x |
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
o |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
Nevada
|
87-0449967
|
(State
or Other Jurisdiction of Incorporation or Organization)
|
(I.R.S.
Employer Identification No.)
|
Title
of Each Class
|
Name
of Exchange on Which Registered
|
Common
Stock, par value $.001
|
The
NASDAQ National Market
|
PART
I.
|
||
Item
1.
|
BUSINESS.
|
1 |
Item
1A.
|
RISK
FACTORS
|
6 |
Item
1B.
|
UNRESOLVED
STAFF COMMENTS
|
10 |
Item
2.
|
PROPERTIES.
|
11 |
Item
3.
|
LEGAL
PROCEEDINGS.
|
11 |
Item
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS.
|
11 |
PART
II.
|
||
Item
5.
|
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
|
|
MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES.
|
12 | |
Item
6.
|
SELECTED
FINANCIAL DATA.
|
12 |
Item
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
|
|
RESULTS
OF OPERATIONS.
|
12 | |
Item
7A
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|
19 |
Item
8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
19 |
Item
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
|
|
AND
FINANCIAL DISCLOSURE
|
42 | |
Item
9A.
|
CONTROLS
AND PROCEDURES
|
42 |
Item
9B.
|
OTHER
INFORMATION
|
42 |
PART
III.
|
42 | |
Item
10.
|
DIRECTORS
AND EXECUTIVE OFFICERS OF THE REGISTRANT.
|
43 |
Item
11.
|
EXECUTIVE
COMPENSATION.
|
43 |
Item
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
|
43 |
Item
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS.
|
44 |
Item
14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
44 |
PART
IV.
|
||
Item
15.
|
EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
|
44 |
Patent
Name
|
Expiration
Date
|
Biodegradable
Absorption Enhancers
|
2008
|
Biodegradable
Absorption Enhancers
|
2009
|
Compositions
and Methods for Amelioration of Human Female Sexual
Dysfunction
|
2017
|
Topical
Compositions for PGE1 Delivery
|
2017
|
Topical
Compositions for Non-Steroidal Anti-Inflammatory Drug
Delivery
|
2017
|
Medicament
Dispenser
|
2019
|
Crystalline
Salts of dodecyl 2-(N, N-Dimethylamino)
|
2019
|
Topical
Compositions Containing Prostaglandin E
1
|
2019
|
CIP:
Topical Compositions Containing Prostaglandin E
1
|
2019
|
Prostaglandin
Composition and Methods of Treatment of Male Erectile
Dysfunction
|
2020
|
CIP:
Prostaglandin Composition and Methods of Treatment of Male Erectile
Dysfunction
|
2020
|
Topical
Stabilized Prostaglandin E Compound Dosage Forms
|
2023
|
Name
|
Age
*
|
Title
|
Richard
J. Berman
|
63
|
Director,
President and Chief Executive Officer
|
Vivian
H. Liu
|
44
|
Executive
Vice President and Secretary
|
Mark
Westgate
|
36
|
Vice
President and Chief Financial
Officer
|
2005
|
2004
|
2003
|
2002
|
2001
|
||||||||||||
Revenue
|
||||||||||||||||
Product
sales and royalties
|
$
|
9,702
|
$
|
9,519
|
$
|
6,206
|
$
|
63,417
|
$
|
68,089
|
||||||
Licensing
and research and development fees
|
$
|
2,389,459
|
$
|
349,850
|
$
|
104,537
|
$
|
84,611
|
0
|
|||||||
Net
Loss
|
$
|
(15,442,438
|
)
|
$
|
(17,023,648
|
)
|
$
|
(17,233,566
|
)
|
$
|
(27,641,519
|
)
|
$
|
(16,174,861
|
)
|
|
Basic
and Diluted Loss per Share
|
$
|
(0.32
|
)
|
$
|
(0.39
|
)
|
$
|
(0.60
|
)
|
$
|
(1.03
|
)
|
$
|
(0.63
|
)
|
|
Weighted
Average Common Shares Outstanding Used for Basic and Diluted Loss
per
Share
|
52,528,345
|
43,603,546
|
33,649,774
|
26,937,200
|
25,486,465
|
Balance
Sheet Data
|
December
31,
|
December
31,
|
|
December
31,
|
December
31,
|
December
31,
|
||||||||||
2005
|
2004
|
2003
|
2002
|
2001
|
||||||||||||
Total
Assets
|
$
|
13,331,943
|
$
|
20,272,661
|
$
|
23,133,679
|
$
|
14,140,127
|
$
|
27,314,713
|
||||||
Total
Long Term Liabilities
|
$
|
4,122,997
|
$
|
6,801,826
|
$
|
7,335,877
|
$
|
5,782,518
|
$
|
724,577
|
||||||
Stockholders’
Equity
|
$
|
640,354
|
$
|
11,401,285
|
$
|
12,723,408
|
$
|
3,223,492
|
$
|
24,107,865
|
Less
than
|
1
- 3
|
3
- 5
|
More
than
|
|||||||||||||
Contractual
Obligations
|
Total
|
1
year
|
years
|
years
|
5
years
|
|||||||||||
Long-term
debt *
|
$
|
6,270,000
|
$
|
3,180,000
|
$
|
3,090,000
|
$
|
0
|
$
|
0
|
||||||
Capital
lease obligations
|
241,099
|
241,099
|
0
|
0
|
||||||||||||
Operating
leases
|
102,923
|
102,923
|
102,923
|
0
|
0
|
|||||||||||
Purchase
obligations **
|
6,172,375
|
4,080,960
|
2,091,415
|
0
|
0
|
|||||||||||
Other
long-term liabilities***
|
1,648,500
|
109,900
|
329,700
|
329,700
|
879,200
|
|||||||||||
Total
|
$
|
14,434,897
|
$
|
7,714,882
|
$
|
5,614,038
|
$
|
329,700
|
$
|
879,200
|
* |
Long-term
debt consists of two notes that are convertible to common stock
at the
option of the noteholders.
|
**
|
Purchase
obligations consist of clinical research agreements that can
be cancelled
at any time with thirty days
notice.
|
*** |
Represents
the payments to be made according to a deferred compensation
agreement.
The present value of these payments
is
recorded on the balance sheet under deferred compensation
in the amount of
$1,178,197
|
March
31, 2004
|
June
30, 2004
|
September
30, 2004
|
December
31, 2004
|
|
Total
Revenues
|
$104,199
|
$189,266
|
$63,457
|
$2,447
|
Loss
from Operations
|
($3,890,187)
|
($4,045,544)
|
($4,632,220)
|
($4,736,887)
|
Net
Loss
|
($3,981,566)
|
($4,047,634)
|
($4,716,253)
|
($4,278,195)
|
Basic
& Diluted Loss
Per
Share
|
$(0.10)
|
$(0.10)
|
$(0.10)
|
$(.09)
|
March
31, 2005
|
June
30, 2005
|
September
30, 2005
|
December
31, 2005
|
|
Total
Revenues
|
$2,381
|
$2,329
|
$2,502
|
$2,391,949
|
Loss
from Operations
|
($4,564,913)
|
($4,325,914)
|
($3,134,817)
|
($3,675,629)
|
Net
Loss
|
($4,624,270)
|
($4,378,846)
|
($3,192,347)
|
($3,246,975)
|
Basic
& Diluted Loss
Per
Share
|
$(0.09)
|
$(0.10)
|
$(0.07)
|
$(0.06)
|
PAGE
|
||
Report
of Independent Registered Public Accounting Firm
|
20
|
|
Financial
Statements
|
20
|
|
Consolidated
Balance Sheets - December 31, 2005 and 2004
|
22
|
|
Consolidated
Statements of Operations and Comprehensive Loss for the years ended
December 31, 2005, 2004 and 2003
|
23
|
|
Consolidated
Statements of Changes in Stockholders' Equity for years ended December
31,
2005, 2004 and 2003
|
24
|
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2005, 2004
and
2003
|
25
|
|
Notes
to the Consolidated Financial Statements
|
26
|
|
Schedule
II - Valuation of Qualifying Accounts
|
45
|
December
31,
|
|||||||
Assets
|
2005
|
2004
|
|||||
Current
assets
|
|||||||
Cash
and cash equivalents
|
$
|
2,953,781
|
$
|
7,747,285
|
|||
Marketable
securities and short term investments
|
500,000
|
1,384,000
|
|||||
Other
receivable
|
582,440
|
-
|
|||||
Debt
issuance cost, net of accumulated amortization of $11,742
|
8,035
|
-
|
|||||
Prepaid
expenses and other current assets
|
373,935
|
1,399,514
|
|||||
Total
current assets
|
4,418,191
|
10,530,799
|
|||||
Fixed
assets, net
|
8,905,716
|
9,714,450
|
|||||
Debt
issuance cost, net of accumulated amortization of $11,742 and
$12,139
|
8,036
|
27,412
|
|||||
Total
assets
|
$
|
13,331,943
|
$
|
20,272,661
|
|||
Liabilities
and Stockholders' Equity
|
|||||||
Current
liabilities
|
|||||||
Accounts
payable and accrued expenses
|
$
|
690,263
|
$
|
1,147,840
|
|||
Payroll
related liabilities
|
1,135,671
|
277,660
|
|||||
Deferred
revenue
|
2,785,801
|
-
|
|||||
Deferred
compensation - current portion
|
55,200
|
-
|
|||||
Convertible
notes payable - current portion
|
3,000,000
|
-
|
|||||
Capital
lease obligation - current portion
|
233,827
|
644,050
|
|||||
Total
current liabilities
|
7,900,762
|
2,069,550
|
|||||
Long
term liabilities
|
|||||||
Convertible
notes payable
|
3,000,000
|
6,000,000
|
|||||
Deferred
compensation
|
1,122,997
|
568,000
|
|||||
Capital
lease obligations, net of current portion
|
-
|
233,826
|
|||||
Total
liabilities
|
12,023,759
|
8,871,376
|
|||||
Series
C 6% cumulative convertible preferred stock
|
667,830
|
-
|
|||||
Commitments
and contingincies (Note 15)
|
|||||||
Stockholders'
equity:
|
|||||||
Preferred
stock $.001 par value, 10,000,000 shares authorized,
|
|||||||
none
issued and outstanding
|
-
|
-
|
|||||
Common
stock, $.001 par value, 120,000,000 shares authorized,
|
|||||||
55,699,467
and 51,687,046 shares issued and outstanding, respectively
|
55,700
|
51,688
|
|||||
Additional
paid-in capital
|
118,281,871
|
113,604,968
|
|||||
Accumulated
other comprehensive loss
|
(9,596
|
)
|
(10,188
|
)
|
|||
Accumulated
deficit
|
(117,687,621
|
)
|
(102,245,183
|
)
|
|||
Total
stockholders' equity
|
640,354
|
11,401,285
|
|||||
Total
liabilities, convertible preferred stock
|
|||||||
and
stockholders' equity
|
$
|
13,331,943
|
$
|
20,272,661
|
For
the Year Ended
|
||||||||||
December
31,
|
||||||||||
2005
|
2004
|
2003
|
||||||||
Revenue
|
||||||||||
Royalties
|
$
|
9,702
|
$
|
9,519
|
$
|
6,206
|
||||
Licensing
and research and development fees
|
2,389,459
|
349,850
|
104,537
|
|||||||
Total
revenue
|
2,399,161
|
359,369
|
110,743
|
|||||||
Costs
and expenses
|
||||||||||
Research
and development
|
11,222,099
|
10,684,477
|
8,439,340
|
|||||||
General
and administrative
|
6,878,335
|
6,979,730
|
5,900,569
|
|||||||
Total
costs and expenses
|
18,100,434
|
17,664,207
|
14,339,909
|
|||||||
Loss
from operations
|
(15,701,273
|
)
|
(17,304,838
|
)
|
(14,229,166
|
)
|
||||
Other
income (expense)
|
||||||||||
Other
income (expense)
|
-
|
82,271
|
(152,867
|
)
|
||||||
Interest
income
|
122,071
|
85,000
|
75,574
|
|||||||
Interest
expense
|
(344,352
|
)
|
(425,128
|
)
|
(3,159,338
|
)
|
||||
Total
other expense
|
(222,281
|
)
|
(257,857
|
)
|
(3,236,631
|
)
|
||||
Loss
before benefit from income taxes
|
(15,923,554
|
)
|
(17,562,695
|
)
|
(17,465,797
|
)
|
||||
Benefit
from income taxes
|
481,116
|
539,047
|
232,231
|
|||||||
Net
loss
|
(15,442,438
|
)
|
(17,023,648
|
)
|
(17,233,566
|
)
|
||||
Deemed
dividend to preferred shareholders
|
||||||||||
from
beneficial conversion feature
|
(984,715
|
)
|
-
|
(2,942,656
|
)
|
|||||
Preferred
dividend
|
(123,326
|
)
|
-
|
(175,188
|
)
|
|||||
Net
loss applicable to common stock
|
(16,550,479
|
)
|
(17,023,648
|
)
|
(20,351,410
|
)
|
||||
Other
comprehensive loss
|
||||||||||
Foreign
currency translation adjustments
|
592
|
(13,671
|
)
|
3,348
|
||||||
Unrealized
gain (loss) on marketable securities
|
-
|
-
|
(3,646
|
)
|
||||||
Comprehensive
loss
|
$
|
(15,441,846
|
)
|
$
|
(17,037,319
|
)
|
$
|
(17,233,864
|
)
|
|
Basic
and diluted loss per share
|
$
|
(.32
|
)
|
$
|
(.39
|
)
|
$
|
(.60
|
)
|
|
Weighted
average common shares outstanding
|
||||||||||
used
for basic and diluted loss per share
|
52,528,345
|
43,603,546
|
33,649,774
|
Accumulated
other
|
|||||||||||||||||||||||||||||||
comprehensive
income (loss)
|
|||||||||||||||||||||||||||||||
Foreign
|
Unrealized
|
||||||||||||||||||||||||||||||
Common
|
Common
|
Preferred
|
Preferred
|
Additional
|
Currency
|
loss
on
|
Total
|
||||||||||||||||||||||||
Stock
|
Stock
|
Stock
|
Stock
|
Paid-In
|
Accumulated
|
Deferred
|
translation
|
marketable
|
Stockholders'
|
||||||||||||||||||||||
(Shares)
|
(Amount)
|
(Shares)
|
(Amount)
|
Capital
|
Deficit
|
Compensation
|
securities
|
Equity
|
|||||||||||||||||||||||
Balance
at January 1, 2003
|
28,293,719
|
28,294
|
-
|
-
|
71,381,751
|
(67,987,969
|
)
|
(97,562
|
)
|
135
|
(101,157
|
)
|
3,223,492
|
||||||||||||||||||
Issuance
of common stock
|
|||||||||||||||||||||||||||||||
from
private placement, net of commission paid
|
3,126,655
|
3,127
|
-
|
-
|
10,246,854
|
-
|
-
|
-
|
-
|
10,249,981
|
|||||||||||||||||||||
Issuance
of common stock
|
|||||||||||||||||||||||||||||||
upon
exercise of options and warrants
|
750,795
|
751
|
-
|
-
|
916,011
|
-
|
-
|
-
|
-
|
916,762
|
|||||||||||||||||||||
Issuance
of compensatory options and warrants to consultants
|
-
|
-
|
253,402
|
-
|
-
|
-
|
-
|
253,402
|
|||||||||||||||||||||||
Issuance
of common stock to Board of Directors
|
15,268
|
15
|
-
|
-
|
54,988
|
-
|
(35,000
|
)
|
-
|
-
|
20,003
|
||||||||||||||||||||
Stock
based compensation to employees
|
186,938
|
187
|
-
|
-
|
15,832
|
-
|
78,294
|
-
|
-
|
94,313
|
|||||||||||||||||||||
Issuance
of preferred stock with detachable warrants
|
|||||||||||||||||||||||||||||||
and
beneficial conversion feature, net of issue costs
|
-
|
-
|
800
|
1
|
7,396,623
|
-
|
-
|
-
|
-
|
7,397,424
|
|||||||||||||||||||||
Issuance
of common stock upon conversion
|
|||||||||||||||||||||||||||||||
of
preferred stock, including dividends paid in stock
|
5,170,907
|
5,171
|
(800
|
)
|
(1
|
)
|
(5,171
|
)
|
-
|
-
|
-
|
-
|
(801
|
)
|
|||||||||||||||||
Discount
on convertible notes, including beneficial
|
|||||||||||||||||||||||||||||||
conversion
features
and fair value of detachable warrants
|
-
|
-
|
-
|
-
|
2,141,417
|
-
|
-
|
-
|
-
|
2,141,417
|
|||||||||||||||||||||
Issuance
of common stock upon conversion
|
|||||||||||||||||||||||||||||||
of
convertible notes, including interest paid in stock
|
2,603,160
|
2,603
|
-
|
-
|
5,641,970
|
-
|
-
|
-
|
-
|
5,644,573
|
|||||||||||||||||||||
Stock
surrendered by officer and retired in payment of loan
|
(24,315
|
)
|
(24
|
)
|
-
|
-
|
(119,363
|
)
|
-
|
-
|
-
|
-
|
(119,387
|
)
|
|||||||||||||||||
Realized
loss on sale of securities
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
101,157
|
101,157
|
|||||||||||||||||||||
Amortization
of deferred compensation expense
|
-
|
-
|
-
|
-
|
-
|
-
|
34,936
|
-
|
-
|
34,936
|
|||||||||||||||||||||
Unrealized
loss from available-for-sale securities
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(3,646
|
)
|
(3,646
|
)
|
|||||||||||||||||||
Cumulative
translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
3,348
|
-
|
3,348
|
|||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(17,233,566
|
)
|
-
|
-
|
-
|
(17,233,566
|
)
|
|||||||||||||||||||
Balance
at December 31, 2003
|
40,123,127
|
40,124
|
-
|
-
|
97,924,314
|
($85,221,535
|
)
|
(19,332
|
)
|
$
|
3,483
|
($3,646
|
)
|
12,723,408
|
|||||||||||||||||
Issuance
of common stock
|
|||||||||||||||||||||||||||||||
from
private placement, net of commission paid
|
11,011,978
|
11,012
|
-
|
-
|
14,194,674
|
-
|
-
|
-
|
-
|
14,205,686
|
|||||||||||||||||||||
Issuance
of common stock
|
|||||||||||||||||||||||||||||||
upon
exercise of stock options and warrants
|
200,482
|
200
|
-
|
-
|
187,472
|
-
|
-
|
-
|
-
|
187,672
|
|||||||||||||||||||||
Issuance
of compensatory options and warrants to consultants
|
-
|
-
|
-
|
-
|
330,215
|
-
|
-
|
-
|
-
|
330,215
|
|||||||||||||||||||||
Issuance
of common stock in payment of interest on convertible
notes
|
130,673
|
131
|
-
|
-
|
243,202
|
-
|
-
|
-
|
-
|
243,333
|
|||||||||||||||||||||
Issuance
of common stock to employees as bonus
|
101,850
|
102
|
-
|
-
|
544,427
|
-
|
-
|
-
|
-
|
544,529
|
|||||||||||||||||||||
Issuance
of common stock in settlement of lawsuit
|
118,936
|
119
|
-
|
-
|
180,664
|
-
|
-
|
-
|
-
|
180,783
|
|||||||||||||||||||||
Amortization
of deferred compensation expense
|
-
|
-
|
-
|
-
|
-
|
-
|
19,332
|
-
|
-
|
19,332
|
|||||||||||||||||||||
Realized
loss on sale of securities
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
3,646
|
3,646
|
||||||||||||||||||||||
Cumulative
translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(13,671
|
)
|
-
|
(13,671
|
)
|
|||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(17,023,648
|
)
|
-
|
-
|
-
|
(17,023,648
|
)
|
|||||||||||||||||||
Balance
at December 31, 2004
|
51,687,046
|
51,688
|
-
|
$
|
0
|
$
|
113,604,968
|
($102,245,183
|
) |
$
|
0
|
($10,188
|
)
|
$
|
0
|
$
|
11,401,285
|
||||||||||||||
Issuance
of common stock
|
|||||||||||||||||||||||||||||||
upon
exercise of stock options and warrants
|
578,286
|
578
|
-
|
-
|
833,848
|
-
|
-
|
-
|
-
|
834,426
|
|||||||||||||||||||||
Issuance
of compensatory options and warrants to consultants
|
-
|
-
|
-
|
-
|
82,210
|
-
|
-
|
-
|
-
|
82,210
|
|||||||||||||||||||||
Issuance
of common stock in payment of interest on convertible
notes
|
218,545
|
218
|
-
|
-
|
303,948
|
-
|
-
|
-
|
-
|
304,166
|
|||||||||||||||||||||
Amortization
of beneficial conversion feature, discount and issuance
|
|||||||||||||||||||||||||||||||
costs
related to preferred stock
|
-
|
-
|
-
|
-
|
(1,032,391
|
)
|
-
|
-
|
-
|
-
|
(1,032,391
|
)
|
|||||||||||||||||||
Issuance
of common stock upon conversion
|
|||||||||||||||||||||||||||||||
of
preferred stock, including dividends paid in stock
|
3,215,590
|
3,216
|
-
|
-
|
3,479,758
|
-
|
-
|
-
|
-
|
3,482,974
|
|||||||||||||||||||||
Discount
on preferred stock, including beneficial conversion
|
|||||||||||||||||||||||||||||||
features
and fair value of detachable warrants
|
-
|
-
|
-
|
-
|
1,009,530
|
1,009,530
|
|||||||||||||||||||||||||
Cumulative
translation adjustment
|
592
|
592
|
|||||||||||||||||||||||||||||
Net
loss
|
(15,442,438
|
)
|
(15,442,438
|
)
|
|||||||||||||||||||||||||||
Balance
at December 31, 2005
|
55,699,467
|
55,700
|
-
|
-
|
118,281,871
|
(117,687,621
|
)
|
-
|
(9,596
|
)
|
-
|
640,354
|
For
the Year Ended
|
||||||||||
December
31,
|
||||||||||
2005
|
2004
|
2003
|
||||||||
Cash
flows from operating activities
|
||||||||||
Net
loss
|
$
|
(15,442,438
|
)
|
$
|
(17,023,648
|
)
|
$
|
(17,233,566
|
)
|
|
Adjustments
to reconcile net loss to net cash
|
||||||||||
used
in operating activities
|
||||||||||
Depreciation
and amortization
|
953,051
|
996,043
|
1,250,667
|
|||||||
Non-cash
interest, amortization of debt discount and
|
||||||||||
deferred
financing costs
|
315,512
|
254,682
|
3,166,072
|
|||||||
Non-cash
compensation expense
|
82,210
|
1,074,859
|
408,636
|
|||||||
Non-cash
insurance expense (income)
|
-
|
-
|
3,501
|
|||||||
Net
loss on sale of marketable securities
|
-
|
8,421
|
94,824
|
|||||||
Loss
on disposal of property and equipment
|
16,371
|
18,982
|
114,542
|
|||||||
Increase
in other receivable
|
(582,440
|
)
|
-
|
-
|
||||||
Decrease
(increase) in prepaid expense and other assets
|
1,025,579
|
82,912
|
(1,109,109
|
)
|
||||||
Increase
(decrease) in deferred revenue
|
2,785,801
|
(128,708
|
)
|
128,708
|
||||||
Increase
(decrease) in payroll related liabilities
|
858,011
|
(995,643
|
)
|
918,311
|
||||||
Increase
in deferred compensation
|
610,199
|
110,000
|
108,000
|
|||||||
Increase
(decrease) in accounts payable and accrued expenses
|
(457,577
|
)
|
374,318
|
(3,395,927
|
)
|
|||||
Net
cash used in operating activities
|
(9,835,721
|
)
|
(15,227,782
|
)
|
(15,545,341
|
)
|
||||
Cash
flows from investing activities
|
||||||||||
Capital
expenditures
|
(160,694
|
)
|
(145,809
|
)
|
(441,297
|
)
|
||||
Proceeds
from collection of note receivable
|
-
|
48,341
|
198,348
|
|||||||
Purchases
of short term investments and marketable securities
|
(1,500,000
|
)
|
(1,897,584
|
)
|
(504,850
|
)
|
||||
Proceeds
from sale/redemption of certificates of deposits,
|
||||||||||
marketable
securities and short term investments
|
2,384,000
|
1,010,079
|
545,200
|
|||||||
Net
cash provided by (used in) investing activities
|
723,306
|
(984,973
|
)
|
(202,599
|
)
|
|||||
Cash
flows from financing activities
|
||||||||||
Issuance
of common stock, net of offering costs
|
-
|
14,205,686
|
10,869,392
|
|||||||
Proceeds
from exercise of stock options and warrants
|
834,426
|
187,672
|
297,349
|
|||||||
Issuance
of preferred stock, net of offering costs
|
4,219,969
|
-
|
7,396,623
|
|||||||
Redemption
of preferred stock
|
(92,027
|
)
|
-
|
-
|
||||||
Issuance
of notes payable, net of debt issue costs
|
-
|
-
|
7,510,445
|
|||||||
Repayment
of notes payable
|
-
|
-
|
(950,000
|
)
|
||||||
Proceeds
from capital lease financing for equipment
|
-
|
-
|
738,731
|
|||||||
Principal
payments on capital lease obligations
|
(644,049
|
)
|
(898,861
|
)
|
(673,883
|
)
|
||||
Net
cash provided by financing activities
|
4,318,319
|
13,494,497
|
25,188,657
|
|||||||
Effect
of foreign exchange on cash
|
592
|
(13,671
|
)
|
3,348
|
||||||
Net
(decrease) increase in cash and cash equivalents
|
(4,793,504
|
)
|
(2,731,929
|
)
|
9,444,065
|
|||||
Cash
and cash equivalents
|
||||||||||
Beginning
of year
|
7,747,285
|
10,479,214
|
1,035,149
|
|||||||
End
of year
|
$
|
2,953,781
|
$
|
7,747,285
|
$
|
10,479,214
|
||||
Cash
paid for interest
|
$
|
40,185
|
$
|
120,962
|
$
|
142,850
|
||||
Supplemental
disclosure of non-cash investing and financing activities:
|
||||||||||
Property
and equipment acquired through capital lease obligations
|
$
|
-
|
$
|
-
|
$
|
738,731
|
||||
Conversion
of debt to common stock
|
-
|
-
|
5,600,000
|
|||||||
Payment
of interest in common stock
|
304,166
|
243,333
|
275,448
|
|||||||
Conversion
of preferred stock to common stock
|
3,359,648
|
-
|
2,019,826
|
|||||||
Preferred
stock dividend paid in common stock
|
123,326
|
-
|
175,188
|
|||||||
Amortization
of debt discount
|
-
|
-
|
2,811,110
|
|||||||
Deemed
dividend to preferred shareholders
|
984,715
|
-
|
2,942,656
|
|||||||
Deemed
dividend to warrant holders
|
-
|
-
|
120,717
|
|||||||
Repayment
of officer loan in stock
|
-
|
-
|
119,387
|
1.
|
Organization
and Basis of Presentation
|
2. |
Summary
of Significant Accounting
Principles
|
For
the year ended
|
||||||||||
2005
|
2004
|
2003
|
||||||||
Net
loss applicable to common stock, as reported
|
$
|
(16,550,479
|
)
|
$
|
(17,023,648
|
)
|
$
|
(20,351,410
|
)
|
|
Add:
Stock-based compensation expense included
|
||||||||||
in
reported net loss
|
82,210
|
355,800
|
408,636
|
|||||||
Deduct:
Total stock-based compensation expense determined
|
||||||||||
under
fair-value based method for all awards
|
(1,147,979
|
)
|
(1,672,545
|
)
|
(2,211,685
|
)
|
||||
Proforma
net loss applicable to common stock
|
$
|
(17,616,248
|
)
|
$
|
(18,340,393
|
)
|
$
|
(22,154,459
|
)
|
|
Basic
and diluted loss per share:
|
||||||||||
As
reported
|
$
|
(0.32
|
)
|
$
|
(0.39
|
)
|
$
|
(0.60
|
)
|
|
Proforma
|
$
|
(0.34
|
)
|
$
|
(0.42
|
)
|
$
|
(0.66
|
)
|
3. |
Licensing
and Research and Development
Agreements
|
4. |
Fixed
Assets
|
2005
|
2004
|
||||||
Land
|
363,909
|
363,909
|
|||||
Building
|
7,425,540
|
7,457,791
|
|||||
Machinery
and equipment
|
2,640,731
|
993,385
|
|||||
Capital
lease - Equipment
|
1,310,815
|
2,861,335
|
|||||
Computer
software
|
596,605
|
565,158
|
|||||
Furniture
and fixtures
|
342,094
|
342,724
|
|||||
Leasehold
improvements
|
640,322
|
637,907
|
|||||
13,320,016
|
13,222,209
|
||||||
Less:
accumulated depreciation
|
(4,414,300
|
)
|
(3,507,759
|
)
|
|||
$
|
8,905,716
|
$
|
9,714,450
|
5. |
Deferred
Co
mpensation
|
6. |
Convertible
Notes Payable
|
7. |
Line
of Credit
|
8. |
Stock
Options
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||
Weighted
Average
|
||||||||||||||||
Range
of
|
Number
|
Remaining
|
Weighted
Average
|
Number
|
Weighted
Average
|
|||||||||||
Exercise
Prices
|
Outstanding
|
Contractual
Life
|
Exercise
Price
|
Exercisable
|
Exercise
Price
|
|||||||||||
$
.55 - 1.85
|
1,600,630
|
7.63
years
|
$
|
1.05
|
1,162,980
|
$
|
1.02
|
|||||||||
2.00
- 3.99
|
1,703,550
|
2.72
years
|
2.42
|
1,681,050
|
2.42
|
|||||||||||
4.00
- 5.50
|
1,602,800
|
4.84
years
|
4.21
|
1,487,800
|
4.16
|
|||||||||||
7.00
- 8.00
|
15,000
|
4.40
years
|
8.00
|
15,000
|
8.00
|
|||||||||||
12.00
- 16.25
|
96,900
|
4.83
years
|
15.79
|
96,900
|
15.79
|
|||||||||||
5,018,880
|
$
|
2.83
|
4,443,730
|
$
|
2.94
|
Weighted
|
|||||||
Average
|
|||||||
Number
of
|
Exercise
|
||||||
Shares
|
Price
|
||||||
Outstanding
at December 31, 2002
|
4,750,755
|
$
|
2.92
|
||||
Granted
|
1,110,350
|
2.80
|
|||||
Exercised
|
(326,074
|
)
|
0.88
|
||||
Cancelled
|
(120,414
|
)
|
6.37
|
||||
Outstanding
at December 31, 2003
|
5,414,617
|
$
|
2.94
|
||||
Granted
|
731,150
|
2.41
|
|||||
Exercised
|
(192,986
|
)
|
0.90
|
||||
Cancelled
|
(737,700
|
)
|
3.22
|
||||
Outstanding
at December 31, 2004
|
5,215,081
|
$
|
2.91
|
||||
Granted
|
400,650
|
1.03
|
|||||
Exercised
|
(106,400
|
)
|
1.08
|
||||
Cancelled
|
(490,451
|
)
|
2.62
|
||||
Outstanding
at December 31, 2005
|
5,018,880
|
$
|
2.83
|
||||
Exercisable
at December 31, 2005
|
4,443,730
|
$
|
2.94
|
||||
Exercisable
at December 31, 2004
|
3,975,628
|
$
|
2.93
|
||||
Exercisable
at December 31, 2003
|
4,269,617
|
$
|
2.92
|
||||
Options
available for grant at December 31, 2005
|
1,257,773
|
2005
|
2004
|
2003
|
||||||||
Dividend
yield
|
0.00
|
%
|
0.00
|
%
|
0.00
|
%
|
||||
Risk-free
yields
|
4.15
|
%
|
1.35%
- 4.58
|
%
|
1.35%
- 4.58
|
%
|
||||
Expected
volatility
|
105
|
%
|
100
|
%
|
100
|
%
|
||||
Expected
option life
|
6
years
|
1
- 10 years
|
1
- 10 years
|
9. |
Common
Stock
|
10. |
Series
C 6% Cumulative Convertible Preferred
Stock
|
11. |
Stockholder
Rights Plan
|
12. |
Warrants
|
Weighted
|
|||||||
Common
Shares
|
Average
|
||||||
Issuable
upon
|
Exercise
|
||||||
Exercise
|
Price
|
||||||
Outstanding
at January 1, 2003
|
2,044,908
|
5.03
|
|||||
Issued
|
5,959,990
|
2.10
|
|||||
Redeemed
|
(424,811
|
)
|
3.96
|
||||
Cancelled
|
(307,826
|
)
|
14.37
|
||||
Outstanding
at December 31, 2003
|
7,272,261
|
2.32
|
|||||
Issued
|
5,128,496
|
1.86
|
|||||
Redeemed
|
(7,500
|
)
|
1.94
|
||||
Cancelled
|
(956,566
|
)
|
3.67
|
||||
Outstanding
at December 31, 2004
|
11,436,691
|
1.91
|
|||||
Issued
|
1,188,938
|
1.43
|
|||||
Redeemed
|
(471,883
|
)
|
1.53
|
||||
Cancelled
|
(1,123,196
|
)
|
1.99
|
||||
Outstanding
at December 31, 2005
|
11,030,550
|
1.83
|
13. |
Income
Taxes
|
For
the years ended
|
||||||||||
December
31,
|
||||||||||
2005
|
2004
|
2003
|
||||||||
Fedral
statutory tax rate
|
(35
|
%)
|
(35
|
%)
|
(35
|
%)
|
||||
State
taxes, net of federal benefit
|
(6
|
%)
|
(6
|
%)
|
(6
|
%)
|
||||
Valuation
allowance
|
41
|
%
|
41
|
%
|
41
|
%
|
||||
Sale
of state net operating losses
|
(3.12
|
%)
|
(3.16
|
%)
|
(1.33
|
%)
|
||||
Provision
(benefit) for income taxes
|
(3.12
|
%)
|
(3.16
|
%)
|
(1.33
|
%)
|
14. |
Restructuring
|
15. |
Commitments
and Contingencies
|
Operating
|
Capital
|
||||||
2006
|
117,521
|
241,099
|
|||||
2007
|
19,848
|
||||||
2008
|
11,578
|
-
|
|||||
Total
minimum lease payments
|
$
|
148,947
|
241,099
|
||||
Less:
amount representing interest
|
(7,272
|
)
|
|||||
Present
value of future minimum lease payments
|
233,827
|
||||||
Less:
current portion
|
(233,827
|
)
|
|||||
Capital
lease obligations, net of current portion
|
$
|
-
|
16. |
Segment
and Geographic Information
|
17. |
Subsequent
Event
|
(a)
|
(b)
|
(c)
|
|
Plan
category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
|
Weighted-average
exercise price of outstanding options, warrants and rights
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column (a))
|
Equity
compensation plans approved by security holders
|
5,018,880
(1)
|
$2.83
|
1,257,773
(2) (3)
|
Equity
compensation plans not approved by security holders
|
--
|
--
|
--
|
Total
|
5,018,880
|
$2.83
|
1,257,773
|
(a) |
1.
Financial
Statements
:
|
Description
|
Balance
at
Beginning
of
Year
|
Charged
to
Costs
and
Expenses
|
Charged
to
Other
Accounts
|
Deductions
|
Balance
at
End
of Year
|
|||||||||||
Year
ended December 31, 2005
|
||||||||||||||||
Valuation
allowance - deferred tax asset
|
$
|
28,520,370
|
$
|
4,339,302
|
--
|
--
|
$
|
32,859,672
|
||||||||
Year
ended December 31, 2004
|
||||||||||||||||
Valuation
allowance - deferred tax asset
|
$
|
23,098,077
|
$
|
5,422,293
|
--
|
--
|
$
|
28,520,370
|
||||||||
Year
ended December 31, 2003
|
||||||||||||||||
Valuation
allowance - deferred tax asset
|
$
|
17,901,534
|
$
|
5,196,543
|
--
|
--
|
$
|
23,098,077
|
EXHIBITS
NO.
|
DESCRIPTION
|
3.1
|
Amended
and Restated Articles of Incorporation of the Company (incorporated
herein
by reference to Exhibit 2.1 filed with the Company's Form 10-SB filed
with
the Securities and Exchange Commission on March 14,
1997).
|
3.2
|
Amended
and Restated By-laws of the Company (incorporated herein by reference
to
Exhibit 3.1 to the Company’s Form 10-Q filed with the Securities and
Exchange Commission on May 14, 2003).
|
3.3
|
Certificate
of Amendment to Articles of Incorporation of the Company, dated June
22,
2000 (incorporated herein by reference to Exhibit 3.2 to the Company’s
Form 10-K filed with the Securities and Exchange Commission on March
31,
2003).
|
3.4
|
Certificate
of Amendment to the Company’s Articles of Incorporation, dated June 14,
2005.
|
3.5
|
Certificate
of Designation of the Company’s Series C 6% Cumulative Convertible
Preferred Stock (incorporated herein by reference to Exhibit 4.2
to the
Company’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on May 19, 2005).
|
4.1
|
Form
of Common Stock Certificate (incorporated herein by reference to
Exhibit
3.1 filed with the Company's Form 10-SB filed with the Securities
and
Exchange Commission on March 14, 1997).
|
4.2
|
Rights
Agreement and form of Rights Certificate (incorporated herein by
reference
to Exhibit 4 to our Current Report on Form 8-K filed with the Commission
on April 10, 2000).
|
4.3
|
Certificate
of Designation of Series A Junior Participating Preferred Stock
(incorporated herein by reference to Exhibit 4 to our Current Report
on
Form 8-K filed with the Commission on April 10,
2000).
|
4.4
|
Certificate
of Designation of the Company's Series B 8% Cumulative Convertible
Preferred Stock (incorporated herein by reference to Exhibit 4.1
to the
Company’s Form 10-Q filed with the Securities and Exchange Commission on
May 14, 2003).
|
4.5
|
Form
of Warrant dated April 21, 2003 (incorporated herein by reference
to
Exhibit 4.2 to the Company’s Form 10-Q filed with the Securities and
Exchange Commission on May 14, 2003).
|
4.6
|
Form
of Common Stock Purchase Warrant dated July 2, 2003 (incorporated
herein
by reference to Exhibit 4.3 to the Company’s Registration Statement on
Form S-3 filed with the Securities and Exchange Commission on July
17,
2003).
|
4.7
|
Form
of Warrant dated June 18, 2004 (incorporated herein by reference
to
Exhibit 4.1 to the Company’s Form 8-K filed with the Securities and
Exchange Commission on June 25, 2004).
|
4.8
|
Form
of Common Stock Purchase Warrant A, dated December 17, 2004 (incorporated
herein by reference to Exhibit 4.1 to the Company’s Current Report on Form
8-K filed with the Securities and Exchange Commission on December
23,
2004).
|
4.9
|
Form
of Common Stock Purchase Warrant B, dated December 17, 2004 (incorporated
herein by reference to Exhibit 4.2 to the Company’s Current Report on Form
8-K filed with the Securities and Exchange Commission on December
23,
2004).
|
4.10
|
Form
of Warrant, dated May 17, 2005 (incorporated herein by reference
to
Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the
Securities and Exchange Commission on May 19, 2005).
|
4.11
|
Form
of Warrant, dated January 23, 2006 (incorporated herein by reference
to
Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the
Securities and Exchange Commission on January 27,
2006).
|
10.1*
|
Amended
and Restated NexMed, Inc. Stock Option and Long-Term Incentive
Compensation Plan (incorporated herein by reference to Exhibit 10.1
filed
with the Company's Form 10-Q filed with the Securities and Exchange
Commission on May 15, 2001).
|
10.2*
|
The
NexMed, Inc. Recognition and Retention Stock Incentive Plan (incorporated
herein by reference to Exhibit 99.1 filed with the Company's Form
8-K
filed with the Securities and Exchange Commission on May 28,
2004).
|
10.3*
|
Form
of Agreement dated November 15, 1995 between NexMed, Inc. and each
of Y.
Joseph Mo, Ph.D., Vivian H. Liu and Gilbert S. Banker, Ph.D, which
are
collectively commonly referred to by NexMed, Inc. as the Non-Qualified
Performance Incentive Program (filed as Exhibit 4.2 to the Company’s
Registration Statement on Form 8-A filed with the Securities and
Exchange
Commission on December 22, 1999, including any amendment or report
filed
for the purpose of updating such information, and incorporated herein
by
reference).
|
10.4
|
License
Agreement dated March 22, 1999 between NexMed International Limited
and
Vergemont International Limited (incorporated herein by reference
to
Exhibit 10.7 of the Company’s Form 10-KSB filed with the Securities and
Exchange Commission on March 16, 2000).
|
10.5*
|
The
NexMed, Inc. Non-Qualified Stock Option Plan (incorporated herein
by
reference to Exhibit 6.6 filed with the Company's Form 10-SB/A filed
with
the Securities and Exchange Commission on June 5,
1997).
|
10.6*
|
Employment
Agreement dated February 26, 2002 by and between NexMed, Inc. and
Dr. Y.
Joseph Mo (incorporated herein by reference to Exhibit 10.7 of the
Company's Form 10-K filed with the Securities and Exchange Commission
on
March 29, 2002).
|
10.7
|
Letter
Agreement dated January 2, 2002, by and among NexMed, Inc. and General
Electric Capital Corporation (Incorporated herein by reference to
Exhibit
10.8 of the Company's Form 10-K filed with the Securities and Exchange
Commission on March 29, 2002).
|
10.8
|
Registration
Rights Agreement between the Company and The Tailwind Fund Ltd. and
Solomon Strategic Holdings, Inc. dated June 11, 2002 (incorporated
herein
by reference to Exhibit 10.2 to the Company's Form 10-Q filed with
the
Securities and
Exchange
Commission on August 14, 2002).
|
10.9
|
Mortgage,
Security Agreement and Assignment of Leases and Rents by NexMed (U.S.A.),
Inc., a wholly owned subsidiary of the Company, in favor of The Tailwind
Fund Ltd. and Solomon Strategic Holdings, Inc. dated June 11, 2002
(incorporated herein by reference to Exhibit 10.4 to the Company's
Form
10-Q filed with the Securities and Exchange Commission on August
14,
2002)
|
10.10
|
Investor
Rights Agreement, dated as of April 21, 2003, between the Company
and the
Purchasers identified on Schedule 1 to the Investor Rights Agreement
(incorporated herein by reference to Exhibit 10.2 to the Company’s Form
10-Q filed with the Securities and Exchange Commission on May 14,
2003).
|
10.11
|
Investor
Rights Agreement, dated as of July 2, 2003, between the Company and
the
Purchasers identified on Schedule 1 to the Investor Rights Agreement
(incorporated herein by reference to Exhibit 10.2 to the Company’s
Registration Statement on Form S-3 filed with the Securities and
Exchange
Commission on July 17, 2003).
|
10.12
|
Letter
Agreement dated July 12, 2003, between NexMed, Inc. and General Electric
Capital Corporation (incorporated herein by reference to Exhibit
10.1 to
the Company's Form 10-Q filed with the Securities and Exchange Commission
on August 12, 2003).
|
10.13*
|
Amendment
dated September 26, 2003 to Employment Agreement by and
between
Dr. Y. Joseph Mo and NexMed, Inc. dated February 26, 2002 (incorporated
herein by reference to Exhibit 10.4 to the Company's Form 10-Q filed
with
the Securities and Exchange Commission on November 12,
2003).
|
10.14
|
Registration
Rights Agreement, dated as of December 12, 2003, between the Company
and
the Purchasers named therein (incorporated herein by reference to
Exhibit
10.2 to the Company’s Registration Statement on Form S-3 filed with the
Securities and Exchange Commission on January 13, 2004).
|
10.15
|
Form
of 5% Convertible Note due May 31, 2007 (incorporated herein by reference
to Exhibit 10.3 to the Company’s Registration Statement on Form S-3 filed
with the Securities and Exchange Commission on January 13,
2004).
|
10.16
|
First
Amendment of Mortgage, Security Agreement and Assignment of Leases
and
Rents by NexMed (U.S.A.), Inc., in favor of The Tail Wind Fund Ltd.
and
Solomon Strategic Holdings, Inc., dated as of December 12, 2003
(incorporated herein by reference to Exhibit 10.4 to the Company’s
Registration Statement on Form S-3 filed with the Securities and
Exchange
Commission on January 13, 2004).
|
10.17
|
Subsidiary
Guaranty by NexMed (U.S.A.), Inc., a wholly owned subsidiary of the
Company, in favor of The Tailwind Fund Ltd. and Solomon Strategic
Holdings, Inc. dated December 12, 2003 (incorporated herein by reference
to Exhibit 10.28 to the Company’s Form 10-K filed with the Securities and
Exchange Commission on March 4,
2004).
|
10.18
|
Common
Stock and Warrant Purchase Agreement, dated as of June 18, 2004,
between
NexMed, Inc. and the Purchases set forth on Schedule 1 thereto
(incorporated herein by reference to Exhibit 10.1 to the Company’s Form
8-K filed with the Securities and Exchange Commission on June 25,
2004).
|
10.19
|
Investor
Rights Agreement, dated as of June 18, 2004, between the Company
and the
Purchasers identified on Schedule 1 thereto (incorporated herein
by
reference to Exhibit 10.2 to the Company’s Form 8-K filed with the
Securities and Exchange Commission on June 25, 2004).
|
10.20
|
License,
Supply and Distribution Agreement between the Company and Schering
AG,
Germany, dated July 1, 2004 (incorporated herein by reference to
Exhibit
10.1 to the Company’s Form 10-Q filed with the Securities and Exchange
Commission on November 9, 2004).
|
10.21*
|
Stock
Option Grant Agreement between the Company and Leonard A. Oppenheim
dated
November 1, 2004 (incorporated herein by reference to Exhibit 10.2
to the
Company’s Form 10-Q filed with the Securities and Exchange Commission on
November 9, 2004).
|
10.22*
|
Form
of Stock Option Grant Agreement between the Company and its Directors
(incorporated herein by reference to Exhibit 10.29 of the Company’s Form
10-K filed with the Securities and Exchange Commission on March 16,
2006).
|
10..23
|
Common
Stock and Warrant Purchase Agreement, dated as of December 17, 2004,
between the Company and the Purchasers named therein (incorporated
herein
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed with the Securities and Exchange Commission on December 23,
2004).
|
10.24
|
Investor
Rights Agreement, dated as of December 17, 2004, between the Company
and
the Purchasers named therein (incorporated herein by reference to
Exhibit
10.2 to our Current Report on Form 8-K filed with the Securities
and
Exchange Commission on December 23, 2004).
|
10.25
|
Preferred
Stock and Warrant Purchase Agreement, dated as of May 16, 2005, between
the Company and the Purchasers named therein (incorporated herein
by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed with the Securities and Exchange Commission on May 19,
2005).
|
10.26
|
Investor
Rights Agreement, dated as of May 16, 2005, between the Company and
the
Purchasers named therein (incorporated herein by reference to Exhibit
10.2
to the Company’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on December 23, 2004).
|
10.27+
|
License
Agreement, dated September 13, 2005, between NexMed, Inc., NexMed
International Limited and Novartis International Pharmaceutical
Ltd.(incorporated herein by reference to Exhibit 99.1 to the Company’s
Current Report on Form 8-K filed with the Securities and Exchange
Commission on September 15, 2005).
|
10.28
|
Common
Stock and Warrant Purchase Agreement, dated as of January 23, 2006,
between the Company and the Purchasers named therein (incorporated
herein
by reference to Exhibit 10.1 to our Current Report on Form 8-K filed
with
the Securities and Exchange Commission on January 27,
2006).
|
10.29
|
Investor
Rights Agreement, dated as of January 23, 2006, between the Company
and
the Purchasers named therein( (incorporated herein by reference to
Exhibit
10.2 to our Current Report on Form 8-K filed with the Securities
and
Exchange Commission on January 27, 2006).
|
10.30*
|
Employment
Agreement dated December 21, 2005 by and between NexMed, Inc. and
Vivian
H. Liu.
|
10.31*
|
Employment
Agreement dated December 21, 2005 by and between NexMed, Inc. and
Mark
Westgate.
|
21
|
Subsidiaries.
|
23
|
Consent
of PricewaterhouseCoopers LLP, independent registered public accounting
firm.
|
31.1
|
Chief
Executive Officer's Certificate, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
31.2
|
Chief
Financial Officer's Certificate, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
32.1
|
Chief
Executive Officer's Certificate, pursuant to 18 U.S.C. Section 1350,
as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
32.2
|
Chief
Financial Officer's Certificate, pursuant to 18 U.S.C. Section 1350,
as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
· |
*Management
compensatory plan or arrangement required to be filed as an exhibit
pursuant to Item 15(c) of Form 10-K.
|
· |
+
Portions of this exhibit have been omitted pursuant to a request
for
confidential treatment with the Securities and Exchange Commission.
Such
portions have been filed separately with the Securities and Exchange
Commission.
|
|
|
|
Dated:
March 15, 2006
|
By: |
/s/
Richard J. Berman
|
Richard J. Berman |
||
President
and Chief Executive Officer
|
SIGNATURE
|
TITLE
|
DATE
|
/s/
Richard J. Berman
RICHARD
J. BERMAN
|
Director,
President and Chief Executive Officer
|
March
15, 2006
|
/s/
Mark Westgate
MARK
WESTGATE
|
Vice
President, Chief Financial Officer and principal accounting
officer
|
March
15, 2006
|
/s/
Y. Joseph Mo
Y.
JOSEPH MO
|
Chairman
of the Board of Directors
|
March
15, 2006
|
/s/
Arthur D. Emil
ARTHUR
D. EMIL
|
Director
|
March
15, 2006
|
/s/
Sami A. Hashim
SAMI
A. HASHIM
|
Director
|
March
15, 2006
|
/s/
Leonard A. Oppenheim
LEONARD
A. OPPENHEIM
|
Director
|
March
15, 2006
|
/s/
Martin Wade III
MARTIN
WADE III
|
Director
|
March
15, 2006
|
EXHIBITS
NO.
|
DESCRIPTION
|
3.4
|
Certificate
of Amendment to the Company’s Articles of Incorporation, dated June 14,
2005
|
10.30*
|
Employment
Agreement dated December 21, 2005 by and between NexMed, Inc. and
Vivian
H. Liu.
|
10.31*
|
Employment
Agreement dated December 21, 2005 by and between NexMed, Inc. and
Mark
Westgate.
|
21
|
Subsidiaries.
|
23
|
Consent
of PricewaterhouseCoopers LLP, independent registered public accounting
firm.
|
31.1
|
Chief
Executive Officer's Certificate, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
31.2
|
Chief
Financial Officer's Certificate, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
32.1
|
Chief
Executive Officer's Certificate, pursuant to 18 U.S.C. Section 1350,
as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
32.2
|
Chief
Financial Officer's Certificate, pursuant to 18 U.S.C. Section 1350,
as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
1. |
Term
of Employment
.
Subject to earlier termination in accordance with the provisions
of
Section 6 of this Agreement, Executive shall be employed by the Company
pursuant to the terms of this Agreement for a period commencing on
December 15, 2005 (the "Effective Date") and ending on December 15,
2008
(the "Expiration Date");
provided
,
however
,
that
,
the term of employment under this Agreement (the "Employment Term")
shall
be automatically extended for one additional year unless and until
either
party gives notice to the other, at least 60 days before the Expiration
Date, that the Employment Term should not be automatically
extended.
|
2. |
Position
.
|
(a) |
During
the Employment Term, Executive shall be employed as an Executive
Vice
President of the Company, and shall have such duties, authority,
and
responsibility as are commensurate with her position, subject to
the
direction of the Company's Board of Directors (the "Board"). Executive
shall initially have the title of Executive Vice President and Acting
Chief Executive Officer of the
Company.
|
(b) |
During
the Employment Term, Executive shall devote all of her business time
and
attention to the performance of her duties hereunder faithfully and
to the
best of her abilities and shall not undertake employment with, or
participate in, the conduct of the business affairs of any other
person,
corporation, or entity;
provided
,
that
,
nothing shall preclude Executive from (i) with the prior written
approval
of the Board, serving in due course as a director, trustee or member
of a
committee of any organization or (ii) participating in the affairs
of any
recognized charitable organizations, or in any community affairs,
of
Executive's choice.
|
(c) |
Executive's
duties hereunder shall be performed for the Company worldwide, with
particular emphasis in the Company's headquarters in East Windsor,
New
Jersey.
|
3. |
Compensation
.
|
(a) |
Base
Salary
.
During the Employment Term, the Company shall pay Executive a base
salary,
subject to increase at the discretion of the Board of Directors of
the
Company (the "Board"), at the annual rate of
$
200,000
(the "Base Salary"), payable in regular installments in accordance
with
the Company's usual payroll
practices.
|
(b) |
Bonus
.
With respect to each calendar year during the Employment Term, Executive
shall be eligible to earn an annual bonus award (the "Bonus"). The
amount
of the Bonus shall be determined by the Board, or the Compensation
Committee of the Board (the "Compensation Committee"), in its sole
discretion, based upon the achievement by the Company of objective
financial targets established and determined by the Board or the
Compensation Committee in consultation with Executive no later than
the
end of the first month of such calendar year. The Bonus in respect
of each
calendar year in the Employment Term shall be paid as promptly as
practicable following the delivery of the Company's audited financial
statements for such year or, if later, by April 30 of the calendar
year
following such year. Unless otherwise stated herein, the Bonus shall
not
accrue until the date on which it is paid, and Executive must be
employed
on the date the Bonus is paid in order to receive the
Bonus.
|
(c) |
Stock
Option Grants
.
|
(i) |
On
December 15, 2005, the Compensation Committee approved a grant to
Executive of an option to purchase an aggregate of 180,000 shares
of the
Company's common stock (the "Option") based on the closing price
of the
Company’s Common Stock on December 14, 2005, of ninety-two cents ($.92)
per share. The Option shall vest in three equal installments (33.33%
of
the Stock Option Shares, which represents 60,000 Stock Option Shares)
on
December 31, 2006, December 31, 2007, and December 31, 2008, respectively,
assuming continuous and uninterrupted employment until such dates.
The
Company will provide the Executive the ability to perform a cashless
exercise of all Stock Options, in accordance with the vesting
schedule.
|
(ii) |
The
Option shall be subject to The NexMed, Inc. Stock Option and Long-Term
Incentive Compensation Plan (the "Option Plan") and the applicable
stock
option agreement.
|
(iii) |
In
addition to the foregoing, the Compensation Committee may recommend
to the
Board that additional stock options be granted to Executive in accordance
with the terms and subject to the conditions of the Option
Plan.
|
(iv) |
All
of Executive's outstanding but unvested stock options shall vest
immediately upon the occurrence of a Change in Control (as defined
in
Appendix A hereto).
|
4. |
Employee
Benefits
.
During the Employment Term, Executive shall be eligible for inclusion,
to
the extent permitted by law, as a full-time employee of the Company
or any
of its subsidiaries, in any and all of the following plans, programs,
and
policies in effect at the time: (i) pension, profit sharing, savings,
and
other retirement plans and programs, (ii) life and health (medical,
dental, hospitalization, short-term and long-term disability) insurance
plans and programs, (iii) stock option and stock purchase plans and
programs, (iv) accidental death and dismemberment protection plans
and
programs, (v) travel accident insurance plans and programs, (vi)
vacation
policy (Executive shall have six weeks of vacation per calendar year),
and
(vii) other plans and programs sponsored by the Company or any subsidiary
for employees or executives generally, including any and all plans
and
programs that supplement any or all of the foregoing types of plans
or
programs.
|
5. |
Business
Expenses and Perquisites
.
The Company shall reimburse to Executive, or pay directly, all reasonable
expenses incurred by Executive in connection with the business of
the
Company, and its subsidiaries and affiliates, including but not limited
to
business-class travel, reasonable accommodations, and entertainment,
subject to documentation in accordance with the Company's policy.
|
6. |
Termination
.
|
(a) |
By
the Company for Cause
.
The Company may, for Cause, terminate Executive's employment hereunder
at
any time by written notice to Executive. For purposes of this Agreement,
the term "Cause" shall mean Executive's (i) engaging in fraud against
the
Company or misappropriation of funds of the Company, (ii) disregard
or
failure to follow specific and reasonable directives of the Board,
(iii)
willful failure to perform her duties as Executive Vice President
and
Acting Chief Executive Officer of the Company, (iv) willful misconduct
resulting in material injury to the Company, (v) violation of the
terms of
the Confidential Information and Intellectual Property Agreement
between
Executive and NexMed (U.S.A.), Inc., a wholly-owned subsidiary of
the
Company, dated October 4, 2000 (the "Intellectual Property Agreement")
attached hereto as Exhibit "A", (vi) conviction of, or Executive's
plea of
guilty or no contest to, a felony or any crime involving as a material
element fraud or dishonesty, or (vii) material breach (not covered
by
clauses (i) through (vi) of this paragraph) of any of the other provisions
of this Agreement;
provided
,
that
,
in the case of subclauses (ii), (iii) or (vii), Cause shall not exist
if
the act or omission deemed to constitute Cause is cured (if curable)
by
Executive within thirty (30) days after written notice thereof to
Executive by the Company. For purposes of the foregoing, no act,
or
failure to act, on Executive's part shall be considered "willful"
unless
done, or omitted to be done, by Executive other than in good faith,
and
without reasonable belief that her action or omission was in furtherance
of the interests of the Company.
|
(b) |
Disability
or Death
.
If Executive should suffer a Permanent Disability, the Company may
terminate Executive's employment hereunder upon ten (10) or more
days'
prior written notice to Executive. If Executive should pass away
during
the term of this Agreement, Executive’s employment shall be deemed
terminated on her date of death. For purposes of this Agreement,
a
"Permanent Disability" shall be deemed to have occurred only when
Executive has qualified for benefits (including satisfaction of any
applicable waiting period) under the Company's or a subsidiary's
long-term
disability insurance arrangement (the "LTD Policy"). In the event
of the
termination of Executive's employment hereunder by reason of Permanent
Disability or death, the Employment Term shall end on the day of
such
termination and the Company shall pay, no later than the payroll
cycle
following Executive’s termination, to Executive or Executive's legal
representative (in the event of Permanent Disability), or any beneficiary
or beneficiaries designated by Executive to the Company in writing,
or to
Executive's estate if no such beneficiary has been so designated
(in the
event of Executive's death), a single lump sum payment of: (i) any
accrued
but unpaid Base Salary, less applicable deductions, including salary
in
respect of any accrued and accumulated vacation, due to Executive
at the
date of such termination; (ii) any amounts owing, but not yet paid,
pursuant to Section 5 hereof.
|
(c) |
By
the Company without Cause
.
The Company may, without Cause, terminate Executive's employment
hereunder
at any time upon ten (10) or more days' written notice to Executive.
The
Company, in its sole discretion, may provide the Executive with ten
(10)
days’ pay in lieu of notice. In the event Executive's employment is
terminated pursuant to this Section 6(c), the Employment Term shall
end on
the day of such termination and the Company shall pay to Executive,
no
later than the payroll cycle following Executive’s termination, in one
lump sum: (i) any accrued but unpaid Base Salary, less applicable
deductions, including salary in respect of any accrued and accumulated
vacation, due to Executive at the date of such termination, and (ii)
any
amounts owing, but not yet paid, pursuant to Section 5 hereof.
|
(d) |
By
Executive for Good Reason
.
If any of the events described below occurs during the Employment
Term,
Executive may terminate Executive's employment hereunder for Good
Reason
by written notice to the Company identifying the event or omission
constituting Good Reason not more than one (1) month following the
occurrence of such event and, in the case of subclauses (ii), (iii),
or
(iv) below, a failure by the Company to cure such act or omission
within
thirty (30) days after receipt of such written notice. In such event,
the
Employment Term and Executive's employment hereunder will be terminated
effective as of the later of thirty-one (31) days after the Company's
receipt of Executive's notice of termination or thirty-one (31) days
after
the event, and Executive's termination for Good Reason pursuant to
this
Section 6(d) shall be treated for all purposes as a termination without
Cause pursuant to Section 6(c) and the provisions of Section 6(c)
shall
apply to such termination. The occurrence of any of the following
events
without Executive's consent shall permit Executive to terminate
Executive's employment for "Good Reason" pursuant to this Section
6(d):
|
(i) |
A
"Change in Control" (as defined in Appendix A hereto) occurs;
|
(ii) |
The
failure by the Company to observe or comply in any material respect
with
any of the material provisions of this Agreement;
and
|
(iii) |
A
material diminution in Executive's
duties.
|
(iv) |
The
assignment to Executive of duties that are materially inconsistent
with
Executive’s duties or that materially impair Executive’s ability to
function as the Executive Vice President and Acting Chief Executive
Officer of the Company.
|
(v) |
The
relocation of Executive’s primary office from a location that is more than
50 miles from both (a) the Company’s executive offices at the time of
relocation and (b) Executive’s primary residence at the time of such
relocation.
|
(e) |
By
Executive without Good Reason
.
Executive may terminate the Employment Term and Executive's employment
hereunder at any time without Good Reason upon thirty (30) days advance
written notice to the Company. In the event Executive's employment
is
terminated pursuant to this Section 6(e), the Company shall pay to
Executive, no later than ten (10) days after the last day of Executive's
employment, in one lump sum, the sum of (i) any accrued but unpaid
Base
Salary, less applicable deductions, including salary in respect of
any
accrued and accumulated vacation, due to Executive at the date of
such
termination, and (ii) any amounts owing, but not yet paid, pursuant
to
Section 5 hereof.
|
(f) |
Release
.
Notwithstanding any other provision of this Agreement to the contrary,
Executive acknowledges and agrees that any and all payments and benefits
to which Executive is entitled under this Section 6(b), 6(c), or
6(d),
with the exception of accrued salary, accrued vacation payments,
and
payments pursuant to Section 5 of this Agreement, are conditioned
upon and
subject to Executive's first executing a Confidential Separation
Agreement
including a general waiver and release (and the expiration of any
associated revocation period), in such reasonable and customary form
as
shall be prepared by the Company, of all claims Executive may have
against
the Company, and related entities and individuals.
|
7. |
No
Mitigation; Employee Benefit Plans
.
Executive shall not be required to mitigate amounts payable to her
under
this Agreement by seeking other employment or otherwise, and there
shall
be no offset against amounts payable to Executive under this Agreement
on
account of Executive's subsequent employment. Amounts payable to
Executive
under this Agreement shall not be offset by any claims that the Company
may have against Executive, and such amounts payable to Executive
under
this Agreement shall not be affected by any other circumstances,
including, without limitation, any counterclaim, recoupment, defense,
or
other right that the Company may have against Executive or others.
Provided
,
however
,
that
,
payments made to Executive as a result of the termination of Executive's
employment hereunder shall not be considered as includible compensation
with respect to any employee benefit plans maintained by the Company,
except to the extent otherwise required by law.
|
8. |
Indemnification
.
In the event that Executive is made a party or threatened to be made
a
party to any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (a "Proceeding"), by reason of
Executive's employment with, or serving as an officer of, the Company,
the
Company shall indemnify and hold Executive harmless, and defend Executive
to the fullest extent authorized by the laws of the state in which
the
Company is incorporated, as the same exist and may hereafter be amended,
against any and all claims, demands, suits, judgments, assessments,
and
settlements (collectively the "Claims"), including all expenses incurred
or suffered by Executive in connection therewith (excluding, however,
any
legal fees incurred by Executive for Executive's own counsel, except
as
otherwise provided in this Section 8, and excluding any proceedings
initiated by executive), and such indemnification shall continue
as to
Executive even after Executive is no longer employed by the Company
hereunder, and shall inure to the benefit of Executive's heirs, executors,
and administrators;
provided
,
however
,
that
,
Executive promptly gives written notice to the Company of any such
Claims
(although Executive's failure to promptly give notice shall not affect
the
Company's obligations under this Section 8 except to the extent that
such
failure prejudices the Company or its ability to defend such Claims).
The
Company shall have the right to undertake, with counsel or other
representatives of its own choosing, the defense or settlement of
any
Claims. In the event that the Company shall fail to notify Executive,
within ten days of its receipt of Executive's written notice, that
the
Company has elected to undertake such defense or settlement, or if
at any
time the Company shall otherwise fail to diligently defend or pursue
settlement of such Claims, then Executive shall have the right to
undertake the defense, compromise, or settlement of such Claims,
in which
event the Company shall hold Executive harmless from any legal fees
incurred by Executive for Executive's counsel. Neither Executive
nor the
Company shall settle any Claims without the prior written consent
of the
other, which consent shall not be unreasonably withheld or delayed.
In the
event that the Company submits to Executive a bona fide settlement
offer
from the claimant of Claims (which settlement offer shall include
as an
unconditional term thereof the giving by the claimant or the plaintiff
to
Executive a release from all liability in respect of such Claims),
and
Executive refuses to consent to such settlement, then thereafter
the
Company's liability to Executive for indemnification hereunder with
respect to such Claims shall not exceed the settlement amount included
in
such bona fide settlement offer, and Executive shall either assume
the
defense of such Claims or pay the Company's attorneys' fees and other
out-of-pocket costs incurred thereafter in continuing the defense
of such
Claims. Regardless of which party is conducting the defense of any
such
Claims, the other party, with counsel or other representatives of
its own
choosing and at its sole cost and expense, shall have the right to
consult
with the party conducting the defense of such Claims and its counsel
or
other representatives concerning such Claims and Executive and the
respective counsel or other representatives shall cooperate with
respect
to such Claims. The party conducting the defense of any such Claims
and
its counsel shall in any case keep the other party and its counsel
(if
any) fully informed as to the status of such Claims and any matters
relating thereto. Executive and the Company shall provide to the
other
such records, books, documents, and other materials as shall reasonably
be
necessary for each to conduct or evaluate the defense of any Claims,
and
will generally cooperate with respect to any matters relating thereto.
This Section 8 shall remain in effect after this Agreement is terminated,
regardless of the reasons for such termination. The indemnification
provided to Executive pursuant to this Section 8 shall not supersede
or
reduce any indemnification provided to Executive under any separate
agreement, or the By-Laws of the Company; in this regard, it is intended
that this Agreement shall expand and extend Executive's rights to
receive
indemnification.
|
9. |
Withholding
.
The Company shall have the right to deduct and withhold from all
payments
to Executive hereunder all payroll taxes, income tax withholding
and other
federal, state and local taxes and charges which currently are or
which
hereafter may be required by law to be so deducted and withheld.
|
10. |
Restrictive
Covenants
.
The restrictive covenants contained in the Confidential Information
and
Intellectual Property Agreement, signed by Executive on October 5,
2000
and attached hereto as Appendix B, including but not limited to,
Section
(2) (Confidential Information); Section 3 (Non-Solicitation of Employees);
and Section 4 (Non-Compete), are incorporated by reference as if
fully set
forth herein. Executive hereby reaffirms her obligations under that
agreement.
|
11. |
Non-Assignability
.
Executive's rights and benefits hereunder are personal to Executive,
and
shall not be alienated, voluntarily or involuntarily assigned, or
transferred.
|
12. |
Binding
Effect
.
This Agreement shall be binding upon the parties hereto, and their
respective assigns, successors, executors, administrators, and heirs.
In
the event the Company becomes a party to any merger, consolidation,
or
reorganization, this Agreement shall remain in full force and effect
as an
obligation of the Company or its successor(s) in interest. None of
the
payments provided for by this Agreement shall be subject to seizure
for
payment of any debts or judgments against Executive or Executive's
beneficiary or beneficiaries, nor shall Executive or any such beneficiary
or beneficiaries have any right to transfer or encumber any right
or
benefit hereunder.
|
13. |
Entire
Agreement; Modification
.
|
(a) |
This
Agreement supersedes all prior agreements, with the exception of
the
Confidential Information and Intellectual Property Agreement, and
all
other agreements (or portions thereof) that deal with confidentiality
or
intellectual property. This Agreement sets forth the entire understanding
among the parties hereto with respect to the subject matter hereof,
may
not be changed orally, and may be changed only by an agreement in
writing
signed by the parties hereto.
|
(b)
|
Executive
acknowledges that from time to time, the Company may establish, maintain
and distribute manuals, handbooks or personnel policies, and officers
or
other representatives of the Company may make written or oral statements
relating to personnel policies and procedures. Such manuals, handbooks
and
statements are intended only for general guidance. No policies, procedures
or statements of any nature by or on behalf of the Company (whether
written or oral, and whether or not contained in any manual or handbook
or
personnel policies), and no acts or practices of any nature, shall
be
construed to modify this Agreement or to create express or implied
obligations of any nature to
Executive.
|
14. |
Notices
.
All notices and communications hereunder shall be in writing, sent
by
certified or registered mail, return receipt requested, postage prepaid;
by facsimile transmission, with proof of the time and date of receipt
retained by the transmitter; or by hand-delivery properly receipted.
The
actual date of receipt as shown by the return receipt therefore,
the
facsimile transmission sheet, or the hand-delivery receipt, as the
case
may be, shall determine the date on which (and, in the case of a
facsimile, the time at which) notice was given. All payments required
hereunder by the Company to Executive shall be sent postage prepaid,
or,
at Executive's election, shall be transferred to Executive electronically
to such bank account as Executive may designate in writing to the
Company,
including designation of the applicable electronic address. The foregoing
items (other than any electronic transfer to Executive) shall be
addressed
as follows (or to such other address as the Company and Executive
may
designate in writing from time to time):
|
15. |
Governing
Law; Jurisdiction
.
This Agreement shall be governed by, and construed and enforced according
to, the domestic laws of the State of New Jersey without giving effect
to
the principles of conflict of laws thereof, or such principles of
any
other jurisdiction, which could cause the application of the substantive
law of any jurisdiction other than the State of New Jersey. The Company
and Executive agree that the state or federal courts of New Jersey
shall
have exclusive jurisdiction to hear and determine any dispute which
may
arise under this Agreement.
|
16. |
Severability
.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of
this Agreement, and each other provision of the Agreement shall be
severable and enforceable to the extent permitted by law.
|
17. |
Headings
.
The headings of the Sections hereof are provided for convenience
only and
are not to serve as a basis for interpretation or construction, and
shall
not constitute a part, of this Agreement.
|
18. |
Signature
in Counterparts
.
This Agreement may be signed in counterparts, each of which shall
be an
original, with the same effect as if the signatures thereto and hereto
were upon the same instrument.
|
/s/
Vivian H. Liu
Vivian
H. Liu
NEXMED,
INC.
By:
/s/
Title:
|
1. |
Term
of Employment
.
Subject to earlier termination in accordance with the provisions
of
Section 6 of this Agreement, Executive shall be employed by the Company
pursuant to the terms of this Agreement for a period commencing on
December 15, 2005 (the "Effective Date") and ending on December 15,
2008
(the "Expiration Date");
provided
,
however
,
that
,
the term of employment under this Agreement (the "Employment Term")
shall
be automatically extended for one additional year unless and until
either
party gives notice to the other, at least 60 days before the Expiration
Date, that the Employment Term should not be automatically
extended.
|
2. |
Position
.
|
(a) |
During
the Employment Term, Executive shall be employed as a Vice President
of
the Company, and shall have such duties, authority, and responsibility
as
are commensurate with his position, subject to the direction of the
Company's Acting Chief Executive Officer (the "Acting CEO"). Executive
shall initially have the title of Vice President of Finance and Chief
Financial Officer of the Company.
|
(b) |
During
the Employment Term, Executive shall devote all of his business time
and
attention to the performance of his duties hereunder faithfully and
to the
best of his abilities and shall not undertake employment with, or
participate in, the conduct of the business affairs of any other
person,
corporation, or entity;
provided
,
that
,
nothing shall preclude Executive from (i) with the prior written
approval
of the Acting CEO, serving in due course as a director, trustee or
member
of a committee of any organization or (ii) participating in the affairs
of
any recognized charitable organizations, or in any community affairs,
of
Executive's choice.
|
(c) |
Executive's
duties hereunder shall be performed for the Company worldwide, with
particular emphasis in the Company's headquarters in East Windsor,
New
Jersey.
|
3. |
Compensation
.
|
(a) |
Base
Salary
.
During the Employment Term, the Company shall pay Executive a base
salary,
subject to increase at the discretion of the Board of Directors of
the
Company (the "Board"), at the annual rate of
$
160,000
(the "Base Salary"), payable in regular installments in accordance
with
the Company's usual payroll
practices.
|
(b) |
Bonus
.
With respect to each calendar year during the Employment Term, Executive
shall be eligible to earn an annual bonus award (the "Bonus"). The
amount
of the Bonus shall be determined by the Board, or the Compensation
Committee of the Board (the "Compensation Committee"), in its sole
discretion, based upon the achievement by the Company of objective
financial targets established and determined by the Board or the
Compensation Committee in consultation with Executive no later than
the
end of the first month of such calendar year. The Bonus in respect
of each
calendar year in the Employment Term shall be paid as promptly as
practicable following the delivery of the Company's audited financial
statements for such year or, if later, by April 30 of the calendar
year
following such year. Unless otherwise stated herein, the Bonus shall
not
accrue until the date on which it is paid, and Executive must be
employed
on the date the Bonus is paid in order to receive the
Bonus.
|
(c) |
Stock
Option Grants
.
|
(i) |
On
December 15, 2005, the Compensation Committee approved a grant to
Executive of an option to purchase an aggregate of 75,000 shares
of the
Company's common stock (the "Option") based on the closing price
of the
Company’s Common Stock on December 14, 2005, of ninety-two cents ($.92)
per share. The Option shall vest in three equal installments (33.33%
of
the Stock Option Shares, which represents 25,000 Stock Option Shares)
on
December 31, 2006, December 31, 2007, and December 31, 2008, respectively,
assuming continuous and uninterrupted employment until such dates.
The
Company will provide the Executive the ability to perform a cashless
exercise of all Stock Options, in accordance with the vesting
schedule.
|
(ii) |
The
Option shall be subject to The NexMed, Inc. Stock Option and Long-Term
Incentive Compensation Plan (the "Option Plan") and the applicable
stock
option agreement.
|
(iii) |
In
addition to the foregoing, the Compensation Committee may recommend
to the
Board that additional stock options be granted to Executive in accordance
with the terms and subject to the conditions of the Option
Plan.
|
(iv) |
All
of Executive's outstanding but unvested stock options shall vest
immediately upon the occurrence of a Change in Control (as defined
in
Appendix A hereto).
|
4. |
Employee
Benefits
.
During the Employment Term, Executive shall be eligible for inclusion,
to
the extent permitted by law, as a full-time employee of the Company
or any
of its subsidiaries, in any and all of the following plans, programs,
and
policies in effect at the time: (i) pension, profit sharing, savings,
and
other retirement plans and programs, (ii) life and health (medical,
dental, hospitalization, short-term and long-term disability) insurance
plans and programs, (iii) stock option and stock purchase plans and
programs, (iv) accidental death and dismemberment protection plans
and
programs, (v) travel accident insurance plans and programs, (vi)
vacation
policy (Executive shall have four weeks of vacation per calendar
year),
and (vii) other plans and programs sponsored by the Company or any
subsidiary for employees or executives generally, including any and
all
plans and programs that supplement any or all of the foregoing types
of
plans or programs.
|
5. |
Business
Expenses and Perquisites
.
The Company shall reimburse to Executive, or pay directly, all reasonable
expenses incurred by Executive in connection with the business of
the
Company, and its subsidiaries and affiliates, including but not limited
to
business-class travel, reasonable accommodations, and entertainment,
subject to documentation in accordance with the Company's policy.
|
6. |
Termination
.
|
(a) |
By
the Company for Cause
.
The Company may, for Cause, terminate Executive's employment hereunder
at
any time by written notice to Executive. For purposes of this Agreement,
the term "Cause" shall mean Executive's (i) engaging in fraud against
the
Company or misappropriation of funds of the Company, (ii) disregard
or
failure to follow specific and reasonable directives of the Board,
(iii)
willful failure to perform his duties as Vice President of Finance
and
Chief Financial Officer of the Company, (iv) willful misconduct resulting
in material injury to the Company, (v) violation of the terms of
the
Confidential Information and Intellectual Property Agreement between
Executive and NexMed (U.S.A.), Inc., a wholly-owned subsidiary of
the
Company, dated March 5, 2002 (the "Intellectual Property Agreement")
attached hereto as Exhibit "A", (vi) conviction of, or Executive's
plea of
guilty or no contest to, a felony or any crime involving as a material
element fraud or dishonesty, or (vii) material breach (not covered
by
clauses (i) through (vi) of this paragraph) of any of the other provisions
of this Agreement;
provided
,
that
,
in the case of subclauses (ii), (iii) or (vii), Cause shall not exist
if
the act or omission deemed to constitute Cause is cured (if curable)
by
Executive within thirty (30) days after written notice thereof to
Executive by the Company. For purposes of the foregoing, no act,
or
failure to act, on Executive's part shall be considered "willful"
unless
done, or omitted to be done, by Executive other than in good faith,
and
without reasonable belief that his action or omission was in furtherance
of the interests of the Company.
|
(b) |
Disability
or Death
.
If Executive should suffer a Permanent Disability, the Company may
terminate Executive's employment hereunder upon ten (10) or more
days'
prior written notice to Executive. If Executive should pass away
during
the term of this Agreement, Executive’s employment shall be deemed
terminated on his date of death. For purposes of this Agreement,
a
"Permanent Disability" shall be deemed to have occurred only when
Executive has qualified for benefits (including satisfaction of any
applicable waiting period) under the Company's or a subsidiary's
long-term
disability insurance arrangement (the "LTD Policy"). In the event
of the
termination of Executive's employment hereunder by reason of Permanent
Disability or death, the Employment Term shall end on the day of
such
termination and the Company shall pay, no later than the payroll
cycle
following Executive’s termination, to Executive or Executive's legal
representative (in the event of Permanent Disability), or any beneficiary
or beneficiaries designated by Executive to the Company in writing,
or to
Executive's estate if no such beneficiary has been so designated
(in the
event of Executive's death), a single lump sum payment of: (i) any
accrued
but unpaid Base Salary, less applicable deductions, including salary
in
respect of any accrued and accumulated vacation, due to Executive
at the
date of such termination; (ii) any amounts owing, but not yet paid,
pursuant to Section 5 hereof.
|
(c) |
By
the Company without Cause
.
The Company may, without Cause, terminate Executive's employment
hereunder
at any time upon ten (10) or more days' written notice to Executive.
The
Company, in its sole discretion, may provide the Executive with ten
(10)
days’ pay in lieu of notice. In the event Executive's employment is
terminated pursuant to this Section 6(c), the Employment Term shall
end on
the day of such termination and the Company shall pay to Executive,
no
later than the payroll cycle following Executive’s termination, in one
lump sum: (i) any accrued but unpaid Base Salary, less applicable
deductions, including salary in respect of any accrued and accumulated
vacation, due to Executive at the date of such termination, and (ii)
any
amounts owing, but not yet paid, pursuant to Section 5
hereof.
|
(d) |
By
Executive for Good Reason
.
If any of the events described below occurs during the Employment
Term,
Executive may terminate Executive's employment hereunder for Good
Reason
by written notice to the Company identifying the event or omission
constituting Good Reason not more than one (1) month following the
occurrence of such event and, in the case of subclauses (ii), (iii),
or
(iv) below, a failure by the Company to cure such act or omission
within
thirty (30) days after receipt of such written notice. In such event,
the
Employment Term and Executive's employment hereunder will be terminated
effective as of the later of thirty-one (31) days after the Company's
receipt of Executive's notice of termination or thirty-one (31) days
after
the event, and Executive's termination for Good Reason pursuant to
this
Section 6(d) shall be treated for all purposes as a termination without
Cause pursuant to Section 6(c) and the provisions of Section 6(c)
shall
apply to such termination. The occurrence of any of the following
events
without Executive's consent shall permit Executive to terminate
Executive's employment for "Good Reason" pursuant to this Section
6(d):
|
(i) |
A
"Change in Control" (as defined in Appendix A hereto) occurs;
|
(ii) |
The
failure by the Company to observe or comply in any material respect
with
any of the material provisions of this Agreement;
and
|
(iii) |
A
material diminution in Executive's
duties.
|
(iv) |
The
assignment to Executive of duties that are materially inconsistent
with
Executive’s duties or that materially impair executive’s ability to
function as the Vice President of Finance and Chief Financial
Officer.
|
(v) |
The
relocation of Executive’s primary office from a location that is more than
50 miles from both (a) the Company’s executive offices at the time of
relocation and (b) Executive’s primary residence at the time of such
relocation.
|
(e) |
By
Executive without Good Reason
.
Executive may terminate the Employment Term and Executive's employment
hereunder at any time without Good Reason upon thirty (30) days advance
written notice to the Company. In the event Executive's employment
is
terminated pursuant to this Section 6(e), the Company shall pay to
Executive, no later than ten (10) days after the last day of Executive's
employment, in one lump sum, the sum of (i) any accrued but unpaid
Base
Salary, less applicable deductions, including salary in respect of
any
accrued and accumulated vacation, due to Executive at the date of
such
termination, and (ii) any amounts owing, but not yet paid, pursuant
to
Section 5 hereof.
|
(f) |
Release
.
Notwithstanding any other provision of this Agreement to the contrary,
Executive acknowledges and agrees that any and all payments and benefits
to which Executive is entitled under this Section 6(b), 6(c), or
6(d),
with the exception of accrued salary, accrued vacation payments,
and
payments pursuant to Section 5 of this Agreement, are conditioned
upon and
subject to Executive's first executing a Confidential Separation
Agreement
including a general waiver and release (and the expiration of any
associated revocation period), in such reasonable and customary form
as
shall be prepared by the Company, of all claims Executive may have
against
the Company, and related entities and individuals.
|
7. |
No
Mitigation; Employee Benefit Plans
.
Executive shall not be required to mitigate amounts payable to him
under
this Agreement by seeking other employment or otherwise, and there
shall
be no offset against amounts payable to Executive under this Agreement
on
account of Executive's subsequent employment. Amounts payable to
Executive
under this Agreement shall not be offset by any claims that the Company
may have against Executive, and such amounts payable to Executive
under
this Agreement shall not be affected by any other circumstances,
including, without limitation, any counterclaim, recoupment, defense,
or
other right that the Company may have against Executive or others.
Provided
,
however
,
that
,
payments made to Executive as a result of the termination of Executive's
employment hereunder shall not be considered as includible compensation
with respect to any employee benefit plans maintained by the Company,
except to the extent otherwise required by law.
|
8. |
Indemnification
.
In the event that Executive is made a party or threatened to be made
a
party to any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (a "Proceeding"), by reason of
Executive's employment with, or serving as an officer of, the Company,
the
Company shall indemnify and hold Executive harmless, and defend Executive
to the fullest extent authorized by the laws of the state in which
the
Company is incorporated, as the same exist and may hereafter be amended,
against any and all claims, demands, suits, judgments, assessments,
and
settlements (collectively the "Claims"), including all expenses incurred
or suffered by Executive in connection therewith (excluding, however,
any
legal fees incurred by Executive for Executive's own counsel, except
as
otherwise provided in this Section 8, and excluding any Proceedings
initiated by executive), and such indemnification shall continue
as to
Executive even after Executive is no longer employed by the Company
hereunder, and shall inure to the benefit of Executive's heirs, executors,
and administrators;
provided
,
however
,
that
,
Executive promptly gives written notice to the Company of any such
Claims
(although Executive's failure to promptly give notice shall not affect
the
Company's obligations under this Section 8 except to the extent that
such
failure prejudices the Company or its ability to defend such Claims).
The
Company shall have the right to undertake, with counsel or other
representatives of its own choosing, the defense or settlement of
any
Claims. In the event that the Company shall fail to notify Executive,
within ten days of its receipt of Executive's written notice, that
the
Company has elected to undertake such defense or settlement, or if
at any
time the Company shall otherwise fail to diligently defend or pursue
settlement of such Claims, then Executive shall have the right to
undertake the defense, compromise, or settlement of such Claims,
in which
event the Company shall hold Executive harmless from any legal fees
incurred by Executive for Executive's counsel. Neither Executive
nor the
Company shall settle any Claims without the prior written consent
of the
other, which consent shall not be unreasonably withheld or delayed.
In the
event that the Company submits to Executive a bona fide settlement
offer
from the claimant of Claims (which settlement offer shall include
as an
unconditional term thereof the giving by the claimant or the plaintiff
to
Executive a release from all liability in respect of such Claims),
and
Executive refuses to consent to such settlement, then thereafter
the
Company's liability to Executive for indemnification hereunder with
respect to such Claims shall not exceed the settlement amount included
in
such bona fide settlement offer, and Executive shall either assume
the
defense of such Claims or pay the Company's attorneys' fees and other
out-of-pocket costs incurred thereafter in continuing the defense
of such
Claims. Regardless of which party is conducting the defense of any
such
Claims, the other party, with counsel or other representatives of
its own
choosing and at its sole cost and expense, shall have the right to
consult
with the party conducting the defense of such Claims and its counsel
or
other representatives concerning such Claims and Executive and the
respective counsel or other representatives shall cooperate with
respect
to such Claims. The party conducting the defense of any such Claims
and
its counsel shall in any case keep the other party and its counsel
(if
any) fully informed as to the status of such Claims and any matters
relating thereto. Executive and the Company shall provide to the
other
such records, books, documents, and other materials as shall reasonably
be
necessary for each to conduct or evaluate the defense of any Claims,
and
will generally cooperate with respect to any matters relating thereto.
This Section 8 shall remain in effect after this Agreement is terminated,
regardless of the reasons for such termination. The indemnification
provided to Executive pursuant to this Section 8 shall not supersede
or
reduce any indemnification provided to Executive under any separate
agreement, or the By-Laws of the Company; in this regard, it is intended
that this Agreement shall expand and extend Executive's rights to
receive
indemnification.
|
9. |
Withholding
.
The Company shall have the right to deduct and withhold from all
payments
to Executive hereunder all payroll taxes, income tax withholding
and other
federal, state and local taxes and charges which currently are or
which
hereafter may be required by law to be so deducted and withheld.
|
10. |
Non-Solicitation
of Employees.
Executive recognizes and acknowledges that it is essential for the
proper
protection of the business of the Company that Executive be restricted
during the term of Executive’s employment and for a one-year period
following the termination of Executive’s employment with the Company from
soliciting or inducing any employee of the Company to leave the employ
of
the Company or to encourage any other business entity to solicit
or seek
to hire any employee of the Company. Therefore, during the term of
the
Executive’s employment with the Company and for a period of one (1) year
following the termination of such employment, Executive agrees that
he
shall not, directly or indirectly, hire or seek to hire any employee
of
the Company or assist or influence any business entity to hire or
solicit
for employment or take any other action which would encourage any
such
employee to terminate such employee’s employment by the Company. For
purposes of this Section 11, “employee” shall include any former employee
of the Company whose employment with the Company terminated less
than one
(1) year prior to the termination of the employment with the Company
of
the Executive.
|
11. |
Confidentiality
.
The confidentiality provisions contained in the Confidential Information
Agreement, signed by Executive on March 25, 2002 and attached hereto
as
Appendix B, including but not limited to, Section (2) (Confidential
Information), are incorporated by reference as if fully set forth
herein.
Executive hereby reaffirms his obligations under that
agreement.
|
12. |
Non-Assignability
.
Executive's rights and benefits hereunder are personal to Executive,
and
shall not be alienated, voluntarily or involuntarily assigned, or
transferred.
|
13. |
Binding
Effect
.
This Agreement shall be binding upon the parties hereto, and their
respective assigns, successors, executors, administrators, and heirs.
In
the event the Company becomes a party to any merger, consolidation,
or
reorganization, this Agreement shall remain in full force and effect
as an
obligation of the Company or its successor(s) in interest. None of
the
payments provided for by this Agreement shall be subject to seizure
for
payment of any debts or judgments against Executive or Executive's
beneficiary or beneficiaries, nor shall Executive or any such beneficiary
or beneficiaries have any right to transfer or encumber any right
or
benefit hereunder.
|
14. |
Entire
Agreement; Modification
.
|
(a) |
This
Agreement supersedes all prior agreements, with the exception of
the
Confidential Information Agreement, and all other agreements (or
portions
thereof) that deal with confidentiality or intellectual property.
This
Agreement sets forth the entire understanding among the parties hereto
with respect to the subject matter hereof, may not be changed orally,
and
may be changed only by an agreement in writing signed by the parties
hereto.
|
(b) |
Executive
acknowledges that from time to time, the Company may establish, maintain
and distribute manuals, handbooks or personnel policies, and officers
or
other representatives of the Company may make written or oral statements
relating to personnel policies and procedures. Such manuals, handbooks
and
statements are intended only for general guidance. No policies, procedures
or statements of any nature by or on behalf of the Company (whether
written or oral, and whether or not contained in any manual or handbook
or
personnel policies), and no acts or practices of any nature, shall
be
construed to modify this Agreement or to create express or implied
obligations of any nature to
Executive.
|
15. |
Notices
.
All notices and communications hereunder shall be in writing, sent
by
certified or registered mail, return receipt requested, postage prepaid;
by facsimile transmission, with proof of the time and date of receipt
retained by the transmitter; or by hand-delivery properly receipted.
The
actual date of receipt as shown by the return receipt therefore,
the
facsimile transmission sheet, or the hand-delivery receipt, as the
case
may be, shall determine the date on which (and, in the case of a
facsimile, the time at which) notice was given. All payments required
hereunder by the Company to Executive shall be sent postage prepaid,
or,
at Executive's election, shall be transferred to Executive electronically
to such bank account as Executive may designate in writing to the
Company,
including designation of the applicable electronic address. The foregoing
items (other than any electronic transfer to Executive) shall be
addressed
as follows (or to such other address as the Company and Executive
may
designate in writing from time to time):
|
16. |
Governing
Law; Jurisdiction
.
This Agreement shall be governed by, and construed and enforced according
to, the domestic laws of the State of New Jersey without giving effect
to
the principles of conflict of laws thereof, or such principles of
any
other jurisdiction, which could cause the application of the substantive
law of any jurisdiction other than the State of New Jersey. The Company
and Executive agree that the state or federal courts of New Jersey
shall
have exclusive jurisdiction to hear and determine any dispute which
may
arise under this Agreement.
|
17. |
Severability
.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of
this Agreement, and each other provision of the Agreement shall be
severable and enforceable to the extent permitted by law.
|
18. |
Headings
.
The headings of the Sections hereof are provided for convenience
only and
are not to serve as a basis for interpretation or construction, and
shall
not constitute a part, of this Agreement.
|
19. |
Signature
in Counterparts
.
This Agreement may be signed in counterparts, each of which shall
be an
original, with the same effect as if the signatures thereto and hereto
were upon the same instrument.
|
/s/
Mark Westgate
Mark
Westgate
NEXMED,
INC.
By:
/s/
Title:
|
1.
|
NexMed
Holdings, Inc., incorporated in Delaware on February 28, 1997.
|
2.
|
NexMed
(U.S.A.), Inc., incorporated in Delaware on June 18, 1997.
|
3.
|
NexMed
International Limited, incorporated in the British Virgin Islands
on
August 2, 1996.
|
(a)
|
NexMed
International (Hong Kong) Ltd. is a wholly-owned subsidiary of NexMed
International Limited incorporated in Hong Kong on March 14,
2001.
|
1.
|
I
have reviewed this Annual Report on Form 10-K of NexMed,
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
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
(d)
|
Disclosed
in this report any changes in the registrant’s internal control over
financial reporting that occurred during the registrant’s fourth fiscal
quarter, that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
/s/
Richard J. Berman
Richard
J. Berman
Chief
Executive Officer
|
1.
|
I
have reviewed this Annual Report on Form 10-K of NexMed,
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
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
(d)
|
Disclosed
in this report any changes in the registrant’s internal control over
financial reporting that occurred during the registrant’s fourth fiscal
quarter, that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
/s/
Mark Westgate
Mark
Westgate
Chief
Financial Officer
|
Date: March 15, 2006. |
By:
/s/
Richard J. Berman
Name:
Richard J. Berman
Title:
Chief Executive Officer
|
Date: March 15, 2006. |
By:
/s/ Mark Westgate
Name:
Mark Westgate
Title:
Chief Financial Officer
|