UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31, 2008
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Commission File Number:
000-52082
REPLIDYNE, INC.
(Exact name of registrant as
specified in its charter)
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Delaware
(State of
Incorporation)
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84-1568247
(I.R.S. Employer I.D.
No.)
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1450 Infinite Drive
Louisville, Colorado
(Address of Principal
Executive Offices)
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80027
(Zip
Code)
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303-996-5500
(Registrants telephone
number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
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Common
Stock, One-tenth of One Cent ($0.001) Par Value Per Share
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NASDAQ
Global Market
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
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No
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Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Exchange
Act. Yes
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No
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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
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No
o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K.
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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):
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Large accelerated filer
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Accelerated
filer
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Non-accelerated
filer
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(Do not check if a smaller reporting company)
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Smaller reporting
company
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes
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No
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The aggregate market value of the voting and non-voting common
equity held by non-affiliates of the registrant on the last
business day of the registrants most recently completed
second fiscal quarter (based upon the closing sale price of such
shares on the NASDAQ Global Market on June 30, 2008 of
$1.35 per share) was approximately $22.1 million. Shares of
the registrants common stock held by each executive
officer and director and by each stockholder who is known by the
registrant to own 10% or more of the outstanding common stock
have been excluded from this computation in that such persons
may be deemed to be affiliates of the registrant. This
determination of affiliate status is not necessarily a
conclusive determination for other purposes. The number of
shares of the registrants common stock outstanding as of
February 2, 2009 was 27,178,715.
DOCUMENTS INCORPORATED BY REFERENCE:
References incorporated are listed in the exhibit list in
Part IV of this report.
PART I
Special
Note Regarding Forward Looking Statements
This report contains plans, intentions, objectives, estimates
and expectations that constitute forward-looking statements
within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, which are subject to the
safe harbor created by those sections.
Forward-looking statements are based on our managements
beliefs and assumptions and on information currently available
to our management. In some cases, you can identify
forward-looking statements by terms such as may,
will, should, could,
would, expect, plans,
anticipates, believes,
estimates, projects,
predicts, potential and similar
expressions intended to identify forward-looking statements.
Examples of these statements include, but are not limited to,
statements regarding the following: the benefits of the proposed
merger with Cardiovascular Systems, Inc. (CSI); our ability to
consummate the proposed merger with CSI; the outcome of our
responses to the FDA with regard to the Warning Letter issued to
us in February 2008 and subsequent related communications; any
statements regarding our future financial performance, results
of operations or sufficiency of capital resources to fund our
operating requirements; and any other statements that are other
than statements of historical fact. Our actual results could
differ materially from those discussed in these forward-looking
statements due to a number of factors, including the risks and
uncertainties are described more fully by us in Part I,
Item 1A and Part II, Item 7 of this report and in
our other filings with the SEC. You should not place undue
reliance on these forward-looking statements, which apply only
as of the date of this report. You should read this report
completely and with the understanding that our actual future
results may be materially different from what we expect. Except
as required by law, we assume no obligation to update these
forward-looking statements publicly, or to update the reasons
actual results could differ materially from those anticipated in
these forward-looking statements, even if new information
becomes available in the future.
Overview
We were incorporated in Delaware in December 2000 and began as a
biopharmaceutical company focused on discovering, developing,
in-licensing and commercializing innovative anti-infective
products. In December 2005, we submitted a new drug
application, or NDA, for our lead product candidate, faropenem
medoxomil, based on 11 Phase III clinical trials for the
following adult indications: acute bacterial sinusitis;
community-acquired pneumonia; acute exacerbation of chronic
bronchitis; and uncomplicated skin and skin structure
infections. In October 2006, the U.S. Food and Drug
Administration, or FDA, issued a non-approvable letter with
respect to our NDA citing the need for further clinical trials
for all indications, including trials using a superiority design
for acute bacterial sinusitis and acute exacerbation of chronic
bronchitis, more extensive microbiologic confirmation and
consideration of alternate dosing regimens. In December 2007, we
began to explore potential strategic alternatives, established
processes for identifying and evaluating those alternatives and,
over the following months, committed to restructuring plans that
reduced spending while maintaining research and clinical
development capabilities for ongoing product candidate and
research development. We had been developing our product
candidate REP3123, an investigational narrow-spectrum
antibacterial agent for the treatment of
Clostridium
difficile
(
C. difficile
) bacteria and
C. difficile
infection and our other novel anti-infective programs based
on our bacterial DNA replication inhibition technology. In
April 2008, we suspended enrollment in the last of our
clinical trials on faropenem medoxomil in order to conserve our
cash assets and further support initiatives related to the
pursuit of strategic transactions. As a result of our inability
to secure a partner for the faropenem medoxomil program, we
announced in June 2008 that we would return the license for
faropenem medoxomil to its licensor, Asubio Pharma Co., Ltd., or
Asubio Pharma. In August 2008, we suspended the development of
REP3123 and our other anti-infective programs based on our
bacterial DNA replication inhibition technology. These actions
reduced our workforce to a level of six employees, who were
involved primarily in financial and administrative roles. At
December 31, 2008 our workforce was comprised of three
employees who were solely involved in financial and
administrative roles. We are pursuing the sale of REP3123 and
its related technology and the sale of our anti-infective
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programs based on our bacterial DNA replication inhibition
technology in a transaction or transactions separate from the
merger with CSI described below. We no longer have employees
engaged in development and commercialization activities.
Following an extensive process of evaluating strategic
alternatives and identifying and reviewing potential candidates
for a strategic transaction, on November 3, 2008 we entered
into a definitive merger agreement with Cardiovascular Systems,
Inc., or CSI, pursuant to which a wholly owned subsidiary of
Replidyne will merge with and into CSI, with CSI continuing as a
wholly owned subsidiary of Replidyne. Immediately prior to the
effective time of the merger, each share of CSI preferred stock
will be converted into shares of CSI common stock at a ratio
determined in accordance with the CSI articles of incorporation.
At the effective time of the merger, each share of CSI common
stock will convert into the right to receive that number of
shares of our common stock as determined pursuant to the
conversion factor described in the merger agreement. We will
assume outstanding and unexercised options and warrants to
purchase CSI common stock, and they will be converted into
warrants and options, as applicable, to purchase our common
stock in accordance with the same conversion factor. Our
stockholders, option holders and warrant holders will continue
to own and hold, respectively, their existing shares of and
options and warrants for our common stock. Immediately after the
merger, current stockholders of Replidyne, together with holders
of our options and warrants, are expected to own or have the
right to acquire between 16.3% and 17.0% of the combined
company, and current CSI stockholders, together with holders of
CSI options and warrants, are expected to own or have the right
to acquire approximately 83.0% and 83.7% of the combined
company, in each case assuming that our net assets at closing
are between $35 and $37 million, as calculated in
accordance with the terms of the merger agreement, on a fully
diluted basis using the treasury stock method of accounting for
options and warrants. The Special Meeting of Stockholders to
consider and vote on the issuance of the shares of common stock
and other matters in connection with our merger with CSI is to
be held on February 24, 2009. If the merger is completed,
the business of the combined company will become the business of
CSI. If the merger with CSI is not completed, we will reconsider
our strategic alternatives and could pursue one of the following
courses of action, which we currently believe to be the most
likely alternatives if the merger with CSI is not completed:
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Pursue another strategic transaction like the
merger.
We may resume our process of evaluating
other companies with which to merge and, if a candidate is
identified, focus our attention on completing such a transaction.
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Dissolve and liquidate our assets.
If we do
not believe we can find a suitable strategic alliance, we may
dissolve and liquidate our assets. We would be required to pay
all of our debts and contractual obligations and to set aside
certain reserves for potential future claims, and there can be
no assurances as to the amount or timing of available cash
remaining to distribute to stockholders after paying our debts
and other obligations and setting aside funds for reserves.
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Our
Product Candidates and Development Programs
In August 2008 we announced that we had suspended development of
REP3123 and our other anti-infective programs based on our
bacterial DNA replication inhibition technology. We are pursuing
the sale of REP3123 and its related technology and the sale of
anti-infective programs based on our bacterial DNA replication
inhibition technology in a transaction or transactions separate
from the merger with CSI. We no longer have employees engaged in
development and commercialization activities. Our product
candidate and development programs are summarized below:
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Product Candidate
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Target Indications
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Development Status
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REP3123
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C. difficile
bacteria and
C. difficile
-associated infection
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Development has been suspended and we are seeking the sale of
the program and related technology
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DNA Replication Inhibition
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Novel mechanism of action antibiotic targeting Gram-positive
bacteria maintaining oral bioavailability and bactericidal
activity
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Development has been suspended and we are seeking the sale of
the program and related technology
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Methionyl
tRNA Synthetase Inhibitor Program
Our methionyl tRNA synthetase inhibitor program includes
REP3123, our investigational narrow spectrum antibacterial agent
to treat
C. difficile
bacteria and
C. difficile
infections, and REP8839, our antibiotic agent for topical to
treat of skin and wound infections.
We acquired the worldwide rights to the methionyl tRNA
synthetase inhibitor program from GlaxoSmithKline, or GSK, in
June 2003 in exchange for 4,000,000 shares of our
Series B convertible preferred stock at a deemed fair value
of $1.25 per share and a final milestone payment of
$1.5 million in June 2006. As part of this asset purchase,
we acquired certain patents and patent applications and other
program intellectual property, supporting material and related
license rights. We retain the worldwide rights to this program
and have no royalty or other ongoing financial obligations to
GSK.
REP3123 and REP8839 are inhibitors of methionyl tRNA synthetase,
an enzyme that plays an essential role in protein synthesis.
Inhibition of methionyl tRNA synthetase results in reduced
protein synthesis and attenuation of bacterial growth. REP3123
and REP8839 are members of a novel group of structurally-related
molecules that selectively inhibit the activity of methionyl
tRNA synthetase. Methionyl tRNA synthetase is a specific
aminoacyl tRNA synthetase responsible for the attachment of the
amino acid methionine to its cognate tRNA. Aminocyl tRNA
synthetases are enzymes that play an essential role in protein
biosyntheses by attaching amino acids to specific carrier
molecules, called tRNAs, that then carry the amino acid to the
ribosome and donate it to the growing polypeptide chain.
Clostridium difficile Program.
We had been
developing REP3123, an investigational narrow spectrum
antibacterial agent, to treat
C. difficile
bacteria and
C. difficile
-associated infections. In
in vitro
preclinical studies, REP3123 has displayed an ability to
inhibit growth of the
C. difficile
bacterium and prevent
the bacterium from forming the spores that allow it to be spread
from person to person, but without inhibiting other key
organisms that are essential for normal intestinal functioning.
Also, in preclinical studies, REP3123 exhibited signs it may be
able to stop the production of destructive intestinal toxins
caused by
C. difficile
bacteria. These results suggest
that REP3123 has the potential to reduce
C.
difficile-
associated infection outbreak and relapse rates
through reducing the presence of
C. difficile
spores and
reduce the severity of, or possibly even prevent,
C.
difficile-
associated infections through inhibiting the
growth of or stopping production of toxins caused by
C.
difficile
bacteria. We are pursuing the sale of REP3123 and
its related technology in a transaction or transactions separate
from the merger with CSI.
REP8839 Program.
During 2007 we were
developing REP8839 for topical use for the treatment of skin and
wound infections, including MRSA infections. Our initial target
indication was the treatment of impetigo, one of the most common
skin infections among children. In December 2007 we announced
that we had
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suspended further development work on REP8839 due to the
incremental investment that would be required to optimize the
formulation of REP8839 and the size of the initial target market
being assessed. Preclinical studies have indicated that REP8839
exhibits potent activity against major skin pathogens such as
S. aureus
and
S. pyogenes,
including strains of
S. aureus
that are resistant to methicillin, vancomycin,
linezolid or mupirocin.
DNA
Replication Inhibitors Program.
DNA replication is one of the essential steps in bacterial
growth. To reproduce and perpetuate an infection, bacteria must
first replicate their DNA. Two copies must be made so that one
can be passed to each daughter cell. DNA replication is a highly
coordinated process. Inhibition of any step from the assembly of
protein complexes to the dissociation of the replication
machinery, offers the potential of interrupting bacterial growth
and providing the basis for a new class of antibacterial drugs.
Despite the complexity of the replication system, we have
developed robust high-throughput screening strategies through
which we were able to identify compounds that interfere with the
replication process.
We were advancing a lead series of novel DNA replication
inhibitors identified from our proprietary compound collection.
These inhibitors use a novel mechanism of action to block an
essential step in the DNA replication process.
Based on preclinical data, the lead series of compounds we
identified exhibit a novel mechanism of action that may block
DNA replication and exhibit oral bioavailability and
bactericidal activity against all major classes of
antibiotic-resistant Gram-positive bacteria, including
clinically-relevant resistant phenotypes such as
methicillin-resistant
S. aureus
(MRSA),
vancomycin-resistant enterococci (VRE) and penicillin-resistant
S. pneumoniae
(PRSP).
We are pursuing the sale of our anti-infective programs based on
our bacterial DNA replication inhibition technology in a
transaction or transactions separate from the merger with CSI.
Research
and Development Programs
Research and development expenditures made to advance our
product candidates and other research efforts during the last
two fiscal years ended December 31, 2008 and 2007 were as
follows (in thousands):
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2008
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2007
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Faropenem medoxomil
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$
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16,363
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$
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29,231
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REP8839
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356
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4,550
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Other research and development
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10,723
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9,532
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$
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27,442
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$
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43,313
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Our
Former Collaboration with Forest Laboratories
In February 2006, we entered into a collaboration and
commercialization agreement with Forest Laboratories to be our
exclusive partner for the development and marketing of faropenem
medoxomil in the U.S. On May 7, 2007, our
collaboration and commercialization agreement with Forest
Laboratories was terminated. This termination followed the
issuance in October 2006 of a non-approvable letter by the FDA
for our faropenem medoxomil NDA that was submitted to the FDA in
December 2005. As a result of the termination, we reacquired all
rights to faropenem medoxomil previously granted to Forest
Laboratories. Under the agreement, we received $60 million
in upfront and milestone payments and throughout the term of the
agreement, we generated approximately $14.6 million of
contract revenue for funded activities related to the
development of faropenem medoxomil. There were no penalty fees
incurred by either us or Forest Laboratories in connection with
the termination of the agreement and no amounts previously
received by us under the agreement are refundable.
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Sales and
Marketing
Replidyne currently has no marketing, sales or distribution
capabilities and does not have any current plans to develop
these capabilities.
Our
License Agreement with Asubio Pharma
We entered into a license agreement with Daiichi Suntory Pharma
(now Daiichi Asubio Pharma Co., Ltd. or Asubio Pharma) that was
effective in March 2004. Under this agreement, we had an
exclusive license to, with the right to sublicense, Asubio
Pharmas patent rights and know-how to develop and
commercialize all forms of faropenem medoxomil for adult and
pediatric use in the U.S. and Canada. The license included
rights to all clinical and other data related to faropenem
medoxomil generated by Asubio Pharma and prior licensees, other
than rights to manufacture faropenem.
In consideration for our licenses, we paid Asubio Pharma an
initial license fee of $3.8 million comprised of
$0.6 million paid in 2003 and $3.2 million paid in
2004. In December 2005, we submitted our first NDA for adult use
of faropenem medoxomil and, at that time, we recorded research
and development expense in the amount of $2.1 million for
the first milestone due to Asubio Pharma under this agreement.
In February 2006, in conjunction with our entering into the
license agreement with Forest Laboratories, this milestone
payment was increased to $3.2 million. The increased
milestone amount of $1.1 million was accounted for as
research and development expense in 2006 when the modified terms
of the license were finalized. On June 20, 2008, we
notified Asubio Pharma, of our decision to terminate the license
agreement to develop and commercialize faropenem medoxomil in
the U.S. and Canada. In accordance with the terms of the
license agreement, in June 2008 we paid Asubio Pharma a
termination fee of ¥375 million, or $3.6 million.
We recorded the termination fee as research and development
expense in 2008.
Manufacturing
We obtained the drug substance, or active pharmaceutical
ingredient, faropenem medoxomil, from Nippon Soda Company
Ltd., or Nippon Soda. As a penem antibiotic, faropenem medoxomil
requires dedicated manufacturing facilities for the manufacture
of drug substance and drug product. For many years, beta-lactams
have been produced separately in segregated facilities due to
concerns about allergic reactions to these types of antibiotics.
During development, faropenem medoxomil was manufactured by
Nippon Soda in a segregated building at its Takaoka facility in
Japan and Bayer manufactured the faropenem medoxomil tablet
internally for its clinical studies.
In 2005, we and MEDA Manufacturing GmbH (formerly Tropon GmbH),
or MEDA, entered into a supply agreement for production of
finished 300 mg adult tablets of faropenem medoxomil, which
was amended as to certain terms in 2006. This agreement was
amended in March 2006 such that our obligations with respect to
all purchase commitments and facility decontamination costs were
suspended and deemed satisfied by Forest Laboratories pursuant
to an agreement between MEDA and Forest Laboratories. In
May 2007, concurrent with Forest Laboratories termination
of its supply agreements with MEDA, the previously suspended
provisions in our agreements with MEDA were no longer suspended
and our obligations with respect to purchase commitments and
facility decontamination costs were no longer waived. In
April 2007, we provided notice to MEDA of our termination
of the supply agreement in accordance with the termination
provisions of the agreement as future clinical development of
faropenem medoxomil adult tablets would use 600 mg dosing.
MEDA disputed our right to terminate the agreement on the basis
indicated in our notice of termination. In May 2008, MEDA filed
a demand for arbitration and amended its demand in July 2008
shortly after we terminated our license agreement with Asubio
Pharma and relinquished all rights to the faropenem medoxomil
program. In August 2008, we and MEDA settled this claim and we
paid MEDA $2.1 million. We have no further financial
obligations under this agreement. As our notice of termination
to MEDA occurred before the effective termination date of our
agreement with Forest Laboratories, we believed that Forest
Laboratories was responsible for costs arising from the
termination. We notified Forest Laboratories of its obligations
to reimburse us for these payments, and Forest Laboratories
responded by disputing such obligations. Our settlement with
MEDA did not impact our belief that Forest Laboratories remained
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responsible for reimbursements, and discussions between us and
Forest Laboratories continued through
mid-February
2009. On February 18, 2009, we accepted a settlement
proposal from Forest Laboratories whereby Forest Laboratories
will pay us $0.7 million in full settlement of all disputed
items arising from our termination of the supply agreement with
MEDA in April 2007. This amount will be recorded by us in 2009.
We do not own facilities for the manufacture of materials for
clinical or commercial use and are not currently manufacturing,
or having any third parties manufacture, any materials.
Intellectual
Property
We acquired worldwide rights to the methionyl tRNA synthetase
inhibitor program from GlaxoSmithKline, or GSK, in June 2003.
Our agreement with GSK included the assignment of patents and
patent applications to us relating to small molecule methionyl
tRNA synthetase inhibitors and the targets initially used to
identify the inhibitors. We have filed additional patent
applications directed to small molecule methionyl tRNA
synthetase, uses, production methods and the like. We have two
issued U.S. patents that cover REP8839 and additional
patent applications directed to REP8839 and combinations of
REP8839 and mupirocin. As of December 31, 2008, we had 15
issued U.S. patents, 10 pending U.S. patent
applications, nine issued foreign patent and 18 pending foreign
patent applications related generally to the methionyl tRNA
synthetase programs including the REP8839 program. These patents
expire from 2017 to 2025.
We filed four pending U.S. patent applications, one
provisional patent application, and four pending PCT patent
applications directed to composition of matter and methods of
use related to our REP3123 program that expire in 2027.
We filed patent applications directed to compounds that inhibit
DNA replication that have been identified through our in-house
screening efforts. We also own a portfolio of patents related to
the DNA replication targets and drug screening methods to
identify inhibitors of DNA replication. As of December 31,
2008, we had one issued U.S. patent, four pending
U.S. patent applications, three issued foreign patents and
12 pending foreign patent applications, including three PCT
patent applications related to our bacterial DNA replication
program. These patents expire from 2021 to 2028.
Competition
We are not currently developing any product candidates and
therefore we are not subject to any competition.
Employees
As of December 31, 2008, we had three full-time employees,
all of whom are solely involved in finance and other
administrative functions. We consider our relationship with our
employees to be good.
Corporate
Information
We were incorporated under the laws of the state of Delaware on
December 6, 2000. Our principal executive offices are
located at 1450 Infinite Drive, Louisville, Colorado 80027, and
our telephone number is
(303) 996-5500.
Our web site address is
http://www.replidyne.com.
The information contained in, or that can be accessed through,
our website is not part of this report and should not be
considered part of this report.
Web
Availability
We make available free of charge through our web site,
www.replidyne.com, our annual report on
Form 10-K
and other reports required under the Securities Exchange Act of
1934, as amended, as soon as reasonably practicable after such
reports are filed with, or furnished to, the Securities and
Exchange Commission (the SEC). These documents are
also available through the SECs website at
www.sec.gov
. Certain of our corporate governance
policies, including the charters for the Board of
Directors audit, compensation and nominating and corporate
governance committees and our code of ethics, corporate
governance guidelines and whistleblower policy. We will provide
to any person without charge, upon request,
7
a copy of any of the foregoing materials. Any such request must
be made in writing to Replidyne, Inc., 1450 Infinite Drive,
Louisville, CO 80027, Attn: Investor Relations.
ITEM 1A.
RISK
FACTORS
You should carefully consider the risks described below,
which we believe are the material risks of our business. Our
business could be harmed by any of these risks. The trading
price of our common stock could decline due to any of these
risks, and you may lose all or part of your investment. In
assessing these risks, you should also refer to the other
information contained in our SEC filings, including our
financial statements and related notes. Additional risks and
uncertainties not presently known to us or that we currently
deem immaterial also may impair our business operations. We are
relying upon the safe harbor for all forward-looking statements
in this Report, and any such statements made by or on behalf of
the Company are qualified by reference to the following
cautionary statements, as well as to those set forth elsewhere
in this Report.
Risks
Relating to the Proposed Merger
Upon
the consummation of the merger with CSI, our business will
become subject to the numerous risks that are associated with
the operation of the business of Cardiovascular
Systems.
Upon the consummation of the merger with CSI, which we refer to
as the merger, we will become subject to the numerous risks
associated with the operation of Cardiovascular Systems,
Inc.s (CSI) business. The success of our combined business
following the merger will be dependent, among other things, on
market acceptance of the products that are being sold by CSI and
the safety and efficacy of those products, CSIs ability to
obtain sufficient financing, the successful resolution of
litigation that is currently pending against CSI and the other
risks associated with medical device companies in general. The
merger could fail to produce the benefits that the companies
anticipate, or could have other adverse effects that the
companies currently do not foresee. These risks associated with
CSIs business may affect us indirectly prior to the
consummation of the merger, to the extent that adverse
developments regarding CSI may reduce the attractiveness of the
merger or the likelihood that the merger will be consummated. As
a result of these and other factors, our business, when combined
with that of CSI following the consummation of the merger, may
not be successful, which could cause our stock price to decline.
In the
event that our level of net assets at the effective time of the
merger, as calculated pursuant to the merger agreement with CSI,
is lower than $35 million, our stockholders will hold a smaller
percentage ownership of us following the consummation of the
merger than is currently anticipated and the combined company
will have less working capital for future
operations.
Subject to the terms of the merger agreement with CSI, which we
refer to as the merger agreement, at the effective time of the
merger, each share of CSI common stock issued and outstanding
immediately prior to the merger will be canceled, extinguished
and automatically converted into the right to receive that
number of shares of Replidyne common stock as determined
pursuant to the conversion factor described in the merger
agreement. The conversion factor depends on our level of net
assets as of the effective time of the merger. Under the merger
agreement, our net assets are defined as our total current
assets minus all of our liabilities and other outstanding and
future obligations as of the effective time of the merger,
subject to certain adjustments. We currently anticipate that our
level of net assets as of the effective time of the merger will
be between $35 million and $37 million, which would
result in our current stockholders, together with holders of our
options and warrants, owning or having the right to acquire
between 16.3% and 17.0% of the common stock of the combined
company on a fully diluted basis as calculated in accordance
with the merger agreement. However, if any of the following
circumstances arise, our level of net assets will be lower than
we expect and our stockholders would hold a smaller percentage
ownership of the combined company following the consummation of
the merger than is currently anticipated, thus making the merger
less attractive to our stockholders:
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We are unable to generate any proceeds from the sale of our
REP3123 and DNA replication inhibition programs;
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8
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We are unable to terminate, sublease or otherwise assign to a
third party our remaining obligations under the lease for our
headquarters in Louisville, Colorado;
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We do not receive the anticipated reimbursement from Forest
Laboratories for certain decontamination costs incurred by us
under our former supply agreement with MEDA Manufacturing GmbH;
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The costs associated with the winding up of our business are
greater than anticipated; or
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We expend more resources than is currently anticipated as a
result of a delay in the closing of the merger or otherwise.
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In addition, if our net assets are lower than expected, the
combined company will have less working capital for future
operations, which could adversely affect the ability of the
combined company to achieve our business plan.
The
costs associated with the merger are difficult to estimate, may
be higher than expected and may harm the financial results of
the combined company.
We and CSI estimate that aggregate direct transaction costs of
approximately $6.2 million will be incurred in connection
with the merger, and additional costs associated with the
commencement of CSIs operation as a public company will
also be incurred, which cannot be estimated accurately at this
time. The costs associated with the merger may increase if any
CSI stockholders elect to dissent from the merger and seek
payment of the fair value of their shares as permitted by
Minnesota law. If the total costs of the merger exceed our and
CSIs estimates, the combined company will have less
working capital for future operations, which will adversely
affect the ability of the combined company to achieve our
business plan.
Nasdaq
considers the anticipated merger a reverse merger and therefore
requires the combined company to submit a new listing
application, which will require certain actions by the combined
company and may not be successful, which would result in you
having difficulty selling your shares.
Nasdaq considers the merger a reverse merger and requires the
combined company to submit a new listing application. Nasdaq may
not approve the combined companys new listing application.
If this occurs and the merger is still consummated, our
stockholders may have difficulty selling their shares.
Additionally, as part of the new listing application, the
combined company will be required to submit, among other things,
a plan for the combined company to conduct a reverse stock
split. A reverse stock split would increase the per share
trading price by a yet undetermined multiple. The change in
share price may affect the volatility and liquidity of the
combined companys stock, as well as the marketplaces
perception of the stock. As a result, the relative price of the
combined companys stock may decline
and/or
fluctuate more than in the past, and stockholders of the
combined company may have trouble converting their investments
in the combined company into cash effectively.
The
market price of our common stock has fallen significantly since
the public announcement of the proposed merger. If the merger is
completed, the market price of the combined companys
common stock may decline further.
On November 3, 2008, the last day prior to the public
announcement of the proposed merger, the closing price per share
of Replidyne common stock as reported on The Nasdaq Global
Market was $1.12. On February 17, 2009 the closing price
per share of Replidyne common stock as reported on The Nasdaq
Global Market was $0.75, which represents a 33% decrease from
the closing price on November 3, 2008. This decrease may
increase the risk that we would become subject to securities
class action litigation, which could result in substantial costs
and a delay in the completion of the merger. If the merger is
completed, the market price of the combined companys
common stock may decline further for a number of reasons,
including if:
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the effect of the merger on the combined companys business
and prospects is not consistent with the expectations of
financial or industry analysts; or
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investors react negatively to the effect on the combined
companys business and prospects from the merger.
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9
Because
the lack of a public market for CSIs outstanding shares
makes it difficult to evaluate the fairness of the merger, CSI
stockholders may receive consideration in the merger that is
greater than the fair market value of the CSI
shares.
The outstanding capital stock of CSI is privately held and is
not traded in any public market. The lack of a public market
makes it extremely difficult to determine the fair market value
of CSI. Since the percentage of our equity to be issued to CSI
stockholders was determined based on negotiations between the
parties, it is possible that the value of the Replidyne common
stock to be issued in connection with the merger will be greater
than the fair market value of CSI.
Our
executive officers and directors may have interests in the
merger that are different from, or in addition to, those of our
stockholders generally.
Our executive officers and directors may have interests in the
merger that are different from, or are in addition to, those of
our stockholders generally. For example, the directors of the
combined company will consist of two directors from our board
and seven directors from CSIs board. Further, certain our
executive officers will receive change in control payments in
connection with the merger.
We and
CSI may not be able to complete the merger or may elect to
pursue a different strategic transaction, which may not occur on
commercially reasonably terms or at all.
We cannot assure you that the merger will close in a timely
manner or at all. The merger agreement is subject to many
closing conditions and termination rights. If we and CSI do not
complete the merger, our and CSIs boards of directors may
elect to attempt to complete a different strategic transaction.
Attempting to complete different strategic transactions would
prove to be costly and time consuming, and we cannot make any
assurances that a future strategic transaction will occur on
commercially reasonable terms or at all.
Failure
to complete the merger could adversely affect our stock price
and future business and operations.
The merger is subject to the satisfaction of closing conditions,
including approval by our and CSI stockholders, and we cannot
assure you that the merger will be completed. In the event that
the merger is not completed, we may be subject to many
significant costs, including legal, accounting and advisory fees
related to the merger, which must be paid even if the merger is
not completed, and the payment of a termination fee and certain
expenses under certain circumstances. If the merger is not
completed, the market price of our common stock could decline as
a result.
During
the pendency of the merger, we may not be able to enter into a
business combination with another party because of restrictions
in the merger agreement.
The merger agreement restricts our ability to make acquisitions
or complete other transactions. While the merger agreement is in
effect, subject to limited exceptions, we are prohibited from
soliciting, initiating, encouraging or taking actions designed
to facilitate any inquiries or the making of any proposal or
offer that could lead to such party entering into certain
extraordinary transactions with any third party, such as a sale
of assets, an acquisition of common stock, a tender offer for
capital stock or a merger or other business combination outside
the ordinary course of business. Any such transactions could be
favorable to our stockholders.
The
merger may be completed even though material adverse changes may
result from the announcement of the merger, industry-wide
changes and other causes.
In general, either we or CSI can refuse to complete the merger
if there is a material adverse change affecting the other party
between November 3, 2008, the date of the merger agreement,
and the closing of the merger. However, some types of changes do
not permit either party to refuse to complete the merger, even
if such changes would have a material adverse effect on us or
CSI. If adverse changes occur but we and CSI must still complete
the merger, the combined companys stock price may suffer.
10
Risks
Relating to Us
If the
proposed merger with CSI is not consummated, our prospects will
be materially and adversely affected and our stock price could
decline.
We and CSI are targeting a closing of the merger in the first
calendar quarter of 2009. If the merger agreement is terminated
and we seek another business combination, we may not be able to
find a third party willing to provide equivalent or more
attractive consideration than the consideration to be provided
in the proposed merger with CSI. In such circumstances, our
board of directors may elect to, among other things, take the
steps necessary to liquidate our business and assets. In the
case of a liquidation, the consideration that we might receive
may be less attractive than the consideration to be received by
us pursuant to the merger with CSI.
We no
longer have any internal capabilities to develop our product
candidates. Our ability to increase stockholder value is
dependent on our ability to successfully complete a strategic
transaction or transactions for the sale of the company and the
sale of our product development programs, which we may be unable
to complete.
In August 2008, we commenced restructuring our operations to
reduce our employee headcount to six employees and officers by
the end of October 2008. We suspended further development
activities of REP3123, our investigational agent for the
treatment of
Clostridium difficile
, or
C. difficile,
bacteria and
C. difficile
Infection, or CDI, and
novel anti-infective compounds based on our DNA replication
inhibition technology. Previously, we had restructured our
operations in a number of actions announced in December 2007,
April 2008 and June 2008 that included our decision to
terminate our license with Asubio Pharma, Co., Ltd, or Asubio
Pharma, for faropenem medoxomil and related contract
manufacturing agreements for faropenem medoxomil, discontinue
enrollment in our Phase III clinical trial of faropenem
medoxomil for the treatment of acute exacerbations of chronic
bronchitis and reduce employee headcount. We had previously
devoted substantially all of our clinical development and
research and development efforts and a material portion of our
financial resources toward the development of faropenem
medoxomil, REP3123, our DNA replication inhibition technologies
and our other product candidates. We currently have no product
candidates in clinical or pre-clinical development. We have
entered into an agreement with Morgan Stanley to provide
financial advisory services for our strategic alternatives
process. Our management has also devoted a substantial amount of
time and effort to the strategic alternatives process. As a
result of this process, we have entered into the merger
agreement with CSI and continue to pursue the sale of our
suspended REP3123 program and DNA replication inhibition
technologies.
Consummation of the merger with CSI is subject to numerous
conditions to closing, including approval from our stockholders
and the stockholders of CSI, which approval cannot be assured.
Further, we cannot predict whether our REP3123 program
and/or
DNA
replication inhibition technologies can be sold on favorable
terms or at all. Completing the merger with CSI and pursuing the
sale of our REP3123 program and DNA replication inhibition
technologies may require us to incur substantial additional
costs. If we are unable to complete the merger, our business may
be liquidated.
We may
not be able to generate adequate proceeds or any proceeds from
the sale of our REP3123 program and DNA replication inhibition
technology.
We are pursuing the sale of our REP3123 program and DNA
replication inhibition technology. We have solicited bids
through provision of bid instruction letters to numerous
parties. Our former Chief Scientific Officer is acting as the
representative for another company that has indicated an
interest in acquiring and pursuing our REP3123 program. If we do
not receive an acceptable bid for our REP3123 program or DNA
replication inhibition technology, we may not be able to
generate adequate proceeds or any proceeds from the sale of
these programs. The failure to generate these proceeds would
negatively impact the percentage of the combined company that
our stockholders will hold following the merger with CSI. In
particular, if our level of net assets at the effective time of
the merger is lower than $35 million, our current
stockholders, together with
11
holders of our options and warrants, will own or have the right
to acquire less than 16.3% of the common stock of the combined
company.
We
received a warning letter from the FDA for our NDA filed in
December 2005 for faropenem medoxomil, our former product
candidate. Failure to resolve the matters addressed in the
warning letter could negatively impact our or a successor
companys ability to undertake clinical trials in the
future or timely complete future IND and NDA
submissions.
On January 22, 2008, we received a warning letter from the
Division of Scientific Investigation of the FDA, or DSI,
informing us of objectionable conditions found during the
DSIs investigation of our role as applicant for our new
drug application, or NDA, for faropenem medoxomil. The
FDAs observations were based on its establishment
inspection reports following on site inspections in conjunction
with the FDAs review of our NDA. Specifically, DSI cited
that we failed to make available the underlying raw data from
the investigation for the FDAs audit and failed to provide
the FDA adequate descriptions and analyses of any other data or
information relevant to the evaluation of the safety and
effectiveness of faropenem medoxomil obtained or otherwise
received by us from any source derived from clinical
investigations. The clinical trials that supported our NDA were
conducted by Bayer as a previous licensee of faropenem
medoxomil. In June 2008, DSI made further inquires of us related
to our previous responses to their observations in the warning
letter. In July 2008, we communicated to the FDA our decision to
terminate our license for faropenem medoxomil with Asubio Pharma
and withdrew the NDA from consideration by the FDA. We also
informed DSI of these actions. In a communication dated
July 22, 2008 the FDA advised us that since we had active
Investigational New Drug applications, or INDs, and ongoing
clinical trials, the issues raised in the warning letter
remained open. Following receipt of this communication, we
withdrew all of our open INDs that related to faropenem
medoxomil and REP8839. If we are unable to sufficiently
establish to the FDA that future clinical trials conducted by
us, or potentially a successor company, would be in accordance
with FDA regulations, we may be subject to enforcement action by
the FDA including being subject to the FDAs Application
Integrity Policy. This policy would require third-party
validation of the integrity of the raw data underlying any of
our future filings to the FDA before those filings would be
accepted for consideration. Such a requirement would be onerous
and require significant additional time and expense for the
clinical development and potential approval of any product
candidates that we may wish to develop in the future. These
requirements would make it difficult for us to attempt to
restart the development of any of our former product candidates
or commence the development of any new product candidates in the
event that the merger with CSI is not completed. Further, we
could be subject to additional actions from the FDA that may
negatively impact our ability or the ability of a successor
company to enter into clinical trials or submit an IND or NDA in
the future.
We
have incurred significant operating losses since inception and
anticipate that we will incur continued losses for the
foreseeable future.
We have experienced significant operating losses since our
inception in December 2000. At December 31, 2008, we had an
accumulated deficit of approximately $150 million. We have
generated no revenue from product sales to date. We have funded
our operations to date principally from the sale of our
securities and payments by Forest Laboratories under our former
collaboration agreement. As a result of the suspension of our
clinical development of each of faropenem medoxomil, REP3123,
our anti-bacterial agent addressing
C. difficile
bacteria and
C. difficile
-associated disease, and our DNA
replication inhibition technology, we have no current prospects
for near term revenues. We expect to continue to incur
substantial additional operating losses during the period in
which we seek to consummate the proposed merger and pursue the
sale of certain company assets including REP3123 and DNA
replication inhibition technology. Because of the numerous risks
and uncertainties associated with closing the proposed merger
with CSI and transactions related to the sale of our drug
development programs, we are unable to predict the extent of any
future losses or the timeline for completing potential
transactions.
12
We may
be unable to retain the senior management required to complete
the merger or pursue alternative transactions.
Our success in selling our remaining pipeline programs and
completing the merger depends in part on our continued ability
to retain and motivate qualified management and provide access
to scientific personnel and on our ability to develop and
analyze strategic alternatives. We are highly dependent upon our
senior management, particularly Kenneth Collins, our President
and Chief Executive Officer, Mark Smith, our
Chief Financial Officer, and Donald Morrissey, our Senior
Vice President of Corporate Development. The loss of services of
any of Mr. Collins, Mr. Smith or Mr. Morrissey
could delay or prevent the successful completion of the merger
or our ability to complete an alternative transaction or the
sale of REP3123 or our DNA replication inhibition technologies.
The
market price of our common stock is highly
volatile.
We cannot assure you that an active trading market for our
common stock will exist at any time. You may not be able to sell
your shares quickly or at the market price if trading in our
common stock is not active. The trading price of our common
stock has been highly volatile and could be subject to wide
fluctuations in price in response to various factors, many of
which are beyond our control, including:
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market reaction and other developments related to the proposed
merger with CSI;
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any developments related to the business of CSI, including
during the pendency of the merger;
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the announcement of or other developments related to a sale of
part or all of our development stage assets;
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failure to achieve stockholder approval of the merger with CSI;
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a decision to liquidate our assets;
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termination of significant agreements;
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changes in laws or regulations applicable to our assets;
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actual or anticipated variations in our results of operations;
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actual or anticipated changes in earnings estimates or
recommendations by securities analysts;
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actions taken by regulatory agencies with respect to us;
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conditions or trends in the biotechnology and biopharmaceutical
industries;
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announcements by us or our competitors of significant
acquisitions, strategic partnerships, joint ventures or capital
commitments;
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general economic and market conditions and other factors that
may be unrelated to our operating performance or to the
operating performance of our competitors;
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changes in the market valuations of similar companies;
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sales of common stock or other securities by us or our
stockholders in the future;
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additions or departures of key management personnel;
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the outcome of litigation or arbitration claims;
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developments relating to proprietary rights held by us or our
competitors;
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disputes or other developments relating to proprietary rights,
including patents, litigation matters and our ability to obtain
patent protection for our technologies;
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trading volume of our common stock;
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13
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sales of our common stock by us or our stockholders; and
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any proceedings instituted by Nasdaq related to the delisting of
our common stock from the Nasdaq Global Market.
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In addition, the stock market in general and the market for
biotechnology and biopharmaceutical companies in particular have
experienced extreme price and volume fluctuations that have
often been unrelated or disproportionate to the operating
performance of those companies. These broad market and industry
factors may seriously harm the market price of our common stock,
regardless of our operating performance. In the past, following
periods of volatility in the market, securities
class-action
litigation has often been instituted against companies. Such
litigation, if instituted against us, could result in
substantial costs and diversion of managements attention
and resources, which could materially adversely affect our
prospects and financial condition.
Our
principal stockholders and management own a significant
percentage of our stock and are able to exercise significant
influence over matters subject to stockholder
approval.
Our executive officers, directors and principal stockholders,
together with their respective affiliates, currently own a
significant percentage of our voting stock, including shares
subject to outstanding options and warrants, and we expect this
group will continue to hold a significant percentage of our
outstanding voting stock until consummation of the merger, when
their ownership interests will be decreased due to the issuance
of our common stock to CSI stockholders. Accordingly, these
stockholders will likely be able to have a significant impact on
the composition of our board of directors and continue to have
significant influence over our operations and decisions until
consummation of the merger. Our stockholders with approximately
48% of our outstanding common stock have entered into voting
agreements and irrevocable proxies in favor of CSI for
approximately 32% of our outstanding common stock, pursuant to
which, among other things, each of these stockholders agreed,
solely in his capacity as a stockholder, to vote these shares in
favor of the issuance of the shares of our common stock in the
merger and the other actions contemplated by the merger
agreement. This concentration of ownership and the voting
agreements could have the effect of delaying or preventing a
change in control, other than the merger with CSI, or otherwise
discouraging a potential acquirer from attempting to obtain
control of us, which in turn could have a material and adverse
effect on the market value of our common stock.
Our
corporate compliance program cannot guarantee that we are in
compliance with all potentially applicable
regulations.
As a publicly traded company we are subject to significant
regulations, including the Sarbanes-Oxley Act of 2002, some of
which have only recently been adopted, and all of which are
subject to change. While we have developed and instituted a
corporate compliance program based on what we believe are the
current appropriate best practices and continue to update the
program in response to newly implemented or changing regulatory
requirements, we cannot ensure that we are or will be in
compliance with all potentially applicable regulations. For
example, we cannot assure you that in the future our management
will not find a material weakness in connection with its annual
review of our internal control over financial reporting pursuant
to Section 404 of the Sarbanes-Oxley Act. We also cannot
assure that we could correct any such weakness to allow our
management to assess the effectiveness of our internal control
over financial reporting as of the end of our fiscal year in
time to enable our independent registered public accounting firm
to attest that such assessment will have been fairly stated in
our annual reports filed with the Securities and Exchange
Commission or attest that we have maintained effective internal
control over financial reporting as of the end of our fiscal
year, if and when required. If we fail to comply with the
Sarbanes-Oxley Act or any other regulations we could be subject
to a range of consequences, including restrictions on our
ability to sell equity or otherwise raise capital funds,
significant fines, enforcement or other civil or criminal
actions by the Securities and Exchange Commission or delisting
by the NASDAQ Global Market or other sanctions or litigation. In
addition, if we disclose any material weakness in our internal
control over financial reporting or other consequence of failing
to comply with applicable regulations, this may cause our stock
price to decline.
14
Our recent reductions of our headcount may make it more
difficult for us to maintain our internal controls over
financial reporting.
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ITEM 1B.
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UNRESOLVED
STAFF COMMENTS
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Not applicable.
Our facilities currently consist of approximately
52,000 square feet of laboratory and office facilities
located at our headquarters in Louisville, Colorado, with
average annual lease payments totaling approximately
$1.2 million. The lease expires in September 2011. We have
entered into sub-leases with respect to approximately
16,500 square feet of our headquarters location. These
sub-leases extend through the term of our lease on the premises.
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ITEM 3.
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LEGAL
PROCEEDINGS
|
We are not currently subject to any material pending legal
proceedings.
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ITEM 4.
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SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
Not applicable.
PART II
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ITEM 5.
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MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
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Price
Range of Common Stock and Dividend Policy
The following table sets forth the high and low sales prices for
our common stock (based upon
intra-day
trading) as reported by the NASDAQ Global Market:
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Common Stock
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High
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Low
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Fiscal Year Ended December 31, 2008
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First quarter
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$
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3.10
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$
|
1.29
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Second quarter
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1.90
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|
|
|
1.25
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Third quarter
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|
1.43
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1.16
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Fourth quarter
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1.27
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0.28
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Fiscal Year Ended December 31, 2007
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First quarter
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$
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6.28
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$
|
4.28
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Second quarter
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6.07
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5.10
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Third quarter
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7.50
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5.23
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Fourth quarter
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6.66
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3.05
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The number of record holders of our common stock on
February 2, 2009 was approximately 75. No cash dividends
have been previously paid on our common stock and none are
anticipated in 2009.
Recent
Sales of Unregistered Securities
None
15
Issuer
Purchases of Equity Securities.
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Maximum Number (or
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Total Number of
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Approximate Dollar
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Shares Purchased as
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Value) of Shares
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Part of Publicly
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That may Yet be
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Total Number of
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Average Price
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Announced Plans or
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Purchased Under the
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Period
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Shares Purchased
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Paid per Share
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Programs
|
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Plans or Programs
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10/07/08
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7,860
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(1)
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$
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0.92
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None
|
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Not Applicable
|
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10/08/08
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|
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425
|
(1)
|
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$
|
0.61
|
|
|
|
None
|
|
|
|
Not Applicable
|
|
10/27/08
|
|
|
638
|
(1)
|
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$
|
0.61
|
|
|
|
None
|
|
|
|
Not Applicable
|
|
10/31/08
|
|
|
425
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(1)
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$
|
1.32
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|
|
|
None
|
|
|
|
Not Applicable
|
|
12/01/08
|
|
|
4,078
|
(1)
|
|
$
|
1.32
|
|
|
|
None
|
|
|
|
Not Applicable
|
|
|
|
|
(1)
|
|
Repurchase of unvested restricted stock from an employee at cost.
|
16
|
|
ITEM 6.
|
SELECTED
FINANCIAL DATA
|
We are not required to provide the information required by this
item.
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
You should read the following discussion and analysis
together with our financial statements and the notes to those
statements included elsewhere in this report. This discussion
contains forward-looking statements that involve risks and
uncertainties. As a result of many factors, such as those set
forth under Part I, Item 1A and elsewhere in this
report, our actual results may differ materially from those
anticipated in these forward-looking statements. See
Special Note Regarding Forward-Looking Statements
under Part I, Item 1.
Overview
We have previously announced that we were reviewing a range of
strategic alternatives that could result in potential changes to
our current business strategy and future operations. As a result
of our strategic alternatives process, on November 3, 2008,
we entered into an Agreement and Plan of Merger and
Reorganization (merger agreement) with Cardiovascular Systems,
Inc. (CSI). Pursuant to the terms of the merger agreement, a
wholly owned subsidiary of the Company will be merged with and
into CSI (merger), with CSI continuing after the merger as the
surviving corporation and a wholly owned subsidiary of
Replidyne. Following consummation of the merger, we will be
renamed Cardiovascular Systems, Inc. and our headquarters will
be located in St. Paul, Minnesota at CSIs headquarters. We
have agreed to appoint directors designated by CSI to our Board
of Directors, specified members of our current directors will
resign from our Board of Directors and we will appoint new
officers designated by CSI.
We and CSI are targeting a closing of the merger in the first
quarter of 2009. The Special Meeting of Stockholders to consider
and vote on our merger with CSI is to be held on
February 24, 2009. Upon the terms and subject to the
conditions set forth in the merger agreement, we will issue, and
holders of CSI capital stock will receive, shares of our common
stock, such that following the consummation of the transactions
contemplated by the merger agreement, our current stockholders,
together with holders of our options and warrants, are expected
to own or have the right to acquire between 16.3% and 17.0% of
the common stock of the combined company and current CSI,
together with holders of CSI options and warrants, are expected
to own or have the right to acquire between 83.0% and 83.7% of
the common stock of the combined company, both on a fully
diluted basis using the treasury stock method of accounting for
options and warrants.
Subject to the terms of the merger agreement, upon consummation
of the transactions contemplated by the merger agreement, at the
effective time of the merger, each share of CSI common stock
issued and outstanding immediately prior to the merger will be
canceled, extinguished and automatically converted into the
right to receive that number of shares of our common stock as
determined pursuant to the conversion factor described in the
merger agreement. In addition, we will assume options and
warrants to purchase shares of CSI common stock which will
become exercisable for shares of our common stock, adjusted in
accordance with the same conversion factor. The conversion
factor will be based on the number of outstanding shares of
capital stock of us and CSI, and any outstanding options and
warrants to purchase shares of capital stock of ours and CSI,
and our net assets, in each case calculated in accordance with
the terms of the merger agreement as of immediately prior to the
effective time of the merger.
Consummation of the merger is subject to closing conditions,
including among other things, (i) approval and adoption of
the merger agreement and merger by the requisite vote of the
stockholders of CSI, (ii) approval of the issuance of
shares of our common stock in connection with the merger and
approval of the certificate of amendment effecting a reverse
stock split by the requisite vote of our stockholders; and
(iii) conditional approval for the listing of our common
stock to be issued in the merger on the Nasdaq Global Market.
Our Registration Statement on
Form S-4
filed with the Securities and Exchange Commission was declared
effective on January 26, 2009.
17
The merger agreement contains certain termination rights for
both us and CSI, and further provides that, upon termination of
the merger agreement under specified circumstances, we or CSI
may be required to pay the other party a termination fee of
$1.5 million plus reimbursement to the applicable party of
all actual out-of-pocket legal, accounting and investment
advisory fees paid or payable by such party in connection with
the merger agreement and the transactions contemplated thereby.
If the merger agreement is terminated and we determine to seek
another business combination, we may not be able to find a third
party willing to provide equivalent or more attractive
consideration than the consideration to be provided in the
proposed merger with CSI. In such circumstances, our board of
directors may elect to, among other things, take the steps
necessary to liquidate our business and assets. In the case of
liquidation, the consideration that we might receive may be less
attractive than the consideration to be received by us and our
stockholders pursuant to the merger with CSI.
In August 2008, in connection with a restructuring of our
workforce that resulted in our headcount being reduced to three
employees by December 31, 2008, we suspended the
development of our lead product candidate REP3123, an
investigational narrow-spectrum antibacterial agent for the
treatment of
Clostridium difficile
(
C. difficile
)
bacteria and
C. difficile
infection (CDI) and our
other novel anti-infective programs based on our bacterial DNA
replication inhibition technology. We are considering the sale
of REP3123 and its related technology and the sale of
anti-infective programs based on our bacterial DNA replication
inhibition technology in a transaction or transactions separate
from the merger. We had previously devoted substantially all of
our clinical development and research and development efforts
and a material portion of our financial resources toward the
development of faropenem medoxomil, REP3123, our DNA replication
inhibition technology and our other product candidates, and we
have no product candidates currently in active clinical or
preclinical development.
In June 2008, we announced our decision to terminate our license
agreement with Asubio Pharma, Co., Ltd, or Asubio Pharma, for
the development and commercialization of faropenem medoxomil in
the U.S. and Canada. As a result of this termination, we
relinquished all of our rights to the development and
commercialization of faropenem medoxomil.
As of December 31, 2008, we reported net assets of
$42.1 million. We have incurred significant operating
losses since our inception on December 6, 2000, and, as of
December 31, 2008, we had an accumulated deficit of
$150 million. We have generated no sustainable revenue or
revenue from product sales to date. We have funded our
operations principally from the sale of our securities and
amounts received from Forest Laboratories under our former
collaboration and commercialization agreement.
Comparison
of Years Ended December 31, 2008 and 2007
Revenue.
We recognized no revenue in 2008 and
$58.6 million in revenue during 2007. The decrease was due
to the recognition of previously deferred revenue as a result of
the termination of our former collaboration and
commercialization agreement with Forest Laboratories in 2007.
Revenue recognized during 2007 included $56.2 million of
license revenue, representing the unamortized portion of
$60 million in upfront and milestone payments we received
under our agreement with Forest Laboratories. Revenue recognized
during 2007 also included $2.4 million of contract revenue
for funded activity under our agreement with Forest Laboratories.
18
Research and Development Expense.
Research and
development expenses were $27.4 million for 2008 as
compared to $43.3 million in 2007. Research and development
expenditures made to advance our product candidates and other
research efforts during 2008 and 2007 were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
Faropenem medoxomil
|
|
$
|
16,363
|
|
|
$
|
29,231
|
|
|
$
|
(12,868
|
)
|
|
|
(44
|
)%
|
REP8839
|
|
|
356
|
|
|
|
4,550
|
|
|
|
(4,194
|
)
|
|
|
(92
|
)%
|
Other research and development
|
|
|
10,723
|
|
|
|
9,532
|
|
|
|
1,191
|
|
|
|
12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
27,442
|
|
|
$
|
43,313
|
|
|
$
|
(15,871
|
)
|
|
|
(37
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs to support our faropenem medoxomil program were
$12.9 million lower in 2008 as compared to 2007. Following
the termination of our license agreement with Asubio Pharma Co.,
Ltd., or Asubio Pharma, in June 2008, activities related to the
faropenem medoxomil program were limited to steps required to
complete patient monitoring, database analysis and regulatory
reporting related to the Phase III clinical trial for the
treatment of acute exacerbation of chronic bronchitis that was
suspended in April 2008. As a result, clinical trial
expenditures and costs of internal research and development
personnel under the faropenem medoxomil program were
$12.0 million lower during 2008 compared to 2007.
Costs to support our REP8839 program were $4.2 million
lower in 2008 as compared to 2007. This program was suspended in
December 2007 due to the incremental investment required to
optimize the formulation compared to the niche market
opportunity represented by the product candidates initial
target indication of impetigo. Our 2008 expenditures for this
program were limited to costs to complete studies that were
ongoing at the time the program was suspended. As a result,
clinical trial and preclinical expenditures and costs of
internal research and development personnel under the REP8839
program were $3.4 million lower during 2008 compared to
2007.
Costs to support our other research and development programs
were $1.2 million higher in 2008 as compared to 2007. The
increase was a result of additional preclinical research prior
to our announcement in August 2008 that we were suspending these
programs comprised primarily of our REP3123 program for the
treatment of
C. difficile
bacteria and CDI and our other
novel anti-infective programs based on our bacterial DNA
replication inhibition technology.
Selling, General and Administrative
Expenses.
Selling, general and administrative
expenses were $15.5 million for 2008, compared to
$13.0 million for 2007. The increase primarily resulted
from severance and related benefit charges of $1.6 million,
a $1.0 million fee due to an investment bank upon the
announcement of our proposed merger transaction with CSI and
incentive payments related to retention of employees engaged in
our strategic alternatives process of approximately
$0.3 million during 2008. In addition, we recorded an
impairment charge against our property and equipment of
$0.5 million. The increases were offset by decreased
compensation expense following organizational restructurings
announced in April and August 2008.
Investment Income, net.
Investment income was
$1.8 million for 2008, compared to $5.5 million for
2007. The decrease was primarily due to lower overall cash
available for investing in 2008. In 2006, we received cash of
$60 million under our former collaboration and
commercialization agreement with Forest Laboratories and
$44.5 million in net proceeds from our initial public
offering.
Other Expense, net.
Other expense was $19
thousand for 2008, compared to $0.1 million in 2007. The
decrease was primarily due to $0.1 million lower net
foreign currency losses associated with our foreign currency
denominated payables.
Comparison
of Years Ended December 31, 2007 and 2006
Revenue.
We recognized $58.6 million in
revenue during 2007 compared to $16.0 million in 2006. The
increase was due to the recognition of previously deferred
revenue as a result of the termination of our former
19
collaboration and commercialization agreement with Forest
Laboratories in 2007. Revenue recognized during 2007 included
$56.2 million of license revenue, representing the
unamortized portion of $60 million in upfront and milestone
payments we received under our agreement with Forest
Laboratories, as compared to $3.8 million of license
revenue recognized in 2006. Revenue recognized during 2007 also
included $2.4 million of contract revenue for funded
activity under our agreement with Forest Laboratories, as
compared to $12.2 million of contract revenue recognized in
2006.
Research and Development Expense.
Research and
development expenses were $43.3 million for 2007 as
compared to $38.3 million in 2006. Research and development
expenditures made to advance our product candidates and other
research efforts during 2007 and 2006 were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
Change
|
|
|
|
2007
|
|
|
2006
|
|
|
$
|
|
|
%
|
|
|
Faropenem medoxomil
|
|
$
|
29,231
|
|
|
$
|
23,266
|
|
|
$
|
5,965
|
|
|
|
26
|
%
|
REP8839
|
|
|
4,550
|
|
|
|
8,363
|
|
|
|
(3,813
|
)
|
|
|
(46
|
)%
|
Other research and development
|
|
|
9,532
|
|
|
|
6,666
|
|
|
|
2,866
|
|
|
|
43
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
43,313
|
|
|
$
|
38,295
|
|
|
$
|
5,018
|
|
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs to support our faropenem medoxomil program were
$6.0 million higher in 2007 as compared to 2006. The
increase primarily reflects expenditures related to increased
external clinical trial activity and clinical trial preparations
with a clinical research organization of $10.4 million.
This increase was partially offset by a $1.4 million
decrease in preclinical research and outside services, a
$1.2 million decrease in contingent supply agreement fees
and a $1.1 million decrease in program acquisition fees.
Research and development activities in 2007 were focused on the
ongoing Phase III clinical trial for the treatment of acute
exacerbation of chronic bronchitis as well as planning
activities in preparation for potential future Phase III
clinical trials for the treatment of acute bacterial sinusitis
and community-acquired pneumonia. Research and development
activities in 2006 were focused on the Phase III placebo-
controlled acute exacerbation of chronic bronchitis clinical
trial as well as the Phase II clinical trial in pediatric
patients with acute bacterial otitis media which results were
reported in the first quarter of 2007.
In 2007, costs to support our REP8839 program decreased by
$3.8 million as compared to 2006 primarily reflecting
decreased clinical and preclinical development costs of
$2.0 million. This program was suspended in December 2007
due to the incremental investment required to optimize the
formulation compared to the niche market opportunity represented
by the product candidates initial target indication of
impetigo. Additionally, in 2006 we incurred $1.5 million
under our June 2003 purchase agreement with GlaxoSmithKline PLC,
or GSK to complete the purchase of the inhibition of tRNA
synthetase technology underlying REP8839 and REP3123.
In 2007, other research and development costs increased by
$2.9 million as compared to 2006. Costs of internal
research and development personnel and related costs increased
by $2.1 million as we increased the activity levels of our
research and development personnel in support of our
C.
difficile
program
,
or REP3123, and DNA replication
inhibition program. Other costs in support of these programs
included external preclinical research, consulting and other
services that increased by $0.4 million in 2007 compared to
2006.
Selling, General and Administrative
Expenses.
Selling, general and administrative
expenses were $13.0 million for 2007, compared to
$12.2 million for 2006. In 2007, we incurred incremental
personnel costs of $0.9 million associated with personnel
hired during 2006 to support our commercial, finance and
administrative activities, compensation costs of
$0.5 million related to our organizational restructuring
announced in December 2007 and increased costs associated with
the adoption of SFAS 123(R),
Share-Based Payment
of
$0.7 million. We also incurred increased legal, accounting
and insurance fees resulting from our first full year of
compliance with Section 404 of the Sarbanes-Oxley Act.
These increases were partially offset by reductions in market
research costs of $1.4 million primarily related to the
faropenem medoxomil program.
Investment Income, net.
Investment income was
$5.5 million for 2007, compared to $6.0 million for
2006. The decrease was primarily due to lower overall cash
available for investing in 2007. In 2006, we
20
received cash of $60 million under our former collaboration
and commercialization agreement with Forest Laboratories and
$44.5 million in net proceeds from our initial public
offering.
Interest Expense.
In 2006 we incurred interest
expense of $14 thousand. The equipment loan and security
agreement was paid in full in 2006.
Other Expense, net.
Other expense was
$0.1 million for 2007, compared to $0.7 million in
2006. The decrease was primarily due to $0.4 million lower
foreign currency losses associated with our foreign currency
denominated payables and $0.1 million in losses to adjust
derivatives in 2006 to market value.
Liquidity
and Capital Resources
As of December 31, 2008, we had $45.5 million in cash,
cash equivalents and short-term investments. We have accumulated
significant operating losses since our inception in 2000 and as
of December 31, 2008 we had an accumulated deficit of
$150.4 million. We have funded our operations to date
principally from private placements of equity securities and
convertible notes totaling $121.5 million, receipt of
payments from Forest Laboratories under our former collaboration
and commercialization agreement totaling $74.6 million and
net proceeds received from our initial public offering of
$44.5 million.
On November 3, 2008, we entered into a definitive merger
agreement with Cardiovascular Systems, Inc., or CSI, pursuant to
which a wholly owned subsidiary of Replidyne will merge with and
into CSI, with CSI continuing as a wholly owned subsidiary of
Replidyne. Immediately prior to the effective time of the
merger, each share of CSI preferred stock will be converted into
shares of CSI common stock at a ratio determined in accordance
with the CSI articles of incorporation. At the effective time of
the merger, each share of CSI common stock will convert into the
right to receive that number of shares of our common stock as
determined pursuant to the conversion factor described in the
merger agreement. We will assume outstanding and unexercised
options and warrants to purchase CSI common stock, and they will
be converted into warrants and options, as applicable, to
purchase our common stock in accordance with the same conversion
factor. Our stockholders, option holders and warrant holders
will continue to own and hold, respectively, their existing
shares of and options and warrants for our common stock.
Immediately after the merger, current stockholders of Replidyne,
together with holders of our options and warrants, are expected
to own or have the right to acquire between 16.3% and 17.0% of
the combined company, and current CSI stockholders, together
with holders of CSI options and warrants, are expected to own or
have the right to acquire approximately 83.0% and 83.7% of the
combined company, in each case assuming that our net assets at
closing are between $35 and $37 million as calculated in
accordance with the terms of the merger agreement, on a fully
diluted basis using the treasury stock method of accounting for
options and warrants. The Special Meeting of Stockholders to
consider and vote on our merger with CSI is to be held on
February 24, 2009. If the merger is completed, the business
of the combined company will become the business of CSI. If the
merger with CSI is not completed, we will reconsider our
strategic alternatives and could pursue another strategic
transaction like the merger or dissolve and liquidate our
assets. If we pursue another merger like the merger proposed
with CSI, we cannot assure you that the terms will be as
favorable as the terms that were available with CSI or that the
process would generate a merger transaction. If we dissolve and
liquidate our assets we would be required to pay all of our
debts and contractual obligations and to set aside certain
reserves for potential future claims, and there can be no
assurances as to the amount or timing of available cash
remaining to distribute to stockholders after paying the our
debts and other obligations and setting aside funds for reserves.
The definitive merger agreement contains certain termination
rights for both us and CSI, and further provides that, upon
termination of the merger agreement under specified
circumstances, we or CSI may be required to pay the other party
a termination fee of $1.5 million plus reimbursement to the
applicable party of all actual out-of-pocket legal, accounting
and investment advisory fees paid or payable by such party in
connection with the merger agreement and the transactions
contemplated thereby.
In May 2007, we entered into an arrangement with an investment
bank to assist us in identifying a licensing partner for our
faropenem medoxomil program and to provide other investment
banking services. Under the terms of the agreement, we may incur
transaction fees of up to $6.0 million based on the value
of a license or strategic transaction as defined. Based on the
terms of our proposed merger with CSI, the total fee
21
due the investment bank for this transaction is
$4.0 million if the merger agreement is approved by our
stockholders. As of December 31, 2008 we had paid
$1.0 million under this agreement that was due and payable
as an Announcement Fee upon the announcement of our merger
agreement with CSI on November 3, 2008. The Announcement
Fee is creditable against the total fee of $4.0 million
that is due and payable upon approval of the merger agreement
with CSI by our stockholders at the Special Stockholder Meeting
scheduled for February 24, 2009. As of December 31,
2008, the balance of the bankers fee of $3.0 million
has not been paid or accrued for, pending such stockholder
approval.
We have entered into employment agreements with our chief
executive officer and certain other executive officers that
provide for base salary, eligibility for bonuses and other
generally available benefits. The employment agreements provide
that we may terminate the employment of the executive at any
time with or without cause. If an executive is terminated
without cause or such executive resigns for good reason, as
defined, then the executive is entitled to receive a severance
package consisting of salary continuation for a period of twelve
months (or eighteen months with respect to our chief executive
officer) from the date of termination among other benefits. If
such termination occurs one month before or thirteen months
following a change of control, then the executive is entitled
to: i) salary continuation for a period of twelve months
(or eighteen months with respect to our chief executive officer)
from the date of termination, ii) a bonus equal to the
average of the executives annual bonuses for the two years
prior to the change in control termination (or one and a half
times the average with respect to the chief executive officer),
iii) acceleration of vesting of all of the executives
outstanding unvested options to purchase our common stock, and
iv) other benefits.
As of December 31, 2008, we have accrued for our estimate
of unpaid benefits expected to be incurred under these
employment agreements with respect to current and former
executives as we determined that a strategic transaction or
liquidation was probable. As of December 31, 2008, the
balance of accrued but unpaid benefits was $1.4 million.
We have entered into retention bonus agreements with our chief
financial officer and senior vice president of corporate
development. The agreements provide that each such executive is
eligible to receive both: i) a cash bonus in the amount of
$0.1 million (Retention Bonus), which was earned and fully
accrued for at September 30, 2008, and ii) a cash
bonus in an amount of not less than $0.1 million and not
greater than $0.2 million, which final amount will be
determined by our board of directors in its sole discretion,
provided that such executive remains employed by us through the
consummation of a strategic transaction (Transaction Bonus). The
Retention Bonuses were paid in October. As of December 31,
2008, the Transaction Bonuses have not been paid or accrued for,
pending the consummation of a strategic transaction.
During 2007, we established a severance benefit plan that
defines termination benefits for all eligible employees, as
defined, not under an employment contract, if the employee is
terminated without cause. Under this plan, employees whose
employment is terminated without cause are provided a severance
benefit of between nine and eighteen weeks pay, based on their
employee grade level, as defined, plus an additional two weeks
pay for each year of service. As of December 31, 2008, we
have accrued for our estimate of unpaid benefits expected to be
incurred under this plan with respect to former employees. As of
December 31, 2008, the balance of accrued but unpaid
benefits under the severance plan was $0.6 million.
Based on the current status of our product development and
commercialization plans, we believe that our current cash, cash
equivalents, short-term investments and interest earned on these
balances will be sufficient to satisfy our anticipated cash
needs for working capital and capital expenditures through at
least the next 12 months. This forecast of the period in
which our financial resources will be adequate to support
operations is a forward-looking statement and involves risks,
uncertainties and assumptions. Our actual results and the timing
of selected events may differ materially from those anticipated
as a result of many factors, including but not limited to those
discussed under Risk Factors in Part I,
Item 1A of this annual report.
Our future capital uses and requirements depend on a number of
factors, including but not limited to the following:
|
|
|
|
|
the costs of consummating the merger with CSI and such other
costs that may result from any delay in such consummation;
|
22
|
|
|
|
|
the costs to enter into and the terms and timing of any sale of
assets or strategic transactions involving our development stage
programs;
|
|
|
|
the costs to enter into and subsequently, the terms and timing
of, any merger, sale of assets including the sale of certain or
all of our development stage programs, additional collaborative,
strategic partnership or licensing agreements that we may
establish;
|
|
|
|
the costs of filing, prosecuting, defending and enforcing any
patent claims and other intellectual property rights; and
|
|
|
|
the costs of defending any litigation or arbitration claims
related to our material agreements.
|
If our available cash, cash equivalents, short-term investments
and net income earned on these balances are insufficient to
satisfy our liquidity requirements, we may seek to sell
additional equity or debt securities or enter into a credit
facility. The sale of additional equity may result in additional
dilution to our stockholders. If we raise additional funds
through the issuance of debt securities, those securities could
have rights senior to those of our common stock and could
contain covenants that would restrict our operations. We may
require additional capital beyond our current forecasts. Any
such required additional capital may not be available on
reasonable terms, if at all. If we are unable to obtain
additional financing, we may be required to modify our operating
strategy.
Critical
Accounting Policies and Estimates
This discussion and analysis of our financial condition and
results of operations is based on our financial statements,
which have been prepared in accordance with accounting
principles generally accepted in the U.S. The preparation
of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets,
liabilities, contingent assets and liabilities revenues,
expenses and related disclosures. Actual results may differ from
these estimates. Our significant accounting policies are
described in Note 2 of Notes to Financial Statements
included elsewhere in this annual report. We believe the
following accounting policies affect our more significant
judgments and estimates used in the preparation of our financial
statements.
Accrued Expenses.
As part of the process of
preparing our financial statements, we are required to estimate
accrued expenses. This process involves identifying services
that third parties have performed on our behalf and estimating
the level of service performed and the associated cost incurred
on these services as of each balance sheet date in our financial
statements. We are party to agreements which include provisions
that require payments to the counterparty upon the consummation
of specified transactions. Further, we estimate severance and
related amounts based on the terms of individual employment
agreements or our severance benefit plan, whichever is
applicable, based on our assessment of the probability of future
events and our ability to estimate our liability. We develop
estimates of liabilities using our judgment based upon the facts
and circumstances known and account for these estimates in
accordance with accounting principles involving accrued expenses
generally accepted in the U.S. Our estimates and
assumptions could differ significantly from the amounts that we
actually may incur.
|
|
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
We are not required to provide the information required by this
item.
23
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS
|
Replidyne,
Inc.
Index to
Financial Statements
|
|
|
|
|
|
|
Page(s)
|
|
|
|
|
25
|
|
|
|
|
26
|
|
|
|
|
27
|
|
|
|
|
28
|
|
|
|
|
29
|
|
|
|
|
30
|
|
24
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Replidyne, Inc.:
We have audited the accompanying balance sheets of Replidyne,
Inc. as of December 31, 2008 and 2007, and the related
statements of operations, stockholders equity (deficit)
and comprehensive income (loss), and cash flows for each of the
years in the two-year period ended December 31, 2008. These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Replidyne, Inc. as of December 31, 2008 and 2007, and
the results of its operations and its cash flows for each of the
years in the two-year period ended December 31, 2008, in
conformity with U.S. generally accepted accounting
principles.
/s/ KPMG LLP
Boulder, Colorado
February 23, 2009
25
REPLIDYNE,
INC.
(in thousands, except par value)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
33,738
|
|
|
$
|
43,969
|
|
Short-term investments
|
|
|
11,750
|
|
|
|
46,297
|
|
Property and equipment held-for-sale
|
|
|
542
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
773
|
|
|
|
2,429
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
46,803
|
|
|
|
92,695
|
|
Property and equipment, net
|
|
|
|
|
|
|
1,905
|
|
Other assets
|
|
|
36
|
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
46,839
|
|
|
$
|
94,690
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
4,698
|
|
|
$
|
12,255
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
4,698
|
|
|
|
12,255
|
|
Other long-term liabilities
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
4,698
|
|
|
|
12,286
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value. Authorized
100,000 shares; issued 27,169 and 27,085 shares;
outstanding 27,115 and 27,077 shares at December 31,
2008 and 2007, respectively
|
|
|
27
|
|
|
|
27
|
|
Treasury stock, $0.001 par value; 54 and 8 shares at
December 31, 2008 and 2007, respectively, at cost
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Additional paid-in capital
|
|
|
192,240
|
|
|
|
191,570
|
|
Accumulated other comprehensive income
|
|
|
288
|
|
|
|
96
|
|
Accumulated deficit
|
|
|
(150,413
|
)
|
|
|
(109,288
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
42,141
|
|
|
|
82,404
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
46,839
|
|
|
$
|
94,690
|
|
|
|
|
|
|
|
|
|
|
See notes to financial statements.
26
REPLIDYNE,
INC.
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Revenue
|
|
$
|
|
|
|
$
|
58,571
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
27,442
|
|
|
|
43,313
|
|
Sales, general and administrative
|
|
|
15,509
|
|
|
|
13,020
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
42,951
|
|
|
|
56,333
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
(42,951
|
)
|
|
|
2,238
|
|
Investment income, net
|
|
|
1,845
|
|
|
|
5,535
|
|
Other expense, net
|
|
|
(19
|
)
|
|
|
(81
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(41,125
|
)
|
|
$
|
7,692
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share basic
|
|
$
|
(1.52
|
)
|
|
$
|
0.29
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share diluted
|
|
$
|
(1.52
|
)
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding basic
|
|
|
27,061
|
|
|
|
26,730
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding diluted
|
|
|
27,061
|
|
|
|
27,666
|
|
|
|
|
|
|
|
|
|
|
See notes to financial statements.
27
REPLIDYNE,
INC.
COMPREHENSIVE
INCOME (LOSS)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Comprehensive
|
|
|
|
|
|
Stockholders
|
|
|
|
Common Stock
|
|
|
Treasury Stock
|
|
|
Paid-In
|
|
|
Income
|
|
|
Accumulated
|
|
|
Equity
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
(Loss)
|
|
|
Deficit
|
|
|
(Deficit)
|
|
|
Balances, January, 1, 2007
|
|
|
27,010
|
|
|
$
|
27
|
|
|
|
(31
|
)
|
|
$
|
(2
|
)
|
|
$
|
188,334
|
|
|
$
|
(7
|
)
|
|
$
|
(116,980
|
)
|
|
$
|
71,372
|
|
Issuance of common stock upon exercise of stock options
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
64
|
|
Issuance of common stock under employee stock purchase plan
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
282
|
|
|
|
|
|
|
|
|
|
|
|
282
|
|
Release of restrictions on restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115
|
|
|
|
|
|
|
|
|
|
|
|
115
|
|
Vested shares of restricted stock returned to the company for
taxes
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
Return of unvested restricted stock by employee upon termination
|
|
|
|
|
|
|
|
|
|
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense related to options granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,784
|
|
|
|
|
|
|
|
|
|
|
|
2,784
|
|
Issuance of restricted stock to an employee
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on available-for-sale equity securities, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103
|
|
|
|
|
|
|
|
103
|
|
Retirement of treasury stock
|
|
|
(58
|
)
|
|
|
|
|
|
|
58
|
|
|
|
9
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,692
|
|
|
|
7,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2007
|
|
|
27,085
|
|
|
$
|
27
|
|
|
|
(8
|
)
|
|
$
|
(1
|
)
|
|
$
|
191,570
|
|
|
$
|
96
|
|
|
$
|
(109,288
|
)
|
|
$
|
82,404
|
|
Issuance of common stock upon exercise of stock options
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
Issuance of common stock under employee stock purchase plan
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
32
|
|
Release of restrictions on restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117
|
|
|
|
|
|
|
|
|
|
|
|
117
|
|
Return of unvested restricted stock by employee upon termination
|
|
|
|
|
|
|
|
|
|
|
(46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense related to options granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
488
|
|
|
|
|
|
|
|
|
|
|
|
488
|
|
Unrealized gain on available-for-sale equity securities, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
192
|
|
|
|
|
|
|
|
192
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(41,125
|
)
|
|
|
(41,125
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(40,933
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2008
|
|
|
27,169
|
|
|
$
|
27
|
|
|
|
(54
|
)
|
|
$
|
(1
|
)
|
|
$
|
192,240
|
|
|
$
|
288
|
|
|
$
|
(150,413
|
)
|
|
$
|
42,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to financial statements.
28
REPLIDYNE,
INC.
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(41,125
|
)
|
|
$
|
7,692
|
|
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
917
|
|
|
|
1,474
|
|
Stock-based compensation
|
|
|
488
|
|
|
|
2,784
|
|
Discounts and premiums on short-term investments, net
|
|
|
144
|
|
|
|
779
|
|
Other-than-temporary impairment of short-term investments
|
|
|
236
|
|
|
|
|
|
Loss on sale/disposal of property and equipment
|
|
|
454
|
|
|
|
|
|
Other
|
|
|
(33
|
)
|
|
|
15
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Receivable from Forest Laboratories
|
|
|
|
|
|
|
4,634
|
|
Prepaid expenses and other current assets
|
|
|
1,655
|
|
|
|
(349
|
)
|
Other assets
|
|
|
54
|
|
|
|
21
|
|
Accounts payable and accrued expenses
|
|
|
(7,395
|
)
|
|
|
4,435
|
|
Deferred revenue
|
|
|
|
|
|
|
(56,175
|
)
|
Other long-term liabilities
|
|
|
(31
|
)
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(44,636
|
)
|
|
|
(34,715
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases of short-term investments classified as
available-for-sale
|
|
|
(7,923
|
)
|
|
|
(26,803
|
)
|
Purchases of short-term investments classified as
held-to-maturity
|
|
|
(1,453
|
)
|
|
|
(74,870
|
)
|
Maturities/sales of short-term investments classified as
available-for-sale
|
|
|
12,243
|
|
|
|
59,489
|
|
Maturities of short-term investments classified as
held-to-maturity
|
|
|
31,526
|
|
|
|
96,686
|
|
Proceeds from sale of property and equipment
|
|
|
7
|
|
|
|
7
|
|
Acquisitions of property and equipment
|
|
|
(14
|
)
|
|
|
(232
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities
|
|
|
34,386
|
|
|
|
54,277
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock from the exercise of
stock options and under the employee stock purchase plan
|
|
|
65
|
|
|
|
346
|
|
Purchase of unvested restricted stock from employees upon
termination
|
|
|
(46
|
)
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
19
|
|
|
|
316
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(10,231
|
)
|
|
|
19,878
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
43,969
|
|
|
|
24,091
|
|
|
|
|
|
|
|
|
|
|
End of year
|
|
$
|
33,738
|
|
|
$
|
43,969
|
|
|
|
|
|
|
|
|
|
|
See notes to financial statements.
29
REPLIDYNE,
INC.
|
|
(1)
|
Nature of
Business and Proposed Transaction
|
Replidyne, Inc. (Replidyne or the Company) has previously
announced that it was reviewing a range of strategic
alternatives that could result in potential changes to the
Companys current business strategy and future operations.
As a result of its strategic alternatives process, on
November 3, 2008 the Company entered into an Agreement and
Plan of Merger and Reorganization (merger agreement) with
Cardiovascular Systems, Inc. (CSI). Pursuant to the terms of the
merger agreement, a wholly owned subsidiary of the Company will
be merged with and into CSI (merger), with CSI continuing after
the merger as the surviving corporation and wholly owned
subsidiary of the Company. Following consummation of the merger,
the Company will be renamed Cardiovascular Systems, Inc. and its
headquarters will be located in St. Paul, Minnesota, at
CSIs headquarters. The Company has agreed to appoint
directors designated by CSI to the Companys Board of
Directors, specified current directors of the Company will
resign from the Board of Directors and the Company will appoint
new officers designated by CSI.
The Company and CSI are targeting a closing of the merger in the
first quarter of 2009. A Special Meeting of Stockholders is
scheduled for February 24, 2009 to vote on the merger. Upon
the terms and subject to the conditions set forth in the merger
agreement, the Company will issue, and holders of CSI capital
stock will receive, shares of common stock of the Company, such
that following the consummation of the transactions contemplated
by the merger agreement, current stockholders of the Company,
together with holders of Company options and warrants, are
expected to own or have the right to acquire between 16.3% and
17.0% of the common stock of the combined company, in each case
assuming that the Companys net assets at closing are
between $35 million and $37 million, as calculated in
accordance with the terms of the merger agreement, and current
CSI stockholders, together with holders of CSI options and
warrants, are expected to own or have the right to acquire
between 83.0% and 83.7% of the common stock of the combined
company, both on a fully diluted basis using the treasury stock
method of accounting for options and warrants.
Subject to the terms of the merger agreement, upon consummation
of the transactions contemplated by the merger agreement, at the
effective time of the merger, each share of CSI common stock
issued and outstanding immediately prior to the merger will be
canceled, extinguished and automatically converted into the
right to receive that number of shares of the Company common
stock as determined pursuant to the conversion factor described
in the merger agreement. In addition, the Company will assume
options and warrants to purchase shares of CSI common stock
which will become exercisable for shares of the Companys
common stock, adjusted in accordance with the same conversion
factor. The conversion factor will be based on the number of
outstanding shares of capital stock of the Company and CSI, and
any outstanding options and warrants to purchase shares of
capital stock of the Company and CSI, and the Companys net
assets, in each case calculated in accordance with the terms of
the merger agreement as of immediately prior to the effective
time of the merger, and will not be calculated until such time.
Consummation of the merger is subject to closing conditions,
including among other things, (i) approval and adoption of
the merger agreement and merger by the requisite vote of the
stockholders of CSI, (ii) approval of the issuance of
shares of Company common stock in connection with the merger and
approval of the certificate of amendment effecting a reverse
stock split by the requisite vote of Company stockholders; and
(iii) conditional approval for the listing of Company
common stock to be issued in the merger on the Nasdaq Global
Market. The registration statement on
Form S-4
was declared effective by the SEC on January 26, 2009.
The merger agreement contains certain termination rights for
both the Company and CSI, and further provides that, upon
termination of the merger agreement under specified
circumstances, the Company or CSI may be required to pay the
other party a termination fee of $1.5 million plus
reimbursement to the applicable party of all actual
out-of-pocket legal, accounting and investment advisory fees
paid or payable by such party in connection with the merger
agreement and the transactions contemplated thereby.
30
REPLIDYNE,
INC.
NOTES TO FINANCIAL
STATEMENTS (continued)
If the merger agreement is terminated and the Company determines
to seek another business combination, the Company may not be
able to find a third party willing to provide equivalent or more
attractive consideration than the consideration to be provided
in the proposed merger with CSI. In such circumstances, the
Companys board of directors may elect to, among other
things, take the steps necessary to liquidate the Companys
business and assets. In the case of liquidation, the
consideration that the Company might receive may be less
attractive than the consideration to be received by the Company
and its stockholders pursuant to the merger with CSI.
In August 2008, in connection with a restructuring of the
Companys workforce that resulted in its headcount being
reduced to three employees, the Company suspended the
development of its lead product candidate REP3123, an
investigational narrow-spectrum antibacterial agent for the
treatment of
Clostridium difficile
(
C. difficile
)
bacteria and
C. difficile
infection (CDI) and its
other novel anti-infective programs based on its bacterial DNA
replication inhibition technology. The Company is pursuing the
sale of REP3123 and its related technology and the sale of
anti-infective programs based on the Companys bacterial
DNA replication inhibition technology in a transaction or
transactions separate from the merger. The Company had
previously devoted substantially all of its clinical development
and research and development efforts and a material portion of
its financial resources toward the development of faropenem
medoxomil, REP3123, its DNA replication inhibition technology
and other product candidates. The Company has no product
candidates currently in active clinical or pre-clinical
development.
|
|
(2)
|
Summary
of Significant Accounting Policies
|
Accounting
Estimates in the Preparation of Financial
Statements.
The preparation of financial statements in conformity with
accounting principles generally accepted in the
U.S. requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenue
and expenses during the reporting period. Actual results could
differ from these estimates.
Fair
Value of Financial Instruments
Statement of Financial Accounting Standards (SFAS) No. 157,
Fair Value Measurements
(SFAS 157) establishes
a fair value hierarchy that requires companies to maximize the
use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. SFAS 157s valuation
techniques are based on observable and unobservable inputs.
Observable inputs reflect readily obtainable data from
independent sources, while unobservable inputs reflect the
Companys market assumptions. SFAS 157 classifies
these inputs into the following hierarchy:
Level 1 Inputs quoted prices in active markets
for identical assets and liabilities
Level 2 Inputs observable inputs other than
quoted prices in active markets for identical assets and
liabilities
Level 3 Inputs unobservable inputs.
As of December 31, 2008, those assets and liabilities that
are measured at fair value on a recurring basis consisted of the
Companys short-term securities it classifies as
available-for-sale. The Company believes that the carrying
amounts of its other financial instruments, including cash and
cash equivalents and accounts payable and accrued expenses,
approximate their fair value due to the short-term maturities of
these instruments.
31
REPLIDYNE,
INC.
NOTES TO FINANCIAL
STATEMENTS (continued)
The following table sets forth the fair value of our financial
assets that were measured at fair value on a recurring basis as
of December 31, 2008. Assets are measured on a recurring
basis if they are remeasured at least annually (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Total
|
|
|
Money market funds
|
|
$
|
26,360
|
|
|
$
|
|
|
|
$
|
26,360
|
|
U.S. bank and corporate notes
|
|
|
|
|
|
|
8,315
|
|
|
|
8,315
|
|
U.S. government agencies
|
|
|
|
|
|
|
3,435
|
|
|
|
3,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
26,360
|
|
|
$
|
11,750
|
|
|
$
|
38,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents
The Company considers all highly liquid investments purchased
with initial maturities of three months or less to be cash
equivalents. Cash equivalents are carried at amortized cost,
which approximates market value.
Short-Term
Investments
Short-term investments are investments with a maturity of more
than three months when purchased. At December 31, 2008,
initial contractual maturities of the Companys short-term
investments were less than two years. At December 31, 2008,
the weighted average days to maturity were less than three
months.
Management determines the classification of securities in
accordance with SFAS No. 115,
Accounting for
Certain Investments in Debt and Equity Securities
, at
purchase date based on its intent. The Company classifies its
marketable equity and debt securities into one of two
categories: held-to-maturity or available-for-sale.
Held-to-maturity securities are those debt securities which the
Company has the positive intent and ability to hold to maturity
and are reported at amortized cost. Those securities not
classified as held-to maturity are considered
available-for-sale. These securities are recorded at estimated
fair value with unrealized gains and losses excluded from
earnings and reported as a separate component of other
comprehensive income or loss until realized. Cost is adjusted
for amortization of premiums and accretion of discounts from the
date of purchase to maturity. Such amortization is included in
investment income and other.
Unrealized losses are charged against Investment income
and other, net when a decline in fair value is determined
to be other-than-temporary. In accordance with FASB Staff
Position
FAS 115-1
and
FAS 124-1,
The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments,
the Company
reviews several factors to determine whether a loss is
other-than-temporary. These factors include but are not limited
to: (i) the extent to which the fair value is less than
cost and the cause for the fair value decline, (ii) the
financial condition and near term prospects of the issuer,
(iii) the length of time a security is in an unrealized
loss position and (iv) the Companys ability to hold
the security for a period of time sufficient to allow for any
anticipated recovery in fair value.
If the estimated fair value of a security is below its carrying
value, the Company evaluates whether it has the intent and
ability to retain its investment for a period of time sufficient
to allow for any anticipated recovery in market value and
whether evidence indicating that the cost of the investment is
recoverable within a reasonable period of time outweighs
evidence to the contrary. If the impairment is considered to be
other-than-temporary, the security is written down through the
statement of operations to its estimated fair value.
Other-than-temporary declines in estimated fair value of all
marketable securities are charged to investment income and
other, net. The cost of all securities sold is based on
the specific identification method. The Company recognized a
charge of $0.2 million during the year ended
December 31, 2008 and no charges during the corresponding
period in 2007 related to other-than-temporary declines in the
estimated fair values of certain of the Companys
marketable equity and debt securities.
32
REPLIDYNE,
INC.
NOTES TO FINANCIAL
STATEMENTS (continued)
The following table sets forth the classification of the
Companys investments (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Available-for-sale securities recorded at fair value
|
|
$
|
11,750
|
|
|
$
|
16,213
|
|
Held-to-maturity securities recorded at amortized
cost
|
|
|
|
|
|
|
30,084
|
|
|
|
|
|
|
|
|
|
|
Total short-term investments
|
|
$
|
11,750
|
|
|
$
|
46,297
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of the types of short-term
investments classified as available-for-sale securities (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
Amortized
|
|
|
Estimated
|
|
|
Amortized
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Cost
|
|
|
Fair Value
|
|
|
U.S. government agencies
|
|
$
|
3,370
|
|
|
$
|
3,435
|
|
|
$
|
3,998
|
|
|
$
|
4,005
|
|
U.S. bank and corporate notes
|
|
|
8,328
|
|
|
|
8,315
|
|
|
|
12,119
|
|
|
|
12,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11,698
|
|
|
$
|
11,750
|
|
|
$
|
16,117
|
|
|
$
|
16,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains and losses on available-for-sale
securities as of December 31, 2008 were $0.1 million
and $15 thousand, respectively. The Company recognized an
other-than-temporary impairment charge of $0.2 million
during the year ended December 31, 2008 and has
reclassified this amount from accumulated other
comprehensive income to investment income and other,
net. Unrealized holding gains and losses on
available-for-sale securities as of December 31, 2007 were
$0.1 million and $7 thousand, respectively. Net unrealized
holding gains or losses that are not other-than-temporary are
recorded in accumulated other comprehensive income or loss.
The following is a summary of short-term investments classified
as held-to-maturity securities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
|
Amortized
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Fair Value
|
|
|
U.S. bank and corporate notes
|
|
$
|
30,084
|
|
|
$
|
30,091
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains and losses on held-to-maturity
investments as of December 31, 2007 were $10 thousand
and $3 thousand, respectively.
Concentrations
of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash, cash
equivalents and short-term investments. Cash, cash equivalents
and investments consist of commercial paper, corporate and bank
notes, U.S. government securities and money market funds,
all held with financial institutions.
Property
and Equipment
Property and equipment are recorded at cost, less accumulated
depreciation and amortization. Depreciation is computed using
the straight-line method over the estimated useful lives of the
assets, generally three to seven years. Leasehold improvements
are amortized over the shorter of the life of the lease or the
estimated useful life of the assets. Repairs and maintenance
costs are expensed as incurred.
33
REPLIDYNE,
INC.
NOTES TO FINANCIAL
STATEMENTS (continued)
Impairment
of Long-Lived Assets
The Company periodically evaluates the recoverability of its
long-lived assets in accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets
, and, if appropriate, reduces the carrying value
whenever events or changes in business conditions indicate the
carrying amount of the assets may not be fully recoverable.
SFAS No. 144 requires recognition of impairment of
long-lived assets in the event the net book value of such assets
is not recoverable. The amount of impairment is the amount by
which the net book value exceeds the fair value, and in the case
of assets classified as held-for-sale, fair value is adjusted
for costs to sell such assets.
In conjunction with the restructuring of its operations
announced in August 2008, the Company concluded that changes in
its business indicated the carrying amount of certain of its
property and equipment was not fully recoverable. The Company
recorded as sales, general and administrative expenses an
impairment charge of $0.5 million during 2008.
Accrued
Expenses
As part of the process of preparing its financial statements,
the Company is required to estimate accrued expenses. This
process involves identifying services that third parties have
performed on the Companys behalf and estimating the level
of service performed and the associated cost incurred on these
services as of each balance sheet date in the Companys
financial statements. Examples of estimated accrued expenses
include contract service fees, such as amounts due to clinical
research organizations, professional service fees, such as
attorneys, independent accountants and investigators in
conjunction with preclinical and clinical trials, and fees
payable to contract manufacturers in connection with the
production of materials related to product candidates. Estimates
are most affected by the Companys understanding of the
status and timing of services provided relative to the actual
level of services provided by the service providers. The date on
which certain services commence, the level of services performed
on or before a given date, and the cost of services is often
subject to judgment.
Restructuring
Liabilities
The Company has restructured its operations to align its
resources with its operating and strategic plans. Restructuring
charges recorded include amounts related to employee severance,
employee benefits, property impairment, facility abandonment and
other costs. The Company was required to use estimates and
assumptions in determining the amount and in which period to
record charges and obligations related to restructuring
activities.
Segments
The Company operates in one segment. Management uses one measure
of profitability and does not segment its business for internal
reporting purposes.
Share-Based
Compensation
The Company accounts for share-based compensation in accordance
with SFAS No. 123(R),
Share-Based Payment
,
which was adopted on January 1, 2006 under the prospective
transition method. The Company selected the Black-Scholes option
pricing model as the most appropriate valuation method for
option grants with service
and/or
performance conditions. The Black-Scholes model requires inputs
for risk-free interest rate, dividend yield, volatility and
expected lives of the options. Since the Company has a limited
history of stock purchase and sale activity, expected volatility
is based on historical data from several public companies
similar in size and nature of operations to the Company. The
Company will continue to use historical volatility and other
similar public entity volatility information until its
historical volatility is relevant to measure
34
REPLIDYNE,
INC.
NOTES TO FINANCIAL
STATEMENTS (continued)
expected volatility for option grants. The Company estimates
forfeitures based upon historical forfeiture rates and
assumptions regarding future forfeitures. The Company will
adjust its estimate of forfeitures if actual forfeitures differ,
or are expected to differ, from such estimates. Based on an
analysis of historical forfeiture rates and assumptions
regarding future forfeitures, the Company applied a weighted
average annual forfeiture rate of 23.07% and 4.48% during 2008
and 2007, respectively. The increase in the forfeiture rate
during 2008 is primarily attributable to the Companys
recent organizational restructurings and future expectations.
The risk-free rate for periods within the contractual life of
the option is based on the U.S. Treasury yield curve in
effect at the time of the grant for a period commensurate with
the expected term of the grant. The expected term (without
regard to forfeitures) for options granted represents the period
of time that options granted are expected to be outstanding and
is derived from the contractual terms of the options granted and
historical and expected option exercise behaviors.
For options granted during 2008, the Company estimated the fair
value of option grants as of the date of grant using the
Black-Scholes option pricing model with the following weighted
average assumptions. Expected volatility was estimated to be
75%. The weighted average risk-free interest rate was 2.23%, and
the dividend yield was 0.00%. The weighted average expected
lives for each individual vesting tranche under the graded
vesting attribution method discussed below was estimated to be
five years.
For options granted during 2007, the Company estimated the fair
value of option grants as of the date of grant using the
Black-Scholes option pricing model with the following weighted
average assumptions. Expected volatility was estimated to be
75%. The weighted average risk-free interest rate was 4.46%, and
the dividend yield was 0.00%. The weighted average expected
lives for each individual vesting tranche under the graded
vesting attribution method discussed below was estimated to be
3.05 years.
Stock options granted by the Company to its employees are
generally structured to qualify as incentive stock
options (ISOs). Under current tax regulations, the Company
does not receive a tax deduction for the issuance, exercise or
disposition of ISOs if the employee meets certain holding
requirements. If the employee does not meet the holding
requirements, a disqualifying disposition occurs, at which time
the Company will receive a tax deduction. The Company does not
record tax benefits related to ISOs unless and until a
disqualifying disposition occurs. The Company has not recognized
any income tax benefit or related tax asset for share-based
compensation arrangements as the Company does not believe, based
on its history of operating losses that it is more likely than
not it will realize any future tax benefit from such tax
deductions.
Under SFAS No. 123(R), the estimated fair value of
share-based compensation, including stock options granted under
the Companys Equity Incentive Plan and discounted
purchases of common stock by employees under the Employee Stock
Purchase Plan, is recognized as compensation expense. The
estimated fair value of stock options is expensed over the
requisite service period as discussed above. Compensation
expense under the Companys Employee Stock Purchase Plan is
calculated based on participant elected contributions and
estimated fair values of the common stock and the purchase
discount at the date of the offering. See Note 10 for
further information on share-based compensation under these
plans. Share-based compensation, including compensation to
non-employees, included in the Companys statements of
operations was as follows for the years ended December 31,
2008 and 2007 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Research and development
|
|
$
|
(88
|
)
|
|
$
|
1,234
|
|
Sales, general and administrative
|
|
|
576
|
|
|
|
1,550
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
488
|
|
|
$
|
2,784
|
|
|
|
|
|
|
|
|
|
|
The decrease in share-based compensation expense in 2008 was
primarily related to a change in the Companys estimate of
expected forfeitures. The Company bases its estimate of expected
forfeitures on historical forfeiture rates and assumptions
regarding future forfeitures. During 2008, the Company applied a
35
REPLIDYNE,
INC.
NOTES TO FINANCIAL
STATEMENTS (continued)
weighted average expected annual forfeiture rate of 23.07% as
compared to an expected forfeiture rate of 4.48% that was
applied during 2007. The increase in the expected forfeiture
rate is primarily attributable to increased forfeitures as a
result of the Companys recent organizational
restructurings and future expectations.
SFAS No. 123(R) is applied only to awards granted or
modified after the required effective date of January 1,
2006. Awards granted prior to the Companys implementation
of SFAS No. 123(R) are accounted for under the
recognition and measurement provisions of APB Opinion
No. 25 and related interpretations unless modified
subsequent to the Companys adoption of
SFAS No. 123(R).
For stock options granted as consideration for services rendered
by nonemployees and for options that may continue to vest upon
the change in status from an employee to a nonemployee who
continues to provide services to the Company, the Company
recognizes compensation expense in accordance with the
requirements of SFAS No. 123(R), Emerging Issues Task
Force (EITF) Issue
No. 96-18,
Accounting for Equity Instruments that are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services
and EITF
No. 00-18
,
Accounting Recognition for Certain Transactions Involving Equity
Instruments Granted to Other Than Employees,
as amended. The
Company has historically estimated the fair value of share-based
payments issued to nonemployees based on the estimated fair
value of the stock options granted, rather than basing its
estimate on the fair value of the services received, as the
Company has determined that the value of the stock options
granted was more reliably determinable. The estimated fair value
of options granted to nonemployees is expensed over the service
period (which is generally equal to the period over which the
options vest) and remeasured each reporting date until the
options vest or performance is complete.
If an employee becomes a nonemployee and continues to vest in an
option grant under its original terms, the option is treated as
an option granted to a nonemployee prospectively, provided the
individual is required to continue providing services. The
option is accounted for prospectively under EITF
No. 96-18
such that the fair value of the option is remeasured at each
reporting date until the earlier of: i) the performance
commitment date or ii) the date the services have been
completed. Only the portion of the newly measured cost
attributable to the remaining requisite service period is
recognized as compensation cost prospectively from the date of
the change in status. During 2008 and 2007, the Company
recognized share-based compensation expense relating to
nonemployee options of $0.3 million and $0.2 million,
respectively.
Comprehensive
Income (Loss)
The Company applies the provisions of SFAS No. 130,
Reporting Comprehensive Income
, which establishes
standards for reporting comprehensive loss and its components in
financial statements. The Companys comprehensive income
(loss) is comprised of its net income (loss) and unrealized
gains and losses on securities available-for-sale. For 2008,
comprehensive loss was $41.1 million and for 2007 the
Company reported compressive income of $7.8 million.
Net
Income (Loss) Per Share
Net income (loss) per share is computed using the weighted
average number of shares of common stock outstanding and is
presented for basic and diluted net income (loss) per share.
Basic net income (loss) per share is computed by dividing net
income (loss) by the weighted average number of common shares
outstanding during the period, excluding common stock subject to
vesting provisions. Diluted net income (loss) per share is
computed by dividing net income (loss) by the weighted average
number of common shares outstanding during the period, increased
to include, if dilutive, the number of additional common shares
that would have been outstanding if the potential common shares
had been issued or if restrictions had been lifted on restricted
stock. The dilutive effect of common stock equivalents such as
outstanding stock options, warrants and restricted stock is
reflected in diluted net income (loss) per share by application
of the treasury stock method.
36
REPLIDYNE,
INC.
NOTES TO FINANCIAL
STATEMENTS (continued)
Potentially dilutive securities representing approximately
2.8 million and 1.5 million shares of common stock for
2008 and 2007, respectively, were excluded from the computation
of diluted earnings per share for these periods because their
effect would have been antidilutive. Potentially dilutive
securities include stock options, warrants, shares to be
purchased under the employee stock purchase plan and restricted
stock.
Revenue
Recognition
The Companys commercial collaboration agreements can
contain multiple elements, including nonrefundable upfront fees,
payments for reimbursement of research costs, payments for
ongoing research, payments associated with achieving specific
milestones and royalties based on specified percentages of net
product sales, if any. The Company applies the revenue
recognition criteria outlined in EITF Issue
No. 00-21,
Revenue Arrangements with Multiple Deliverables
(EITF 00-21),
in accounting for upfront and milestone payments under the
agreement. In applying the revenue recognition criteria within
EITF 00-21,
the Company considers a variety of factors in determining the
appropriate method of revenue recognition under these
arrangements, such as whether the elements are separable,
whether there are determinable fair values and whether there is
a unique earnings process associated with each element of a
contract.
Where the Company does not believe that an upfront fee or
milestone payment is specifically tied to a separate earnings
process, revenues are recognized ratably over the estimated term
of the agreement. When the Companys obligations under such
arrangements are completed, any remaining deferred revenue is
recognized.
Payments received by the Company for the reimbursement of
expenses for research, development and commercial activities
under commercial collaboration and commercialization agreements
are recorded in accordance with EITF Issue
99-19,
Reporting Revenue Gross as Principal Versus Net as an Agent
(EITF 99-19).
Per
EITF 99-19,
in transactions where the Company acts as principal, with
discretion to choose suppliers, bears credit risk and performs a
substantive part of the services, revenue is recorded at the
gross amount of the reimbursement. Costs associated with these
reimbursements are reflected as a component of operating
expenses in the Companys statements of operations.
Research
and Development
Research and development costs are expensed as incurred. These
costs consist primarily of salaries and benefits, licenses to
technology, supplies and contract services relating to the
development of new products and technologies, allocated
overhead, clinical trial and related clinical manufacturing
costs, and other external costs.
The Company has historically produced, but no longer produces,
clinical and commercial grade product in its Colorado facility
and through third parties. Prior to filing for regulatory
approval of its products for commercial sale, and such
regulatory approval being assessed as probable, these costs have
been expensed as research and development expense when incurred.
Income
Taxes
The Company accounts for income taxes pursuant to
SFAS No. 109,
Accounting for Income Taxes
,
which requires the use of the asset and liability method of
accounting for deferred income taxes. Deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases. A valuation allowance is recorded to the
extent it is more likely than not that a deferred tax asset will
not be realized. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
operations in the period that includes the enactment date.
37
REPLIDYNE,
INC.
NOTES TO FINANCIAL
STATEMENTS (continued)
Based on an analysis of historical equity transactions under the
provisions of Section 382 of the Internal Revenue Code, the
Company believes that ownership changes have occurred at two
points since its inception. These ownership changes, as well as
future changes (including the proposed transaction with CSI)
will limit the annual utilization of the Companys net
operating losses in future periods. The Companys only
significant deferred tax assets are its net operating loss
carryforwards. The Company has provided a valuation allowance
for its entire net deferred tax asset since its inception as,
due to uncertainty as to future utilization of its net operating
loss carryforwards, and the Companys history of operating
losses, the Company has concluded that it is more likely than
not that its deferred tax asset will not be realized.
FASB Interpretation No. 48 (FIN 48),
Accounting for
Uncertainty in Income Taxes An Interpretation of
FASB Statement No. 109
, defines a recognition threshold
and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected
to be taken in a tax return. FIN 48 also provides guidance
on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. At the
adoption date of January 1, 2007, the Company had no
unrecognized tax benefits which would affect its effective tax
rate if recognized. At December 31, 2008, the Company had
no unrecognized tax benefits. The Company classifies interest
and penalties arising from the underpayment of income taxes in
the statements of operations as general and administrative
expenses. At December 31, 2008, the Company has no accrued
interest or penalties related to uncertain tax positions. The
tax years 2005 to 2008 federal returns remain open to
examination, and the tax years 2005 to 2008 also remain open to
examination by other taxing jurisdictions to which the Company
is subject.
|
|
(3)
|
Property
and Equipment
|
Property and equipment classified as non-current at
December 31, 2008 and 2007 consist of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Equipment
|
|
$
|
|
|
|
$
|
5,011
|
|
Furniture and fixtures
|
|
|
|
|
|
|
700
|
|
Leasehold improvements
|
|
|
|
|
|
|
2,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,931
|
|
Less accumulated depreciation and amortization
|
|
|
|
|
|
|
(6,026
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
|
|
|
$
|
1,905
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31, 2008 and 2007 depreciation
and amortization expense was $0.9 million and
$1.5 million, respectively. The Company also recorded an
impairment charge against property and equipment of
$0.8 million during 2008.
At December 31, 2008, the Companys property and
equipment totaled $0.5 million and all items were
classified as held-for-sale and reported as a current asset in
the Companys balance sheet. Property and equipment held
for sale are stated at the lower of carrying amount or estimated
fair value less cost to sell.
|
|
(4)
|
Agreement
with Forest Laboratories Holdings Limited
|
In February 2006, the Company entered into a collaboration and
commercialization agreement with Forest Laboratories for the
commercialization, development and distribution of faropenem
medoxomil in the U.S. In October 2006, the Company received
a non-approvable letter from the FDA for the NDA it submitted
for faropenem medoxomil in December 2005. According to the
non-approvable letter, the FDA recommended further clinical
studies for all indications included in the NDA, additional
microbiologic confirmation and consideration of alternate dosing
of faropenem medoxomil. In May 2007, the collaboration and
38
REPLIDYNE,
INC.
NOTES TO FINANCIAL
STATEMENTS (continued)
commercialization agreement with Forest Laboratories was
terminated. In accordance with the terms of the agreement,
following the termination, all of Forest Laboratories
rights and licenses with respect to faropenem medoxomil have
ceased.
The Company received $60 million in upfront and milestone
payments from Forest Laboratories in 2006, which the Company was
recognizing into revenue through 2020, the then estimated term
of the agreement. Effective May 7, 2007, the termination
date of the agreement with Forest Laboratories, the Company
recognized all remaining deferred revenue related to the upfront
and milestone payments of approximately $55 million as
revenue.
|
|
(5)
|
Accounts
Payable and Accrued Expenses
|
Accounts payable and accrued expenses at December 31, 2008
and 2007 consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Accounts payable trade
|
|
$
|
635
|
|
|
$
|
4,553
|
|
Accrued employee severance and other restructuring charges
|
|
|
2,020
|
|
|
|
|
|
Accrued lease loss
|
|
|
1,307
|
|
|
|
|
|
Accrued employee compensation
|
|
|
114
|
|
|
|
2,692
|
|
Accrued clinical trial costs
|
|
|
59
|
|
|
|
1,227
|
|
Accrued contingent supply agreement fees
|
|
|
|
|
|
|
2,641
|
|
Other accrued expenses
|
|
|
563
|
|
|
|
1,142
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,698
|
|
|
$
|
12,255
|
|
|
|
|
|
|
|
|
|
|
|
|
(6)
|
Commitments
and Contingencies
|
Indemnifications
The Company has agreements whereby it indemnifies directors and
officers for certain events or occurrences while the director or
officer is, or was, serving in such capacity at the
Companys request. The maximum potential amount of future
payments the Company could be required to make under these
indemnification agreements is unlimited.
Employment
Agreements
The Company has entered into employment agreements with its
chief executive officer and certain other executive officers
that provide for base salary, eligibility for bonuses and other
generally available benefits. The employment agreements provide
that the Company may terminate the employment of the executive
at any time with or without cause. If an executive is terminated
by the Company without cause or such executive resigns for good
reason, as defined, then such executive is entitled to receive a
severance package consisting of the equivalent of twelve months
(or eighteen months with respect to its chief executive officer)
of the executives base salary as in effect immediately
prior to date of termination among other benefits. If such
termination occurs one month before or thirteen months following
a change of control, then the executive is entitled to:
i) the equivalent of twelve months (or eighteen months with
respect to its chief executive officer) of the executives
base salary as in effect immediately prior to the date of
termination, ii) a bonus equal to the average of such
executives annual bonuses for the two years prior to the
change in control termination (or one and a half times the
average with respect to the chief executive officer),
iii) acceleration of vesting of all of the executives
outstanding unvested options to purchase the Companys
common stock, and iv) other benefits.
39
REPLIDYNE,
INC.
NOTES TO FINANCIAL
STATEMENTS (continued)
As of December 31, 2008, the Company has an accrued but
unpaid balance of $1.4 million for its estimate of unpaid
benefits expected to be incurred under these employment
agreements.
In addition, the Company has entered into retention bonus
agreements with its chief financial officer and senior vice
president of corporate development. The agreements provide that
each such executive is eligible to receive both: i) a cash
bonus in the amount of $0.1 million (Retention Bonuses),
which was earned and recorded as expense in 2008, and ii) a
cash bonus in an amount of not less than $0.1 million and
not greater than $0.2 million (Transaction Bonuses), which
final amount will be determined by the Companys board of
directors in its sole discretion, provided that such executive
remains employed by the Company through the consummation of a
strategic transaction. The Retention Bonuses were paid in 2008.
Management evaluates the probability of triggering the
Transaction Bonuses each quarter and, when the bonuses are
deemed to be probable of being incurred, the Company will begin
expensing the Transaction Bonuses accordingly. As of
December 31, 2008, the Transaction Bonuses have not been
paid or accrued for.
During 2007 the Company established a severance benefit plan
that defines termination benefits for eligible employees. The
severance plan does not apply to employees who have entered into
separate employment agreements with the Company. Under the
severance plan, employees whose employment is terminated without
cause are provided a severance benefit of between nine and
eighteen weeks pay, based on their employee grade level as
defined by the Company, plus an additional two weeks pay for
each year of service. Employees are also entitled to receive
other benefits such as health insurance during the period of
severance under the plan. As of December 31, 2008, the
Company has accrued for its estimate of unpaid benefits expected
to be incurred under this plan with respect to current and
former employees. As of December 31, 2008, the balance of
accrued but unpaid benefits under the severance plan was
$0.6 million.
Asubio
Pharma License Agreement
On June 20, 2008, the Company notified Asubio Pharma Co.,
Ltd., or Asubio Pharma, of its decision to terminate the license
agreement with Asubio Pharma to develop and commercialize
faropenem medoxomil in the U.S. and Canada. In accordance
with the terms of the license agreement, the Company paid Asubio
Pharma a termination fee of ¥375 million
($3.6 million paid in June 2008). During the quarter ended
June 30, 2008, the Company recorded the termination fee as
research and development expense and paid this fee to Asubio
Pharma.
Asubio
Pharma and Nippon Soda Supply Agreement
On June 20, 2008 the Company notified Asubio Pharma Co.
Ltd., or Asubio Pharma, and Nippon Soda Company Ltd., or Nippon
Soda, of its decision to terminate the supply agreement for the
exclusive supply of the Companys commercial requirements
of the active pharmaceutical ingredient in faropenem medoxomil.
In July 2008, the Company paid Nippon Soda unpaid delay
compensation fees accumulated through the effective date of
termination of the supply agreement totaling $1.0 million.
In addition, the Company reimbursed Nippon Soda for certain
engineering costs totaling $0.6 million. These fees were
recorded as research and development expense in prior periods.
The Company has no further financial obligations under this
agreement.
MEDA
Supply Agreement Arbitration Settlement
In July 2008, MEDA Manufacturing GmbH (MEDA) filed an amended
demand for arbitration after the Company terminated its license
agreement with Asubio Pharma and relinquished all rights to the
faropenem medoxomil program. In its amended demand, MEDA claimed
that the Company terminated its supply agreement with MEDA in
June 2008 when it returned the faropenem medoxomil program to
Asubio Pharma and did not have the right to terminate its supply
agreement with MEDA in April 2007. During 2008, the Company and
MEDA settled this claim and the Company paid MEDA
$2.1 million. The Company has no further financial
obligations under this agreement.
40
REPLIDYNE,
INC.
NOTES TO FINANCIAL
STATEMENTS (continued)
Operating
Leases
The Company entered into a
74-month
lease agreement for its Colorado corporate office and laboratory
facility and a
60-month
lease agreement for its Connecticut office facility,
respectively. During 2008, the company terminated its lease
agreement for its previous Connecticut office facility and at
December 31, 2008, had no future obligations under this
former lease agreement. The Colorado lease agreement includes
rent concessions and escalating rent payments throughout the
term of the lease. The rent expense related to these leases is
recorded monthly on a straight-line basis in accordance with
U.S. generally accepted accounting principles.
At December 31, 2008, future minimum lease payments under
the Companys non-cancelable operating lease for its
Colorado facility are as follows (in thousands) for the year
ended December 31:
|
|
|
|
|
2009
|
|
|
608
|
|
2010
|
|
|
651
|
|
2011
|
|
|
514
|
|
|
|
|
|
|
Total future minimum lease payments
|
|
$
|
1,773
|
|
|
|
|
|
|
During the years ended December 31, 2008 and 2007 the
Company recognized $0.6 million and $0.7 million in
rent expense, respectively. The Company is actively looking to
sublease all of its facility and in 2009, subject to the
approval of the landlord under its lease, has entered into
sub-leases with respect to approximately 16,500 square feet
of its 52,000 square foot facility. These sub-leases extend
through the term of the lease for the premises.
Other
The Company entered into an agreement with a bank to provide
investment banking services. Under the terms of the agreement,
the Company may incur transaction fees of at least
$4 million and up to $6 million based on the value of
a completed license or strategic transaction, as defined, such
as the proposed merger with CSI. Additionally, a fee of
$1.0 million was paid and expensed under this agreement
following the Companys announcement of the proposed
transaction with CSI in November 2008. This fee is creditable
against the total final fee of $4 million that will become
due if the proposed transaction is consummated.
|
|
(7)
|
Restructuring
Activities
|
In April and June 2008, the Company completed restructurings of
its operations under which it recorded $2.5 million of
expense in the second quarter of 2008. These restructurings
included the termination of 23 employees from the clinical,
commercial, research and administrative functions of the
Company, and closure of the Companys office in Milford,
Connecticut. In addition, the Company discontinued enrollment in
its placebo-controlled Phase III clinical trial of
faropenem medoxomil in patients with acute exacerbations of
chronic bronchitis. The charges associated with the
restructuring included approximately $2.1 million of cash
expenditures for employee severance benefits, $0.1 million
of cash expenditures for facility related costs, and
$0.3 million for non-cash expenses related primarily to
accelerated depreciation of certain property and
41
REPLIDYNE,
INC.
NOTES TO FINANCIAL
STATEMENTS (continued)
equipment. The following table summarizes activity in the
restructuring accrual related to the April and June 2008
restructurings (in thousands):
|
|
|
|
|
|
|
Severance
|
|
|
|
and
|
|
|
|
Related
|
|
|
|
Benefits
|
|
|
Costs recognized through December 31, 2008
|
|
$
|
2,132
|
|
Cash payments
|
|
|
(1,765
|
)
|
Non-cash adjustments
|
|
|
(106
|
)
|
|
|
|
|
|
Remaining costs accrued at December 31, 2008
|
|
$
|
261
|
|
|
|
|
|
|
In August 2008, the Company announced an additional
restructuring of its operations resulting in the termination of
19 employees among clinical, research and development and
administrative functions. The August restructuring reduced the
number of employees to three in actions that took place into the
fourth quarter of 2008. In conjunction with these actions,
the Company suspended further development activities of its C.
difficile
and DNA replication inhibition programs. The
Company recorded $3.1 million of costs related to the
August restructuring during the third quarter of 2008 which
comprised of $1.6 million of cash expenditures for employee
severance benefits, $0.8 million in cash expenditures for
future lease payments in excess of expected sub-lease income for
the laboratory and clean room portion of the Companys
leased premises that have been abandoned, and $0.7 million
for non-cash expense related to the impairment of property and
equipment. During the fourth quarter of 2008 the Company
increased its estimate of cash expenditures for future lease
payments in excess of expected sub-lease income for the
laboratory and clean room portion of the Companys leased
premises that have been abandoned to $1.3 million based on
its assessment of future sub-lease income at that time. The
following table summarizes activity in the restructuring accrual
related to the August 2008 restructuring (in thousands):
|
|
|
|
|
|
|
Severance
|
|
|
|
and
|
|
|
|
Related
|
|
|
|
Benefits
|
|
|
Costs recognized through December 31, 2008
|
|
$
|
1,543
|
|
Cash payments
|
|
|
(1,053
|
)
|
Non-cash adjustments
|
|
|
(51
|
)
|
|
|
|
|
|
Remaining costs accrued at December 31, 2008
|
|
$
|
439
|
|
|
|
|
|
|
Additionally, during 2008 the Company determined that severance
and related benefits for its remaining five employees was both
probable of being paid and estimable. Accordingly, the Company
accrued for an additional $1.8 million in the third quarter
of 2008 for employee severance and related benefits in
accordance with individual employment agreements or the
Companys severance plan. During 2008, the Company paid
$0.3 million and reversed $0.2 million of the original
estimate as a non-cash adjustment, leaving an accrual of
$1.3 million at December 31, 2008.
|
|
(8)
|
Employee
Benefit Plans
|
The Company had a 401(k) plan and matched an amount equal to
50 percent of the employees current contributions,
limited to $2 thousand per participant annually. The Company
contributed $0.1 million during each of the years ended
December 31, 2008 and 2007. The plan was terminated in 2008
and subsequently liquidated.
42
REPLIDYNE,
INC.
NOTES TO FINANCIAL
STATEMENTS (continued)
The Companys Certificate of Incorporation, as amended and
restated on July 3, 2006, authorizes the Company to issue
105,000,000 shares of $0.001 par value stock which is
comprised of 100,000,000 shares of common stock and
5,000,000 shares of preferred stock. Each share of common
stock is entitled to one vote on each matter properly submitted
to the stockholders of the Company for their vote. The holders
of common stock are entitled to receive dividends when and as
declared or paid by the board of directors, subject to prior
rights of the Preferred Stockholders, if any.
Common
Stock Warrants
In connection with the issuance of debt and convertible notes in
2002 and 2003, the Company issued warrants to certain lenders
and investors to purchase shares of the Companys then
outstanding redeemable convertible preferred stock. The warrants
were initially recorded as liabilities at their fair value. In
July 2006, upon completion of the Companys initial public
offering, all outstanding preferred stock warrants were
automatically converted into common stock warrants and
reclassified to equity at the then current fair value. As of
December 31, 2008 and 2007, warrants for the purchase of
53,012 shares of common stock were outstanding and
exercisable with exercise prices ranging from $4.90 to $6.13 per
share.
|
|
(10)
|
Share-Based
Compensation
|
Stock
Option Plan
The Companys Equity Incentive Plan, as amended (the Option
Plan), provides for issuances of up to 7,946,405 shares of
common stock for stock option grants. Options granted under the
Option Plan may be either incentive or nonqualified stock
options. Incentive stock options may only be granted to Company
employees. Nonqualified stock options may be granted by the
Company to its employees, directors, and nonemployee
consultants. Generally, options granted under the Option Plan
expire ten years from the date of grant and vest over four
years. Options granted prior to 2008 generally vest 25% on the
first anniversary from the grant date and ratably in equal
monthly installments over the remaining 36 months. Options
granted in 2008 generally vest in equal monthly installments
over 48 months. This plan is considered a compensatory plan
for financial reporting purposes and subject to the provisions
of SFAS No. 123(R).
Stock options outstanding at December 31, 2008, changes
during the year then ended and options exercisable at
December 31, 2008 are presented below (share amounts in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
Number
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
of
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
Term (Years)
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
Options outstanding at January 1, 2008
|
|
|
2,880
|
|
|
$
|
4.42
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,569
|
|
|
|
1.83
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(56
|
)
|
|
|
0.59
|
|
|
|
|
|
|
|
|
|
Forfeited/Expired
|
|
|
(1,619
|
)
|
|
|
4.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at December 31, 2008
|
|
|
2,774
|
|
|
|
3.15
|
|
|
|
6.23
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at December 31, 2008
|
|
|
1,399
|
|
|
$
|
3.42
|
|
|
|
4.07
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
REPLIDYNE,
INC.
NOTES TO FINANCIAL
STATEMENTS (continued)
The following table summarizes outstanding and exercisable
options at December 31, 2008 (share amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options Outstanding
|
|
|
Stock Options
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Exercisable
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Number of
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Number of
|
|
|
Exercise
|
|
Range of Exercise Prices
|
|
Shares
|
|
|
Life (Years)
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
$ 0.49 to $0.80
|
|
|
338
|
|
|
|
0.78
|
|
|
$
|
0.61
|
|
|
|
377
|
|
|
$
|
0.61
|
|
0.81 to 1.64
|
|
|
152
|
|
|
|
5.13
|
|
|
|
1.48
|
|
|
|
112
|
|
|
|
1.52
|
|
1.64 to 1.86
|
|
|
826
|
|
|
|
8.89
|
|
|
|
1.86
|
|
|
|
101
|
|
|
|
1.86
|
|
1.86 to 3.19
|
|
|
644
|
|
|
|
6.02
|
|
|
|
3.19
|
|
|
|
310
|
|
|
|
3.19
|
|
3.19 to 10.00
|
|
|
814
|
|
|
|
6.16
|
|
|
|
5.81
|
|
|
|
539
|
|
|
|
5.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,775
|
|
|
|
|
|
|
$
|
3.15
|
|
|
|
1,400
|
|
|
$
|
3.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average grant date fair value of options granted to
employees during 2008 and 2007 was $1.09 per share and $2.75 per
share, respectively. The total intrinsic value of options
exercised during 2008 and 2007 was $38 thousand and
$0.2 million, respectively.
Performance
Options
In March 2008, the Company issued 400,000 options to certain of
its executives with a grant date fair value of $1.48 per share.
The options contain performance vesting conditions and were
granted at an exercise price equal to the fair value of the
underlying common stock on the date of grant of $1.86 per share.
These options will vest in full, at the sole discretion of the
Companys board of directors, immediately prior to the
consummation of a strategic transaction. If consummated, the
merger with CSI is expected to represent such a strategic
transaction. Vested options, if any, continue to be exercisable
three years following termination of the employees
continued service with the Company. These options currently
remain unvested. The Company evaluates the probability of
meeting the performance conditions on a quarterly basis and, as
of December 31, 2008, has not recognized any share-based
compensation expense related to these options.
Share-Based
Compensation Stock Options
During 2008 and 2007, the Company recognized share-based
compensation expense of $0.5 million and $2.6 million,
respectively. As of December 31, 2008, the Company had
$1.6 million of total unrecognized compensation costs (or
$0.7 million net of expected forfeitures) from options
granted to employees under the Option Plan to be recognized in
2009 based on the proposed transaction with CSI. Additionally,
as of December 31, 2008, the Company had $0.6 million
of total unrecognized share based compensation costs (net of
expected forfeitures) from options granted with performance
conditions.
Nonemployee
Options
During 2008, the Company granted 100,000 stock options to
certain former employees in their new capacity as consultants to
the Company at exercise prices equal to the fair value of the
underlying shares of common stock on the date of grant. The
options vest over eight months and have a contractual life of
ten years. Additionally, certain former employees who have
changed their status with the Company from employee to
nonemployee, have met the continued service requirements of the
Companys equity incentive plan and have continued to vest
in options previously granted to them as employees. Vesting
continues until their continued service to the Company is
terminated. The Company recorded $0.3 million and
$0.1 million in compensation expense during 2008 and 2007,
respectively, related to the nonemployee options, and will re-
44
REPLIDYNE,
INC.
NOTES TO FINANCIAL
STATEMENTS (continued)
measure compensation expense until these options vest. Based on
the Companys current estimate of fair value and the period
under which continued service will be provided, the Company
expects to recognize approximately $0.9 million of
remaining unamortized expense in 2009.
Employee
Stock Purchase Plan
The Company has reserved approximately 306,000 shares of
its common stock for issuance under its Employee Stock Purchase
Plan (the Purchase Plan). The Purchase Plan allows eligible
employees to purchase common stock of the Company at the lesser
of 85% of its market value on the offering date or the purchase
date as established by the board of directors. Employee
purchases are funded through after-tax payroll deductions, which
participants can elect from one percent to twenty percent of
compensation, subject to the federal limit. The Purchase Plan is
considered a compensatory plan and subject to the provisions of
SFAS No. 123(R). To date, approximately
140,000 shares have been issued pursuant to the Purchase
Plan. During 2008 and 2007, the Company recognized
$0.1 million and $0.2 million in share-based
compensation expense, respectively. No employees remain as
participants in the current offering period which ended on
December 31, 2008.
SFAS No. 109 requires that a valuation allowance
should be provided if it is more likely than not that some or
all of the Companys deferred tax assets will not be
realized. The Companys ability to realize the benefit of
its deferred tax assets will depend on the generation of future
taxable income. Due to the uncertainty of future profitable
operations and taxable income, the Company has recorded a full
valuation allowance against its net deferred tax assets.
The Company has had no provision for income taxes since
inception due to its net operating losses.
The income tax effects of temporary differences that give rise
to significant portions of the Companys net deferred tax
assets are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
47,505
|
|
|
$
|
32,632
|
|
Research and experimentation credits
|
|
|
4,438
|
|
|
|
4,540
|
|
Depreciation and amortization
|
|
|
710
|
|
|
|
681
|
|
Lease loss
|
|
|
500
|
|
|
|
|
|
Accrued expenses and other
|
|
|
1,145
|
|
|
|
739
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
54,298
|
|
|
|
38,592
|
|
Valuation allowance
|
|
|
(54,298
|
)
|
|
|
(38,592
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
45
REPLIDYNE,
INC.
NOTES TO FINANCIAL
STATEMENTS (continued)
The benefit for income taxes differs from the amount computed by
applying the United States of America federal income tax rate of
35% to the income (loss) before income taxes as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
U.S. federal income tax expense (benefit) at statutory rates
|
|
$
|
(14,393
|
)
|
|
$
|
2,692
|
|
State income tax expense (benefit), net of federal impact
|
|
|
(1,337
|
)
|
|
|
250
|
|
Non-deductable expenses
|
|
|
(73
|
)
|
|
|
588
|
|
Research and experimentation credits
|
|
|
(659
|
)
|
|
|
(2,157
|
)
|
Other items
|
|
|
755
|
|
|
|
81
|
|
Change in valuation allowance
|
|
|
15,707
|
|
|
|
(1,454
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2008, the Company had approximately
$124 million of net operating loss carryforwards and
approximately $4.4 million of research and experimentation
credits which may be used to offset future taxable income. The
carryforwards will expire in 2020 through 2028. The Internal
Revenue Code places certain limitations on the annual amount of
net operating loss carryforwards that can be utilized if certain
changes in the Companys ownership occur. The Company
believes, based on an analysis of historical equity transactions
under the provisions of Section 382 that ownership changes
have in fact occurred at two points since its inception. Such
ownership changes can have the impact of limiting the
utilization of net operating losses and other built-in
deductions in future periods. The Company believes that the
proposed transaction with CSI will result in an ownership change
that will result in the loss of the Companys net operating
loss carryforwards and other built-in deductions existing on the
date of the ownership change.
In February 2007, concurrent with Forest Laboratories
termination of its supply agreement with MEDA, previously
suspended provisions in the Companys agreement with MEDA
that had been assumed by Forest Laboratories were no longer
suspended, and the Companys obligations to MEDA with
respect to purchase commitments and facility decontamination
costs were no longer waived. Following this termination, in
April 2007, the Company provided notice to MEDA of its
termination of the supply agreement between MEDA and the
Company. As this notice occurred before the effective date of
the termination of the Companys collaboration agreement
with Forest Laboratories, the Company believes that Forest
Laboratories, under the terms of the collaboration agreement,
was responsible for supply chain obligations related to
faropenem medoxomil, including minimum purchase commitments and
decontamination obligations under the MEDA agreement, through
May 7, 2007 (the termination date of the collaboration
agreement). The Company made certain payments to MEDA,
consistent with its interpretation of the related agreements.
These payments also included amounts paid by the Company on
behalf of Forest Laboratories related to periods prior to the
effective date of the termination of the collaboration
agreement. The Company notified Forest Laboratories of its
obligation to reimburse the Company for such payments, and
Forest Laboratories responded by disputing such obligations. In
May 2008, MEDA filed a demand for arbitration and amended its
demand in July 2008. During the third quarter of 2008, the
Company and MEDA settled this claim and the Company paid MEDA
$2.1 million. Refer to Note 6. The settlement with
MEDA did not impact the Companys belief that Forest
Laboratories remained responsible for reimbursements, and
discussions between the Company and Forest Laboratories
continued through mid-February 2009.
On February 18, 2009, the Company accepted a settlement
proposal from Forest Laboratories whereby Forest Laboratories
would pay the Company $0.7 million in full settlement of
all disputed items arising from termination of the supply
agreement with MEDA in April 2007. This amount will be recorded
by the Company in 2009.
46
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
None.
|
|
ITEM 9A.
|
CONTROLS
AND PROCEDURES
|
Disclosure
Controls and Procedures
Under the supervision and with the participation of our
management, including our principal executive officer and
principal financial officer, we conducted an evaluation of our
disclosure controls and procedures, as such term is defined
under
Rule 13a-15(e)
promulgated under the Securities Exchange Act of 1934, as
amended (the Exchange Act). Based on this evaluation, our
principal executive officer and our principal financial officer
concluded that our disclosure controls and procedures were
effective as of the end of the period covered by this annual
report.
Management
Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting. Our internal
control over financial reporting was designed to provide
reasonable assurance to our management and board of directors
regarding the preparation and fair presentation of published
financial statements. Internal control over financial reporting
is promulgated under the Exchange Act as a process designed by,
or under the supervision of, our principal executive and
principal financial officers and effected by our board of
directors, management and other personnel, to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles and
includes those policies and procedures that:
|
|
|
|
|
Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect our transactions and dispositions
of our assets;
|
|
|
|
Provide reasonable assurance that our transactions are recorded
as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that our receipts and expenditures are being made only in
accordance with authorizations of our management and
directors; and
|
|
|
|
Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition or disposition of our
assets that could have a material effect on the financial
statements.
|
Internal control over financial reporting, no matter how well
designed, has inherent limitations and may not prevent or detect
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions,
or that the degree of compliance with policies or procedures may
deteriorate. Therefore, even effective internal control over
financial reporting can only provide reasonable assurance with
respect to financial statement preparation and presentation.
Our management assessed the design and effectiveness of our
internal control over financial reporting as of
December 31, 2008. In making this assessment, it used the
criteria based on the framework set forth by the Committee of
Sponsoring Organizations of the Treadway Commission in
Internal Control Integrated Framework.
Based on its evaluation, management concluded that on
December 31, 2008, the Companys internal control over
financial reporting was effective.
This Annual Report on
Form 10-K
does not include an attestation report of the Companys
independent registered public accounting firm regarding internal
control over financial reporting. Managements report was
not subject to attestation by the Companys independent
registered public accounting firm pursuant to temporary rules of
the SEC that permit us to provide only managements report
in this Annual Report on
Form 10-K.
47
No
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial
reporting during the quarter ended December 31, 2008 that
have materially affected, or are reasonably likely to materially
affect, our internal controls over financial reporting.
|
|
ITEM 9B.
|
OTHER
INFORMATION
|
None.
PART III
|
|
ITEM 10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
Non
Executive Directors of the Registrant
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Edward Brown
|
|
|
45
|
|
|
Director
|
Kirk K. Calhoun
|
|
|
64
|
|
|
Director
|
Geoffrey Duyk, M.D., Ph.D.
|
|
|
49
|
|
|
Director
|
Augustine Lawlor
|
|
|
52
|
|
|
Director
|
Daniel Mitchell
|
|
|
52
|
|
|
Director
|
Edward Brown
has served as a Director since May 2007.
Mr. Brown is a Managing Director at TPG Growth. Prior to
joining TPG, Mr. Brown was a Managing Director and
co-founder of HealthCare Investment Partners, a private equity
fund focused on healthcare investments from June 2004 to June
2007. Before HealthCare Investment Partners, Mr. Brown was
a Managing Director in the healthcare group of Credit Suisse
Group where he led the firms West Coast healthcare effort
and was one of the senior partners responsible for the
firms global life sciences practice. Mr. Brown
graduated from Middlebury College, Phi Beta Kappa, with a B.A.
degree in English and received his M.B.A. degree from the
University of California, Los Angeles. Mr. Brown also
serves on the board of directors of Angiotech Pharmaceuticals.
Kirk K. Calhoun
has served as a Director since March
2006. Mr. Calhoun joined Ernst & Young, LLP, a
public accounting firm, in 1965 and served as a partner of the
firm from 1975 until his retirement in 2002. His
responsibilities included both area management and serving
clients in a variety of industries, including biotechnology.
Mr. Calhoun is a Certified Public Accountant with a
background in auditing and accounting. Mr. Calhoun also
serves on the board of directors of Abraxis Bioscience, Inc. and
Response Genetics, Inc. Mr. Calhoun received a B.S. in
Accounting from the University of Southern California.
Geoffrey Duyk, M.D., Ph.D.
has served as a
Director since June 2004. Dr. Duyk is a partner at TPG
Ventures. From 1996 to 2003, Dr. Duyk was President of
Research & Development and a director of Exelixis Inc.
From 1993 to 1996, he was one of the founding scientific staff
at Millennium Pharmaceuticals. Prior thereto, Dr. Duyk was
an Assistant Professor at Harvard Medical School in the
Department of Genetics and Assistant Investigator of the Howard
Hughes Medical Institute. Dr. Duyk also serves on the board
of directors of Agria Corporation. Dr. Duyk holds a B.A.
from Wesleyan University and a Ph.D. and M.D. from Case Western
Reserve University.
Augustine Lawlor
has served as a Director since March
2002. Mr. Lawlor is the Managing Partner of HealthCare
Ventures LLC, where he was a Managing Director from 2000 to
2007. Mr. Lawlor was previously Chief Operating Officer of
LeukoSite, Inc. and has also served as a management consultant
with KPMG Peat Marwick. Mr. Lawlor is a member of the board
of directors of Human Genome Sciences Inc. Mr. Lawlor holds
a B.A. from the University of New Hampshire and a M.P.P.M. from
the School of Management at Yale University. Mr. Lawlor is
a member of the board of directors of Human Genome Sciences Inc.
Daniel J. Mitchell
has served as a Director since March
2002. Mr. Mitchell founded and is Manager of Sequel Venture
Partners, L.L.C., a venture capital firm formed in January 1997.
Prior to founding Sequel
48
Venture Partners, Mr. Mitchell was a founder of Capital
Health Venture Partners, a health care focused venture capital
firm, from October 1986 and has been a General Partner since
December 1992. Mr. Mitchell holds a B.S. from the
University of Illinois and an M.B.A. from the University of
California at Berkeley.
Executive
Officers of the Registrant
Our executive officers are as follows:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Kenneth J. Collins
|
|
|
62
|
|
|
President, Chief Executive Officer and Director
|
Donald J. Morrissey, Jr.
|
|
|
42
|
|
|
Senior Vice President, Corporate Development
|
Mark L. Smith
|
|
|
47
|
|
|
Chief Financial Officer, Treasurer and Secretary
|
Kenneth J. Collins
has served as our President, Chief
Executive Officer and a member of the board of directors since
January 2002. From 1997 to 2001, Mr. Collins served as
President of Pegasus Technology Ventures, a firm that advised
and raised seed capital for early stage life sciences companies.
From 1995 to 1996, Mr. Collins served as Chief Financial
Officer and a member of the board of directors of Quark, Inc., a
developer of desktop publishing software. Mr. Collins
served as an Executive Vice President from 1992 to 1994 and
Chief Financial Officer from 1983 to 1994 of Synergen, Inc., a
biotechnology company. Mr. Collins holds a B.S. from the
University of Notre Dame and an M.B.A. from the Harvard Business
School.
Donald J. Morrissey, Jr.
has served as our Senior
Vice President, Corporate Development since March 2006 and,
prior to that, as Vice President, Corporate Development and
General Counsel since 2002. From 1997 to 2002,
Mr. Morrissey held various positions with Caliper
Technologies, most recently as Vice President, Legal Affairs and
Business Development from September 2001 to November 2002. From
1992 to 1997, Mr. Morrissey was a business attorney with
Cooley Godward Kronish LLP. Mr. Morrissey holds a B.A. from
the University of Colorado and a J.D. from the University of
Southern California Law School.
Mark L. Smith
has served as our Chief Financial Officer
and Treasurer since March 2006. Since November 2008,
Mr. Smith has also held the position of Chief Financial
Officer of Gevo, Inc., a privately held alternate energy
company. From August 1999 to March 2006, Mr. Smith held
financial executive capacities at Nabi Biopharmaceuticals,
including serving as Senior Vice President, Finance, Chief
Financial Officer and Chief Accounting Officer from 2001 to
March 2006. From 1998 to 1999, Mr. Smith served as Vice
President of Finance and Administration and Chief Financial
Officer of Neuromedical Systems, Inc. From 1996 to 1998,
Mr. Smith served in various financial executive capacities
at Genzyme Corporation. From 1991 to 1996, Mr. Smith held
various positions at Genetrix, Inc., most recently as its Chief
Financial Officer. Before joining Genetrix, Inc., Mr. Smith
practiced with the accounting firm of PricewaterhouseCoopers LLP
in both the U.S. and Australia. Mr. Smith holds a B.A.
in Accounting from the Canberra College of Advanced Education in
Australia.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the
1934 Act) requires our directors and executive officers,
and persons who own more than ten percent of a registered class
of our equity securities, to file with the SEC initial reports
of ownership and reports of changes in ownership of common stock
and other equity securities of ours. Officers, directors and
greater than ten percent stockholders are required by SEC
regulation to furnish us with copies of all Section 16(a)
forms they file.
To our knowledge, based solely on a review of the copies of such
reports furnished to us and written representations that no
other reports were required, during the fiscal year ended
December 31, 2008, all Section 16(a) filing
requirements applicable to our officers, directors and greater
than ten percent beneficial owners were complied with.
49
Information
Regarding the Audit Committee of the Board of
Directors
The Audit Committee of the Board of Directors was established by
the Board in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934 to oversee our corporate
accounting and financial reporting processes and audits of our
financial statements. For this purpose, the Audit Committee
performs several functions. The Audit Committee evaluates the
performance of and assesses the qualifications of the
independent auditors; determines and approves the engagement of
the independent auditors; determines whether to retain or
terminate the existing independent auditors or to appoint and
engage new independent auditors; reviews and approves the
retention of the independent auditors to perform any proposed
permissible non-audit services; monitors the rotation of
partners of the independent auditors on our audit engagement
team as required by law; reviews and approves or rejects
transactions between us and any related persons; confers with
management and the independent auditors regarding the
effectiveness of internal controls over financial reporting;
establishes procedures, as required under applicable law, for
the receipt, retention and treatment of complaints received by
us regarding accounting, internal accounting controls or
auditing matters and the confidential and anonymous submission
by employees of concerns regarding questionable accounting or
auditing matters; and meets to review our annual audited
financial statements and quarterly financial statements with
management and the independent auditor, including reviewing our
disclosures under Managements Discussion and
Analysis of Financial Condition and Results of Operations.
The Audit Committee is composed of three directors:
Messrs. Brown, Calhoun and Lawlor. Christopher D.
Earl, Ph.D., a former member of the Audit Committee,
resigned as a director effective as of March 27, 2008.
The Board of Directors reviews the Nasdaq listing standards
definition of independence for Audit Committee members on an
annual basis and has determined that all members of our Audit
Committee are independent (as independence is currently defined
in Rule 4350(d)(2)(A)(i) and (ii) of the Nasdaq
listing standards). The Board of Directors has also determined
that Mr. Calhoun qualifies as an audit committee
financial expert, as defined in applicable SEC rules. The
Board made a qualitative assessment of Mr. Calhouns
level of knowledge and experience based on a number of factors,
including his formal education and experience with other public
reporting companies.
Code of
Ethics
We have adopted a Code of Business Conduct and Ethics, or the
Code that applies to all of our employees (including
executive officers) and directors. The Code is available on our
website at www.replidyne.com under the heading Investor
Information. We intend to satisfy the disclosure
requirement regarding any waiver of a provision of the Code
applicable to any executive officer or director, by posting such
information on such website. We shall provide to any person
without charge, upon request, a copy of the Code. Any such
request must be made in writing to Replidyne, Inc.,
c/o Investor
Relations, 1450 Infinite Drive, Louisville, CO 80027.
ITEM 11.
EXECUTIVE
COMPENSATION
Elements
of Compensation
We have employment agreements with each of our executive
officers that include severance and change in control benefits.
These agreements are discussed below in the section entitled
Employment Agreements with the Chief Executive Officer and
Other Executives. We have also entered into retention
bonus agreements with our Chief Financial Officer and Senior
Vice President of Corporate Development, which agreements are
discussed below in the section entitled Retention Bonus
Agreement with our Chief Financial Officer and Senior Vice
President of Corporate Development.
There are four major elements that comprise our compensation
program: (i) base salary; (ii) annual incentive
bonuses; (iii) equity incentives, such as stock option
awards; and (iv) retirement benefits provided under a
401(k) plan. Our Compensation Committee of the Board of
Directors, which we refer to as the Committee, reviewed the
compensation program for 2007 and 2008, including each of the
above elements. In setting compensation levels for a particular
executive, the Committee takes into consideration the proposed
50
compensation package as a whole and each element individually,
as well as their expected future contributions to our business.
Base
Salary
For fiscal 2008 the Committee maintained the base salary of our
President and Chief Executive Officer, Kenneth Collins, at
$350,000. The base salaries of each of our then Chief Medical
Officer, Roger Echols, M.D., our then Chief Commercial
Officer, Peter Letendre, Pharm.D., our then Chief Scientific
Officer, Nebojsa Janjic, Ph.D., our Senior Vice President
of Corporate Development, Donald Morrissey and our Chief
Financial Officer, Mark Smith were increased to $350,000,
$306,800, $290,000, $270,000 and $295,000 per annum,
respectively. For fiscal 2007, the Committee maintained the base
salaries for each of Mr. Collins, Dr. Echols,
Dr. Letendre, Dr. Janjic, Mr. Morrissey and
Mr. Smith at $350,000, $345,000, $295,000, $275,000,
$240,000 and $280,000 per annum, respectively, which were the
same levels as for 2006.
For fiscal 2009, the Committee maintained the base salaries of
each of Mr. Collins, Mr. Smith and Mr. Morrissey
at the same levels as for 2008. The employment of each of
Drs. Letendre, Echols, and Janjic were terminated as part
of organizational changes in April 2008, May 2008 and December
2008, respectively. Refer to Departure of Certain Officers
and related Separation and Consulting Agreements below.
Annual
Incentive Opportunities
In March 2007, the Company adopted the Variable Incentive Bonus
Plan, or the Plan, under which bonuses are calculated and paid
to our executives. The purpose of the Plan is to promote our
interests and those of our shareholders by rewarding our
executives based upon the level of achievement of financial,
business and other performance objectives established in
accordance with the Plan. Executives serving on the executive
committee are eligible to participate in the Plan. To receive a
bonus, an executive must have become eligible to participate in
the Plan prior to October 1st of the applicable fiscal
year and must be on our payroll on the last day of the fiscal
year. Bonuses are paid in cash.
For fiscal 2008, the Committee recommended that there be no
bonuses paid under the Plan.
Due to our entering into a merger agreement with CSI on
November 3, 2008 that is subject to vote at a Special
Meeting of Stockholders on February 24, 2009, the Committee
does not anticipate recommending bonuses under the Plan in 2009.
Notwithstanding any other provision of the Plan, the Committee
with respect to any named executive officers bonus, or the
President and Chief Executive Officer with respect to non-named
executive officers bonus, shall have the authority, in
their sole discretion and in such circumstances as they may deem
appropriate, to approve any adjustments to a participants
bonus with respect to any fiscal year.
Long-Term
Incentive Compensation
We have provided long-term incentive compensation through awards
of stock options that generally vest over four years. Our equity
compensation program is intended to align the interests of our
officers with those of our stockholders by creating an incentive
for our officers to maximize stockholder value. The equity
compensation program also is designed to encourage our officers
to remain employed with us despite uncertainties related to the
outcome of initiatives exploring strategic alternatives for us
and other short term uncertainties.
Equity-based incentives are granted to our employees, including
our officers, under our approved Equity Incentive Plan. The
Committee has granted equity awards at its scheduled meetings or
by unanimous written consent throughout 2008. Stock option
grants have a per share exercise price equal to the fair market
value of our common stock on the grant date. Options granted
prior to December 31, 2007 or pursuant to the hiring of a
new employee typically vest 25% on the anniversary of the grant
date and then monthly over the subsequent 36 months.
Employee stock options granted subsequent to January 1,
2008 as part of annual option grants generally vest in equal
monthly amounts over 48 months. Our stock options typically
have a ten-year term.
51
The Committee has not granted, nor does it intend in the future
to grant, equity compensation awards to executives in
anticipation of the release of material nonpublic information
that is likely to result in changes to the price of our common
stock. Similarly, the Committee has not timed, nor does it
intend in the future to time, the release of material nonpublic
information based on equity award grant dates.
Employees and executive officers are able to profit from stock
options only if our stock price increases in value over the
stock options exercise price. We believe the options that
were granted provide effective incentives to option holders to
achieve increases in the value of our stock.
In March 2008, the Committee granted options to certain of our
executives and to all other eligible employees. Grants to our
executive officers were intended to retain and motivate them to
meet our long term objectives including securing a
commercialization and development partner for the faropenem
medoxomil program and executing a strategic transaction. The
stock options granted to certain of our executive officers in
March 2008 recognized in part that execution of a strategic
transaction creates uncertainty of ongoing employment for those
executive officers beyond or significantly beyond the effective
date of such a transaction. Total stock option grants to
employees, including our executive officers, in March 2008 in
conjunction with the March Board of Directors meeting, were
1,428,183 shares. Within this total stock options grant,
the following stock option grants were made to our executive
officers:
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Options Granted in
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Executive Officer
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March 2008
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Kenneth Collins
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200,000
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Mark Smith
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200,000
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Roger Echols, M.D.
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Peter Letendre, Pharm. D.
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Nebojsa Janjic, Ph.D.
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200,000
|
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Donald Morrissey
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|
200,000
|
|
All stock options granted during 2008 were approved at a meeting
of the Committee or through unanimous written consent of the
Committee if a meeting was not scheduled. Grants approved by
unanimous written consent become effective and are priced as of
the date the last signature is obtained.
Employee stock options granted by us are generally structured to
qualify as incentive stock options (ISOs). Under
current tax regulations, we do not receive a tax deduction for
the issuance, exercise or disposition of ISOs if the employee
meets certain holding requirements.
The above stock options granted to our executive officers
provide that 50% of such options vest at a rate of 1/48 of the
total grant per month from the date of grant such that full
vesting occurs over four years. The remainder of such stock
options granted to our executive officers vest in full, subject
to the sole discretion of the Board of Directors, immediately
prior to the consummation of either (a) a strategic
alliance or partnership with an unaffiliated third party that
relates to the development and commercialization of faropenem
medoxomil or (b) another strategic transaction to which we
are a party. All stock options granted to executive officers in
March 2008 are exercisable for three years following the
executive officers termination from us following a
strategic transaction.
Pursuant to the consultant agreements entered into with
Drs. Letendre and Echols in conjunction with their entering
into separation agreements dated April 15, 2008 and
May 1, 2008, respectively, we granted each of
Drs. Letendre and Echols stock options to purchase up to
40,000 shares of our common stock at an exercise price of
$1.64 and $1.40 per share, respectively. Such options vested
over the course of the consultant agreements in eight equal
monthly installments and have an exercise period of up to three
years from the termination date of the applicable consultant
agreement. Each consultant agreement terminated on
December 31, 2008.
52
Retirement
Benefits under the 401(k) Plan, Executive Perquisites and
Generally Available Benefit Programs
In fiscal 2008, the executive officers were eligible to receive
health care coverage that was generally available to our other
employees. In addition, employees at the level of associate
director and above received a base of four weeks vacation time
as compared to three weeks vacation time typically provided to
our other employees. Additional vacation time was awarded
following the completion of five years service with us.
We maintained a tax-qualified 401(k) Plan during 2008, which
provided for broad-based employee participation. The 401(k) Plan
was terminated effective December 31, 2008. Under the
401(k) Plan, all Replidyne employees were eligible to receive
matching contributions from us. The matching contribution for
the 401(k) Plan year 2008 was established at the level of $0.50
for each dollar of a participants pretax contributions up
to a maximum of $2,000 annually and was calculated and paid on a
payroll-by-payroll
basis subject to applicable Federal limits. Matching
contributions are 100% vested on the date of such contributions.
We also offered a number of other benefits to our executive
officers pursuant to benefit programs that provide for
broad-based employee participation. These benefits programs
included the employee stock purchase plan, medical, dental and
vision insurance, long-term and short-term disability insurance,
life and accidental death and dismemberment insurance, health
and dependent care flexible spending accounts, business travel
insurance, and relocation programs and services. Many employees
were also eligible for variable pay under the incentive plans
described above.
The 401(k) Plan and other generally available benefit programs
allowed us to remain competitive for employee talent, and we
believe that the availability of the benefit programs generally
enhanced employee productivity and loyalty to us. The main
objectives of our benefits programs were to give our employees
access to quality healthcare, financial protection from
unforeseen events, assistance in achieving retirement financial
goals and enhanced health and productivity, in full compliance
with applicable legal requirements. These generally available
benefits typically do not specifically factor into decisions
regarding an individual executives total compensation or
equity award package.
Employment
Agreements with the Chief Executive Officer and other
Executives
We have employment agreements with each of Messrs. Collins,
Morrissey and Smith providing for the payment of base salary,
eligibility for bonus and other generally available benefits,
all as described above. Each of these agreements was entered
into on April 4, 2006 and amended on June 15, 2007.
Each executives base salary is subject to annual review
and adjustment. Under the employment agreements, the
employees eligibility to receive an annual performance
bonus is based upon the employees achievement of
milestones and objectives established by us, as determined by
the Board of Directors in its sole discretion. In 2008 no
specific goals were established under the Variable Incentive
Bonus Plan and no bonuses were awarded to our named executive
officers under this plan for 2008. On March 31, 2008, we
entered into retention bonus agreements with Messrs Smith, our
Chief Financial Officer, and Morrissey, our Senior Vice
President of Corporate Development. These agreements are
described below at Retention Bonus Agreements with our
Chief Financial Officer and Senior Vice President of Corporate
Development.
During 2008 we entered into separation agreements with each of
our Chief Commercial Officer, Chief Medical Officer and Chief
Scientific Officer as part of restructuring our operations as we
pursued strategic alternatives initiatives as described below at
Departure of Certain Officers and related Separation
Agreements. None of these positions were replaced.
The employment agreements provide that we may terminate the
employee at any time with or without cause. However, if the
employees employment is terminated without cause or
terminated by the employee for good reason, then the employee
shall be entitled to receive a severance package consisting of:
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|
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the equivalent of 12 months (or 18 months with respect
to Mr. Collins) of the executives base salary as in
effect immediately prior to the date of termination; and
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53
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reimbursement for the cost of continued medical insurance
coverage through the end of this 12 month period (or
18 month period with respect to Mr. Collins) or, if
earlier, the date on which the employee obtains alternative
group health insurance.
|
Upon a change in control of us, each of the employment
agreements provide that the executive officer shall be entitled
to acceleration of vesting of 50% of the executives
outstanding unvested options to purchase our common stock,
except that 100,000 stock options granted to
Messrs. Collins, Morrissey, and Smith in March 2008 vest
solely at the discretion of the Board of Directors. If the
executives employment is terminated without cause or
terminated by the executive for good reason within one month
before or 13 months following a change of control, then the
employee shall be entitled to the following additional benefits:
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the equivalent of 12 months (or 18 months with respect
to Mr. Collins) of the executives base salary as in
effect immediately prior to the date of termination;
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reimbursement for the cost of continued medical insurance
coverage through the end of this 12 month period (or
18 month period with respect to Mr. Collins) or if
earlier, the date on which the employee obtains alternative
group health insurance; and
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|
acceleration of vesting of all of the executives
outstanding unvested options to purchase our common stock,
except that 100,000 stock options granted to
Messrs. Collins, Morrissey and Smith in March 2008
vest solely at the discretion of the Board of Directors.
|
In addition, if the executive officers employment is
terminated without cause or terminated by him for good reason
within one month before or 13 months following a change of
control of us, then he would be entitled to payment of a bonus
equal to the average of his annual bonus for the two years prior
to such termination (or one and a half times the average of his
annual bonus for the two years prior to such termination with
respect to Mr. Collins). The merger with CSI would
constitute a change of control for purposes of these employment
agreements if it is completed.
Retention
Bonus Agreement with our Chief Financial Officer and Senior Vice
President of Corporate Development
On March 31, 2008, we entered into a retention bonus
agreements with Mark Smith, our Chief Financial Officer and
Donald Morrissey, our Senior Vice President of Corporate
Development.
The retention bonus agreements provide that Messrs. Smith
and Morrissey are eligible to earn both (i) a cash bonus in
the amount of $100,000, provided that Messrs. Smith and
Morrissey remained employed by us through September 30,
2008, and (ii) a Transaction cash bonus in an amount of not
less than $100,000 and not greater than $150,000, which final
amount will be determined by our Board of Directors in its sole
discretion, provided that Messrs. Smith and Morrissey
remain employed by us through the consummation of a strategic
transaction. For purposes of the retention bonus agreements, a
strategic transaction is defined, subject to the sole discretion
of the Board of Directors, as entering into a development and
commercialization of faropenem medoxomil or (ii) another
strategic transaction to which we are a party. The cash bonuses
of $100,000 to each of Messrs. Smith and Morrissey due upon
their remaining as employees of us through September 30,
2008 were paid in October 2008. No amount related to the
Transaction cash bonuses have been paid or accrued at
December 31, 2008.
Departure
of Certain Officers and related Separation and Consulting
Agreements
On April 15, 2008, in connection with a restructuring of
our operations we terminated the employment of Peter Letendre,
Pharm.D., our Chief Commercial Officer. On May 1, 2008 we
terminated the employment of Roger Echols, M.D., our Chief
Medical Officer, effective as of May 1, 2008. Effective as
of December 8, 2008, we terminated the employment of
Nebojsa Janjic, Ph.D., our Chief Scientific Officer.
Dr. Janjic also resigned as the Secretary of the Company
effective as of such date. The terminations of
Drs. Letendre, Echols and Janjic resulted in the
elimination of the positions of Chief Commercial Officer, Chief
Medical Officer and Chief Scientific Officer.
54
Pursuant to the terms of their separation agreements, we will
pay to each of Dr. Letendre and Dr. Echols the
equivalent of twelve months of his base salary in effect
immediately prior to his termination, which was $306,800 in the
case of Dr. Letendre and $350,000 in the case of
Dr. Echols. Pursuant to the terms of the separation
agreement with Dr. Janjic, we paid Dr. Janjic a single
payment that was the equivalent of twelve months of his base
salary in effect immediately prior to his termination, which was
$290,000. We also agreed to pay Dr. Janjic (i) a bonus
in the amount of $50,000 within 10 days following the
consummation of a strategic transaction to which we are a party
and (ii) a bonus in the amount of $50,000 within
10 days following the sale by us of our preclinical
programs for a defined minimum purchase price, provided such
sale occurs prior to the completion of a strategic transaction
to which we are a party.
We also agreed to pay the premiums of group health insurance
COBRA continuation coverage for each of Drs. Letendre,
Echols and Janjic and his eligible dependents, up to a maximum
period of twelve months from each employees respective
termination date. We will also pay the cost for each of
Drs. Letendre and Echols to participate in up to six months
of outplacement services with Right Management Inc., up to a
maximum of $7,500, if such services are initiated within three
months following the termination of his consultant agreement
with us, the terms of which consultant agreements are described
below. As consideration for the benefits of his separation
agreement, each of Drs. Letendre, Echols and Janjic
executed a full general release of claims against us and our
affiliates.
On April 16, 2008, we entered into consultant agreements
with Drs. Letendre and Dr. Echols, which agreements
are effective as of April 16, 2008 in the case of
Dr. Letendre and May 2, 2008 in the case of
Dr. Echols. Pursuant to his consultant agreement,
Dr. Letendre advised and consulted with us on strategic
planning. Pursuant to his consultant agreement, Dr. Echols
advised and consulted with us on clinical development and
regulatory strategies related to our anti-infective products,
including faropenem medoxomil.
Pursuant to the consultant agreements, we agreed to pay each of
Drs. Letendre and Echols an amount equal to $10,000 for
each full month of consulting services rendered to us by such
consultant during the period from the effective date of his
consultant agreement until July 31, 2008, subject to pro
ration for partial months of service. In addition, we have
agreed to grant each of Drs. Letendre and Echols stock
options to purchase up to 40,000 shares of our common stock
at an exercise price of $1.64 and $1.40 per share, respectively.
Such options vested over the course of the consultant agreements
in eight equal monthly installments and have an exercise period
of up to three years from the termination date of the applicable
consultant agreement. Each consulting agreement terminated on
December 31, 2008.
On December 9, 2008, we into a consultant agreement with
Dr. Janjic pursuant to which Dr. Janjic will advise
and consult with us with respect to the divestment of our
preclinical programs, finalization of previously initiated
studies currently in progress related to these programs and
close-out of our laboratory facilities. Dr. Janjic will
also perform such other services that relate to his areas of
expertise and which our executive officers believe would be
beneficial to us.
Pursuant to his consultant agreement, we have agreed to pay
Dr. Janjic an amount equal to $10,000 for each full month
of consulting services rendered to us by him during the period
from the effective date of the consultant agreement until the
consummation of the merger with CSI (not to exceed a period of
three months), subject to pro ration for partial months of
service. During the period from March 9, 2009 through
June 9, 2009, and for any hours in excess of forty hours
per month during the initial consulting period, as defined,
Dr. Janjic will be compensated at a rate of $300 per hour.
In addition, the stock options previously granted to
Dr. Janjic during his employment with us shall continue to
vest for so long as Dr. Janjic continues to provide
continuous service (as defined in our 2006 Equity Incentive
Plan) to us. Dr. Janjics consultant agreement also
provides that, in the event that we consummate a change in
control (as defined in our 2006 Equity Incentive Plan), prior to
the termination date of the consultant agreement,
Dr. Janjics outstanding stock options shall become
fully vested and exercisable.
Dr. Janjics consultant agreement terminates on
June 9, 2009, provided that the consultant agreement will
automatically terminate immediately upon just cause
or the consummation of a change in control (as defined in our
2006 Equity Incentive Plan). The merger with CSI will constitute
a change of control for purposes of Dr. Janjics
consultant agreement.
55
SUMMARY
COMPENSATION TABLE
The following table shows for the fiscal years ended
December 31, 2008 and 2007, respectively, compensation
awarded to or paid to, or earned by, our Chief Executive
Officer, our two most highly compensated executive officers
other than our Chief Executive Officer who were serving as
executive officers as December 31, 2008, and two additional
individuals for who disclosure would have been required but for
the fact that such individuals were not serving as executive
officers as of December 31, 2008 (the named executive
officers).
Summary
Compensation Table
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Non-Equity
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Option
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Incentive Plan
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All Other
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Salary
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Awards
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Compensation
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Compensation
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Name and Principal Position
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Year
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($)
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($)(1)
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($)(2)
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($)(3)
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Total ($)
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Kenneth J. Collins
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2008
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$
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350,000
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$
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267,375
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$
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0
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$
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2,000
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(4)
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$
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619,375
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President and Chief Executive Officer
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2007
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350,000
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307,136
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52,500
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2,000
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(4)
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711,636
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Mark L. Smith
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2008
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295,000
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197,381
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0
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102,000
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(4)(5)
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594,381
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Chief Financial Officer
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2007
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280,000
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|
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232,584
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44,800
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2,000
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(4)
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559,384
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Donald Morrissey
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2008
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270,000
|
|
|
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158,017
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0
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102,000
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(4)(5)
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530,017
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Senior Vice President of Corporate Development
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2007
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240,000
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139,530
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33,600
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|
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2,000
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(4)
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559,384
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Roger M. Echols, M.D.
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2008
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350,000
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|
|
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106,868
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|
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0
|
|
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233,987
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(4)(6)
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690,855
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Chief Medical Officer
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2007
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345,000
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|
|
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159,624
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|
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49,680
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|
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2,000
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(4)
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556,304
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Nebojsa Janjic, Ph.D.
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2008
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|
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290,000
|
|
|
|
187,311
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|
|
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0
|
|
|
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292,000
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(4)(6)
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769,311
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Chief Scientific Officer
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2007
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275,000
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|
|
|
195,623
|
|
|
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41,800
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2,000
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(4)
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514,423
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(1)
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See Note 2 to the financial statements and the discussion
under Managements Discussion and Analysis of
Financial Condition and Results of Operations for the
fiscal year ended December 31, 2008 for a discussion of the
valuation of these option awards.
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(2)
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Represents bonuses paid to our named executive officers under
our Variable Incentive Bonus Plan with respect to the
achievement of certain corporate and individual objectives
established by the Board of Directors. These bonuses were earned
in the year set forth in this table and paid in the following
year. Please see the section entitled Annual Incentive
Opportunities for a description of the terms of this Plan.
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(3)
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As permitted by rules promulgated by the Securities and Exchange
Commission, no amounts are shown in this column if the aggregate
amount of compensation related to perquisites and other personal
benefits received by a named executive officer does not exceed
$10,000 for the applicable year.
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(4)
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Includes matching contributions up to a maximum amount of $2,000
made by us under our 401(k) plan.
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(5)
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Represents payment of $100,000 retention bonus to each of
Messrs. Smith and Morrissey.
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(6)
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Includes severance payments to Drs. Echols and Janjic of
$231,987 and $290,000, respectively. The employment of
Dr. Echols with us terminated effective as of May 1,
2008 and the employment of Dr. Janjic with us terminated
effective as of December 8, 2008.
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56
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
The following table shows certain information regarding
outstanding equity awards at December 31, 2008 for our
named executive officers.
Outstanding
Equity Awards At December 31, 2008
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Option Awards
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Equity
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Incentive
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Number of
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Plan Awards:
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Securities
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Number of
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Number of
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|
|
|
Underlying
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
Unexercised
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
|
(#)
|
|
|
Options
|
|
|
Unearned
|
|
|
Exercise
|
|
|
|
|
|
|
Exercisable
|
|
|
(#)
|
|
|
Options
|
|
|
Price
|
|
|
Option
|
|
Name
|
|
(1)(2)
|
|
|
Unexercisable(2)
|
|
|
(#)
|
|
|
($)
|
|
|
Expiration Date
|
|
|
Kenneth J. Collins
|
|
|
118,950
|
|
|
|
207,313
|
|
|
|
207,313
|
|
|
$
|
3.19
|
|
|
|
1/19/2016
|
|
|
|
|
43,750
|
|
|
|
56,250
|
|
|
|
56,250
|
|
|
|
5.35
|
|
|
|
3/8/2017
|
|
|
|
|
18,750
|
|
|
|
181,250
|
|
|
|
181,250
|
|
|
|
1.86
|
|
|
|
3/5/2018
|
|
Nebojsa Janjic
|
|
|
50,554
|
|
|
|
88,107
|
|
|
|
88,107
|
|
|
|
3.19
|
|
|
|
1/19/2016
|
|
|
|
|
39,375
|
|
|
|
50,625
|
|
|
|
50,625
|
|
|
|
5.35
|
|
|
|
3/8/2017
|
|
|
|
|
18,750
|
|
|
|
181,250
|
|
|
|
181,250
|
|
|
|
1.86
|
|
|
|
3/5/2018
|
|
Roger M. Echols
|
|
|
101,958
|
|
|
|
|
|
|
|
|
|
|
|
0.61
|
|
|
|
12/2/2014
|
|
|
|
|
23,789
|
|
|
|
41,462
|
|
|
|
41,462
|
|
|
|
3.19
|
|
|
|
1/19/2016
|
|
|
|
|
39,375
|
|
|
|
50,625
|
|
|
|
50,625
|
|
|
|
5.35
|
|
|
|
3/8/2017
|
|
|
|
|
35,000
|
|
|
|
5,000
|
|
|
|
5,000
|
|
|
|
1.40
|
|
|
|
5/1/2018
|
|
Mark L. Smith
|
|
|
112,152
|
|
|
|
50,979
|
|
|
|
50,979
|
|
|
|
5.20
|
|
|
|
3/9/2016
|
|
|
|
|
39,375
|
|
|
|
50,625
|
|
|
|
50,625
|
|
|
|
5.35
|
|
|
|
3/8/2017
|
|
|
|
|
18,750
|
|
|
|
181,250
|
|
|
|
181,250
|
|
|
|
1.86
|
|
|
|
3/5/2018
|
|
Donald J. Morrissey
|
|
|
20,392
|
|
|
|
|
|
|
|
|
|
|
|
0.61
|
|
|
|
6/9/2014
|
|
|
|
|
11,895
|
|
|
|
340
|
|
|
|
340
|
|
|
|
0.61
|
|
|
|
2/26/2015
|
|
|
|
|
42,694
|
|
|
|
38,871
|
|
|
|
38,871
|
|
|
|
3.19
|
|
|
|
1/19/2016
|
|
|
|
|
39,375
|
|
|
|
50,625
|
|
|
|
50,625
|
|
|
|
5.35
|
|
|
|
3/8/2017
|
|
|
|
|
18,750
|
|
|
|
181,750
|
|
|
|
181,750
|
|
|
|
1.86
|
|
|
|
3/5/2018
|
|
|
|
|
(1)
|
|
Some options listed in this column permit early exercise of
unvested shares, in which case all unvested shares are subject
to repurchase by us at cost. The option awards granted before
March 2008 vest 25% at the completion of the first year of
service following grant and 1/48 th of the total grant per month
thereafter such that full vesting occurs over four years. The
options granted to Dr. Echols in May 2008 vested over an
eight month period. All other options granted to employees and
not subject to a performance vesting described below granted in
March 2008 vest 1/48th of the total grant per month such that
full vesting occurs over four years. However, within the total
stock options held by Mr. Collins, Dr. Echols, and
Dr. Janjic, respectively, options in the amounts of
163,132, 32,626, and 69,331 vest upon the earlier of our quoted
stock price equaling at least $18.39 or the vesting schedule
described above.
|
|
(2)
|
|
Other than 100,000 stock options granted to each of
Messrs. Collins, Smith and Morrissey on March 5, 2008
with an expiration date of March 5, 2018, unexercisable
stock options granted to each of Messrs. Collins, Smith,
and Morrissey and Dr. Janjic vest in full upon consummation
of a change in control transaction, as defined, and termination
of the executives employment with us as a result of the
change of control transaction. Those 100,000 unexercisable stock
options granted to each of Messrs. Collins, Smith and
Morrissey on March 5, 2008 vest in full, subject to the
sole discretion of the Board of Directors, immediately prior to
the consummation of either (a) a strategic alliance or
partnership with an unaffiliated third party that relates to the
development and commercialization of faropenem medoxomil or
(b) another strategic transaction to which Replidyne is a
party. All stock options granted to executive officers on
March 5, 2008 are exercisable for three years following the
named executive officers termination from Replidyne.
|
57
OPTION
EXERCISES AND STOCK VESTED
None of our named executive officers exercised options or held
stock that vested during the fiscal year ended December 31,
2008.
DIRECTOR
COMPENSATION
The following table shows for the fiscal year ended
December 31, 2008 certain information with respect to the
compensation of all non-employee directors of the Company:
Director
Compensation for Fiscal 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
|
|
|
|
|
|
|
Paid in
|
|
|
Option
|
|
|
|
|
|
|
Cash
|
|
|
Awards
|
|
|
Total
|
|
Name(1)
|
|
($)
|
|
|
($)(3)(4)
|
|
|
($)
|
|
|
Edward Brown
|
|
$
|
29,000
|
|
|
$
|
20,587
|
|
|
$
|
49,587
|
|
Kirk K. Calhoun
|
|
|
38,750
|
|
|
|
8,906
|
|
|
|
47,656
|
|
Geoffrey Duyk, M.D., Ph.D.
|
|
|
30,250
|
|
|
|
19,892
|
|
|
|
49,392
|
|
Christopher D. Earl, Ph.D.(2)
|
|
|
3,500
|
|
|
|
17,722
|
|
|
|
21,222
|
|
Augustine Lawlor
|
|
|
31,000
|
|
|
|
19,892
|
|
|
|
50,892
|
|
Daniel J. Mitchell
|
|
|
35,000
|
|
|
|
19,892
|
|
|
|
54,892
|
|
|
|
|
(1)
|
|
Kenneth J. Collins is also a named executive officer and his
compensation is included in the Summary Compensation Table set
forth in this Annual Report on
Form 10-K.
He does not receive any additional compensation for his service
on the Board of Directors.
|
|
(2)
|
|
Dr. Earl resigned from the Board of Directors effective
March 27, 2008.
|
|
(3)
|
|
The full grant date fair value of the awards reported in this
column, as calculated under FAS 123R for financial
reporting purposes, is equal to: $20,587 with respect to the
award made to Mr. Brown; $8,906 with respect to the award
made to Mr. Calhoun; and $19,892 with respect to the awards
made to each of Dr. Duyk and Messrs. Lawlor and
Mitchell. See note 2 to the financial statements and the
discussion under Managements Discussion and Analysis
of Financial Condition and Results of Operations for the
fiscal year ended December 31, 2008 for a discussion of the
valuation of these option awards.
|
|
(4)
|
|
As of December 31, 2008, Mr. Brown had
24,469 shares subject to stock option awards outstanding,
Mr. Calhoun, Dr. Duyk, Mr. Lawlor and
Mr. Mitchell each had 32,625 shares subject to stock
option awards outstanding and Dr. Earl had no shares
subject to stock option awards outstanding.
|
Director
Cash Compensation
In April 2006, the Board of Directors adopted a compensation
program for non-employee directors. This compensation program
became effective immediately upon the closing of our initial
public offering in 2006. Pursuant to this program, each member
of the Board of Directors who is not our employee will receive
the following cash compensation for board services, as
applicable:
|
|
|
|
|
$17,500 per year for service as a Board member;
|
|
|
|
$7,500 per year for service as Chairman of the Audit Committee;
|
|
|
|
$2,500 per year for service as Chairman of the Compensation
Committee or the Nominating and Corporate Governance Committee;
|
|
|
|
$1,500 for each Board meeting attended in person ($750 for
meetings attended by video or telephone conference);
|
|
|
|
$1,500 for each Audit or Compensation Committee meeting attended
by the Chairman of such Committee in person ($750 for meetings
attended by video or telephone conference); and
|
58
|
|
|
|
|
$1,000 for each Committee meeting attended in person by members
who are not Chairman of such Committee ($500 for meetings
attended by video or telephone conference).
|
Annual payments are made on the date of our annual meeting of
stockholders as a retainer fee. Per-meeting payments are made
for meetings actually attended during the fiscal year.
We have reimbursed and will continue to reimburse our
non-employee directors for their reasonable expenses incurred in
attending meetings of the Board of Directors and Committees of
the Board of Directors.
Director
Equity Compensation
Members of the Board of Directors who are not our employees
receive non-statutory stock options under the terms of a
Non-Discretionary Grant Program contained in our 2006 Equity
Incentive Plan. Upon initially joining the Board of Directors,
each non-employee director will automatically be granted a
non-statutory stock option to purchase 16,313 shares of
common stock with an exercise price equal to the then fair
market value of our common stock. On the date of each annual
meeting of our stockholders, each non-employee director who has
served as a non-employee director for at least six months prior
to that annual meeting will automatically be granted a
non-statutory stock option to purchase 8,156 shares of our
common stock on that date with an exercise price equal to the
then fair market value of our common stock. Initial grants vest
over three years with 33.33% of the shares vesting one year from
the date of grant and the remaining shares vesting in equal
monthly installments over the next 24 months. Automatic
annual grants vest on the first anniversary of the date of
grant. All stock options granted under our 2006 Equity Incentive
Plan have a term of 10 years. In the event of certain
significant corporate transactions constituting a change in
control, the vesting of stock awards granted under the
Non-Discretionary Grant Program will automatically accelerate in
full, unless provided otherwise in an applicable award agreement.
Each non-employee director on the Board of Directors at the
effective date of our initial public offering in 2006, who had
served as a non-employee director for at least one year prior to
that date, was granted a non-statutory stock option to purchase
16,313 shares of common stock with an exercise price equal
to the then fair market value of our common stock, with the
other terms described above.
59
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
Security
Ownership Of Certain Beneficial Owners And Management
The following table sets forth certain information regarding the
ownership of our common stock as of December 31, 2008 by:
(i) each of our directors; (ii) each of our current or
former executive officers named in the Summary Compensation
Table; (iii) all of our executive officers and directors as
a group; and (iv) all those known by us to be beneficial
owners of more than five percent of our common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
Number of Shares
|
|
|
Shares Beneficially
|
|
Beneficial Owner
|
|
Beneficially Owned
|
|
|
Owned(1)
|
|
|
Named Executive Officers and Directors
|
|
|
|
|
|
|
|
|
Edward Brown(2)(19)
|
|
|
190,027
|
|
|
|
*
|
|
Kenneth J. Collins(3)
|
|
|
730,154
|
|
|
|
2.7
|
%
|
Kirk K. Calhoun(4)
|
|
|
24,469
|
|
|
|
*
|
|
Geoffrey Duyk, M.D., Ph.D.(5)(19)
|
|
|
2,775,570
|
|
|
|
10.2
|
%
|
Augustine Lawlor(6)(14)
|
|
|
4,381,725
|
|
|
|
16.2
|
%
|
Daniel J. Mitchell(7)(18)
|
|
|
1,570,741
|
|
|
|
5.8
|
%
|
Roger M. Echols, M.D.(8)
|
|
|
247,079
|
|
|
|
*
|
|
Nebojsa Janjic, Ph.D.(9)
|
|
|
518,560
|
|
|
|
1.9
|
%
|
Donald J. Morrissey(10)
|
|
|
213,530
|
|
|
|
*
|
|
Mark Smith(11)
|
|
|
184,989
|
|
|
|
*
|
|
All Directors and Executive Officers as a Group (8
individuals)(12)
|
|
|
10,071,205
|
|
|
|
36.3
|
%
|
5% Stockholders
|
|
|
|
|
|
|
|
|
Duquesne Capital Management LLC and its affiliates
|
|
|
1,383,918
|
|
|
|
5.1
|
%
|
2579 Washington Road, Suite 322
Pittsburgh, PA 15241(13)
|
|
|
|
|
|
|
|
|
HealthCare Ventures VI, L.P.
|
|
|
4,359,069
|
|
|
|
16.1
|
%
|
44 Nassau Street
Princeton, NJ 08542(14)
|
|
|
|
|
|
|
|
|
Morgenthaler Partners VII, L.P.
|
|
|
2,344,546
|
|
|
|
8.6
|
%
|
50 Public Square, Suite 2700
Cleveland, OH 44113(15)
|
|
|
|
|
|
|
|
|
Perseus-Soros BioPharmaceutical Fund, LP
|
|
|
1,487,808
|
|
|
|
5.5
|
%
|
888 Seventh Avenue, 30th Floor
New York, NY 10106(16)
|
|
|
|
|
|
|
|
|
RRC Management LLC and its affiliates
|
|
|
1,343,225
|
|
|
|
5.0
|
%
|
217R Concord Avenue
Cambridge, MA 01238(17)
|
|
|
|
|
|
|
|
|
Sequel Limited Partnership III and its affiliates
|
|
|
1,459,459
|
|
|
|
5.4
|
%
|
4430 Arapahoe Avenue, Suite 220
Boulder, CO 80303(18)
|
|
|
|
|
|
|
|
|
Tarrant Capital Advisors, Inc. and its affiliates
|
|
|
2,752,914
|
|
|
|
10.2
|
%
|
301 Commerce Street, Suite 3300
Fort Worth, TX 76102(19)
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Less than 1% of the outstanding shares.
|
|
(1)
|
|
Based on 27,114,741 shares of common stock outstanding as
of December 31, 2008. Unless otherwise indicated, each
person or entity listed has sole investment and voting power
with respect to the shares listed.
|
60
|
|
|
(2)
|
|
Includes 9,516 shares Mr. Brown has the right to
acquire within 60 days of December 31, 2008 through
the exercise of vested options.
|
|
(3)
|
|
Includes 199,978 shares Mr. Collins has the right to
acquire within 60 days of December 31, 2008 through
the exercise of vested options, and 25,488 shares held by
Ryan D. Collins and 25,488 shares held by Brendan C.
Collins, of which Mr. Collins is custodian.
|
|
(4)
|
|
Includes 24,469 shares Mr. Calhoun has the right to
acquire within 60 days of December 31, 2008 through
the exercise of vested options.
|
|
(5)
|
|
Includes 22,656 shares Dr. Duyk has the right to
acquire within 60 days of December 31, 2008 through
the exercise of vested options.
|
|
(6)
|
|
Includes 22,656 shares Mr. Lawlor has the right to
acquire within 60 days of December 31, 2008 through
the exercise of vested options.
|
|
(7)
|
|
Includes 22,656 shares Mr. Mitchell has the right to
acquire within 60 days of December 31, 2008 through
the exercise of vested options, and 88,626 shares held by
The Daniel J. Mitchell Trust, of which Mr. Mitchell is
Trustee.
|
|
(8)
|
|
Includes 200,122 shares Dr. Echols has the right to
acquire within 60 days of December 31, 2008 through
the exercise of vested options. Dr. Echols ceased serving
as an officer of Replidyne as of May 1, 2008.
|
|
(9)
|
|
Includes 120,927 shares Dr. Janjic has the right to
acquire within 60 days of December 31, 2008 through
the exercise of vested options. Dr. Janjic ceased serving
as an officer of Replidyne as of December 8, 2008.
|
|
(10)
|
|
Includes 143,272 shares Mr. Morrissey has the right to
acquire within 60 days of December 31, 2008 through
the exercised of vested options, and 15,000 shares held by
The Morrissey Family Revocable Trust dated April 6, 2001.
|
|
(11)
|
|
Includes 184,989 shares Mr. Smith has the right to
acquire within 60 days of December 31, 2008 through
the exercise of vested options.
|
|
(12)
|
|
Includes shares, options and warrants described in the notes
above, as applicable, and held by our directors and executive
officers. Includes an aggregate of 630,192 shares subject
to vesting conditions of unexercised stock options held by our
directors and executive officers that vest on or prior to
March 1, 2009.
|
|
(13)
|
|
Includes 1,097,509 shares held by Windmill Master Fund,
L.P., 240,681 shares held by Juggernaut Fund, L.P. and
45,728 shares held by Iron City Fund, Ltd. The Chairman and
Chief Executive Officer of Duquesne Capital Management LLC,
Stanley F. Druckenmiller, possesses voting and investment
authority over these shares.
|
|
(14)
|
|
Includes 746,707 shares held by HealthCare Ventures VIII,
L.P. HealthCare Ventures VI, L.P. disclaims beneficial ownership
of those shares owned by HealthCare Ventures VIII, L.P.
Mr. Lawlor is a general partner of HealthCare Partners VI,
L.P. which is the general partner of HealthCare Ventures VI,
L.P. Mr. Lawlor shares voting and investment authority over
the shares held by HealthCare Ventures VI, L.P. with Eric
Aguiar, James Cavanaugh, William Crouse, John Littlechild,
Christopher Mirabelli and Harold Werner. Mr. Lawlor is also
a managing director of HealthCare Partners VIII LLC which is the
general partner of HealthCare Partners VIII, L.P. which is the
general partner of HealthCare Ventures VIII, L.P.
Mr. Lawlor shares voting and investment authority over the
shares held by HealthCare Ventures VIII, L.P. with Eric Aguiar,
James Cavanaugh, John Littlechild, Christopher Mirabelli and
Harold Werner. Mr. Lawlor disclaims beneficial ownership of
these shares except to the extent of his proportionate pecuniary
interest in these securities.
|
|
(15)
|
|
Includes 16,311 shares that Morgenthaler Partners VII, L.P.
has the right to acquire from Replidyne within 60 days of
December 31, 2008 pursuant to the exercise of outstanding
warrants. Morgenthaler Management Partners VII, LLC is the
managing general partner of Morgenthaler Partners VII, L.P. The
managing members of Morgenthaler Management Partners VII, LLC,
Robert C. Bellas, Jr., Theodore A. Laufik, Gary R. Little, John
D. Lutsi, Gary J. Morgenthaler, Robert D. Pavey, and Peter G.
Taft, share voting and investment authority over these shares.
|
|
(16)
|
|
Perseus-Soros Partners, LLC is the general partner of the
Perseus-Soros BioPharmaceutical Fund, LP. Perseus BioTech
Fund Partners, LLC and SFM Participation, L.P. are the
managing members of
|
61
|
|
|
|
|
Perseus-Soros
Partners, LLC. Perseuspur, LLC is the managing member of Perseus
BioTech Fund Partners, LLC. Frank Pearl is the sole member
of Perseuspur, LLC and in such capacity may be deemed a
beneficial owner of securities held for the account of the
Perseus-Soros BioPharmaceutical Fund, LP. SFM AH, LLC is the
general partner of SFM Participation, L.P. The sole managing
member of SFM AH, LLC is Soros Fund Management LLC. George
Soros is the Chairman of Soros Fund Management LLC and in
such capacity may be deemed a beneficial owner of securities
held for the account of the Perseus-Soros BioPharmaceutical
Fund, LP.
|
|
(17)
|
|
James A. Silverman (the Manager) is the manager of RRC
Management, LLC (Capital), which is the sole general partner of
RRC Bio Fund, L.P. (the Fund). The Manager is also the president
of Risk Reward Capital Management, Inc. (Risk Reward), which
serves as investment adviser to a number of discretionary
accounts. The Manager beneficially owns 1,343,225 of the shares,
the Fund and Capital each beneficially own 957,000 of the
shares, and Risk Reward beneficially owns 386,225 of the shares.
|
|
(18)
|
|
Includes 39,240 shares held by Sequel Entrepreneurs
Fund III, L.P. Also includes 8,154 shares that Sequel
Limited Partnership III and Sequel Entrepreneurs
Fund III, L.P. have the right to acquire from Replidyne
within 60 days of December 31, 2008 pursuant to the
exercise of outstanding warrants. Sequel Venture Partners III,
L.L.C. is the general partner of Sequel Limited
Partnership III and Sequel Entrepreneurs
Fund III, L.P. The managers of Sequel Venture Partners III,
L.L.C., Daniel Mitchell, Timothy Connor, Thomas Washing, John
Greff and Kinney Johnson, share voting and investment authority
over these shares. Each of Sequel Venture Partners III, L.L.C.
and its managers (including Mr. Mitchell) disclaim
beneficial ownership of these shares, except to the extent of
any pecuniary interest therein.
|
|
(19)
|
|
Tarrant Capital Advisors, Inc. (Tarrant) is the sole shareholder
of Tarrant Advisors, Inc., which is the general partner of TPG
Ventures Professionals, L.P., which is the general partner of
TPG Ventures Partners, L.P., which is the managing member of TPG
Ventures Holdings, L.L.C., which is the sole member of each of
TPG Ventures Advisors, L.L.C. and TPG Biotechnology Advisors,
L.L.C. TPG Ventures Advisors, L.L.C. is the general partner of
TPG Ventures GenPar, L.P., which is the general partner of TPG
Ventures, L.P. (TPG Ventures). TPG Biotech Advisors, L.L.C. is
the general partner of TPG Biotechnology GenPar, L.P., which is
the general partner of TPG Biotechnology Partners, L.P. (TPG
Biotech, and together with TPG Ventures, the TPG Funds). Because
of Tarrants relationship to the TPG Funds, Tarrant may be
deemed to beneficially own such shares. David Bonderman and
James G. Coulter are the sole shareholders of Tarrant and
therefore may be deemed to beneficially own these shares.
Dr. Duyk and Mr. Brown are Managing Directors at TPG
Ventures and disclaim beneficial ownership of these shares.
|
62
Securities
Authorized for Issuance Under Equity Compensation
Plans
The following table provides certain information with respect to
all of the Companys equity compensation plans in effect as
of December 31, 2008:
Equity
Compensation Plan Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
Remaining Available
|
|
|
|
|
|
|
|
|
|
for Issuance Under
|
|
|
|
Number of Securities
|
|
|
Weighted-Average
|
|
|
Equity Compensation
|
|
|
|
to be Issued Upon
|
|
|
Exercise Price of
|
|
|
Plans (Excluding
|
|
|
|
Exercise of
|
|
|
Outstanding
|
|
|
Securities
|
|
|
|
Outstanding Options,
|
|
|
Options, Warrants
|
|
|
Reflected in Column
|
|
|
|
Warrants and Rights
|
|
|
and Rights
|
|
|
(a))(1)
|
|
Plan Category
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved by security holders
|
|
|
2,774,000
|
|
|
$
|
3.15
|
|
|
|
3,926,243
|
(2)
|
Equity compensation plans not approved by security
holders(3)
|
|
|
53,012
|
|
|
$
|
5.47
|
|
|
|
0
|
|
Total
|
|
|
2,828,012
|
|
|
|
|
|
|
|
3,926,243
|
(2)
|
|
|
|
(1)
|
|
Subject to approval by the Board of Directors of such increase
by no later than March 31st of each year, the number of
shares of common stock reserved for issuance under the 2006
Equity Incentive Plan, as amended (the EIP), will
increase, effective as of April 1st, from April 1,
2007 through and including April 1, 2016, by the lesser of
(a) 5% of the total number of shares of common stock
outstanding on December 31st of the preceding calendar year
or (b) 1,325,448 shares, or such lesser amount as
determined by the Board. In March 2008, the Board of Directors
determined not to increase the share reserve under the EIP at
that time. Subject to approval by the Board of Directors of such
increase by no later than March 31st of each year, on
April 1st of each year for ten years, beginning on
April 1, 2007, through and including April 1, 2016,
the number of shares of common stock reserved for issuance under
the 2006 Employee Stock Purchase Plan (ESPP) will be
increased by the lesser of (a) 1% of our outstanding shares
on December 31st of the prior year or
(b) 101,957 shares of common stock, or such lesser
amount approved by the Board of Directors. In March 2008, the
Board of Directors determined not to increase the share reserve
under the ESPP at that time. If the merger with CSI is
consummated no additional shares shall be issued under the EIP.
|
|
(2)
|
|
Includes 3,759,955 shares that remain available for
issuance under the EIP and 166,288 shares that remain
available for future purchase under the ESPP.
|
|
(3)
|
|
Represents the aggregate number of shares issuable pursuant to
the exercise of outstanding warrants to purchase our common
stock. Descriptions of such warrants are contained in
note 10 to the consolidated financial statements contained
in this Annual Report on
Form 10-K
for the year ended December 31, 2008.
|
Changes
in Control
The information regarding our proposed merger with CSI that is
included in Managements Discussion and Analysis of
Financial Condition and Results of Operations is hereby
incorporated by reference into this Item.
63
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
|
As required under Nasdaq listing standards, a majority of the
members of a listed companys Board of Directors must
qualify as independent, as affirmatively determined
by the Board of Directors. The Board consults with our counsel
to ensure that the Boards determinations are consistent
with relevant securities and other laws and regulations
regarding the definition of independent, including
those set forth in pertinent listing standards of the Nasdaq, as
in effect time to time.
Consistent with these considerations, after review of all
relevant transactions or relationships between each director, or
any of his family members, and us, our senior management and our
independent auditors, the Board has affirmatively determined
that the following five directors are independent directors
within the meaning of the applicable Nasdaq listing standards:
Edward Brown, Kirk K. Calhoun, Geoffrey
Duyk, M.D., Ph.D., Augustine Lawlor and Daniel J.
Mitchell. Ralph E. Christopher D. Earl, Ph.D., who resigned
as a member of the Board effective as of March 27, 2008,
was also an independent director within the meaning of the
applicable Nasdaq listing standards during his term of service
to us. In making this determination on independence, the Board
found that none of these directors had a material or other
disqualifying relationship with us. Mr. Collins, our
President and Chief Executive Officer, is not an independent
director by virtue of his employment with us.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
The following table represents aggregate fees billed to the
Company for the fiscal years ended December 31, 2008 and
2007, by KPMG LLP, the Companys principal accountant (in
thousands).
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Audit Fees(1)
|
|
$
|
211
|
|
|
$
|
236
|
|
Tax Fees(2)
|
|
$
|
14
|
|
|
$
|
38
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
225
|
|
|
$
|
274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Audit fees include fees for services related to our registration
statement in connection with our proposed merger transaction in
2008.
|
|
(2)
|
|
Tax fees include fees for tax annual compliance and other advice.
|
All fees described above were approved by the Audit Committee.
The Audit committee has determined that the rendering of the
services described above by KPMG LLP is compatible with
maintaining the independence of the independent registered
public accounting firm.
Under the Audit Committee Charter, the Audit Committee shall
pre-approve all auditing services and permitted non-audit
services (including the fees and terms thereof) to be performed
for the Company by our independent accountant, KPMG LLP (subject
to de minimis exceptions for non-audit services described in
Section 10A(i)(1)(B) of the 1934 Act which are
approved by the Audit Committee prior to completion of the
audit). The Audit Committee may form and delegate authority to
subcommittees consisting of one or more members when
appropriate, including the authority to grant pre-approvals of
audit and permitted non-audit services, provided that decisions
of such subcommittee to grant pre-approvals shall be presented
to the full Audit Committee at its next scheduled meeting.
64
PART IV
|
|
ITEM 15.
|
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES
|
a.
Financial Statements
.
The following
financial statements are submitted as part of this report:
|
|
|
|
|
Reports of Independent Registered Public Accounting Firm,
Balance Sheets at December 31, 2008 and 2007,
Statements of Operations for 2008 and 2007,
Statements of Stockholders Equity (Deficit) and
Comprehensive Income (Loss) for 2008 and 2007,
Statements of Cash Flows for 2008 and 2007,
Notes to Financial Statements
|
b.
Financial Statement Schedules
No financial statement schedules are included because they are
not required or the information is included in the financial
statements or notes thereto.
c.
Exhibits
|
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
Number
|
|
Note
|
|
Description of Document
|
|
|
2
|
.1
|
|
|
(6)
|
|
|
Agreement and Plan of Merger and Reorganization, dated as of
November 3, 2008, by and among Registrant, Responder Merger
Sub, Inc. and Cardiovascular Systems, Inc.
|
|
2
|
.2
|
|
|
(6)
|
|
|
Form of Voting Agreement between Cardiovascular Systems, Inc.
and certain stockholders of Registrant.
|
|
2
|
.3
|
|
|
(6)
|
|
|
Form of Voting Agreement between Registrant and certain
stockholders of Cardiovascular Systems, Inc.
|
|
3
|
.1
|
|
|
(1)
|
|
|
Restated Certificate of Incorporation.
|
|
3
|
.2
|
|
|
(1)
|
|
|
Amended and Restated Bylaws.
|
|
4
|
.1
|
|
|
(1)
|
|
|
Reference is made to exhibits 3.1 and 3.2.
|
|
4
|
.2
|
|
|
(1)
|
|
|
Specimen Common Stock Certificate.
|
|
4
|
.3
|
|
|
(1)
|
|
|
Form of Warrant to purchase shares of Series A Convertible
Preferred Stock (together with schedule prepared in accordance
with Instruction 2 to Item 601 of
Regulation S-K).
|
|
4
|
.4
|
|
|
(1)
|
|
|
Form of Warrant to purchase shares of Series C Preferred
Stock (together with schedule prepared in accordance with
Instruction 2 to Item 601 of
Regulation S-K).
|
|
4
|
.5
|
|
|
(1)
|
|
|
Fourth Amended and Restated Stockholders Agreement, dated
August 17, 2005, between Registrant. and certain of its
stockholders, as amended March 7, 2006.
|
|
10
|
.1+
|
|
|
(1)
|
|
|
Form of Indemnification Agreement for Directors.
|
|
10
|
.2+
|
|
|
(1)
|
|
|
Form of Indemnification Agreement for Executive Officers.
|
|
10
|
.3+
|
|
|
(1)
|
|
|
2006 Equity Incentive Plan.
|
|
10
|
.4+
|
|
|
(1)
|
|
|
Form of Option Grant Notice and Form of Option Agreement under
2006 Equity Incentive Plan.
|
|
10
|
.5+
|
|
|
(1)
|
|
|
2006 Employee Stock Purchase Plan.
|
|
10
|
.6+
|
|
|
(1)
|
|
|
Form of Offering Document under 2006 Employee Stock Purchase
Plan.
|
|
10
|
.7+
|
|
|
(1)
|
|
|
Employment Agreement, dated April 3, 2006, between
Registrant and Kenneth J. Collins.
|
|
10
|
.7.1+
|
|
|
(3)
|
|
|
Amendment, dated June 15, 2007, to Employment Agreement,
dated April 3, 2006, between Registrant and Kenneth J.
Collins.
|
|
10
|
.8+
|
|
|
(1)
|
|
|
Employment Agreement, dated April 3, 2006, between
Registrant and Nebojsa Janjic, Ph.D.
|
|
10
|
.8.1+
|
|
|
(3)
|
|
|
Amendment, dated June 15, 2007, to Employment Agreement,
dated April 3, 2006, between Registrant and Nebojsa
Janjic, Ph.D.
|
|
10
|
.9+
|
|
|
(1)
|
|
|
Employment Agreement, dated April 3, 2006, between
Registrant and Peter Letendre, Pharm.D.
|
65
|
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
Number
|
|
Note
|
|
Description of Document
|
|
|
10
|
.9.1+
|
|
|
(3)
|
|
|
Amendment, dated June 15, 2007, to Employment Agreement,
dated April 3, 2006, between Registrant and Peter Letendre,
Pharm.D.
|
|
10
|
.10+
|
|
|
(1)
|
|
|
Employment Agreement, dated April 3, 2006, between
Registrant and Roger M. Echols, M.D.
|
|
10
|
.10.1+
|
|
|
(3)
|
|
|
Amendment, dated June 15, 2007, to Employment Agreement,
dated April 3, 2006, between Registrant and Roger M.
Echols, M.D.
|
|
10
|
.11+
|
|
|
(1)
|
|
|
Employment Agreement, dated April 3, 2006, between
Registrant and Mark Smith.
|
|
10
|
.11.1+
|
|
|
(3)
|
|
|
Amendment, dated June 15, 2007, to Employment Agreement,
dated April 3, 2006, between Registrant and Mark Smith.
|
|
10
|
.12+
|
|
|
(1)
|
|
|
Employment Agreement, dated April 3, 2006, between
Registrant and Donald Morrissey.
|
|
10
|
.13+
|
|
|
(1)
|
|
|
Summary of Director Compensation Program.
|
|
10
|
.14*
|
|
|
(1)
|
|
|
License Agreement, dated March 15, 2004, between Registrant
and Daiichi Suntory Pharma Co., Ltd.
|
|
10
|
.14.1*
|
|
|
(1)
|
|
|
Amendment, dated April 5, 2005, to License Agreement, dated
March 15, 2004, between the Registrant and Daiichi Suntory
Pharma Co., Ltd.
|
|
10
|
.14.2*
|
|
|
(1)
|
|
|
Second Amendment, dated February 10, 2006, to License
Agreement, dated March 15, 2004, between the Registrant and
Daiichi Suntory Pharma Co., Ltd.
|
|
10
|
.15*
|
|
|
(1)
|
|
|
Supply Agreement, dated December 20, 2004, among the
Registrant, Daiichi Suntory Pharma Co., Ltd. and Nippon Soda
Co., Ltd.
|
|
10
|
.16
|
|
|
(1)
|
|
|
Lease Agreement, dated March 22, 2005, by and between the
Registrant and Crown Milford LLC.
|
|
10
|
.17
|
|
|
(1)
|
|
|
Lease Agreement, dated October 25, 2005, by and between the
Registrant and Triumph 1450 LLC.
|
|
10
|
.18*
|
|
|
(1)
|
|
|
Collaboration and Commercialization Agreement, dated
February 10, 2006, between the Registrant and Forest
Laboratories Holdings Limited.
|
|
10
|
.19+
|
|
|
(2)
|
|
|
Replidyne, Inc. Variable Incentive Bonus Plan for Calendar Year
2007.
|
|
10
|
.20+
|
|
|
(4)
|
|
|
Retention Bonus Agreement, dated March 27, 2008, by and
between Registrant and Mark Smith.
|
|
10
|
.21+
|
|
|
(4)
|
|
|
Retention Bonus Agreement, dated March 27, 2008, by and
between Registrant and Donald Morrissey.
|
|
10
|
.22+*
|
|
|
(5)
|
|
|
Separation Agreement, dated April 15, 2008, by and between
Registrant and Peter Letendre.
|
|
10
|
.23+*
|
|
|
(5)
|
|
|
Consulting Agreement, effective as of April 16, 2008, by
and between Registrant and Peter Letendre.
|
|
10
|
.24+*
|
|
|
(5)
|
|
|
Separation Agreement, dated May 1, 2008, by and between
Registrant and Roger Echols.
|
|
10
|
.25+*
|
|
|
(5)
|
|
|
Consulting Agreement, effective as of May 2, 2008, by and
between Registrant and Roger Echols.
|
|
10
|
.26+
|
|
|
(6)
|
|
|
Separation Agreement, dated December 8, 2008, by and
between Registrant and Nebojsa Janjic.
|
|
10
|
.27+
|
|
|
(6)
|
|
|
Consulting Agreement, effective as of December 9, 2009, by
and between Registrant and Nebojsa Janjic.
|
|
23
|
.1
|
|
|
|
|
|
Consent of KPMG LLP.
|
|
31
|
.1
|
|
|
|
|
|
Certification of principal executive officer required by
Rule 13a-14(a).
|
|
31
|
.2
|
|
|
|
|
|
Certification of principal financial officer required by
Rule 13a-14(a).
|
|
32
|
.1
|
|
|
|
|
|
Section 1350 Certification.
|
66
|
|
|
+
|
|
Indicates management contract or compensatory plan.
|
|
*
|
|
Confidential treatment has been granted with respect to certain
portions of this exhibit. Omitted portions have been filed
separately with the Securities and Exchange Commission.
|
|
(1)
|
|
Incorporated by reference to the same numbered exhibit filed
with Registrants Registration Statement on
Form S-1
(File
No. 333-133021),
as amended, declared effective June 29, 2006.
|
|
(2)
|
|
Incorporated by reference to Registrants Current Report on
Form 8-K
filed on March 9, 2007.
|
|
(3)
|
|
Incorporated by reference to Registrants Current Report on
Form 8-K
filed on June 19, 2007.
|
|
(4)
|
|
Incorporated by reference to Registrants Current Report on
Form 8-K
filed on April 1, 2008.
|
|
(5)
|
|
Incorporated by reference to Registrants Quarterly Report
on
Form 10-Q
filed on August 5, 2008.
|
|
(6)
|
|
Incorporated by reference to the same numbered exhibit filed
with Registrants Registration Statement on
Form S-4
(File
No. 333-155887),
as amended, declared effective January 26, 2009.
|
67
SIGNATURES
Pursuant to the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, the registrant has duly
caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
REPLIDYNE, INC.
Kenneth Collins
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons in
the capacities indicated and on the dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Kenneth
J. Collins
Kenneth
J. Collins
|
|
President, Chief Executive Officer and Member of the Board of
Directors (Principal Executive Officer)
|
|
February 23, 2009
|
|
|
|
|
|
/s/ Mark
L. Smith
Mark
L. Smith
|
|
Chief Financial Officer, Treasurer, and Secretary (Principal
Financial and Accounting Officer)
|
|
February 23, 2009
|
|
|
|
|
|
/s/ Kirk
K. Calhoun
Kirk
K. Calhoun
|
|
Member of the Board of Directors
|
|
February 23, 2009
|
|
|
|
|
|
/s/ Edward
Brown
Edward
Brown
|
|
Member of the Board of Directors
|
|
February 23, 2009
|
|
|
|
|
|
/s/ Geoffrey
Duyk
Geoffrey
Duyk, MD, Ph.D.
|
|
Member of the Board of Directors
|
|
February 23, 2009
|
|
|
|
|
|
/s/ Daniel
J. Mitchell
Daniel
J. Mitchell
|
|
Member of the Board of Directors
|
|
February 23, 2009
|
68
Exhibit
Index
|
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
Number
|
|
Note
|
|
Description of Document
|
|
|
2
|
.1
|
|
|
(6)
|
|
|
Agreement and Plan of Merger and Reorganization, dated as of
November 3, 2008, by and among Registrant, Responder Merger
Sub, Inc. and Cardiovascular Systems, Inc.
|
|
2
|
.2
|
|
|
(6)
|
|
|
Form of Voting Agreement between Cardiovascular Systems, Inc.
and certain stockholders of Registrant.
|
|
2
|
.3
|
|
|
(6)
|
|
|
Form of Voting Agreement between Registrant and certain
stockholders of Cardiovascular Systems, Inc.
|
|
3
|
.1
|
|
|
(1)
|
|
|
Restated Certificate of Incorporation.
|
|
3
|
.2
|
|
|
(1)
|
|
|
Amended and Restated Bylaws.
|
|
4
|
.1
|
|
|
(1)
|
|
|
Reference is made to exhibits 3.1 and 3.2.
|
|
4
|
.2
|
|
|
(1)
|
|
|
Specimen Common Stock Certificate.
|
|
4
|
.3
|
|
|
(1)
|
|
|
Form of Warrant to purchase shares of Series A Convertible
Preferred Stock (together with schedule prepared in accordance
with Instruction 2 to Item 601 of
Regulation S-K).
|
|
4
|
.4
|
|
|
(1)
|
|
|
Form of Warrant to purchase shares of Series C Preferred
Stock (together with schedule prepared in accordance with
Instruction 2 to Item 601 of
Regulation S-K).
|
|
4
|
.5
|
|
|
(1)
|
|
|
Fourth Amended and Restated Stockholders Agreement, dated
August 17, 2005, between Registrant. and certain of its
stockholders, as amended March 7, 2006.
|
|
10
|
.1+
|
|
|
(1)
|
|
|
Form of Indemnification Agreement for Directors.
|
|
10
|
.2+
|
|
|
(1)
|
|
|
Form of Indemnification Agreement for Executive Officers.
|
|
10
|
.3+
|
|
|
(1)
|
|
|
2006 Equity Incentive Plan.
|
|
10
|
.4+
|
|
|
(1)
|
|
|
Form of Option Grant Notice and Form of Option Agreement under
2006 Equity Incentive Plan.
|
|
10
|
.5+
|
|
|
(1)
|
|
|
2006 Employee Stock Purchase Plan.
|
|
10
|
.6+
|
|
|
(1)
|
|
|
Form of Offering Document under 2006 Employee Stock Purchase
Plan.
|
|
10
|
.7+
|
|
|
(1)
|
|
|
Employment Agreement, dated April 3, 2006, between
Registrant and Kenneth J. Collins.
|
|
10
|
.7.1+
|
|
|
(3)
|
|
|
Amendment, dated June 15, 2007, to Employment Agreement,
dated April 3, 2006, between Registrant and Kenneth J.
Collins.
|
|
10
|
.8+
|
|
|
(1)
|
|
|
Employment Agreement, dated April 3, 2006, between
Registrant and Nebojsa Janjic, Ph.D.
|
|
10
|
.8.1+
|
|
|
(3)
|
|
|
Amendment, dated June 15, 2007, to Employment Agreement,
dated April 3, 2006, between Registrant and Nebojsa
Janjic, Ph.D.
|
|
10
|
.9+
|
|
|
(1)
|
|
|
Employment Agreement, dated April 3, 2006, between
Registrant and Peter Letendre, Pharm.D.
|
|
10
|
.9.1+
|
|
|
(3)
|
|
|
Amendment, dated June 15, 2007, to Employment Agreement,
dated April 3, 2006, between Registrant and Peter Letendre,
Pharm.D.
|
|
10
|
.10+
|
|
|
(1)
|
|
|
Employment Agreement, dated April 3, 2006, between
Registrant and Roger M. Echols, M.D.
|
|
10
|
.10.1+
|
|
|
(3)
|
|
|
Amendment, dated June 15, 2007, to Employment Agreement,
dated April 3, 2006, between Registrant and Roger M.
Echols, M.D.
|
|
10
|
.11+
|
|
|
(1)
|
|
|
Employment Agreement, dated April 3, 2006, between
Registrant and Mark Smith.
|
|
10
|
.11.1+
|
|
|
(3)
|
|
|
Amendment, dated June 15, 2007, to Employment Agreement,
dated April 3, 2006, between Registrant and Mark Smith.
|
|
10
|
.12+
|
|
|
(1)
|
|
|
Employment Agreement, dated April 3, 2006, between
Registrant and Donald Morrissey.
|
|
10
|
.13+
|
|
|
(1)
|
|
|
Summary of Director Compensation Program.
|
|
10
|
.14*
|
|
|
(1)
|
|
|
License Agreement, dated March 15, 2004, between Registrant
and Daiichi Suntory Pharma Co., Ltd.
|
|
10
|
.14.1*
|
|
|
(1)
|
|
|
Amendment, dated April 5, 2005, to License Agreement, dated
March 15, 2004, between the Registrant and Daiichi Suntory
Pharma Co., Ltd.
|
|
10
|
.14.2*
|
|
|
(1)
|
|
|
Second Amendment, dated February 10, 2006, to License
Agreement, dated March 15, 2004, between the Registrant and
Daiichi Suntory Pharma Co., Ltd.
|
|
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
Number
|
|
Note
|
|
Description of Document
|
|
|
10
|
.15*
|
|
|
(1)
|
|
|
Supply Agreement, dated December 20, 2004, among the
Registrant, Daiichi Suntory Pharma Co., Ltd. and Nippon Soda
Co., Ltd.
|
|
10
|
.16
|
|
|
(1)
|
|
|
Lease Agreement, dated March 22, 2005, by and between the
Registrant and Crown Milford LLC.
|
|
10
|
.17
|
|
|
(1)
|
|
|
Lease Agreement, dated October 25, 2005, by and between the
Registrant and Triumph 1450 LLC.
|
|
10
|
.18*
|
|
|
(1)
|
|
|
Collaboration and Commercialization Agreement, dated
February 10, 2006, between the Registrant and Forest
Laboratories Holdings Limited.
|
|
10
|
.19+
|
|
|
(2)
|
|
|
Replidyne, Inc. Variable Incentive Bonus Plan for Calendar Year
2007.
|
|
10
|
.20+
|
|
|
(4)
|
|
|
Retention Bonus Agreement, dated March 27, 2008, by and
between Registrant and Mark Smith.
|
|
10
|
.21+
|
|
|
(4)
|
|
|
Retention Bonus Agreement, dated March 27, 2008, by and
between Registrant and Donald Morrissey.
|
|
10
|
.22+*
|
|
|
(5)
|
|
|
Separation Agreement, dated April 15, 2008, by and between
Registrant and Peter Letendre.
|
|
10
|
.23+*
|
|
|
(5)
|
|
|
Consulting Agreement, effective as of April 16, 2008, by
and between Registrant and Peter Letendre.
|
|
10
|
.24+*
|
|
|
(5)
|
|
|
Separation Agreement, dated May 1, 2008, by and between
Registrant and Roger Echols.
|
|
10
|
.25+*
|
|
|
(5)
|
|
|
Consulting Agreement, effective as of May 2, 2008, by and
between Registrant and Roger Echols.
|
|
10
|
.26+
|
|
|
(6)
|
|
|
Separation Agreement, dated December 8, 2008, by and
between Registrant and Janjic.
|
|
10
|
.27+
|
|
|
(6)
|
|
|
Consulting Agreement, effective as of December 9, 2009, by
and between Registrant and Nebojsa Janjic.
|
|
23
|
.1
|
|
|
|
|
|
Consent of KPMG LLP.
|
|
31
|
.1
|
|
|
|
|
|
Certification of principal executive officer required by
Rule 13a-14(a).
|
|
31
|
.2
|
|
|
|
|
|
Certification of principal financial officer required by
Rule 13a-14(a).
|
|
32
|
.1
|
|
|
|
|
|
Section 1350 Certification.
|
|
|
|
+
|
|
Indicates management contract or compensatory plan.
|
|
|
|
*
|
|
Confidential treatment has been granted with respect to certain
portions of this exhibit. Omitted portions have been filed
separately with the Securities and Exchange Commission.
|
|
(1)
|
|
Incorporated by reference to the same numbered exhibit filed
with Registrants Registration Statement on
Form S-1
(File
No. 333-133021),
as amended, declared effective June 29, 2006.
|
|
(2)
|
|
Incorporated by reference to Registrants Current Report on
Form 8-K
filed on March 9, 2007.
|
|
(3)
|
|
Incorporated by reference to Registrants Current Report on
Form 8-K
filed on June 19, 2007.
|
|
(4)
|
|
Incorporated by reference to Registrants Current Report on
Form 8-K
filed on April 1, 2008.
|
|
(5)
|
|
Incorporated by reference to Registrants Quarterly Report
on
Form 10-Q
filed on August 5, 2008.
|
|
(6)
|
|
Incorporated by reference to the same numbered exhibit filed
with Registrants Registration Statement on
Form S-4
(File
No. 333-155887),
as amended, declared effective January 26, 2009.
|
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