þ
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934.
|
For
the quarterly period ended June 30, 2008
|
|
or
|
|
o
|
TRANSACTION
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the transition period from ______________________
to_______________________
|
New
York
|
11-0853640
|
(State
or other Jurisdiction of
|
(I.R.S.
Employer Identification No.)
|
incorporation
or organization)
|
616
N. North Court, Suite 120
|
|
Palatine,
Illinois
|
60067
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer þ
|
Smaller
reporting company o
|
Page No.
|
||
Item
1.
|
Financial
Statements (Unaudited)
|
|
Consolidated
Balance Sheets June 30, 2008 and December 31, 2007
|
1
|
|
Consolidated
Statements of Operations Three months and six months ended June 30,
2008
and June 30, 2007
|
2
|
|
Consolidated
Statement of Stockholders’ Equity Six months ended June 30, 2008
|
3
|
|
Consolidated
Statements of Cash Flows Six months ended June 30, 2008 and June
30, 2007
|
4
|
|
Notes
to Consolidated Financial Statements
|
6
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and Results of Operations
|
12
|
Item
4.
|
Controls
and Procedures
|
18
|
PART
II. OTHER INFORMATION
|
||
Item
1A.
|
Risk
Factors Relating to the Company
|
18
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
19
|
Item
6.
|
Exhibits
|
20
|
Signatures
|
21
|
June 30,
2008
|
December 31,
2007
|
||||||
ASSETS
|
|||||||
Current
Assets
|
|||||||
Cash
and cash equivalents
|
$
|
32,924
|
$
|
31,368
|
|||
Short-term
investments
|
5,000
|
-
|
|||||
Collaboration
revenue receivable
|
1,977
|
2,977
|
|||||
Prepaid
clinical study costs
|
-
|
388
|
|||||
Prepaid
insurance
|
486
|
202
|
|||||
Prepaid
expense and other current assets
|
151
|
47
|
|||||
Deferred
income taxes
|
38
|
9,600
|
|||||
Total
current assets
|
40,576
|
44,582
|
|||||
Property,
plant and equipment, net
|
1,123
|
1,046
|
|||||
Total
assets
|
$
|
41,699
|
$
|
45,628
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
Current
Liabilities
|
|||||||
Deferred
program fee revenue – current portion
|
$
|
5,053
|
$
|
21,942
|
|||
Accrued
expenses
|
597
|
334
|
|||||
Total
current liabilities
|
5,650
|
22,276
|
|||||
Non-Current
Liabilities
|
|||||||
Deferred
program fee revenue – non current portion
|
2,105
|
4,632
|
|||||
Total
liabilities
|
7,755
|
26,908
|
|||||
Commitments
and contingencies (Note 9)
|
|||||||
Stockholders’
Equity
|
|||||||
Common
stock - $.01 par value; 650,000 shares authorized; 42,723 and 42,706
shares
issued
and outstanding at June 30, 2008 and December 31, 2007,
respectively
|
427
|
427
|
|||||
Additional
paid-in capital
|
341,058
|
340,153
|
|||||
Accumulated
deficit
|
(307,541
|
)
|
(321,860
|
)
|
|||
Total
stockholders’ equity
|
33,944
|
18,720
|
|||||
Total
liabilities and stockholders’ equity
|
$
|
41,699
|
$
|
45,628
|
For the Six Months
Ended June 30,
|
For the Three Months
Ended June 30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Revenue
|
|||||||||||||
Program
fee revenue
|
$
|
22,415
|
$
|
-
|
$
|
8,708
|
$
|
-
|
|||||
Milestone
revenue
|
5,000
|
-
|
5,000
|
-
|
|||||||||
Collaboration
revenue
|
5,354
|
-
|
1,977
|
-
|
|||||||||
Total
revenue
|
32,769
|
-
|
15,685
|
-
|
|||||||||
Operating
Expenses
|
|||||||||||||
Research
and development expenses
|
7,166
|
1,948
|
3,084
|
752
|
|||||||||
Marketing,
general and administrative expenses
|
2,244
|
1,366
|
1,374
|
588
|
|||||||||
Total
operating expenses
|
9,410
|
3,314
|
4,458
|
1,340
|
|||||||||
Operating
income (loss)
|
23,359
|
(3,314
|
)
|
11,227
|
(1,340
|
)
|
|||||||
|
|||||||||||||
Other
Income (Expense)
|
|||||||||||||
Interest
income (expense), net
|
504
|
(809
|
)
|
207
|
(447
|
)
|
|||||||
Amortization
of debt discount
|
-
|
(2,102
|
)
|
-
|
(410
|
)
|
|||||||
Loss
on fair value change of conversion features
|
-
|
(3,483
|
)
|
-
|
-
|
||||||||
Loss
on fair value change of common stock warrants
|
-
|
(1,668
|
)
|
-
|
-
|
||||||||
Other
income (expense)
|
17
|
(2
|
)
|
17
|
(2
|
)
|
|||||||
Gain
on asset disposals
|
1
|
20
|
1
|
-
|
|||||||||
Total
other income (expense)
|
522
|
(8,044
|
)
|
225
|
(859
|
)
|
|||||||
Income
(loss) before income tax expense
|
23,881
|
(11,358
|
)
|
11,452
|
(2,199
|
)
|
|||||||
Income
tax expense
|
9,562
|
-
|
4,582
|
-
|
|||||||||
Net
Income (Loss)
|
$
|
14,319
|
$
|
(11,358
|
)
|
$
|
6,870
|
$
|
(2,199
|
)
|
|||
Earnings
(loss) per share
|
|||||||||||||
Basic
|
$
|
0.31
|
$
|
(0.32
|
)
|
$
|
0.15
|
$
|
(0.06
|
)
|
|||
Diluted
|
$
|
0.28
|
$
|
(0.32
|
)
|
$
|
0.13
|
$
|
(0.06
|
)
|
|||
Weighted
average shares used in computation
|
|||||||||||||
Basic
|
45,665
|
35,404
|
45,673
|
35,540
|
|||||||||
Diluted
|
51,319
|
35,404
|
51,327
|
35,540
|
Common
Stock
$0.01 Par
Value -
Shares
|
Common
Stock
$0.01 Par
Value -
Amount
|
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Total
|
||||||||||||
Balance at
December 31, 2007
|
42,706
|
$
|
427
|
$
|
340,153
|
$
|
(321,860
|
)
|
$
|
18,720
|
||||||
Net
income
|
-
|
-
|
-
|
14,319
|
14,319
|
|||||||||||
Stock
based compensation
|
-
|
-
|
885
|
-
|
885
|
|||||||||||
Exercise
of warrant
|
17
|
-
|
20
|
-
|
20
|
|||||||||||
Balance
at June 30, 2008
|
42,723
|
$
|
427
|
$
|
341,058
|
$
|
(307,541
|
)
|
$
|
33,944
|
|
2008
|
2007
|
|||||
Cash
flows from Operating Activities:
|
|||||||
Net
income (loss)
|
$
|
14,319
|
$
|
(11,358
|
)
|
||
Adjustments
to reconcile net income (loss) to net cash provided by (used in)
operating
activities
|
|||||||
Depreciation
and amortization
|
72
|
61
|
|||||
Amortization
of debt discount
|
-
|
2,102
|
|||||
Loss
on fair value change of conversion features
|
-
|
3,483
|
|||||
Loss
on fair value change of common stock warrants
|
-
|
1,668
|
|||||
Common
stock issued for interest
|
-
|
812
|
|||||
Non-cash
stock compensation expense
|
885
|
722
|
|||||
Gain
on asset disposals
|
(1
|
)
|
(20
|
)
|
|||
Deferred
income taxes
|
9,562
|
-
|
|||||
Impairment
reserve against fixed assets
|
(17
|
)
|
-
|
||||
Changes
in assets and liabilities
|
|||||||
Collaboration
revenue receivable
|
1,000
|
-
|
|||||
Prepaid
expenses and other current assets
|
-
|
60
|
|||||
Accounts
payable
|
-
|
63
|
|||||
Accrued
expenses
|
262
|
188
|
|||||
Deferred
program fee revenue
|
(19,416
|
)
|
-
|
||||
Net
cash provided by (used in) operating activities
|
6,666
|
(2,219
|
)
|
||||
Cash
flows from Investing Activities
|
|||||||
Purchase
of investments
|
(5,000
|
)
|
-
|
||||
Capital
expenditures
|
(131
|
)
|
(29
|
)
|
|||
Proceeds
from asset disposals
|
1
|
20
|
|||||
Net
cash used in investing activities
|
(5,130
|
)
|
(9
|
)
|
|||
Cash
flows from Financing Activities
|
|||||||
Proceeds
from issuance of senior secured term notes payable
|
-
|
2,096
|
|||||
Proceeds
from exercise of stock warrant
|
20
|
-
|
|||||
Payments
on capital lease obligations
|
-
|
(13
|
)
|
||||
Net
cash provided by financing activities
|
20
|
2,083
|
|||||
Increase
(decrease) in cash and cash equivalents
|
1,556
|
(145
|
)
|
||||
Cash
and cash equivalents at beginning of period
|
31,368
|
228
|
|||||
Cash
and cash equivalents at end of period
|
$
|
32,924
|
$
|
83
|
|||
Cash
paid during the period for interest
|
$
|
2
|
$
|
6
|
1.
|
Impaired
fixed assets with a $51,000 net book value were disposed and a $17,000
reduction in the impairment allowance was favorably recognized.
|
1.
|
The
Company issued 47,552 shares of common stock as payment of $460,000
of
Senior Secured Convertible Bridge Term Notes Payable accrued
interest.
|
2.
|
The
Company issued 36,151 shares of common stock as payment of $352,000
of
Secured Term Note Payable accrued
interest.
|
3.
|
Warrants
to purchase an aggregate 58,009 shares of common stock were exercised
at
exercise prices between $1.20 and $6.60 per share in a series of
cashless
exercise transactions resulting in the issuance of an aggregate 31,362
shares of common stock.
|
4.
|
The
issuance of $1,296,000 Senior Secured Convertible Bridge Term Notes
included conversion features measured at $1,188,000, which resulted
in an
equal amount of debt discount. The change in all separated conversion
feature’s fair value through March 30, 2007 resulted in a loss of
$3,483,000. Due to a debt agreement modification on March 30, 2007,
the
then current conversion feature fair value of $21,086,000 was reclassified
from liabilities to equity.
|
5.
|
The
change in the common stock warrants’ fair value through March 30, 2007
resulted in a loss of $1,668,000. Due to a debt agreement modification
on
March 30, 2007, the then current $12,307,000 fair value of all 1,592,100
outstanding common stock warrants was reclassified from liabilities
to
equity, as was $146,000 of such value related to warrants exercised
during
the period.
|
Six
months ended
June
30,
|
Three
months ended
June
30,
|
||||||||||||
(in
thousands, except per share data)
|
2008
|
2007
|
2008
|
2007
|
|||||||||
Basic
earnings (loss) per share
|
|||||||||||||
Numerator:
|
|||||||||||||
Net
income (loss)
|
$
|
14,319
|
$
|
(11,358
|
)
|
$
|
6,870
|
$
|
(2,199
|
)
|
|||
Deemed
dividend from modification of debt
|
-
|
(3
|
)
|
-
|
-
|
||||||||
Net
income (loss) allocable to common shareholder
|
$
|
14,319
|
$
|
(11,361
|
)
|
$
|
6,870
|
$
|
(2,199
|
)
|
|||
Denominator:
|
|||||||||||||
Common
shares (weighted)
|
42,714
|
33,138
|
42,722
|
33,164
|
|||||||||
Vested
restricted stock units (weighted)
|
2,951
|
2,265
|
2,951
|
2,376
|
|||||||||
Weighted
average shares used in computing basic earnings (loss) per share
allocable
to common
shareholder
|
45,665
|
35,403
|
45,673
|
35,540
|
|||||||||
Basic
earnings (loss) per share allocable
to common shareholder
|
$
|
0.31
|
$
|
(0.32
|
)
|
$
|
0.15
|
$
|
(0.06
|
)
|
|||
Diluted
earnings per share
|
|||||||||||||
Denominator:
|
|||||||||||||
Common
shares (weighted)
|
42,714
|
-
|
42,722
|
-
|
|||||||||
Vested
restricted stock units (weighted)
|
2,951
|
-
|
2,951
|
-
|
|||||||||
Stock
options
|
1,746
|
-
|
1,746
|
-
|
|||||||||
Common
stock warrants
|
3,908
|
-
|
3,908
|
-
|
|||||||||
Weighted
average shares used in computing diluted earnings per share allocable
to
common shareholder
|
51,319
|
-
|
51,327
|
-
|
|||||||||
Diluted
earnings (loss) per share allocable to common shareholder
|
$
|
0.28
|
$
|
(0.32
|
)
|
$
|
0.13
|
$
|
(0.06
|
)
|
|||
Excluded
potentially dilutive securities:
|
|||||||||||||
Common
stock issuable (see #1 below):
|
|||||||||||||
Stock
options (vested and nonvested)
|
1,224
|
1,899
|
1,224
|
1,899
|
|||||||||
Nonvested
restricted stock units
|
45
|
492
|
45
|
492
|
|||||||||
Common
stock warrants
|
47
|
1,575
|
47
|
1,575
|
|||||||||
Convertible
bridge term notes
|
-
|
3,770
|
-
|
3,770
|
|||||||||
Total
excluded dilutive common stock equivalents
|
1,316
|
7,736
|
1,316
|
7,736
|
Jun
30,
|
Dec
31,
|
||||||
2008
|
2007
|
||||||
Payroll,
payroll taxes and benefits
|
$
|
132
|
$
|
63
|
|||
Legal
fees
|
57
|
35
|
|||||
Audit
examination and tax preparation fees
|
87
|
120
|
|||||
Franchise
taxes
|
23
|
15
|
|||||
Property
taxes
|
43
|
34
|
|||||
Clinical,
regulatory, trademarks, and patent consulting fees
|
233
|
50
|
|||||
Other
fees and services
|
22
|
17
|
|||||
$
|
597
|
$
|
334
|
Six Months Ended June 30,
|
Change
|
||||||||||||
($ in thousands):
|
2008
|
2007
|
Dollars
|
%
|
|||||||||
Revenue
– Program fee revenue
|
$
|
22,415
|
$
|
-
|
$
|
22,415
|
*
|
%
|
|
Six Months Ended June 30,
|
Change
|
|||||||||||
($ in thousands):
|
2008
|
2007
|
Dollars
|
%
|
|||||||||
Revenue
– Milestone revenue
|
$
|
5,000
|
$
|
-
|
$
|
5,000
|
*
|
%
|
|
Six Months Ended June 30,
|
Change
|
|||||||||||
($ in thousands):
|
2008
|
2007
|
Dollars
|
%
|
|||||||||
Revenue
– Collaboration fee revenue
|
$
|
5,354
|
$
|
-
|
$
|
5,354
|
*
|
%
|
|
Six Months Ended June 30,
|
Change
|
|||||||||||
($ in thousands):
|
2008
|
2007
|
Dollars
|
%
|
|||||||||
Research
and development expenses
|
$
|
7,166
|
$
|
1,948
|
$
|
5,218
|
268
|
%
|
|
Six Months Ended June 30,
|
Change
|
|||||||||||
($ in thousands):
|
2008
|
2007
|
Dollars
|
%
|
|||||||||
Marketing,
general & administrative expenses
|
$
|
2,244
|
$
|
1,366
|
$
|
878
|
64
|
%
|
|
Six Months Ended June 30,
|
Change
|
|||||||||||
($ in thousands):
|
2008
|
2007
|
Dollars
|
|
%
|
||||||||
Interest
income (expense), net
|
$
|
504
|
$
|
(809
|
)
|
$
|
1,313
|
162
|
%
|
|
Six Months Ended June 30,
|
Change
|
|||||||||||
($ in thousands):
|
2008
|
2007
|
Dollars
|
%
|
|||||||||
Net
income (loss)
|
$
|
14,319
|
$
|
(11,358
|
)
|
$
|
25,677
|
226
|
%
|
|
Three Months Ended June 30,
|
Change
|
|||||||||||
($ in thousands):
|
2008
|
2007
|
Dollars
|
%
|
|||||||||
Revenue
– Program fee revenue
|
$
|
8,708
|
$
|
-
|
$
|
8,708
|
*
|
%
|
|
Three Months Ended June 30,
|
Change
|
|||||||||||
($ in thousands):
|
2008
|
2007
|
Dollars
|
%
|
|||||||||
Revenue
– Milestone revenue
|
$
|
5,000
|
$
|
-
|
$
|
5,000
|
*
|
%
|
|
Three Months Ended June 30,
|
Change
|
|||||||||||
($ in thousands):
|
2008
|
2007
|
Dollars
|
%
|
|||||||||
Revenue
– Collaboration fee revenue
|
$
|
1,977
|
$
|
-
|
$
|
1,977
|
*
|
%
|
|
Three Months Ended June 30,
|
Change
|
|||||||||||
($ in thousands):
|
2008
|
2007
|
Dollars
|
%
|
|||||||||
Research
and development expenses
|
$
|
3,084
|
$
|
752
|
$
|
2,332
|
310
|
%
|
|
Three Months Ended June 30,
|
Change
|
|||||||||||
($ in thousands):
|
2008
|
2007
|
Dollars
|
%
|
|||||||||
Marketing,
general & administrative expenses
|
$
|
1,374
|
$
|
588
|
$
|
786
|
134
|
%
|
|
Three Months Ended June 30,
|
Change
|
|||||||||||
($ in thousands):
|
2008
|
2007
|
Dollars
|
%
|
|||||||||
Interest
income (expense), net
|
$
|
207
|
$
|
(447
|
)
|
$
|
654
|
146
|
%
|
|
Three Months Ended June 30,
|
Change
|
|||||||||||
($ in thousands):
|
2008
|
2007
|
Dollars
|
%
|
|||||||||
Net
income (loss)
|
$
|
6,870
|
$
|
(2,199
|
)
|
$
|
9,069
|
412
|
%
|
Expected
cash payments on
contractual
obligations outstanding
at
June 30, 2008
|
Total
|
Due
in
2008
|
Due
in
2009
|
Due
Thereafter
|
|||||||||
Clinical
trials
|
$
|
2,157
|
$
|
2,157
|
$
|
-
|
$
|
-
|
|||||
Operating
leases
|
22
|
15
|
7
|
-
|
|||||||||
Employment
agreements
|
878
|
588
|
290
|
-
|
|||||||||
Marketing
study
|
18
|
18
|
-
|
-
|
|||||||||
Total
contractual cash obligations
|
$
|
3,075
|
$
|
2,778
|
$
|
297
|
$
|
-
|
|||||
Expected
cash payments on
contractual
obligations entered into
subsequent
to June 30, 2008
|
Total
|
|
|
Due
in
2008
|
|
|
Due
in
2009
|
|
|
Due
Thereafter
|
|||
Clinical
trials
|
$
|
283
|
$
|
283
|
$
|
-
|
$
|
-
|
·
|
litigation
or other proceedings we may initiate against third parties to enforce
our
patent rights or other intellectual property rights;
|
·
|
litigation
or other proceedings we may initiate against third parties to seek
to
invalidate the patents held by such third parties or to obtain a
judgment
that our product candidates do not infringe such third parties’
patents;
|
·
|
litigation
or other proceedings third parties may initiate against us to seek
to
invalidate our patents or to obtain a judgment that third party products
do not infringe our patents;
|
·
|
if
our competitors file patent applications that claim technology also
claimed by us, we may participate in interference or opposition
proceedings to determine the priority of invention; and
|
·
|
if
third parties initiate litigation claiming that our product candidates
infringe their patent or other intellectual property rights, we will
need
to defend against such proceedings.
|
Nominee
|
For
|
Withheld
|
|||||
Richard
J. Markham
|
|
|
39,409,482
|
|
|
231,632
|
|
Immanuel
Thangaraj
|
|
|
39,407,132
|
|
|
233,982
|
|
Bruce
F. Wesson
|
|
|
39,409,165
|
|
|
231,949
|
|
Andrew
D. Reddick
|
|
|
39,416,216
|
|
|
224,898
|
|
William
A. Sumner
|
|
|
39,434,258
|
|
|
206,289
|
|
William
G. Skelly
|
|
|
39,434,825
|
|
|
206,289
|
|
George
Ross
|
39,434,918
|
206,196
|
For
|
|
Against
|
|
Abstained
|
|
Not
Voted
|
|
|||
34,764,832
|
|
|
227,814
|
|
|
15,748
|
|
|
4,632,720
|
|
For
|
|
Against
|
|
Abstained
|
|
Not
Voted
|
|
|||
34,780,914
|
|
|
216,791
|
|
|
10,759
|
|
|
4,632,720
|
|
For
|
|
Against
|
|
Abstained
|
|
Not
Voted
|
|
|||
|
|
16,909
|
|
|
26,741
|
|
|
0
|
|
31.1
|
Certification
of Periodic Report by Chief Executive Officer pursuant to Rule
13a-14 and
15d-14 of the Securities Exchange Act of 1934.
|
31.2
|
Certification
of Periodic Report by Chief Financial Officer pursuant to Rule
13a-14 and
15d-14 of the Securities Exchange Act of 1934.
|
32.1
|
Certification
of Periodic Report by the Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section
906 of the Sarbanes-Oxley Act of
2002.
|
July
29, 2008
|
ACURA
PHARMACEUTICALS, INC.
|
/s/
Andrew D. Reddick
|
|
Andrew
D. Reddick
|
|
President
& Chief Executive Officer
|
|
/s/
Peter A. Clemens
|
|
Peter
A. Clemens
|
|
Senior
VP & Chief Financial
Officer
|