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HORIZON PHARMACEUTICAL LLC 10-Q 2010

Documents found in this filing:

  1. 10-Q/A
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.1
raptor10qa113009.htm



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
[X]
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period endedNovember 30, 2009
[   ]
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________ to __________

Commission file number 000-25571

Raptor Pharmaceutical Corp.
(Exact name of registrant as specified in its charter)
 
Delaware
 
86-0883978
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
9 Commercial Blvd., Suite 200, Novato, CA 94949
(Address of principal executive offices)
 
 
(415) 382-8111
(Registrant’s telephone number, including area code)
 
 
TorreyPines Therapeutics, Inc., P.O. Box 231386, Encinitas, CA  92023-1386, December 31
(Former name, former address and former fiscal year, if changed since last report)
 
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]     No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  [  ]    No   [X ]      
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer   [  ]
 
 
 
Accelerated filer    [  ]
   
Non-accelerated filer    [  ]  (Do not check if a smaller reporting company)
 
Smaller reporting company    [ X ]
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  [ ]  No [X]

There were 22,579,515 shares of the registrant’s common stock, $.001 par value per share, outstanding at January 11, 2010.

 
 

 

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-Q/A (the “Amendment”) amends the Quarterly Report on Form 10-Q for  the fiscal quarter ended November 30, 2009 of Raptor Pharmaceutical Corp. (the “Company”), which was originally filed with the Securities and Exchange Commission (the “SEC”) on January 14, 2009 (the “Original Quarterly Report”).  This Amendment amends the disclosure in (i) Part I, Item 1, “Financial Statements - Unaudited Condensed Consolidated Statements of Cash Flows for the three month periods ended November 30, 2009 and 2008 and the cumulative period from September 8, 2005 (inception) to November 30, 2009” of the Original Quarterly Report to correct four typographical errors contained therein, and (ii) Part II, Item 4, “Submissions of Matters to a Vote of Security Holders” of the Original Quarterly Report to include updated disclosure regarding the Company’s results of its Annual Meeting of Stockholders held on September 28, 2009.

Except as set forth above, this Amendment does not amend, modify or update any other disclosures or Item presented in the Original Quarterly Report.  Except as specifically set forth herein, this Amendment does not reflect events occurring after the filing of the Original Quarterly Report or amend, modify or update those disclosures or Items, including exhibits to the Original Quarterly Report affected by subsequent events.  Accordingly, this Amendment should be read in conjunction with our filings with the SEC subsequent to the filing of the Original Quarterly Report, including any amendments to those filings.  Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, new certifications of our principal executive officer and principal financial officer are being filed as exhibits to this Amendment.

 
 
 

 
 



RAPTOR PHARMACEUTICAL CORP.

Table of Contents
   
Page
Part 1 - Financial Information
Item 1
Financial Statements
 
 
Condensed Consolidated Balance Sheets as of November 30, 2009 (unaudited) and August 31, 2009
2
 
Unaudited Condensed Consolidated Statements of Operations for the three month periods ended November 30, 2009 and 2008 and the cumulative period from September 8, 2005 (inception) to November 30, 2009
3
 
Unaudited Condensed Consolidated Statements of Cash Flows for the three month periods ended November 30, 2009 and 2008 and the cumulative period from September 8, 2005 (inception) to November 30, 2009
5
 
Notes to Condensed Consolidated Financial Statements
6
Item 2
Management’s Discussion and Analysis and Results  of Operations
27
Item 3
Quantitative and Qualitative Disclosures About Market Risk
46
Item 4
Controls and Procedures
46
Part II - Other Information
Item 1
Legal Proceedings
47
Item 1A
Risk Factors
47
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds
65
Item 3
Defaults Upon Senior Securities
65
Item 4
Submission of Matters to a Vote of Security Holders
65
Item 5
Other Information
66
Item 6
Exhibits
66
SIGNATURES
68



 
 
 

 
 
 



 
PART I – FINANCIAL INFORMATION
 
Item 1. Financial Statements.

Raptor Pharmaceutical Corp.
(A Development Stage Company)
Condensed Consolidated Balance Sheets
 
         
November 30, 2009
 
August 31, 2009
ASSETS
 
(unaudited)
 
(1)
Current assets:
             
 
Cash and cash equivalents
 
 $
1,164,808
 
 $
     3,701,787
 
Prepaid expenses and other
   
231,958
   
        107,054
Total current assets
   
1,396,766
   
3,808,841
                   
Intangible assets, net
   
3,627,667
   
2,524,792
Goodwill
     
3,275,403
   
-
Fixed assets, net
     
130,868
   
        144,735
Deposits
     
100,206
   
        100,206
   
Total assets
 
$
8,530,910
 
$
6,578,574
                   
LIABILITIES AND STOCKHOLDERS’ EQUITY
           
                   
Liabilities
             
Current liabilities:
             
 
Accounts payable
 
 $
1,102,197
 
 $
        613,577
 
Accrued liabilities
   
844,282
   
        451,243
 
Deferred rent
     
496
   
-
 
Capital lease liability – current
   
4,292
   
            4,117
Total current liabilities
   
1,951,267
   
     1,068,937
                   
Capital lease liability - long-term
   
5,535
   
                  6,676
Total liabilities
     
1,956,802
   
1,075,613
                   
 
Commitments and contingencies
           
                   
Stockholders’ equity:
           
 
Preferred stock, $0.001 par value, 15,000,000 shares authorized, zero shares issued and        outstanding
   
-
   
-
 
Common stock, $0.001 par value, 150,000,000 shares authorized 18,831,957 and 17,857,555 shares issued and outstanding as at November 30, 2009 and
           
 
  August 31, 2009, respectively
   
18,832
   
          17,858
 
Additional paid-in capital
   
31,373,131
   
   27,364,286
 
Deficit accumulated during development stage
   
(24,817,855)
   
(21,879,183)
Total stockholders’ equity
   
6,574,108
   
     5,502,961
   
Total liabilities and stockholders’ equity
 
 $
8,530,910
 
 $
   6,578,574
(1) Derived from the Company’s audited consolidated financial statements as of August 31, 2009.
The accompanying notes are an integral part of these financial statements.






-2-


 
 
 
 

 
 
 



Raptor Pharmaceutical Corp.
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(Unaudited)
               
     
For the three month periods from September 1, to November 30,
     
2009
 
2008
               
 Revenues:
$
-
 
$
-
               
Operating expenses:
         
       General and administrative
 
1,010,076
   
659,689
       Research and development
 
1,930,836
   
1,820,400
              Total operating expenses
 
2,940,912
   
2,480,089
               
 Loss from operations
 
(2,940,912)
   
(2,480,089)
               
      Interest income
 
3,265
   
21,777
      Interest expense
 
(1,025)
   
(686)
             Net loss
$
(2,938,672)
 
$
(2,458,998)
               
Net loss per share:
         
       Basic and diluted
$
(0.16)
 
$
(0.17)
               
Weighted average shares
         
      outstanding used to compute:
         
         Basic and diluted
 
18,520,579
   
14,074,849
               
               
The accompanying notes are an integral part of these financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
-3-
 


 
 
 
 

 
 
 




Raptor Pharmaceutical Corp.
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(Unaudited)
       
For the cumulative period from September 8, 2005 (inception) to November 30, 2009
           
 Revenues:
 
$
-
           
Operating expenses:
     
       General and administrative
   
7,966,316
       Research and development
   
16,805,120
 
In-process research and development
   
240,625
              Total operating expenses
   
25,012,061
           
 Loss from operations
   
(25,012,061)
           
      Interest income
   
305,168
      Interest expense
   
(110,962)
             Net loss
 
$
(24,817,855)
           
           
           
The accompanying notes are an integral part of these financial statements.










 

 








 

 
-4-


 
 
 
 

 
 
 

Raptor Pharmaceutical Corp.
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(unaudited)
       
For the three month periods from
 
For the cumulative period from September 8, 2005
September 1, 2009 to November 30, 2009
 
September 1, 2008 to November 30, 2008
 (inception) to November 30, 2009
Cash flows from operating activities:
                 
 
Net loss
 
$
(2,938,672)
 
$
(2,458,998)
 
$
(24,817,855)
 
Adjustments to reconcile net loss to net cash used in operating activities:
                 
 
Employee stock-based compensation exp.
   
25,803
   
116,518
   
1,240,830
 
Consultant stock-based compensation exp.
   
65,200
   
12,993
   
472,813
 
Amortization of intangible assets
   
37,124
   
34,626
   
282,332
 
Depreciation of fixed assets
   
17,169
   
21,996
   
368,110
 
In-process research and development
   
-
   
-
   
240,625
 
Amortization of capitalized finder’s fee
   
-
   
-
   
102,000
 
Capitalized acquisition costs previously expensed
   
-
   
-
   
38,000
 
Changes in assets and liabilities:
                 
   
Prepaid expenses and other
   
(25,466)
   
(79,560)
   
(132,519)
   
Intangible assets
   
-
   
-
   
(150,000)
   
Deposits
   
-
   
-
   
(100,207)
   
Accounts payable
   
488,620
   
74,158
   
1,102,197
   
Accrued liabilities
   
(287,792)
   
29,080
   
163,556
   
Deferred rent
   
496
   
91
   
391
   
Net cash used in operating activities
   
(2,617,518)
   
(2,249,096)
   
(21,189,727)
 
Cash flows from investing activities:
                 
   
Purchase of fixed assets
   
(3,303)
   
(3,592)
   
(479,653)
   
Cash acquired in 2009 Merger
   
581,395
   
-
   
581,394
   
Net cash from investing activities
   
578,092
   
(3,592)
   
101,741
 
Cash flows from financing activities:
                 
   
Proceeds from the sale of common stock
   
-
   
-
   
17,386,000
   
Proceeds from the exercise of common stock warrants
   
56,020
   
-
   
6,565,520
   
Proceeds from the exercise of common stock options
   
4,750
   
-
   
13,448
   
Fundraising costs
   
(557,358)
   
(20,296)
   
(2,012,679)
   
Proceeds from the sale of common stock to initial investors
   
-
   
-
   
310,000
   
Proceeds from bridge loan
   
-
   
-
   
200,000
   
Repayment of bridge loan
   
-
   
-
   
(200,000)
   
Principal payments on capital lease
   
(965)
   
(770)
   
(9,495)
 
Net cash provided by (used in) financing activities
   
(497,553)
   
(21,066)
   
22,252,794
 
Net increase (decrease) in cash and cash equivalents
   
(2,536,979)
   
(2,273,754)
   
1,164,808
 
Cash and cash equivalents, beginning of period
   
3,701,787
   
7,546,912
   
-
 
Cash and cash equivalents, end of period
 
$
1,164,808
 
$
5,273,158
 
$
1,164,808
Supplemental disclosure of non-cash financing activities:
                 
   
Common stock and warrants issued in connection with reverse merger
 
$
4,415,403
 
$
-
 
$
4,415,403
   
Acquisition of equipment in exchange for capital lease
 
$
-
 
$
14,006
 
$
21,403
   
Notes receivable issued in exchange for common stock
 
$
-
 
$
-
 
$
110,000
   
Common stock issued for a finder’s fee
 
$
-
 
$
-
 
$
102,000
   
Common stock issued in asset purchase
 
$
-
 
$
-
 
$
2,898,624
The accompanying notes are an integral part of these financial statements.
   
                                    -5-
   


 
 
 
 

 
 
 

RAPTOR PHARMACEUTICAL CORP.
(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(1) NATURE OF OPERATIONS AND BUSINESS RISKS

The accompanying condensed consolidated financial statements reflect the results of operations of Raptor Pharmaceutical Corp. (the “Company” or “Raptor”) and have been prepared in accordance with the accounting principles generally accepted in the United States of America.
 
On July 28, 2009, the Company and ECP Acquisition, Inc., a Delaware corporation, the Company’s then-wholly-owned subsidiary, herein referred to as merger sub, entered into an Agreement and Plan of Merger and Reorganization, herein referred to as the 2009 Merger Agreement, with Raptor Pharmaceuticals Corp. (“RPC”), a Delaware corporation. On September 29, 2009, on the terms and subject to the conditions set forth in the 2009 Merger Agreement, pursuant to a stock-for-stock reverse triangular merger, herein referred to as the 2009 Merger, merger sub was merged with and into Raptor Pharmaceuticals Corp. and Raptor Pharmaceuticals Corp. survived such 2009 Merger as the Company’s wholly-owned subsidiary. Immediately prior to such 2009 Merger and in connection therewith, the Company effected a 1-for-17 reverse stock split of its common stock and changed its corporate name from “TorreyPines Therapeutics, Inc.” to “Raptor Pharmaceutical Corp.”
 
As a result of the 2009 Merger and in accordance with the 2009 Merger Agreement, each share of Raptor Pharmaceuticals Corp.’s common stock outstanding immediately prior to the effective time of the 2009 Merger was converted into the right to receive 0.2331234 shares of our common stock, on a post 1-for-17 reverse-split basis. Each option and warrant to purchase Raptor Pharmaceuticals Corp.’s common stock outstanding immediately prior to the effective time of the 2009 Merger was assumed by the Company at the effective time of the 2009 Merger, with each share of such common stock underlying such options and warrants being converted into the right to receive 0.2331234 shares of the Company’s common stock, on a post 1-for-17 reverse split basis, rounded down to the nearest whole share of the Company’s common stock. Following the 2009 Merger, each such option or warrant has an exercise price per share of the Company’s common stock equal to the quotient obtained by dividing the per share exercise price of such common stock subject to such option or warrant by 0.2331234, rounded up to the nearest whole cent.
 
Immediately following the effective time of the 2009 Merger, Raptor Pharmaceuticals Corp.’s (as of immediately prior to the 2009 Merger) stockholders owned approximately 95% of the Company’s outstanding common stock and the Company’s (as of immediately prior to the 2009 Merger) stockholders owned approximately 5% of the Company’s outstanding common stock.
 
Raptor Pharmaceuticals Corp., the Company’s wholly-owned subsidiary, was the “accounting acquirer,” and for accounting purposes, the Company was deemed as having been “acquired” in the 2009 Merger.  The board of directors and officers that managed and operated Raptor Pharmaceuticals Corp. immediately prior to the effective time of the 2009 Merger became the Company’s board of directors and officers.  Additionally, following the effective time of the 2009 Merger, the business conducted by Raptor Pharmaceuticals Corp. immediately prior to the effective time of the 2009 Merger became primarily the business conducted by the Company.
 
                      The following reflects the Company’s current, post 2009 Merger corporate structure (incorporation State):
 
Raptor Pharmaceutical Corp., formerly TorreyPines Therapeutics, Inc. (Delaware)
 
|                                                    |
 
TPTX, Inc. (Delaware)                                                      Raptor Pharmaceuticals Corp. (Delaware)
 
         |                                        |
 
Raptor Therapeutics Inc. (Delaware)   Raptor Discoveries Inc. (Delaware)
(f/k/a  Bennu Pharmaceuticals Inc.)                                                                     (f/k/a Raptor Pharmaceutical Inc.)

Raptor is a publicly-traded biotechnology company dedicated to speeding the delivery of new treatment options to patients by enhancing existing therapeutics through the application of highly specialized drug targeting platforms and formulation expertise. The Company focuses on underserved patient populations where it can have the greatest potential impact. Raptor’s preclinical division bioengineers novel drug candidates and drug-targeting platforms derived from the human receptor-associated protein (“RAP”) and related proteins, while Raptor’s clinical

-6-

 
 
 
 

 
 
 


RAPTOR PHARMACEUTICAL CORP.
(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

division advances clinical-stage product candidates towards marketing approval and commercialization. Raptor’s clinical programs include DR Cysteamine for the potential treatment of nephropathic cystinosis, non-alcoholic steatohepatitis (“NASH”), and Huntington’s Disease. Raptor also has two clinical stage product candidates in which the Company is seeking to out-license or form a development partnership: ConviviaTM for the potential treatment of aldehyde dehydrogenase (“ALDH2”) deficiency; and Tezampanel and NGX426, a non-opioid solution designed to treat chronic pain. Raptor’s preclinical programs target cancer, neurodegenerative disorders and infectious diseases. HepTide™ is designed to utilize engineered RAP-based peptides conjugated to drugs to target delivery to the liver to potentially treat primary liver cancer and hepatitis. NeuroTrans™ represents engineered RAP peptides created to target receptors in the brain and are currently, in collaboration with Roche, undergoing preclinical evaluation for their ability to enhance the transport of therapeutics across the blood-brain barrier. WntTide™ is based upon Mesd and Mesd peptides that the Company is studying in a preclinical breast cancer model for WntTide™’s potential inhibition of Wnt signaling through LRP5, which may block cancers dependent on signaling through LRP5 or LRP6. Raptor is also examining Tezampanel and NGX426, for the treatment of thrombotic disorder. The Company’s fiscal year end is August 31.

The Company is subject to a number of risks, including: the need to raise capital through equity and/or debt financings; the uncertainty whether the Company’s research and development efforts will result in successful commercial products; competition from larger organizations; reliance on licensing proprietary technology of others; dependence on key personnel; uncertain patent protection; and dependence on corporate partners and collaborators.

See the section titled “Risk Factors” in Part II Item 1A of this Quarterly Report on Form 10-Q.
 
 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
(a) Basis of Presentation

The Company’s condensed consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries, Raptor Pharmaceuticals Corp., Raptor Discoveries Inc., Raptor Therapeutics Inc., and TPTX, Inc. incorporated in Delaware on May 5, 2006, September 8, 2005 (date of inception), August 1, 2007, and April 24, 2000, respectively. All inter-company accounts have been eliminated. The Company’s condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Through November 30, 2009, the Company had accumulated losses of approximately $24.8 million. Management expects to incur further losses for the foreseeable future. Management believes that the Company’s cash and cash equivalents at November 30, 2009 along with the net funds raised subsequent to quarter-end in December 2009 of approximately $6.9 million (see the subsequent event Note 12) will be sufficient to meet the Company’s obligations into the third calendar quarter of 2010. The Company is currently in the process of negotiating strategic partnerships and collaborations in order to fund its preclinical and clinical programs into 2011. If the Company is not able to close a strategic transaction, the Company anticipates raising additional capital in the second calendar quarter of 2010. If the Company is not able to obtain funds either through a strategic transaction or through the sale of its equity, it may not be able to continue as a going concern.  Until the Company can generate sufficient levels of cash from its operations, the Company expects to continue to finance future cash needs primarily through proceeds from equity or debt financings, loans and collaborative agreements with corporate partners or through a business combination with a company that has such financing in order to be able to sustain its operations until the Company can achieve profitability and positive cash flows, if ever.

On September 29, 2009, upon the closing of the merger with RPC (as discussed further in the Note 9, Issuance of Common Stock), RPC’s stockholders exchanged each share of RPC’s common stock into .2331234 shares of the post-merger company and the exercise prices and stock prices were divided by .2331234 to reflect the post-merger equivalent stock prices and exercise prices. Therefore, all shares of common stock and exercise prices of common stock options and warrants are reported in these condensed consolidated financial statements on a post-merger basis.

The Company’s independent registered public accounting firm has audited our consolidated financial statements for the years ended August 31, 2009 and 2008. The October 27, 2009 audit opinion included a paragraph indicating substantial doubt as to the Company’s ability to continue as a going concern due to the fact that the Company is in the development stage and has not generated any revenue to date.



-7-
 
RAPTOR PHARMACEUTICAL CORP.
(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Management plans to seek additional debt and/or equity financing for the Company through private or public offerings or through a business combination or strategic partnership, but it cannot assure that such financing or transaction will be available on acceptable terms, or at all. The uncertainty of this situation raises substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the failure to continue as a going concern.
 
(b) Use of Estimates
 
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
(c) Fair Value of Financial Instruments

The carrying amounts of certain of the Company’s financial instruments including cash and cash equivalents, prepaid expenses, accounts payable, accrued liabilities and capital lease liability approximate fair value due to their short maturities.
 
(d) Segment Reporting

The Company has determined that it operates in two operating segments, preclinical development and clinical development. Operating segments are components of an enterprise for which separate financial information is available and are evaluated regularly by the Company in deciding how to allocate resources and in assessing performance. The Company’s chief executive officer assesses the Company’s performance and allocates its resources. Below is a break-down of the Company’s net loss and total assets by operating segment:
                                                 
   
For the three month period ended November 30,
 
   
2009
   
2008
 
   
Preclinical
   
Clinical
   
Total
   
Preclinical
   
Clinical
   
Total
 
Net loss
 
$
(949,726)
   
$
(1,988,946)
   
$
(2,938,672)
   
$
(796,343)
   
$
(1,662,655)
   
$
(2,458,998)
 
Total assets
   
498,524
     
8,032,386
     
8,530,910
     
1,463,910
     
6,921,564
     
8,385,474
 
  
(e) Cash and Cash Equivalents
 
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.
 
(f) Intangible Assets

Intangible assets include the intellectual property and other rights relating to DR Cysteamine, to the RAP technology and to the out-license and the rights to NGX 426 acquired in the 2009 Merger. The intangible assets related to DR Cysteamine and the RAP technology are amortized using the straight-line method over the estimated useful life of 20 years, which is the life of the intellectual property patents. The 20 year estimated useful life is also based upon the typical development, approval, marketing and life cycle management timelines of pharmaceutical drug products.  The intangible assets related to the out-license will be amortized using the straight-line method over the estimated useful life of 16 years, which is the life of the intellectual property patents. The intangible assets related to NGX 426, which has been classified as in-process research and development, will not be amortized until development is completed.
 
(g) Goodwill
 
Goodwill represents the excess of the value of the purchase consideration over the identifiable assets acquired in the 2009 Merger.  Goodwill will be reviewed annually, or when an indication of impairment exists, to determine if any impairment analysis and resulting write-down in valuation is necessary.
 
(h) Fixed Assets

Fixed assets, which mainly consist of leasehold improvements, lab equipment, computer hardware and software and capital lease equipment, are stated at cost. Depreciation is computed using the straight-line method over the related estimated
-8-
RAPTOR PHARMACEUTICAL CORP.
(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

useful lives, except for leasehold improvements and capital lease equipment, which are depreciated over the shorter of the useful life of the asset or the lease term. Significant additions and improvements that have useful lives estimated at greater than one year are capitalized, while repairs and maintenance are charged to expense as incurred.
 
(i) Impairment of Long-Lived Assets

The Company evaluates its long-lived assets for indicators of possible impairment by comparison of the carrying amounts to future net undiscounted cash flows expected to be generated by such assets when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Should an impairment exist, the impairment loss would be measured based on the excess carrying value of the asset over the asset’s fair value or discounted estimates of future cash flows. The Company has not identified any such impairment losses to date.
 
(j) Income Taxes

Income taxes are recorded under the liability method, under which deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
 
(k) Research and Development
 
The Company is an early development stage company. Research and development costs are charged to expense as incurred. Research and development expenses include scientists’ salaries, lab collaborations, preclinical studies, clinical trials, clinical trial materials, regulatory and clinical consultants, lab supplies, lab services, lab equipment maintenance and small equipment purchased to support the research laboratory, amortization of intangible assets and allocated executive, human resources and facilities expenses.
 
(l) In-Process Research and Development

Prior to September 1, 2009, the Company recorded in-process research and development expense for a product candidate acquisition where there is not more than one potential product or usage for the assets being acquired. Upon the adoption of the revised guidance on business combinations, effective September 1, 2009, the fair value of acquired in-process research and development is capitalized and tested for impairment at least annually.  Upon completion of the research and development activities, the intangible asset is amortized into earnings over the related products useful life. The Company reviews each product candidate acquisition to determine the existence of in-process research and development.
 
(m) Net Loss per Share

Net loss per share is calculated by dividing net loss by the weighted average shares of common stock outstanding during the period. Diluted net income per share is calculated by dividing net income by the weighted average shares of common stock outstanding and potential shares of common stock during the period. For all periods presented, potentially dilutive securities are excluded from the computation of fully diluted net loss per share as their effect is anti-dilutive. Potentially dilutive securities include:

                 
   
November 30,
 
   
2009
   
2008
 
Warrants to purchase common stock
   
2,020,793
     
3,090,814
 
Options to purchase common stock
   
1,196,163
     
925,087
 
Total potentially dilutive securities
   
3,216,956
     
4,015,901
 
             
  (n) Stock Option Plan

Effective September 1, 2006, the Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Accounting for Compensation Arrangements, (“ASC 718”) (previously listed as SFAS No. 123 (revised 2004)), Share-Based Payment. in accounting for its 2006 Equity Incentive Plan, as amended.

-9-

 
 
 
 

 
 
 

RAPTOR PHARMACEUTICAL CORP.
(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Under ASC 718, compensation cost is measured at the grant date based on the fair value of the equity instruments awarded and is recognized over the period during which an employee is required to provide service in exchange for the award, or the requisite service period, which is usually the vesting period. The fair value of the equity award granted is estimated on the date of the grant. The Company previously applied Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations and provided the required pro forma disclosures required by SFAS No. 123, Accounting for Stock-Based Compensation. The Company accounts for stock options issued to third parties, including consultants, in accordance with the provisions of the FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees, (“ASC 505-50”) (previously listed as Emerging Issues Task Force (“EITF”) Consensus No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services). See Note 8, Stock Option Plan, for further discussion of employee stock-based compensation.
 
(o) Recent Accounting Pronouncements

In September 2006, ASC Topic 820, Fair Value Measurements (“ASC 820”) (previously listed as the FASB issued SFAS No. 157, Fair Value Measurements). ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements; rather, it applies under other accounting pronouncements that require or permit fair value measurements. The provisions of ASC 820 are to be applied prospectively as of the beginning of the fiscal year in which it is initially applied, with any transition adjustment recognized as a cumulative-effect adjustment to the opening balance of retained earnings. The provisions of ASC 820 are effective for fiscal years beginning after November 15, 2007; therefore, the Company adopted ASC 820 as of September 1, 2008 for financial assets and liabilities. In accordance with FASB Staff Position 157-2, Effective Date of ASC 820, the Company adopted  the provisions of ASC 820 for its non-financial assets and non-financial liabilities on September 1, 2009 and has determined that it had no material impact on the Company’s results for the three months ended November 30, 2009. See Note 5, Fair Value Measurements, regarding the disclosure of the Company’s value of its cash equivalents.

In February 2007, the FASB issued ASC Topic 825, Financial Instruments, (“ASC 825”) (previously SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115), which permits the measurement of many financial instruments and certain other asset and liabilities at fair value on an instrument-by-instrument basis (the fair value option). The guidance is applicable for fiscal years beginning after November 15, 2007; therefore, the Company adopted ASC 825 as of September 1, 2008. The Company has determined that ASC 825 had no material impact  on its financial results for the three months ended November 30, 2009.

In June 2007, the EITF reached a consensus on ASC Topic 730, Research and Development, (“ASC 730”) (previously EITF No. 07-3, Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities). ASC 730 specifies the timing of expense recognition for non-refundable advance payments for goods or services that will be used or rendered for research and development activities. ASC 730 was effective for fiscal years beginning after December 15, 2007, and early adoption is not permitted; therefore, the Company adopted ASC 730 as of September 1, 2008. The Company has determined that ASC 730 had no material impact on its financial results for the three months ended November 30, 2009.

In December 2007, the EITF reached a consensus on ASC Topic 808, Collaborative Agreement, (“ASC 808”) (previously EITF 07-01, Accounting for Collaborative Arrangements).  ASC 808 discusses the appropriate income statement presentation and classification for the activities and payments between the participants in arrangements related to the development and commercialization of intellectual property. The sufficiency of disclosure related to these arrangements is also specified. ASC 808 is effective for fiscal years beginning after December 15, 2008. As a result, ASC 808 is effective for the Company as of September 1, 2009.  Based upon the nature of the Company’s business, ASC 808 could have a material impact on its financial position and consolidated results of operations in future years, but had no material impact for the three months ended November 30, 2009.

In December 2007, FASB issued ASC Topic 805, Business Combinations, (“ASC 805”) (previously SFAS 141(R) and FASB ASC Topic 810, Consolidation (“ASC 810”) (previously SFAS 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51).  These statements will significantly change the financial accounting and reporting of business combination transactions and non-controlling (or minority) interests in consolidated financial statements. ASC 805 requires companies to: (i) recognize, with certain exceptions, 100% of the fair values of assets acquired, liabilities assumed, and non-controlling interests in acquisitions of less than a 100% controlling interest when the acquisition constitutes a change in control of the acquired entity; (ii) measure acquirer shares issued in consideration for a business combination at fair value on the
-10-

 
 
 
 

 
 
 

RAPTOR PHARMACEUTICAL CORP.
(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

acquisition date; (iii) recognize contingent consideration arrangements at their acquisition-date fair values, with subsequent changes in fair value generally reflected in earnings; (iv) with certain exceptions, recognize pre-acquisition loss and gain contingencies at their acquisition-date fair values; (v) capitalize in-process research and development (“IPR&D”) assets acquired; (vi) expense, as incurred, acquisition-related transaction costs; (vii) capitalize acquisition-related restructuring costs only if the criteria in ASC 420, Exit and Disposal Cost Obligations, (previously SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities), are met as of the acquisition date; and (viii) recognize changes that result from a business combination transaction in an acquirer’s existing income tax valuation allowances and tax uncertainty accruals as adjustments to income tax expense. ASC 805 is required to be adopted concurrently with ASC 810 and is effective for business combination transactions for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 (the Company’s fiscal 2010). Early adoption of these statements is prohibited. The Company believes the adoption of these statements will have a material impact on significant acquisitions completed after September 1, 2009.   See Note 9 which reflects the accounting treatment of our 2009 Merger utilizing these provisions.

In March 2008, the FASB issued ASC Topic 815, Derivatives and Hedging, (“ASC 815”) (previously SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities). This statement will require enhanced disclosures about derivative instruments and hedging activities to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company adopted ASC 815 on December 1, 2008 and has determined that ASC 815 had no material impact on its financial results for the three months ended November 30, 2009.

In May 2008, the FASB released ASC Topic 470, Debt, (“ASC 470”) (previously FASB Staff Position (“FSP”) APB 14-1 Accounting For Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement) that alters the accounting treatment for convertible debt instruments that allow for either mandatory or optional cash settlements. ASC 470 specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. Furthermore, it would require recognizing interest expense in prior periods pursuant to retrospective accounting treatment. FSP ASC 470 is effective for financial statements issued for fiscal years beginning after December 15, 2008; therefore, the Company adopted ASC 470 as of September 1, 2009. The Company has determined that ASC 470 had no material impact on its condensed consolidated financial statements for the three months ended November 30, 2009.

In June 2008, the FASB issued FASB ASC Topic 815, Derivatives and Hedging, (“ASC 815”) (previously EITF 07-5, Determining Whether an Instrument (or an Embedded Feature) is Indexed to an Entity's Own Stock).  ASC 815 requires entities to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock by assessing the instrument’s contingent exercise provisions and settlement provisions. Instruments not indexed to their own stock fail to meet the scope exception of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, paragraph 11(a), and should be classified as a liability and marked-to-market. The statement is effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years and is to be applied to outstanding instruments upon adoption with the cumulative effect of the change in accounting principle recognized as an adjustment to the opening balance of retained earnings. The Company adopted ASC 815 as of September 1, 2009 and has determined that ASC 815 had no material impact on its condensed consolidated financial statements for the three months ended November 30, 2009.

In April 2008, the FASB issued ASC Topic 350, Intangibles – Goodwill and Other, (“ASC 350”) (previously FSP SFAS No. 142-3, Determination of the Useful Life of Intangible Assets). ASC 350 provides guidance with respect to estimating the useful lives of recognized intangible assets acquired on or after the effective date and requires additional disclosure related to the renewal or extension of the terms of recognized intangible assets. ASC 350 is effective for fiscal years and interim periods beginning after December 15, 2008. The Company adopted ASC 350 as of September 1, 2009 and has determined that ASC 350 had no material impact on the Company’s condensed consolidated financial statements for the three months ended November 30, 2009.








-11-

 
 
 
 

 
 
 

RAPTOR PHARMACEUTICAL CORP.
(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In May 2009, the FASB issued ASC Topic 855, Subsequent Events, (“ASC 855”) (previously SFAS No. 165, Subsequent Events). ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. ASC 855 defines the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, and the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements. ASC 855 is effective for fiscal years and interim periods ending after June 15, 2009. The Company adopted ASC 855 as of August 31, 2009 and anticipates that the adoption will impact the accounting and disclosure of future transactions. The Company’s management has evaluated and disclosed subsequent events from the balance sheet date of November 30, 2009 through January 13, 2010, the day before the date that these condensed consolidated financial statements were included in the Company’s Quarterly Report on Form 10-Q and filed with the SEC.

ASC Topic 825, Financial Instruments, (“ASC 825”) (previously FSP FAS 107-1 and APB 28-1 amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments), to require disclosures about the fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This ASC 825 also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. The adoption of ASC 825 did not have a material impact on the Company’s condensed consolidated financial statements for the three months ended November 30, 2009.
 
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R), (“SFAS 167”), which has not yet been codified in the ASC. The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. This statement is effective for fiscal years beginning after November 15, 2009, and for interim periods within that first annual reporting period. The Company is currently evaluating the impact of this standard, however, it does not expect SFAS 167 will have a material impact on its condensed consolidated financial statements.

In June 2009, the FASB issued ASC Topic 105, Generally Accepted Accounting Standards, (“ASC 105”) (previously SFAS No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162), (the “Codification”). The Codification, which was launched on July 1, 2009, became the single source of authoritative nongovernmental U.S. GAAP, superseding existing FASB, American Institute of Certified Public Accountants (“AICPA”), EITF and related literature. The Codification eliminates the GAAP hierarchy contained in ASC 105 and establishes one level of authoritative GAAP. All other literature is considered non-authoritative. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company adopted ASC 105 as of September 1, 2009 however, references to both current GAAP and the Codification are included in this filing. The Company has determined that this provision had no material impact on its condensed consolidated financial statements for the three months ended November 30, 2009.
 
(3) INTANGIBLE ASSETS AND GOODWILL>

On January 27, 2006, BioMarin Pharmaceutical Inc. (“BioMarin”) assigned the intellectual property and other rights relating to the RAP technology to the Company. As consideration for the assignment of the RAP technology, BioMarin will receive milestone payments based on certain financing and regulatory triggering events. No other consideration was paid for this assignment. The Company has recorded $150,000 of intangible assets on the consolidated balance sheets as of November 30, 2009 and August 31, 2009 based on the estimated fair value of its agreement with BioMarin.

On December 14, 2007, the Company acquired the intellectual property and other rights to develop DR Cysteamine to treat various indications from the University of California at San Diego (“UCSD”) by way of a merger with Encode Pharmaceuticals, Inc. (“Encode”), a privately held research and development company, which held the intellectual property license with UCSD.

Intangible assets recorded as a result of the 2009 merger were approximately $1.1 million as discussed in Note 9 below.





-12-

 
 
 
 

 
 
 

RAPTOR PHARMACEUTICAL CORP.
(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The intangible assets, recorded at approximately $2.6 million acquired in the merger with Encode, were primarily based on the value of the Company’s common stock and warrants issued to the Encode stockholders:

Intangible asset (IP license) related to the Encode merger, gross
 
$
2,620,000
 
Intangible asset related to NeuroTransTM purchase from BioMarin, gross
   
150,000
 
Intangible assets (out-license) related to the 2009 Merger, gross
   
240,000
 
In-process research and development (IP license) related to the 2009 Merger, gross
 
900,000
 
Total gross intangible assets
   
3,910,000
 
Less accumulated amortization
   
(282,333
)
       
Intangible assets, net
 
$
3,627,667
 
       
  
The intangible assets related to DR Cysteamine and NeuroTransTM are being amortized monthly over 20 years, which are the life of the intellectual property patents and the estimated useful life. The 20 year estimated useful life is also based upon the typical development, approval, marketing and life cycle management timelines of pharmaceutical drug products. The intangible assets related to the out-license will be amortized using the straight-line method over the estimated useful life of 16 years, which is the life of the intellectual property patents. The intangible assets related to NGX 426 will not be amortized until the product is developed.  During the three months ended November 30, 2009 and 2008 and the cumulative period from September 8, 2005 (inception) to November 30, 2009, the Company amortized $37,124, $34,624, and $282,332, respectively, of intangible assets to research and development expense.

The following table summarizes the actual and estimated amortization expense for our intangible assets for the periods indicated:

         
Amortization period
 
Amortization expense
 
September 8, 2005 (inception) to August 31, 2006 – actual
 
$
4,375
 
Fiscal year ending August 31, 2007 – actual
   
7,500
 
Fiscal year ending August 31, 2008 – actual
   
94,833
 
Fiscal year ending August 31, 2009 – actual
   
138,500
 
Fiscal year ending August 31, 2010 – estimate
   
141,000
 
Fiscal year ending August 31, 2011 – estimate
   
153,500
 
Fiscal year ending August 31, 2012 – estimate
   
153,500
 
Fiscal year ending August 31, 2013 – estimate
   
153,500
 
Fiscal year ending August 31, 2014 – estimate
   
153,500
 
Fiscal year ending August 31, 2015 – estimate
   
153,500
 
 

 
 














-13-

 
 
 
 

 
 
 

RAPTOR PHARMACEUTICAL CORP.
(A Development Stage Company)
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(4) FIXED ASSETS
 
Fixed assets consisted of:
                         
Category
 
 
November 30, 2009
   
 
August 31, 2009
   
Estimated useful lives
Leasehold improvements
 
$
113,422
   
$
113,422
   
Shorter of life of asset or lease term
Office furniture
   
3,188
     
3,188
   
7 years
Laboratory equipment
   
277,303
     
277,303
   
5 years
Computer hardware and software
   
83,740
     
80,437
     
3 years
 
Capital lease equipment
   
14,006
     
14,006
   
Shorter of life of asset or lease term
                     
Total at cost
   
491,659
     
488,356
         
Less: accumulated depreciation
   
(360,791
)
   
(343,621
)
       
                     
Total fixed assets, net
 
$
130,868
   
$
144,735
         
                     
  
Depreciation expense for the three months ended November 30, 2009 and 2008 and the cumulative period from September 8, 2005 (inception) to November 30, 2009 was $17,169, $21,996 and $368,109, respectively. Accumulated depreciation on capital lease equipment was $5,028 and $3,951 as of November 30, 2009 and August 31, 2009, respectively.
 
(5) FAIR VALUE MEASUREMENT

The Company uses a fair-value approach to value certain assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The Company uses a fair value hierarchy, which distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

 
Level one — Quoted market prices in active markets for identical assets or liabilities;
 
 
Level two — Inputs other than level one inputs that are either directly or indirectly observable; and
 
 
Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. Assets and liabilities measured at fair value on a recurring basis at November 30, 2009 and August 31, 2009 are summarized as follows:

 
Assets
 
 
Level 1
 
 
Level 2
 
 
Level 3
   
November 30, 2009
Fair value of cash equivalents
 
$1,027,231
 
$                —
 
$             —
   
$1,027,231
                   
Total
 
$1,027,231
 
$                —
 
$             —
   
$1,027,231


 

 
 

 
-14-

 
 
 
 

 
 
 

RAPTOR PHARMACEUTICAL CORP.
(A Development Stage Company)
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


 
Assets
 
 
Level 1
 
 
Level 2
 
 
Level 3
   
August 31, 2009
Fair value of cash equivalents
 
$ 3,515,353
 
$                —
 
$             —
   
$  3,515,353
                   
Total
 
$ 3,515,353
 
$                —
 
$             —
   
$  3,513,353

Cash equivalents represent the fair value of our investment in two money market accounts as of November 30, 2009 and August 31, 2009
 
(6) ACCRUED LIABILITIES
 

Accrued liabilities consisted of:
                 
   
November 30, 2009
   
August 31, 2009
 
Salaries and benefits and other obligations related to 2009 Merger
 
$
429,457
   
$
 
Legal fees primarily due to 2009 Merger
   
227,731
     
195,552
 
Accrued vacation
   
52,786
     
38,109
 
Patent costs
   
39,551
     
10,500
 
Salaries and wages
   
34,397
     
57,351
 
Auditing and tax preparation fees
   
33,710
     
19,720
 
Consulting — research and development
   
26,650
     
21,000
 
2009 Merger joint proxy/prospectus
   
     
109,011
 
Total accrued liabilities
 
$
844,282
   
$
451,243
 
             

(7) IN-PROCESS RESEARCH AND DEVELOPMENT

On October 17, 2007, the Company purchased certain assets of Convivia, Inc. (“Convivia”) including intellectual property, know-how and research reports related to a product candidate targeting liver aldehyde dehydrogenase (“ALDH2”) deficiency, a genetic metabolic disorder. The Company issued an aggregate of 101,991 shares of its restricted, unregistered common stock to the seller and other third parties in settlement of the asset purchase. Pursuant to ASC Topic 730, Research and Development, (previously Financial Accounting Standard (“FAS”) 2 Paragraph 11(c), Intangibles Purchased From Others), the Company has expensed the value of the common stock issued in connection with this asset purchase as in-process research and development expense. The amount expensed was based upon the closing price of Raptor’s common stock on the date of the closing of the asset purchase transaction of $2.359 per share multiplied by the aggregate number of shares of Raptor common stock issued or 101,991 for a total expense of $240,625 recorded on Raptor’s consolidated statement of operations during the year ended August 31, 2008.

(8) STOCK OPTION PLAN

Effective September 1, 2006, the Company began recording compensation expense associated with stock options and other forms of equity compensation in accordance with ASC 718, as interpreted by ASC 718. Prior to September 1, 2006, the Company accounted for stock options according to the provisions of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, and therefore no related compensation expense was recorded for awards granted with no intrinsic value. The Company adopted the modified prospective transition method provided for under ASC 718, and consequently has not retroactively adjusted results from prior periods. Under this transition method, compensation cost associated with stock options now includes: (1) quarterly amortization related to the remaining unvested portion of all stock option awards granted prior to September 1, 2006, based on the grant date value estimated in accordance with the original provisions of ASC 718; and (2) quarterly amortization related to all stock option




-15-

 
 
 
 

 
 
 

RAPTOR PHARMACEUTICAL CORP.
(A Development Stage Company)
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 

awards granted subsequent to September 1, 2006, based on the grant date fair value estimated in accordance with the provisions of ASC 718. In addition, the Company records consulting expense over the vesting period of stock options granted to consultants. The compensation expense for stock-based compensation awards includes an estimate for forfeitures and is recognized over the requisite service period of the options, which is typically the period over which the options vest, using the straight-line method. Employee stock-based compensation expense for the three months ended November 30, 2009 and 2008 and for the cumulative period from September 8, 2005 (inception) to November 30, 2009 was $25,803, $116,518, and $1,240,830 of which cumulatively $1,051,583 was included in general and administrative expense and $189,247 was included in research and development expense. No employee stock compensation costs were recognized for the period from September 8, 2005 (inception) to August 31, 2006, which was prior to the Company’s adoption of ASC 718.

Stock-based compensation expense was based on the Black-Scholes option-pricing model assuming the following:
                                     
             
Expected
               
     
Risk-free
   
life of stock
   
Annual
   
Annual
   
 
Period*
 
interest rate
   
option
   
volatility
   
turnover rate
   
 
September 8, 2005 (inception) to August 31, 2006**
   
5
%
 
10 years
   
100
%
   
0
%
 
                                     
 
Quarter ended November 30, 2006
   
5
%
 
8 years
   
100
%
   
10
%
 
                                     
 
Quarter ended February 28, 2007
   
5
%
 
8 years
   
100
%
   
10
%
 
                                     
 
Quarter ended May 31, 2007
   
5
%
 
8 years
   
100
%
   
10
%
 
                                     
 
Quarter ended August 31, 2007
   
4
%
 
8 years
   
100
%
   
10
%
 
                                     
 
Quarter ended November 30, 2007
   
3.75
%
 
8 years
   
109
%
   
10
%
 
                                     
 
Quarter ended February 29, 2008
   
2
%
 
8 years
   
119
%
   
10
%
 
                                     
 
Quarter ended May 31, 2008
   
2
%
 
8 years
   
121
%
   
10
%
 
                                     
 
Quarter ended August 31, 2008
   
2.5
%
 
8 years
   
128
%
   
10
%
 
                                     
 
Quarter ended November 30, 2008
   
1.5
%
 
7 years
   
170
%
   
10
%
 
                                     
 
Quarter ended February 28, 2009
   
2.0
%
 
7 years
   
220
%
   
10
%
 
                                     
 
Quarter ended May 31, 2009
   
2.6
%
 
7 years
   
233
%
   
10
%
 
                                     
 
Quarter ended August 31, 2009
   
3.2
%
 
7 years
   
240
%
   
10
%
 
                                 
 
Quarter ended November 30, 2009
   
3.0
%
 
7 years
   
245
%
   
10
%
 
     
*
 
Dividend rate is 0% for all period presented.
 
**
 
Stock-based compensation expense was recorded on the consolidated statements of operations commencing on the effective date of ASC 718, September 1, 2006. Prior to September 1, 2006, stock based compensation was reflected only in the footnotes to the consolidated statements of operations, with no effect on the consolidated statements of operations, per the guidelines of APB No. 25. Consultant stock-based compensation expense has been recorded on the consolidated statements of operations since inception.

If factors change and different assumptions are employed in the application of ASC 718, the compensation expense recorded in future periods may differ significantly from what was recorded in the current period.

The Company recognizes as an expense the fair value of options granted to persons who are neither employees nor directors. The fair value of expensed options was based on the Black-Scholes option-pricing model assuming the same factors shown in the stock-based compensation expense table above. Stock-based compensation expense for consultants for the three months ended November 30, 2009 and 2008 and for the cumulative period from September 8, 2005 (inception) to November 30,

-16-


 
 
 
 

 
 
 


RAPTOR PHARMACEUTICAL CORP.
(A Development Stage Company)
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2009, were $65,200, $12,993 and $472,813, respectively, of which cumulatively $113,439 was included in general and administrative expense and $359,374 was included in research and development expense.

A summary of the activity in the 2006 Equity Compensation Plan, as amended and the Company’s other stock option plans, is as follows:
                                 
                               
           
Weighted average
           
 
Weighted average
 
   
Option shares
   
exercise price
   
 
Exercisable
   
fair value of
options granted
 
Outstanding at September 8, 2005
   
     
     
     
 
Granted
   
580,108
   
$
2.64
     
   
$
2.47
 
Exercised
   
     
     
     
 
Canceled
   
     
     
     
 
                               
Outstanding at August 31, 2006
   
580,108
   
$
2.64
     
4,010
   
$
2.47
 
Granted
   
107,452
   
$
2.56
     
   
$
2.31
 
Exercised
   
(3,381
)
 
$
2.57
     
   
$
2.40
 
Canceled
   
     
     
         
                               
Outstanding at August 31, 2007
   
684,179
   
$
2.63
     
273,236
   
$
2.45
 
Granted
   
223,439
   
$
2.27
     
   
$
2.21
 
Exercised
   
     
     
     
 
Canceled
   
     
     
     
 
                               
Outstanding at August 31, 2008
   
907,618
   
$
2.54
     
600,837
   
$
2.39
 
Granted
   
81,595
   
$
1.13
     
   
$
1.04
 
Exercised
   
     
     
     
 
Canceled
   
     
     
     
 
                               
Outstanding at August 31, 2009
   
989,213
   
$
2.42
     
826,303
   
$
2.28
 
                               
Granted
 
50,590
   
$
3.43
     
34,959
   
$
2.26
 
Assumed in the 2009 Merger
 
161,044
   
$
114.12
     
158,475
     
 
Exercised
 
(2,115
)
 
$
2.24
     
     
 
Canceled
 
(2,569
)
 
$
819.17
     
     
 
Outstanding at November 30, 2009
 
1,196,163
   
$
17.26
     
1,109,737
   
$
2.39
 
  
The weighted average intrinsic values of stock options outstanding and expected to vest and stock options exercisable as of November 30, 2009 and 2008 were $906,974, $692,785, zero and zero respectively.

There were 1,208,104 options available for grant under the 2006 Equity Compensation Plan, as amended, and under the stock option plans assumed in the 2009 Merger as of November 30, 2009. As of November 30, 2009, the options outstanding consisted of the following:
                             
   
Options outstanding
   
 Options exercisable
 
         
Weighted
   
Weighted
             
   
Number of options
   
average remaining
   
average exercise
   
Number of options
   
Weighted average
 
 
Range of exercise prices
 
outstanding (#)
   
contractual life (yrs.)
   
price ($)
   
exercisable (#)
   
exercise price ($)
 
$0 to $1.00
   
34,969
     
9.37
     
.85
     
5,099
     
0.85
 
$1.01 to $2.00
   
78,684
     
8.93
     
1.56
     
38,427
     
1.55
 
$2.01 to $3.00
   
873,445
     
6.95
     
2.56
     
803,499
     
2.58
 
$3.01 to $4.00
   
94,146
     
9.87
     
3.52
     
59,178
     
3.84
 
$4.01 to $5.00
 
62,104
     
9.87
     
4.57
   
58,604
     
4.59
 
$5.01 to $1,564
 
52,815
     
5.00
     
333.83
   
52,815
     
333.83
 
     
1,196,163
     
7.32
     
17.26
     
1,017,622
     
19.92
 
                                     
-17-

 
 
 
 

 
 
 

RAPTOR PHARMACEUTICAL CORP.
(A Development Stage Company)
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 

           At November 30, 2009, the total unrecognized compensation cost was approximately $260,000. The weighted average period over which it is expected to be recognized is 3.25 years.
 
 (9) ISSUANCE OF COMMON STOCK
 

ISSUANCE OF COMMON STOCK PURSUANT TO COMMON STOCK WARRANT EXERCISES AND STOCK OPTION EXERCISES

During the three month period ended November 30, 2009, the Company received $56,018 from the exercise of a warrant issued to a placement agent in the May/June 2008 private placement in exchange for the issuance of 23,744 shares of the Company’s common stock and the Company issued 7,680 shares of its common stock resulting from a cashless exercise of a warrant issued in 2007 in connection with the purchase of DR Cysteamine.  During cumulative period from September 8, 2005 (inception) through November 30, 2009, the Company received $6.566 million from the exercise of warrants in exchange for the issuance of an aggregate of 3,576,454 shares.

During the three month period ended November 30, 2009, the Company received $4,750  from the exercise of stock options in exchange for 2,115 shares of the Company’s common stock.  For the cumulative period from September 8, 2005 (inception) through November 30, 2009, the Company received $13,898 from the exercise of stock options resulting in the issuance of 5,495 shares of common stock. Total common stock outstanding as of November 30, 2009 was 18,831,957 shares.

ISSUANCE OF COMMON STOCK PURSUANT TO AN ASSET PURCHASE AGREEMENT WITH CONVIVIA, INC.

On October 18, 2007, the Company purchased certain assets of Convivia, Inc. (“Convivia”) including intellectual property, know-how and research reports related to a product candidate targeting liver aldehyde dehydrogenase (“ALDH2”) deficiency, a genetic metabolic disorder. The Company hired Convivia’s chief executive officer and founder, Thomas E. (Ted) Daley, as President of its clinical division. In exchange for the assets related to the ALDH2 deficiency program, the Company issued to Convivia 46,625 shares of its restricted, unregistered common stock, an additional 46,625 shares of its restricted, unregistered common stock to a third party in settlement of a convertible loan between the third party and Convivia, and another 8,742 shares of restricted, unregistered common stock in settlement of other obligations of Convivia. Mr. Daley, as the former sole stockholder of Convivia (now dissolved), may earn additional shares of the Company based on certain triggering events or milestones related to the development of Convivia assets. In addition, Mr. Daley may earn cash bonuses based on the same triggering events pursuant to his employment agreement. In January 2008, Mr. Daley earned a $30,000 cash bonus pursuant to his employment agreement for executing the Patheon formulation agreement for manufacturing ConviviaTM. In March 2008, Mr. Daley earned a $10,000 cash bonus pursuant to his employment agreement and was issued 23,312 shares of valued at $56,000 based on the execution of an agreement to supply the Company with the active pharmaceutical ingredient for ConviviaTM pursuant to the asset purchase agreement. In October 2008, Mr. Daley was issued 23,312 shares of restricted Raptor common stock valued at $27,000 and earned a $30,000 cash bonus (pursuant to Mr. Daley’s employment agreement) pursuant to the fulfillment of a clinical milestone. Pursuant to ASC 730, the accounting guidelines for expensing research and development costs, the Company has expensed the value of the stock issued in connection with this asset purchase (except for milestone bonuses, which are expensed as compensation expense) as in-process research and development expense in the amount of $240,625 on its condensed consolidated statement of operations for the year ended August 31, 2008.
 
MERGER OF RAPTOR’S CLINICAL DEVELOPMENT SUBSIDIARY AND ENCODE PHARMACEUTICALS, INC.
  
On December 14, 2007, the Company entered into a Merger Agreement (the “Encode Merger Agreement”), dated as of the same date, by and between the Company, its clinical development subsidiary and Encode Pharmaceuticals, Inc. (“Encode”), a privately held development stage company. Pursuant to the Encode Merger Agreement, a certificate of merger was filed with the Secretary of State of the State of Delaware and Encode was merged with and into the Company’s clinical development subsidiary. The existence of Encode ceased as of the date of the Encode Merger Agreement. Pursuant to the Encode Merger Agreement and the certificate of merger, the Company’s clinical development subsidiary, as the surviving corporation, continued as a wholly-owned subsidiary of the Company. Under the terms of and subject to the conditions set forth in the Encode Merger Agreement, the Company issued 802,946 shares of restricted, unregistered shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) to the stockholders of Encode (the “Encode Stockholders”), options (“Company Options”) to purchase
 
-18-

 
 
 
 

 
 
 

RAPTOR PHARMACEUTICAL CORP.
(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
83,325 shares of Common Stock to the optionholders of Encode (the “Encode Optionholders”), and warrants (“Company Warrants”) to purchase 256,034 restricted, unregistered shares of Common Stock to the warrantholders of Encode (the “Encode Warrantholders”, and together with the Encode Stockholders and Encode Optionholders, the “Encode Securityholders”), as of the date of such Agreement. Such Common Stock, Company Options to purchase Common Stock, and Company Warrants to purchase Common Stock combine for an aggregate amount of 1,142,305 shares of Common Stock issuable to the Encode Securityholders as of the closing of the merger with Encode. The purchase price was valued at $2.6 million, which is reflected as intangible assets on the Company’s consolidated balance sheet as of August 31, 2008, primarily based on the value the Company’s common stock and warrants issued to Encode stockholders. The Encode Securityholders are eligible to receive up to an additional 559,496 shares of Common Stock, Company Options and Company Warrants to purchase Common Stock in the aggregate based on certain triggering events related to regulatory approval of DR Cysteamine, an Encode product program described below, if completed within the five year anniversary date of the Encode Merger Agreement. The Company recorded this transaction as an asset purchase rather than a business combination, as Encode had not commenced planned principle operations, such as generating revenues from its drug product candidate.

As a result of the merger with Encode, the Company received the exclusive worldwide license to DR Cysteamine (“License Agreement”), developed by clinical scientists at the UCSD, School of Medicine. DR Cysteamine is a proprietary enterically coated formulation of cysteamine bitartrate, a cystine depleting agent currently approved by the U.S. Food and Drug Administration (“FDA”). Cysteamine bitartrate is prescribed for the management of the genetic disorder known as nephropathic cystinosis (“cystinosis”), a lysosomal storage disease. The active ingredient in DR Cysteamine has also demonstrated potential in studies as a treatment for other metabolic and neurodegenerative diseases, such as Huntington’s Disease and Non-alcoholic steatohepatitis (“NASH”).

In consideration of the grant of the license, the Company will be obligated to pay an annual maintenance fee until it begins commercial sales of any products developed pursuant to the License Agreement. In addition to the maintenance fee, the Company will be obligated to pay during the life of the License Agreement: milestone payments ranging from $20,000 to $750,000 for orphan indications and from $80,000 to $1,500,000 for non-orphan indications upon the occurrence of certain events, if ever; royalties on commercial net sales from products developed pursuant to the License Agreement ranging from 1.75% to 5.5%; a percentage of sublicense fees ranging from 25% to 50%; a percentage of sublicense royalties; and a minimum annual royalty commencing the year the Company begins commercially selling any products pursuant to the License Agreement, if ever. Under the License Agreement, the Company is obligated to fulfill predetermined milestones within a specified number of years ranging from 0.75 to 6 years from the effective date of the License Agreement, depending on the indication. To the extent that the Company fails to perform any of the obligations, UCSD may terminate the license or otherwise cause the license to become non-exclusive. To-date, Raptor has paid $270,000 in milestone payments to UCSD based upon the initiation of clinical trials in cystinosis and in NASH.
 
ISSUANCES OF COMMON STOCK AND WARRANTS IN CONNECTION WITH THE SALE OF UNITS IN A PRIVATE PLACEMENT

During the period from May 21, 2008 through June 27, 2008 Raptor entered into a Securities Purchase Agreement, as Amended (the “Purchase Agreement”), with 11 investors for the private placement of units of the Company, each unit comprised of one share of Raptor’s Common Stock and one warrant to purchase one half of one share of Raptor’s Common Stock, at a purchase price of $2.14 per unit. Pursuant to the Purchase Agreement, the Company sold an aggregate of 4,662,468 shares of Common Stock for aggregate gross proceeds of $10 million and issued to the investors warrants, exercisable for two years from the initial closing, which entitle the investors to purchase up to an aggregate of 2,331,234 shares of Common Stock of the Company and have an exercise price of either $3.22 or $3.86 per share, depending on when such warrants are exercised, if at all, and were valued at approximately $3 million (using the following Black -Scholes pricing model assumptions: risk-free interest rate 2%; expected term 2 years and annual volatility 121.45%).

In connection with the May / June 2008 private placement, the Company issued warrants and a cash fee to placement agents to compensate them for placing investors into the financing. Placement agents were issued warrants exercisable for 7% of Common Stock issued and issuable under the warrants issued to investors as part of the financing units and a cash fee based upon the proceeds of the sale of the units of the private placement. In connection with the sale of units, the Company issued placement agent warrants to purchase 489,559 shares of Raptor’s Common Stock at an exercise price of $2.36 per share for a five year term (valued at approximately $960,000 using the following Black -Scholes pricing model assumptions: risk-free interest rate 2%; expected term 5 years and annual volatility 121.45%) and cash fees to placement agents totaling $700,000. Of the placement agents compensated, Limetree Capital was issued warrants to purchase 438,890 shares of Raptor’s Common Stock and cash commission of $627,550. One of our Board members serves on the board of Limetree Capital.
-19-

 
 
 
 

 
 
 

RAPTOR PHARMACEUTICAL CORP.
(A Development Stage Company)
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On April 29, 2009, in order to reflect current market prices, Raptor notified the holders of warrants purchased in the May/June 2008 private placement that the Company was offering, in exchange for such warrants, new warrants to purchase its common stock at an exercise price of $1.29 per share, but only to the extent such exchange of the original warrants and exercise of the new warrants, including the delivery of the exercise price, occurred on or prior to July 17, 2009. The new warrants were valued at approximately $2.3 million based on the following Black -Scholes pricing model assumptions: risk-free interest rate 0.55%; expected term 1 year and annual volatility 231.97%. The warrants that were not exchanged prior to or on July 17, 2009 retained their original exercise prices of $3.86 per share and original expiration date of May 21, 2010. The Company received $2,614,500 of proceeds from warrant exercises that resulted in the issuance of 2,031,670 shares of Raptor’s common stock pursuant to the exchange described above.

On August 21, 2009, Raptor entered into a securities purchase agreement, with four investors for the private placement of units of the Company at a purchase price of $1.37 per unit, each unit comprised of one share of Raptor’s common stock, par value $0.001 per share and one warrant to purchase one half of one share of Raptor’s common stock. Pursuant to the securities purchase agreement, the Company sold an aggregate of 1,738,226 units to the investors for aggregate gross proceeds of $2,386,000. The 1,738,226 units comprised of an aggregate of 1,738,226 shares of common stock and warrants to purchase up to 869,113 shares of Raptor’s common stock valued at $1.0 million (using the following Black -Scholes pricing model assumptions: risk-free interest rate 1.11%; expected term 2 years and annual volatility 240.29%). The warrants, exercisable for two years from the closing, entitle the investors to purchase, in the aggregate, up to 869,113 shares of Raptor’s common stock and have an exercise price of either $2.57 until the first anniversary of issuance or $3.22 per share after the first anniversary of issuance.

In connection with the August 2009 private placement, the Company issued warrants and a cash fee to Limetree Capital as its sole placement agent to compensate them for placing investors into the financing. Limetree Capital was issued warrants exercisable for 7% of common stock issued and issuable under the warrants issued to investors as part of the financing units and a 3.5% cash fee based upon the proceeds of the sale of the units of the August 2009 private placement. Limetree Capital was issued a five-year warrant to purchase 129,733 shares of Raptor’s Common Stock at an exercise price of $1.50 per share (valued at approximately $171,000 using the following Black -Scholes pricing model assumptions: risk-free interest rate 2.58%; expected term 5 years and annual volatility 240.29%) and cash commission of $59,360.

2009 MERGER AND NASDAQ LISTING
On September 29, 2009, the Company, formerly known as TorreyPines Therapeutics, Inc. (“TorreyPines”) and Raptor Pharmaceuticals Corp. (“RPC”) completed a reverse merger. The Company changed its name to “Raptor Pharmaceutical Corp.” and commenced trading on September 30, 2009 on the NASDAQ Capital Market under the ticker symbol “RPTP.”
 
In connection with the exchange of shares in the merger, immediately after the effective time of such merger, RPC and the Company’s stockholders owned 95% and 5% of the outstanding shares of the combined company, respectively. RPC stockholders received (as of immediately prior to such merger) 17,881,300 shares of the combined company’s common stock in exchange for the 76,703,147 shares of RPC’s common stock outstanding immediately prior to the closing of the merger. On September 29, 2009, immediately prior to the effective time of such merger the Company’s board of directors, with the consent of RPC’s board of directors, acted to effect a reverse stock split of the issued and outstanding shares of the Company’s common stock such that every 17 shares of the Company’s common stock outstanding immediately prior to the effective time of the merger would represent one share of the Company’s common stock. Due to the reverse stock split implemented by the Company, the 15,999,058 shares of the Company’s common stock outstanding immediately prior to the closing of the merger became 940,863 shares of the combined company’s common stock.

In connection with the merger and subject to the same conversion factor as the RPC common stock (.2331234), the combined company assumed all of RPC’s stock options and warrants outstanding at the time of the merger. The combined company also retained and/or retained the Company’s stock options and warrants outstanding at the merger, subject to the same adjustment factor as described above to give effect to the 1 for 17 reverse split.

The combined company is headquartered in Novato, California and is managed by Christopher M. Starr, Ph.D., as Chief Executive Officer and director, Todd C. Zankel, Ph.D., as Chief Scientific Officer, Kim R. Tsuchimoto, C.P.A., as Chief Financial Officer, Ted Daley, as President of the clinical division and Patrice P. Rioux., M.D., Ph.D., as Chief Medical Officer of the clinical division.

There were a number of factors on which RPC’s board of directors relied in approving the merger, including, having access to an expanded pipeline of product candidates and having development capabilities across a wider spectrum of diseases and markets. Another primary reason for RPC’s board of directors’ decision to merge with TorreyPines was the benefit anticipated
-20-

 
 
 
 

 
 
 

RAPTOR PHARMACEUTICAL CORP.
(A Development Stage Company)
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 from the additional liquidity expected from having a NASDAQ trading market on which the combined company’s common stock could be listed. This liquidity benefit is the primary factor behind the goodwill recognized in the transaction (see below). The goodwill has been assigned to the Company’s clinical segment and is expected to be fully deductible for tax purposes. Below is a breakdown of the assets acquired and liabilities assumed in the merger described herein (in millions, except for %):

 
Asset Allocation
 
Value (millions)
   
%
 
Cash and equivalents
 
$
0.58
     
13
 
Other current assets
   
0.10
     
2
 
Accrued liabilities
   
(0.68
)
   
(15)
 
Intangible assets:
               
In-process research & development
   
0.90
     
20
 
Licenses
   
0.24
     
6
 
             
Total identifiable assets
   
1.14
     
26
 
Plus Goodwill
   
3.28
     
74
 
             
Total net assets acquired
 
$
4.42
     
100
 
                 

Acquisition costs incurred by the Company related to the merger were approximately $0.6 million and were expensed as incurred. If the reverse merger had occurred on September 1, 2008, the Company’s revenues would have increased by approximately $1.5 million from fees earned by TorreyPines from the sale one of its programs in the quarter ended December 31, 2008 for total pro forma revenues of $1.5 million for the three months ended November 30, 2008. Net loss would have increased by approximately $2.5 million due to an increase of revenues of $1.5 million described above offset by $3.1 million of loss on impairment of purchased patents recognized by TorreyPines during the period plus $0.9 million in transaction costs and costs associated with obligations owed to the TorreyPines employees for a pro forma net loss of $4.8 million (or $(0.32) per share) for the three month period ended November 30, 2008.  If the reverse merger had occurred on September 1, 2009, the Company’s revenues would have remained zero. Net loss would have increased by approximately $0.3 million due to the transaction costs which were accrued during our year ended August 31, 2009, for a pro forma net loss of $3.2 million or $(0.17) per share.

The following is a summary of common stock outstanding as of November 30, 2009:
             
       
Common Stock
 
Transaction
 
Date
 
Issued
 
             
Founders’ shares
 
Sept. 2005
   
1,398,742
 
Seed round
 
Feb. 2006
   
466,247
 
PIPE concurrent with reverse merger
 
May 2006
   
1,942,695
 
Shares issued in connection with reverse merger
 
May 2006
   
3,100,541
 
Warrant exercises
 
Jan. – Nov. 2007
   
1,513,359
 
Stock option exercises
 
Mar. 2007
   
3,380
 
Loan finder’s fee
 
Sept. 2007
   
46,625
 
Convivia asset purchase
 
Oct. 2007 – Nov. 2008
   
148,616
 
Encode merger DR Cysteamine asset purchase
 
Dec. 2007
   
802,946
 
Shares issued pursuant to consulting agreement
 
May 2008
   
2,040