CHTP » Topics » Contractual Obligations

This excerpt taken from the CHTP 10-Q filed Nov 6, 2008.

Contractual Obligations

As of September 30, 2008, we had contractual obligations and commitments of approximately $20.8 million, primarily related to the lease agreement for our office space and contracted research and development activities. To facilitate an understanding of our contractual obligations and commercial commitments, the following data is provided as of September 30, 2008:

 

     Payments due by period

Category

   Total    < 1 Year    1-3 Years    3-5 Years    More than
5 Years

Operating lease obligations

   $ 1,306,198    $ 236,938    $ 492,393    $ 576,867    $ —  

Purchase obligations

     19,514,035      16,632,250      2,881,785      —        —  
                                  

Total

   $ 20,820,233    $ 16,869,188    $ 3,374,178    $ 576,867    $ —  
                                  

In addition, we have entered into certain licensing and related agreements that, as of September 30, 2008, might require we make contingent milestone payments of up to approximately $4.9 million over the life of the agreements upon the achievement of certain clinical or commercial milestones. Such future payments are subject to our right to terminate the agreements. In the event that the milestones are not achieved, we elect not to pursue further testing of the drug candidate or we terminate such agreements, we will have no further obligations under the agreements. The uncertainty relating to the timing and occurrence of the commitments described prevents us from including them in the table above.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We invest our cash in a variety of financial instruments in order to preserve principal and liquidity while maximizing returns and we do not invest in financial instruments or their derivatives for trading or speculative purposes. To minimize the exposure due to adverse shifts in interest rates, we maintain investments of shorter maturities. Our investment guidelines include security type, credit quality and maturity and are intended to limit market risk by restricting our investments to high quality debt instruments with relatively short maturities. At September 30, 2008, our investments primarily consisted of Treasury funds with an average maturity under 90 days and ARS with long-term nominal maturities for which the interest rates are reset through a dutch auction each month or, should those auctions fail, as determined by contractual obligation. All investments to date have been made in U. S. dollars and accordingly, we do not have any exposure to foreign currency rate fluctuations.

 

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Our interest income is sensitive to changes in the general level of interest rates in the United States, particularly since our investments are and will be in short-term investments. To assess our interest rate risk, we performed a sensitivity analysis projecting potential future interest earnings on investments in which we estimated the impact of a 1%, or 100 basis point, increase or decrease in our average interest rate over a 12 month time horizon. This analysis resulted in a potential effect of approximately $230,000 on the interest earned on investments.

At September 30, 2008, we had investments in ARS with an estimated fair value of $22.4 million. Historically, ARS were priced at par, as per industry convention, based on observed or reported verifiable trades and provided a liquid market for these ARS investments. However, the recent liquidity issues have virtually shut down most active market transactions for ARS. Our investments in ARS represent interests in collateralized debt obligations supported by pools of student loans, typically over-collateralized and/or insured by the FFELP. None of the ARS investments in our portfolio were backed by sub-prime mortgage loans or other collateral with exposure to certain current market conditions. However, liquidity issues experienced recently in global credit and capital markets have prevented us from liquidating our ARS investments as the amount of securities submitted for sale at recent ARS auctions has exceeded the market demand, though they continue to pay interest according to their stated terms. Although insufficient demand related to the ARS auctions is expected to continue, we anticipate, based on continuing discussions with our investment advisors, that liquidity for our securities might possibly be realized through redemptions by the issuing agencies and our increased participation in secondary markets. In the event that we are unable to sell the investments at or above our carrying value, these securities may not provide us a liquid source of cash or might require us to record additional impairment to the asset value.

 

Item 4. Controls and Procedures

Disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) are designed only to provide reasonable assurance that they will meet their objectives that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e)) pursuant to Exchange Act Rule 13a-15. Based upon that evaluation and subject to the foregoing, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2008.

This excerpt taken from the CHTP 10-Q filed Aug 6, 2008.

Contractual Obligations

As of June 30, 2008, we had contractual obligations and commitments of approximately $18.1 million, primarily related to the recently executed lease agreement for our new office space and contracted research and development activities. To facilitate an understanding of our contractual obligations and commercial commitments, the following data is provided as of June 30, 2008:

 

     Payments due by period

Category

   Total    < 1 Year    1-3 Years    3-5 Years    More than
5 Years

Operating lease obligations

   $ 1,446,833    $ 178,102    $ 746,681    $ 522,050    $ —  

Purchase obligations

     16,683,043      14,328,498      2,261,546      93,000      —  
                                  

Total

   $ 18,129,877    $ 14,506,600    $ 3,008,227    $ 615,050    $ —  
                                  

In addition, we have entered into certain licensing and related agreements that, as of June 30, 2008, might require we make contingent milestone payments of up to approximately $4.9 million over the life of the agreements upon the achievement of certain clinical or commercial milestones. Such future payments are subject to our right to terminate the agreements. In the event that the milestones are not achieved, we elect not to pursue further testing of the drug candidate or we terminate such agreements, we will have no further obligations under the agreements. The uncertainty relating to the timing and occurrence of the commitments described prevents us from including them in the table above.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We invest our cash in a variety of financial instruments in order to preserve principal and liquidity while maximizing returns and we do not invest in financial instruments or their derivatives for trading or speculative purposes. To minimize the exposure due to adverse shifts in interest rates, we maintain investments of shorter maturities. Our investment guidelines include security type, credit quality and maturity and are intended to limit market risk by restricting our investments to high quality debt instruments with relatively short maturities. At June 30, 2008, our investments primarily consisted of money market funds, corporate debt securities and commercial paper with an average maturity under 90 days and ARS with long-term nominal maturities for which the interest rates are reset through a dutch auction each month or, should those auctions fail, as determined by contractual obligation. All investments to date have been made in U. S. dollars and accordingly, we do not have any exposure to foreign currency rate fluctuations.

Our interest income is sensitive to changes in the general level of interest rates in the United States, particularly since our investments are and will be in short-term investments. To assess our interest rate risk, we performed a sensitivity

 

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analysis projecting potential future interest earnings on investments in which we estimated the impact of a 1%, or 100 basis point, increase or decrease in our average interest rate over a 12 month time horizon. This analysis resulted in a potential effect of approximately $300,000 on the interest earned on investments.

At June 30, 2008, we had investments in ARS with an estimated fair value of $24.7 million. Historically, ARS were priced at par, as per industry convention, based on observed or reported verifiable trades and provided a liquid market for these ARS investments. However, the recent liquidity issues have virtually shut down most active market transactions. Our investments in ARS represent interests in collateralized debt obligations supported by pools of student loans, typically over-collateralized and/or insured by the Federal Family Education Loan Program (FFELP). None of the ARS investments in our portfolio were backed by sub-prime mortgage loans or other collateral with exposure to certain current market conditions. However, liquidity issues experienced recently in global credit and capital markets have prevented us from liquidating our ARS investments as the amount of securities submitted for sale at recent ARS auctions has exceeded the market demand, though they continue to pay interest according to their stated terms. Although insufficient demand for certain ARS may continue, we anticipate, based on discussions with our investment advisors, that liquidity for our securities might possibly be realized through redemptions by the issuing agencies, government intervention in the market or the emergence of secondary markets in the near term, particularly considering the relatively high default interest rates, high credit ratings, the backing of the FFELP and/or the underlying assets collateralizing these investments. In the event that we are unable to sell the investments at or above our carrying value, these securities may not provide us a liquid source of cash or might require us to record additional impairment to the asset value.

Notwithstanding the above, if uncertainties in the credit and capital markets continue and secondary markets for ARS do not emerge, we might not be able to convert these investments into cash during our required timeframe. Even if secondary markets do emerge, we might experience temporary losses of principal if such securities continue to be marketed at a discount or additional realized losses if it becomes necessary to sell these investments at such a discount. In addition, should the credit ratings of our ARS be downgraded, we might incur further value impairment and additional problems in liquidating our investments.

 

Item 4. Controls and Procedures

Disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) are designed only to provide reasonable assurance that they will meet their objectives that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e)) pursuant to Exchange Act Rule 13a-15. Based upon that evaluation and subject to the foregoing, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of June 30, 2008.

EXCERPTS ON THIS PAGE:

10-Q
Nov 6, 2008
10-Q
Aug 6, 2008
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