PART II | 21 | ||
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS | 21 | ||
ITEM 6. SELECTED FINANCIAL DATA | 22 | ||
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 23 | ||
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 27 | ||
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | 28 | ||
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 42 | ||
ITEM 9A. CONTROLS AND PROCEDURES | 42 | ||
PART III | 43 | ||
PART IV | 44 | ||
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K | 44 | ||
SIGNATURES | 46 | ||
EXHIBIT INDEX |
Name
|
Age
|
Position
|
Director
Since |
Terren S. Peizer
|
44
|
Director, Chairman of the Board of Directors and Chief Executive Officer
|
2003
|
Anthony M. LaMacchia
|
50
|
Director, Chief Operating Officer
|
2003
|
Chuck Timpe
|
57
|
Chief Financial Officer
|
|
James W. Elder
|
52
|
Senior Vice President - Marketing and Business Development
|
|
David E. Smith, M.D.
|
64
|
Senior Vice President - Medical Affairs, Chair of Clinical Advisory Board
|
|
Leslie F. Bell, Esq.
|
63
|
Director, Chair of Audit Committee, Member of Compensation Committee
|
2003
|
Hervé de Kergrohen, M.D.
|
46
|
Director, Chair of Nominations and Governance Committee, Member of Audit Committee
|
2003
|
Richard A. Anderson
|
34
|
Director, Member of Audit Committee
|
2003
|
Ivan M. Lieberburg, Ph.D., M.D.
|
54
|
Director, Chair of Compensation Committee, Chair of Scientific Advisory Board, Member of Clinical Advisory Board
|
2003
|
Juan José Legarda, Ph.D.
|
48
|
Director, Member of Nominations and Governance Committee, Member of Scientific Advisory Board, Member of Clinical Advisory Board
|
2003
|
19 | ||
|
||
20 | ||
|
||
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is listed for trading on the American Stock Exchange under the symbol HTM. Prior to December 15, 2003, the stock was quoted on the OTC Bulletin Board. As of March 23, 2004, there were approximately 200 record holders and approximately 800 beneficial owners of our common stock. Following is a list by fiscal quarters of the sales prices of the stock:
High
Low
High
Low
2003
2002
CASH FLOW STATEMENT DATA
22 | ||
|
||
|
Quarters Ended
|
||||||||||
|
|||||||||||
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||
|
|
|
|
||||||||
|
(in thousands
except per share amounts)
|
||||||||||
Revenues
|
$
|
-
|
$
|
-
|
$
|
44
|
$
31
|
||||
Operating expenses
|
|
|
|
|
|||||||
General and administrative
|
|||||||||||
Salaries and benefits
|
-
|
63
|
364
|
1,190
|
|||||||
Other expenses
|
-
|
138
|
515
|
1,275
|
|||||||
Depreciation and amortization
|
-
|
-
|
9
|
66
|
|||||||
|
|
|
|
||||||||
Loss from operations
|
-
|
(201
|
)
|
(844
|
)
|
(2,500)
|
|||||
Interest income
|
-
|
-
|
3 |
38
|
|||||||
|
|
|
|
||||||||
Net loss | $ | - | $ | (201 | ) | $ | (841 | ) |
$ (2,462) |
||
|
|
|
|
||||||||
Basic and diluted loss per share
|
$
|
-
|
$
|
(0.02
|
)
|
$
|
(0.06
|
)
|
$
(0.13)
|
||
|
|
|
|
Contractual Obligations
|
|
|
Total
|
|
|
Less than
1 year
|
|
|
1 - 3 years
|
|
|
3 - 5 years
|
|
|
More than
5 years
|
|
|
|
|
|
|
|
|||||||||||
Operating lease obligations
(1)
|
$
|
2,992,000
|
$
|
392,000
|
$
|
822,000
|
$
|
874,000
|
$
|
904,000
|
||||||
Lease build-out/furniture and
equipment
commitments (2) |
333,000
|
333,000
|
-
|
-
|
-
|
|||||||||||
|
|
|
|
|
||||||||||||
|
$
|
3,325,000
|
$
|
725,000
|
$
|
822,000
|
$
|
874,000
|
$
|
904,000
|
||||||
|
|
|
|
|
(
Dollars in thousands, except per share data
)
|
|
|||
ASSETS
|
|
|||
|
|
|||
Current assets
|
|
|||
Cash and cash equivalents
|
$
|
3,444
|
||
Marketable securities
|
13,196
|
|||
Receivables
|
455
|
|||
Prepaids and other current assets
|
249
|
|||
|
||||
Total current assets
|
17,344
|
|||
Long-term assets
|
|
|||
Property and equipment, net
|
1,981
|
|||
Intellectual property, net
|
2,772
|
|||
Deposits and other assets
|
483
|
|||
|
||||
$
|
22,580
|
|||
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|||
|
|
|||
Current liabilities
|
|
|||
Accounts payable
|
$
|
1,259
|
||
Accrued compensation and benefits
|
318
|
|||
Other accrued liabilities
|
451
|
|||
|
||||
Total current liabilities
|
2,028
|
|||
|
||||
Long-term liabilities
|
|
|||
Deferred rent liability
|
64
|
|||
Commitments and contingencies
|
|
|||
|
|
|||
Stockholders' equity
|
|
|||
Preferred stock, $.0001 par value; 50,000,000 shares authorized, no shares issued and outstanding
|
|
|||
Common stock, $.0001 par value; 200,000,000 shares authorized, and 24,607,000 issued and
|
|
|||
outstanding
|
3
|
|||
Additional paid-in capital
|
24,113
|
|||
Deficit accumulated during the development stage
|
(3,628
|
)
|
||
|
||||
Total stockholders' equity
|
20,488
|
|||
|
||||
$
|
22,580
|
|||
|
(In thousands except per share amounts
)
|
|
|||
Revenues
|
$
|
75
|
||
Operating expenses
|
|
|||
General and administrative
|
||||
Salaries and benefits
|
1,617
|
|||
Other
expenses, including $337 related to stock-based payments
|
1,928
|
|||
Depreciation and amortization |
75
|
|||
|
|
|||
Total operating expenses
|
3,620
|
|||
|
|
|||
Loss from operations
|
(3,545
|
)
|
||
Interest income
|
41
|
|||
|
|
|||
Loss before provision for income taxes
|
(3,504
|
)
|
||
Provision for income taxes
|
|
|||
|
|
|||
Net loss
|
$
|
(3,504
|
)
|
|
|
|
|||
Basic and diluted loss per share
|
$
|
(0.21
|
)
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
||||||||||||||||||
Preferred stock
|
Common stock
|
Additional
paid-in- |
Deficit
|
|||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
capital
|
stage
|
Total
|
|||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||
Common stock issued at inception
|
-
|
$
|
-
|
13,740
|
$
|
-
|
$
|
1
|
$
|
-
|
$
|
1
|
||||||||||
Common stock issued in merger transaction
|
-
|
-
|
1,120
|
1
|
(1
|
)
|
-
|
-
|
||||||||||||||
Preferred stock and warrants issued for cash
|
1,876
|
2
|
-
|
-
|
4,688
|
-
|
4,690
|
|||||||||||||||
Beneficial conversion feature of preferred stock
|
-
|
-
|
-
|
-
|
124
|
(124
|
)
|
-
|
||||||||||||||
Common stock issued in private placement offering, net of expenses
|
-
|
-
|
7,035
|
7
|
16,647
|
-
|
16,654
|
|||||||||||||||
Conversion of preferred stock to common stock
|
(1,876
|
)
|
(2
|
)
|
1,876
|
2
|
-
|
-
|
-
|
|||||||||||||
Par value change from $0.001 to $0.0001
|
-
|
-
|
-
|
(8
|
)
|
8
|
-
|
-
|
||||||||||||||
Common stock and options issued for intellectual property acquired
|
-
|
-
|
836
|
1
|
2,280
|
-
|
2,281
|
|||||||||||||||
Stock options and warrants issued for outside services
|
-
|
-
|
-
|
-
|
366
|
-
|
366
|
|||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
-
|
(3,504
|
)
|
(3,504
|
)
|
|||||||||||||
|
|
|
|
|
|
|
||||||||||||||||
Balance at December 31, 2003
|
-
|
$
|
-
|
24,607
|
$
|
3
|
$
|
24,113
|
$
|
(3,628
|
)
|
$
|
20,488
|
|||||||||
|
|
|
|
|
|
|
|
(In thousands)
|
|
|||
Operating activities
|
|
|||
Net loss
|
$
|
(3,504
|
)
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|||
Depreciation and amortization
|
75
|
|||
Deferred rent liability
|
64
|
|||
Stock-based expense
|
337
|
|||
Changes in current assets and liabilities:
|
|
|||
Increase in receivables
|
(455
|
)
|
||
Increase in prepaids and other current assets
|
(220
|
)
|
||
Increase in accounts payable
|
1,259
|
|||
Increase in accrued compensation and benefits
|
318
|
|||
Increase in accrued liabilities
|
451
|
|||
|
||||
Net cash used in operating activities
|
(1,675
|
)
|
||
|
||||
Investing activities
|
|
|||
Purchases of marketable securities
|
(18,240
|
)
|
||
Proceeds from sales and maturities of marketable securities
|
5,044
|
|
||
Purchase of property and equipment
|
(2,009
|
)
|
||
Cash deposited as collateral for letter of credit
|
(350
|
)
|
||
Deposits made on equipment
|
(133
|
)
|
||
Cost of intellectual property
|
(538
|
)
|
||
|
||||
Net cash used in investing activities
|
(16,226
|
)
|
||
|
||||
Financing activities
|
|
|||
Net proceeds from the sale of common and preferred stock and warrants
|
21,345
|
|||
|
||||
Net cash provided by financing activities
|
21,345
|
|||
|
||||
Net increase in cash and cash equivalents
|
3,444
|
|||
|
|
|||
Cash and cash equivalents
at beginning of period
|
|
|||
|
||||
Cash and cash equivalents
at end of period
|
$
|
3,444
|
||
|
||||
Supplemental disclosure of non-cash activity
|
|
|||
Common stock and options issued for intellectual property
|
$
|
2,281
|
||
Common stock and warrants issued to consultants
|
139
|
|||
Common stock and warrants issued as commissions on private placement
|
265
|
|||
|
|
Fair
Market Value |
Less than 1 Year
|
15 Years
|
5-10 Years
|
More than
10 Years |
|||||||||||
|
|
|
|
|
||||||||||||
Short-term variable rate taxable municipal securities
|
$
|
8,955,000
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
8,955,000
|
||||||
Short-term variable rate
auction preferred securities
|
4,000,000
|
4,000,000
|
-
|
-
|
-
|
|||||||||||
Certificates of deposit
|
241,000
|
241,000
|
-
|
-
|
-
|
|||||||||||
|
|
|
|
|
||||||||||||
|
$
|
13,196,000
|
$
|
4,241,000
|
-
|
-
|
$
|
8,955,000
|
||||||||
|
|
|
|
|
|
Fair Value of Financial Instruments and Concentration of Credit Risk
|
Period from February 13, 2003 (Inception) through December 31, 2003
|
|||
Net loss
|
$
|
(3,504,000
|
)
|
|
Less: Beneficial conversion feature of preferred stock
|
(124,000
|
)
|
||
|
||||
Net loss available to common stockholders
|
$
|
(3,628,000
|
)
|
|
|
||||
Basic and diluted loss per share
|
$
|
(0.21
|
)
|
|
|
||||
Weighted average common shares used to compute basic net loss per share
|
16,888,000
|
|||
Effect of dilutive securities
|
|
|||
|
||||
Weighted average common shares used to compute diluted net loss per share
|
16,888,000
|
|||
|
All share and per share data have been restated to reflect a stock split of 100 to 1 declared on July 1, 2003.
As reported
|
$
|
(3,504,000
|
)
|
|
Less: Stock based compensation expense determined under
fair value based method
|
(73,000
|
)
|
||
|
||||
Pro forma net loss
|
(3,577,000
|
)
|
||
Less: Beneficial conversion feature of preferred stock
|
(124,000
|
)
|
||
|
||||
Net loss available to common stockholders
|
$
|
(3,701,000
|
)
|
|
|
As reported diluted
License fees receivable
|
$
|
16,000
|
||
Payroll tax refunds
|
110,000
|
|||
Tenant improvement allowance
(1)
|
301,000
|
|||
Other receivables
|
42,000
|
|||
|
||||
|
469,000
|
|||
Less-allowance for doubtful accounts
|
( 14,000
|
)
|
||
|
||||
|
$
|
455,000
|
||
|
Leasehold improvements
|
$
|
1,080,000
|
||
Furniture and equipment
|
918,000
|
|||
|
||||
|
1,998,000
|
|||
Less-accumulated depreciation
|
( 17,000
|
)
|
||
|
||||
|
$
|
1,981,000
|
||
|
Deferred tax asset
|
|
|||
Net operating losses
|
$
|
1,182,000
|
||
Temporary differences
|
59,000
|
|||
Valuation
allowance
|
(1,241,000
|
)
|
||
|
||||
|
$ | - | ||
|
Federal statutory rate
|
(34
|
%)
|
||
State taxes
|
( 9
|
%)
|
||
Stock-based
expense
|
4
|
%
|
||
Other
|
3
|
%
|
||
Change in
valuation allowance
|
36
|
%
|
||
|
||||
|
- | % | ||
|
Contractual
Life
Quarter Ended
|
||||||||||||
March 31
|
June 30
|
September 30
|
December 31
|
Total
2003
|
||||||||
(In thousands, except per share)
|
||||||||||||
Net revenues
|
|
$ -
|
$ |
-
|
$ 44
|
$ 31
|
$ 75
|
|||||
Operating loss
|
-
|
(201)
|
(844)
|
(2,500)
|
(3,545)
|
|||||||
Net loss
|
-
|
|
(201)
|
|
(841)
|
|
(2,462)
|
|
(3,504)
|
|||
Basic and diluted loss per share
|
-
|
|
(0.02)
|
|
(0.06)
|
|
(0.13)
|
|
(0.21)
|
The information required by Items 10 through 14 of Part III is incorporated by reference from Item 1 of this report and from registrants proxy statement that will be mailed to stockholders in connection with the registrants 2004 annual meeting of stockholders.
43 | ||
|
||
PART IV
Balance Sheet as of December 31, 2003
|
28
|
Statement of Operations for the period
from February 13, 2003 (Inception) through December 31, 2003
|
29
|
Statement of Stockholders Equity for the period
from February 13, 2003 (Inception) through December 31, 2003
|
30
|
Statement of Cash Flows for the period
from February 13, 2003 (Inception) through December 31, 2003
|
31
|
Notes to Financial Statements
|
32
|
Report of Independent Public Accountants
|
41
|
45 | ||
|
||
HYTHIAM, INC. | ||
|
|
|
Date: March 26, 2004 | By: | /s/ TERREN S. PEIZER |
Terren S. Peizer President and Chief Executive Officer |
Signature
|
Title(s)
|
Date
|
/s/ TERREN S. PEIZER
Terren S. Peizer
|
Chairman of the Board of Directors and Chief Executive Officer
(Principal Executive Officer) |
March 26, 2004
|
/s/ CHUCK TIMPE
Chuck Timpe
|
Chief Financial Officer
(Principal Financial and Accounting Officer) |
March 26, 2004
|
/s/ ANTHONY M. LAMACCHIA
Anthony M. LaMacchia
|
Director and Chief Operating Officer
|
March 26, 2004
|
/s/ LESLIE F. BELL
Leslie F. Bell
|
Director
|
March 26, 2004
|
/s/ HERVÉ DE KERGROHEN
Hervé de Kergrohen
|
Director
|
March 26, 2004
|
/s/ RICHARD A. ANDERSON
Richard A. Anderson
|
Director
|
March 26, 2004
|
/s/ IVAN M. LIEBERBURG
Ivan M. Lieberburg
|
Director
|
March 26, 2004
|
* Incorporated by reference to exhibit of the same number to the registrants Form 8-K filed September 30, 2003.
Incorporated by reference to exhibit of the same number to the registrants Form 8-K/A filed October 21, 2003.
Hythiam, Inc. (the Company) takes seriously its obligations as a public company to honestly and accurately report its financial results and related information. The Company strives to comply with all applicable securities laws and regulations, accounting standards, accounting controls, and audit practices.
This Code of Conduct and Ethics covers a wide range of business practices and procedures. It does not cover every issue that may arise, but it sets out basic principles to guide the directors, officers, and employees of the Company. All Company directors, officers, and employees should conduct themselves accordingly and seek to avoid even the appearance of improper behavior in any way relating to the Company. In appropriate circumstances, this Code should also be provided to and followed by the Companys agents and representatives, including consultants.
Any director or officer who has any questions about this Code should consult with the Companys Chief Executive Officer (CEO), Chief Financial Officer (CFO), or legal counsel as appropriate in the circumstances. If an employee has any questions about this Code, the employee should ask his or her supervisor how to handle the situation.
This Code is intended to deter wrongdoing and to promote the following:
Obeying the law, both in letter and in spirit, is the foundation on which the Companys ethical standards are built. All directors, officers, and employees should respect and obey all laws, rules, and regulations applicable to the business and operations of the Company. Although directors, officers, and employees are not expected to know all of the details of these laws, rules, and regulations, it is important to know enough to determine when to seek advice from supervisors, managers, officers or other appropriate Company personnel.
A conflict of interest exists when an individuals private interest interferes in any way or even appears to conflict with the interests of the Company. A conflict of interest situation can arise when a director, officer, or employee takes actions or has interests that may make it difficult to perform his or her work on behalf of the Company in an objective and effective manner. Conflicts of interest may also arise when a director, officer, or employee, or a member of his or her family, receives improper personal benefits as a result of his or her position with the Company. Loans to, or guarantees of obligations of, employees and their family members may create conflicts of interest.
Service to the Company should never be subordinated to personal gain or advantage. Conflicts of interest, whenever possible, should be avoided. In particular, clear conflict of interest situations involving directors, officers, and employees who occupy supervisory positions or who have discretionary authority in dealing with any third party may include the following:
It is almost always a conflict of interest for a Company officer or employee to work simultaneously for a competitor, customer, or supplier. No officer or employee may work for a competitor as a consultant or board member. The best policy is to avoid any direct or indirect business connection with the Companys customers, suppliers, and competitors, except on the Companys behalf.
Conflicts of interest are prohibited as a matter of Company policy, except under guidelines approved by the Board of Directors. Conflicts of interest may not always be clear-cut and further review and discussions may be appropriate. Any director or officer who becomes aware of a conflict or potential conflict should bring it to the attention of the CEO, the CFO, or legal counsel as appropriate in the circumstances. Any employee who becomes aware of a conflict or potential conflict should bring it to the attention of a supervisor, manager, or other appropriate personnel.
Directors, officers, and employees who have access to material non-public information relating to the Company are not permitted to use or share that information for stock trading purposes or for any other purpose except the conduct of the Companys business. All non-public information about the Company should be considered confidential information. To use non-public information for personal financial benefit or to tip others who might make an investment decision on the basis of this information is not only unethical and against Company policy but is also illegal. Directors, officers, and employees also should comply with insider trading policy and procedures adopted by the Company. If a question arises, the director, officer, or employee should consult with the Companys CFO.
Directors, officers, and employees are prohibited from taking for themselves personally or directing to a third party any opportunity that is discovered through the use of corporate property, information, or position without the consent of the Board of Directors. No director, officer, or employee may use corporate property, information, or position for improper personal gain, and no director, officer, or employee may compete with the Company directly or indirectly. Directors, officers, and employees owe a duty to the Company to advance its legitimate interests when the opportunity to do so arises.
The Company seeks to compete in a fair and honest manner. The Company seeks competitive advantages through superior performance rather than through unethical or illegal business practices. Stealing proprietary information, possessing trade secret information that was obtained without the owners consent, or inducing such disclosures by past or present employees of other companies is prohibited. Each director, officer, and employee should endeavor to respect the rights of and deal fairly with the Companys customers, suppliers, service providers, competitors, and employees. No director, officer, or employee should take unfair advantage of anyone relating to the Companys business or operations through manipulation, concealment, or abuse of privileged information, misrepresentation of material facts, or any unfair dealing practice.
To maintain the Companys valuable reputation, compliance with the Companys quality processes and safety requirements is essential. In the context of ethics, quality requires that the Companys products and services meet reasonable customer expectations. All inspection and testing documents must be handled in accordance with all applicable regulations.
The purpose of business entertainment and gifts in a commercial setting is to create good will and sound working relationships, not to gain unfair advantage with customers. No gift or entertainment should ever be offered, given, provided, or accepted by a director, officer, or employee, family member of a director, officer, or employee, or agent relating to the individuals position with the Company unless it (1) is not a cash gift, (2) is consistent with customary business practices, (3) is not excessive in value, (4) cannot be construed as a bribe or payoff, and (5) does not violate any laws or regulations. A director or officer should discuss with the CEO or CFO, and an employee should discuss with his or her supervisor, any gifts or proposed gifts that the individual is not certain are appropriate.
The diversity of the Companys employees is a tremendous asset. The Company is firmly committed to providing equal opportunity in all aspects of employment and will not tolerate any illegal discrimination or harassment or any kind. Examples include derogatory comments based on racial or ethnic characteristics and unwelcome sexual advances.
The Company strives to provide each employee with a safe and healthful work environment. Each officer and employee has responsibility for maintaining a safe and healthy workplace for all employees by following safety and health rules and practices and reporting accidents, injuries, and unsafe equipment, practices, or conditions.
Violence and threatening behavior are not permitted. Officers and employees should report to work in a condition to perform their duties, free from the influence of illegal drugs or alcohol. The use of illegal drugs in the workplace will not be tolerated.
The Company requires honest and accurate recording and reporting of information in order to make responsible business decisions.
Many officers and employees regularly use business expense accounts, which must be documented and recorded accurately. If an officer or employee is not sure whether a certain expense is legitimate, the employee should ask his or her supervisor or the Companys controller. Rules and guidelines are available from the Accounting Department.
All of the Companys books, records, accounts, and financial statements must be maintained in reasonable detail, must appropriately reflect the Companys transactions, and must conform both to applicable legal requirements and to the Companys system of internal controls. Unrecorded or off the books funds or assets should not be maintained unless permitted by applicable law or regulation.
Business records and communications often become public, and the Company and its officers and employees in their capacity with the Company should avoid exaggeration, derogatory remarks, guesswork, or inappropriate characterizations of people and companies that can be misunderstood. This applies equally to e-mail, internal memos, and formal reports. The Companys records should always be retained or destroyed according to the Companys record retention policies. In accordance with those policies, in the event of litigation or governmental investigation, directors, officers, and employees should consult with the Companys CFO or legal counsel before taking any action because it is critical that any impropriety or possible appearance of impropriety be avoided.
Directors, officers, and employees must maintain the confidentiality of confidential information entrusted to them by the Company or its customers, suppliers, joint venture partners, or others with whom the Company is considering a business or other transaction, except when disclosure is authorized by the board of directors or an executive officer or required or mandated by laws or regulations. Confidential information includes all information that is identified or should reasonably be understood to be proprietary or trade secret, useful or helpful to competitors or harmful to the Company or its customers and suppliers if disclosed, but does not include information that has been independently developed, become publicly or widely known or made generally available through no wrongful act of directors, officers or employees or by persons who were under no confidentiality obligations. It also includes information that suppliers and customers have entrusted to the Company pursuant to an undertaking of confidentiality. The obligation to preserve confidential information continues even after the relationship with the Company ends.
All directors, officers, and employees should endeavor to protect the Companys assets and ensure their efficient use. Theft, carelessness, and waste have a direct impact on the Companys profitability. Any suspected incident of fraud or theft should be immediately reported for investigation. Company assets should be used for legitimate business purposes and should not be used for non-Company business.
The obligation to protect the Companys assets includes its proprietary information. Proprietary information includes intellectual property, such as trade secrets, patents, trademarks, and copyrights, as well as business, marketing and service plans, engineering and manufacturing ideas, designs, databases, records, salary information, and any unpublished financial data and reports. Unauthorized use or distribution of this information would violate Company policy. It could also be illegal and result in civil or even criminal penalties.
The U.S. Foreign Corrupt Practices Act prohibits giving anything of value, directly or indirectly, to officials of foreign governments or foreign political candidates in order to obtain or retain business. It is strictly prohibited to make illegal payments to government officials of any country.
In addition, the U.S. government has a number of laws and regulations regarding business gratuities that may be accepted by U.S. government personnel. The promise, offer, or delivery to an official or employee of the U.S. government of a gift, favor, or other gratuity in violation of these rules would not only violate Company policy but could also be a criminal offense. State and local governments, as well as foreign governments, may have similar rules.
All directors, officers, and employees should support the Companys goal to have full, fair, accurate, timely, and understandable disclosure in the periodic reports required to be filed by the Company with the SEC. Although most employees hold positions that are far removed from the Companys required filings with the SEC, each director, officer, and employee should promptly bring to the attention of the CEO, the CFO, or the Audit Committee, as appropriate in the circumstances, any of the following:
Any waiver of this Code for directors or executive officers may be made only by the Board of Directors or a committee of the Board. To the extent required by applicable laws, rules, and regulations, including the rules of the SEC and any stock exchange, quotation system or market on which the Companys securities are listed (the Exchange), any such waiver will be promptly disclosed to stockholders or in a Current Report on Form 8-K.
Directors and officers are encouraged to talk to the CEO, the CFO, or legal counsel, and employees are encouraged to talk to supervisors, managers, or other appropriate personnel, when in doubt about the best course of action in a particular situation. Directors, officers, and employees should report any observed illegal or unethical behavior and any perceived violations of laws, rules, regulations, or this Code to appropriate personnel. It is the policy of the Company not to allow retaliation for reports of misconduct by others made in good faith. Directors, officers, and employees are expected to cooperate in internal investigations of misconduct.
The Board of Directors shall determine, or designate appropriate persons to determine, appropriate actions to be taken in the event of violations of this Code. Such actions shall be reasonably designed to deter wrongdoing and to promote accountability for adherence to this Code and to these additional procedures, and may include written notices to the individual involved that the Board has determined that there has been a violation, censure by the Board, demotion or re-assignment of the individual involved, suspension with or without pay or benefits (as determined by the Board), and termination of the individuals employment or position. In determining the appropriate action in a particular case, the Board of Directors or such designee shall take into account all relevant information, including the nature and severity of the violation, whether the violation was a single occurrence or repeated occurrences, whether the violation appears to have been intentional or inadvertent, whether the individual in question had been advised prior to the violation as to the proper course of action, and whether or not the individual in question had committed other violations in the past.
Hythiam, Inc. (the Company) has a Code of Business Conduct and Ethics applicable to all directors and employees of the company. The Chief Executive Officer (CEO) and all senior financial officers, including the Chief Financial Officer (CFO) and principal accounting officer, are bound by the provisions set forth therein relating to ethical conduct, conflicts of interest, and compliance with law. In addition to the Code of Business Conduct and Ethics, the CEO and senior financial officers are subject to the following additional specific policies:
1. |
The CEO and all senior financial officers are responsible for full, fair, accurate, timely, and understandable disclosure in the periodic reports required to be filed by the Company with the Securities and Exchange Commission (SEC). Accordingly, it is the responsibility of the CEO and each senior financial officer promptly to bring to the attention of the Audit Committee any material information of which he or she may become aware that affects the disclosures made by the Company in its public filings or otherwise assist the Audit Committee in fulfilling their responsibilities. |
2. |
The CEO and each senior financial officer shall promptly bring to the attention of the Audit Committee any information he or she may have concerning (a) significant deficiencies in the design or operation of internal controls that could adversely affect the Companys ability to record, process, summarize, and report financial data or (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Companys financial reporting, disclosures, or internal controls. |
3. |
The CEO and each senior financial officer shall promptly bring to the attention of the Audit Committee any information he or she may have concerning any violation of this Code or the Companys Code of Business Conduct and Ethics, including any actual or apparent conflicts of interest between personal and professional relationships, involving any management or other employees who have a significant role in the Companys financial reporting, disclosures, or internal controls. |
4. |
The CEO and each senior financial officer shall promptly bring to the attention of the Audit Committee any information he or she may have concerning evidence of a material violation of the securities or other laws, rules, or regulations applicable to the Company and the operation of its business, by the Company or any agent thereof, or of violation of the Code of Business Conduct and Ethics or of these additional procedures. |
5. |
The Board of Directors shall determine, or designate appropriate persons to determine, appropriate actions to be taken in the event of violations of the Code of Business Conduct and Ethics or of these additional procedures by the CEO and the Companys senior financial officers. Such actions shall be reasonably designed to deter wrongdoing and to promote accountability for adherence to the Code of Business Conduct and Ethics and to these additional procedures, and may include written notices to the individual involved that the Board has determined that there has been a violation, censure by the Board, demotion or re-assignment of the individual involved, suspension with or without pay or benefits (as determined by the Board), and termination of the individuals employment. In determining the appropriate action in a particular case, the Board of Directors or such designee shall take into account all relevant information, including the nature and severity of the violation, whether the violation was a single occurrence or repeated occurrences, whether the violation appears to have been intentional or inadvertent, whether the individual in question had been advised prior to the violation as to the proper course of action, and whether or not the individual in question had committed other violations in the past. |
Certification of Preparation for Periodic and Annual Reports
In my role as _________________________ (title) of Hythiam, Inc., I certify that I have adhered to and advocated the following principles and responsibilities governing my professional and ethical conduct with respect to the preparation of ______________________________________ (current periodic or annual report).
To the best of my knowledge and ability:
I
provided all officers, employees, contractors, subcontractors, and agents with
information that is accurate, complete, objective, relevant, timely and
understandable.
I
complied with rules and regulations of federal, state, and local governments,
and other appropriate private and public regulatory agencies.
I
acted in good faith, responsibly, with due care, competence and diligence,
without misrepresenting material facts or allowing my independent judgment to
be subordinated.
I
respected the confidentiality of information acquired in the course of my work
except when authorized or otherwise legally obligated to disclose.
Confidential information acquired in the course of my work is not used to
personal advantage.
I
shared knowledge and maintained skills important and relevant to the needs of
the officers, employees, contractors, subcontractors, and agents.
I
proactively promoted ethical behavior as a responsible partner among my peers
in my work environment.
I achieved responsible use of and control over all assets and resources employed or entrusted to me.
Signature:
Date:
Print Name:
I, Terren S. Peizer certify that:
1. I have reviewed this annual report on Form 10-K of Hythiam, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within the entity, particularly during the period in which this report is being prepared; |
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and |
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: March 26, 2004 | /s/ TERREN S. PEIZER | |
|
||
TERREN S. PEIZER
President and Chief Executive Officer (Principal Executive Officer) |
I, Chuck Timpe, certify that:
1. I have reviewed this annual report on Form 10-K of Hythiam, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within the entity, particularly during the period in which this report is being prepared; |
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and |
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: March 26, 2004 | /s/ CHUCK TIMPE | |
|
||
Chuck Timpe
Chief Financial Officer (Principal Financial Officer) |
In connection with the Annual Report on Form 10-K of Hythiam, Inc. (the Company) for the fiscal year ended December 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Terren S. Peizer, Chief Executive Officer of the Company, certify, to the best of my knowledge and belief, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ TERREN S. PEIZER
|
March 26, 2004 |
|
TERREN S. PEIZER
Chief Executive Officer |
Date |
In connection with the Annual Report on Form 10-K of Hythiam, Inc. (the Company) for the quarter ended September 30, 2003, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Chuck Timpe, Chief Financial Officer of the Company, certify, to the best of my knowledge and belief, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ CHUCK TIMPE
|
March 26, 2004 |
|
CHUCK TIMPE
Chief Financial Officer |
Date |