1/6/2021
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`10-Q 1 f53244e10vq.htm FORM 10-Q
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`e10vq
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`https://www.sec.gov/Archives/edgar/data/1013238/000095012309031361/f53244e10vq.htm
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`1/37
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`Liquidia's Exhibit 1073
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`1/6/2021
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`Table of Contents
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`e10vq
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`UNITED STATES SECURITIES AND EXCHANGE COMMISSION
`Washington, DC 20549
`Form 10-Q
`
`(Mark One)
`
`þ
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`o
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`QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`For the quarterly period ended June 30, 2009
`
`
`
`Or
`TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`For the transition period from to ,
`
`California
`(State or other jurisdiction of
`incorporation or organization)
`
`Commission File Number 000-28402
`
`Aradigm Corporation
`
`(Exact name of registrant as specified in its charter)
`
`
`
`
`
`
`3929 Point Eden Way
`
`Hayward, CA 94545
`
`(Address of principal executive offices including zip code)
`
`94-3133088
`(I.R.S. Employer
`Identification No.)
`
`
`Smaller reporting company þ
`
`
`(510) 265-9000
`
`(Registrant’s telephone number, including area code)
` 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 þ No o
` Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of
`Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
`Yes o No o
` Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, or smaller reporting company. See definition of “accelerated filer”, “large accelerated filer”
`and “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act. (Check one):
`
`
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`Non-accelerated filer o
`
` Large accelerated filer o
`
`Accelerated filer o
`(Do not check if a smaller reporting company)
`
`
`
`
` Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
` Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
`
`
`
`
`
`
`(Class)
`Common
`
`(Outstanding at July 31, 2009)
`100,726,171
`
`
`
`
`
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`https://www.sec.gov/Archives/edgar/data/1013238/000095012309031361/f53244e10vq.htm
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`2/37
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`Liquidia's Exhibit 1073
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`1/6/2021
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`e10vq
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`ARADIGM CORPORATION
`
`TABLE OF CONTENTS
`
`
`
`PART I. FINANCIAL INFORMATION
`Item 1. Financial Statements
`Condensed Balance Sheets at June 30, 2009 and December 31, 2008 (unaudited)
`Condensed Statements of Operations for the three and six months ended June 30, 2009 and 2008 (unaudited)
`Condensed Statements of Cash Flows for the six months ended June 30, 2009 and 2008 (unaudited)
`Notes to the Unaudited Condensed Financial Statements
`Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
`Item 3. Quantitative and Qualitative Disclosures About Market Risk
`Item 4. Controls and Procedures
`
`PART II. OTHER INFORMATION
`Item 1. Legal Proceedings
`Item 1A. Risk Factors
`Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
`Item 3. Defaults Upon Senior Securities
`Item 4. Submission of Matters to a Vote of Security Holders
`Item 5. Other Information
`Item 6. Exhibits
`Signatures
` EX-31.1
` EX-31.2
` EX-32.1
`
`2
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`Page
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`3
`3
`4
`5
`6
`15
`22
`23
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`23
`23
`33
`33
`33
`34
`34
`35
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`1/6/2021
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`Table of Contents
`
`PART I. FINANCIAL INFORMATION
`Item 1. FINANCIAL STATEMENTS
`
`
`
`
`
`
`Current assets:
`Cash and cash equivalents
`Short-term investments
`Receivables
`Restricted cash
`Prepaid and other current assets
`Total current assets
`Property and equipment, net
`Notes receivable
`Other assets
`Total assets
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`e10vq
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`ARADIGM CORPORATION
`
`CONDENSED BALANCE SHEETS
`
`(In thousands, except share data)
`
`ASSETS
`
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`$
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`
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`$
`
`
`June 30,
`
`2009
`
`(Unaudited)
`
`
`
`
`7,101
`8,665
`230
`225
`630
`16,851
`4,465
`50
`104
`21,470
`
`
`
`
`
`
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`
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`
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`
`
`December 31,
`2008
`
`(Note 1)
`
`
`
`16,741
`2,399
`393
`225
`387
`20,145
`5,093
`34
`247
`25,519
`
`
`
`
`
`
`$
`
`
`
`
`
`
`
`
`$
`
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`
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`LIABILITIES AND SHAREHOLDERS’ EQUITY
`
`Current liabilities:
`Accounts payable
`Accrued clinical and cost of other studies
`Accrued compensation
`Deferred revenue
`Facility lease exit obligation
`Other accrued liabilities
`Total current liabilities
`Deferred rent
`Facility lease exit obligation, non-current
`Deferred revenue, non-current
`Other non-current liabilities
`Note payable and accrued interest
`Total liabilities
`Commitments and contingencies
`Shareholders’ equity:
`Preferred stock, 2,950,000 shares authorized, none outstanding
`Common stock, no par value; authorized shares: 150,000,000 at June 30, 2009 and December 2008; issued and outstanding shares: 100,726,171 at June 30,
`2009 and 55,029,384 at December 31, 2008
`Accumulated other comprehensive income (loss)
`Accumulated deficit
`Total shareholders’ equity
`Total liabilities and shareholders’ equity
`
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`$
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`
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`
`
`
`
`
`
`
`
`
`$
`
`
`
`
`
`
`
`1,463
`173
`1,190
`4,832
`254
`402
`8,314
`152
`967
`—
`75
`8,679
`18,187
`
`
`
`
`
`
`
`
`
`
`
`
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`
`
`
`
`347,774
`(4)
`(344,487)
`3,283
`
`21,470
`
`
`
`
`
`
`
`
`
`
`
`
`
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`
`
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`$
`
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`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`$
`
`
`
`
`
`
`739
`94
`1,051
`—
`318
`630
`2,832
`199
`1,056
`4,122
`82
`8,472
`16,763
`
`
`
`
`
`
`
`
`
`
`343,426
`4
`(334,674)
`8,756
`25,519
`
`
`
`
`
`
`
`
`
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`
`
`
`
`
`
`
`
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`
`
`See accompanying Notes to Condensed Financial Statements
`
`3
`
`https://www.sec.gov/Archives/edgar/data/1013238/000095012309031361/f53244e10vq.htm
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`4/37
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`1/6/2021
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`Table of Contents
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`e10vq
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`2009
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`2008
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`Six Months Ended
`June 30,
`
`2009
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`2008
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`Revenue:
`Contract revenue
`Operating expenses:
`Research and development
`General and administrative
`Restructuring and asset impairment
`Total operating expenses
`Loss from operations
`Interest income
`Interest expense
`Other income (expense), net
`Net loss
`
`Basic and diluted net loss per common share
`Shares used in computing basic and diluted net loss per common share
`
`
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`ARADIGM CORPORATION
`
`CONDENSED STATEMENTS OF OPERATIONS
`
`(In thousands, except per share data)
`
`(Unaudited)
`
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`$
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`$
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`$
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`Three Months Ended
`June 30,
`
`
`
`
`
`—
`
`
`
`2,927
`
`1,368
`
`205
`
`4,500
`(4,500)
`14
`
`(105)
`(3)
`(4,594)
`
`
`(0.05)
`99,298
`
`
`
`
`
`
`
`
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`
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`
`
`54
`
`
`
`5,364
`
`1,825
`
`20
`
`7,209
`(7,155)
`202
`
`(100)
`1
`
`(7,052)
`
`
`(0.13)
`54,519
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`$
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`
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`
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`$
`
`$
`
`
`
`
`
`
`
`
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`—
`
`
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`6,653
`
`2,766
`
`223
`
`9,642
`(9,642)
`42
`
`(209)
`(4)
`(9,813)
`
`
`(0.12)
`85,080
`
`
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`
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`
`
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`
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`54
`
`9,693
`3,374
`42
`13,109
`(13,055)
`563
`(198)
`—
`(12,690)
`
`(0.23)
`54,083
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`$
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`$
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`$
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`$
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`$
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`$
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`See accompanying Notes to Condensed Financial Statements
`
`4
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`5/37
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`2009
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`1/6/2021
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`Table of Contents
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`
`
`Cash flows from operating activities:
`Net loss
`Adjustments to reconcile net loss to cash used in operating activities:
`Impairment loss on property and equipment
`Amortization and accretion of investments
`Depreciation
`Stock-based compensation
`Loss on retirement and sale of property and equipment
`Facility lease exit cost
`Changes in operating assets and liabilities:
`Receivables
`Prepaid and other current assets
`Restricted cash
`Other assets
`Accounts payable
`Accrued compensation
`Other accrued liabilities
`Deferred rent
`Deferred revenue
`Facility lease exit obligation
`Net cash used in operating activities
`Cash flows from investing activities:
`Capital expenditures
`Purchases of available-for-sale investments
`Proceeds from sales and maturities of available-for-sale investments
`Notes receivable payments
`Net cash provided by (used in) investing activities
`Cash flows from financing activities:
`Proceeds from public offering of common stock, net
`Proceeds from issuance of common stock, net
`Net cash provided by financing activities
`Net decrease in cash and cash equivalents
`Cash and cash equivalents at beginning of period
`Cash and cash equivalents at end of period
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`e10vq
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`ARADIGM CORPORATION
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`CONDENSED STATEMENTS OF CASH FLOWS
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`(In thousands)
`
`(Unaudited)
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`$
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`$
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`(9,813)
`
`
`31
`
`(5)
`600
`
`384
`
`3
`
`158
`
`
`
`163
`
`(243)
`—
`
`27
`
`724
`
`139
`
`51
`
`(47)
`710
`
`(195)
`(7,313)
`
`
`(6)
`(8,669)
`2,400
`
`(16)
`(6,291)
`
`
`3,927
`
`37
`
`3,964
`
`(9,640)
`16,741
`
`7,101
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`Six Months Ended
`June 30,
`
`
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`2008
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`
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`
`(12,690)
`
`—
`(6)
`375
`482
`—
`—
`
`282
`459
`(6)
`12
`(267)
`3
`83
`(37)
`288
`(184)
`(11,206)
`
`(2,013)
`(1,235)
`10,547
`—
`7,299
`
`—
`143
`143
`(3,764)
`29,964
`26,200
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`$
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`$
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`See accompanying Notes to Condensed Financial Statements
`
`5
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`1/6/2021
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`Table of Contents
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`e10vq
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`ARADIGM CORPORATION
`
`NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
`
`June 30, 2009
`
`1. Organization and Basis of Presentation
`Organization
` Aradigm Corporation (the “Company,” “we,” “our,” or “us”) is a California corporation focused on the development and commercialization of drugs delivered by inhalation for the treatment of severe
`respiratory diseases. The Company’s principal activities to date have included conducting research and development and developing collaborations. Management does not anticipate receiving any revenues from
`the sale of products in the upcoming year. The Company operates as a single operating segment.
`
`Basis of Presentation
` The accompanying unaudited condensed financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the
`instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted
`accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management, the financial statements
`reflect all adjustments, which are of a normal recurring nature, necessary for fair presentation. The accompanying unaudited condensed financial statements should be read in conjunction with the financial
`statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, as filed with the SEC on March 30, 2009 (the “2008 Form 10-K”). The results of
`the Company’s operations for the interim periods presented are not necessarily indicative of operating results for the full fiscal year or any future interim period.
` The balance sheet at December 31, 2008 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by United States generally
`accepted accounting principles for complete financial statements. For further information, please refer to the financial statements and notes thereto included in the 2008 Form 10-K.
` In accordance with SFAS 165 Subsequent Events, we have evaluated subsequent events through August 6, 2009, the date of issuance of the unaudited condensed financial statements. See Note 12,
`Subsequent Events.
`
`2. Summary of Significant Accounting Policies
`Use of Estimates
` The preparation of financial statements, in conformity with United States generally accepted accounting principles, requires management to make estimates and assumptions that affect the amounts reported
`in the financial statements and accompanying notes. These estimates include useful lives for property and equipment and related depreciation calculations, estimated amortization period for payments received
`from product development and license agreements as they relate to revenue recognition, assumptions for valuing options and warrants, and income taxes. Actual results could differ materially from these
`estimates.
`Cash and Cash Equivalents
` The Company considers all liquid investments purchased with an initial maturity of three months or less to be cash equivalents. The Company invests cash and cash equivalents not needed for operations in
`money market funds, commercial paper, corporate bonds and government notes in accordance with its investment policy.
`Investments
` Management determines the appropriate classification of the Company’s investments, which consist solely of debt securities, at the time of purchase. All investments are classified as available-for-sale,
`carried at estimated fair value and reported in cash and cash equivalents or short-term investments. Unrealized gains and losses on available-for-sale securities are excluded from earnings and losses and are
`reported as a separate component in accumulated other comprehensive income (loss) in shareholders’ equity until realized. Fair values of investments are based on quoted market prices where available. Interest
`income is recognized when earned and
`
`6
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`e10vq
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`includes interest, dividends, amortization of purchase premiums and discounts, and realized gains and losses on sales of securities. The cost of securities sold is based on the specific identification method. The
`Company regularly reviews all of its investments for other-than-temporary declines in fair value. When the Company determines that the decline in fair value of an investment below the Company’s accounting
`basis is other-than-temporary, the Company reduces the carrying value of the securities held and recognizes the loss in earnings for the amount of any such decline that is related to the credit loss component. If
`the Company has intent to sell the asset before maturity, the entire amount of the decline is recognized in earnings. No such reductions have been required during any of the periods presented.
`Property and Equipment
` The Company records property and equipment at cost and calculates depreciation using the straight-line method over the estimated useful lives of the respective assets. Machinery and equipment includes
`external costs incurred for validation of the equipment. The Company does not capitalize internal validation expense. Computer equipment and software includes capitalized computer software. All of the
`Company’s capitalized software is purchased; the Company has not internally developed computer software. Leasehold improvements are depreciated over the shorter of the term of the lease or useful life of the
`improvement.
`Impairment of Long-Lived Assets
` In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company reviews for impairment whenever events
`or changes in circumstances indicate that the carrying amount of property and equipment may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows
`resulting from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the assets, the assets are written down to their
`estimated fair values and the loss is recognized in the statements of operations.
`Accounting for Costs Associated with Exit or Disposal Activities
` In accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities (“SFAS 146”), the Company recognizes a liability for the cost associated with an exit or disposal activity
`that is measured initially at its fair value in the period in which the liability is incurred. According to SFAS 146, costs to terminate an operating lease or other contracts are (a) costs to terminate the contract
`before the end of its term or (b) costs that will continue to be incurred under the contract for its remaining term without economic benefit to the entity. In periods subsequent to initial measurement, changes to
`the liability are measured using the credit-adjusted risk-free rate that was used to measure the liability initially.
`Revenue Recognition
` Contract revenues consist of revenues from grants, collaboration agreements and feasibility studies. The Company recognizes revenue under the provisions of the SEC’s Staff Accounting Bulletin 104, Topic
`13, Revenue Recognition Revised and Updated (“SAB 104”) and Emerging Issues Task Force Issue No. 00-21, Revenue Arrangements with Multiple Deliverables (“EITF 00-21”). Revenue for arrangements not
`having multiple deliverables, as outlined in EITF 00-21, is recognized once costs are incurred and collectability is reasonably assured. Under some agreements, the Company’s collaborators have the right to
`withhold reimbursement of costs incurred until the work performed under the agreement is mutually agreed upon. For these agreements, revenue is recognized upon acceptance of the work and confirmation of
`the amount to be paid by the collaborator. Deferred revenue includes the portion of all refundable and nonrefundable research payments received that have not been earned. In accordance with contract terms,
`milestone payments from collaborative research agreements are considered reimbursements for costs incurred under the agreements and, accordingly, are recognized as revenue either upon completion of the
`milestone effort, when payments are contingent upon completion of the effort, or are based on actual efforts expended over the remaining term of the agreement when payments precede the required efforts.
`Costs of contract revenues are approximate to or are greater than such revenues, and are included in research and development expenses. Refundable development and license fee payments are deferred until
`specific performance criteria are achieved. Refundable development and license fee payments are generally not refundable once specific performance criteria are achieved and accepted.
` Collaborative license and development agreements that require the Company to provide multiple deliverables, such as a license, research and product steering committee services and other performance
`obligations, are accounted for in accordance with EITF 00-21. Under EITF 00-21, delivered items are evaluated to determine whether such items have value to the Company’s collaborators on a stand-alone
`basis and whether objective reliable evidence of fair value of the undelivered items exists. Deliverables that meet these criteria are considered a separate unit of accounting. Deliverables that do not meet these
`criteria are combined and accounted for as a single unit of accounting. The appropriate revenue recognition criteria are identified and applied to each separate unit of accounting.
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`Research and Development
` Research and development expenses consist of costs incurred for company-sponsored, collaborative and contracted research and development activities. These costs include direct and research-related
`overhead expenses. Research and development expenses under collaborative and government grants approximate the revenue recognized under such agreements. The Company expenses research and
`development costs as such costs are incurred.
`Stock-Based Compensation
` The Company accounts for share-based payment arrangements in accordance with SFAS No. 123(R), Share-Based Payment (“SFAS 123(R)”) which requires the recognition of compensation expense, using
`a fair-value based method, for all costs related to share-based payments including stock options and restricted stock awards and stock issued under the employee stock purchase plan. SFAS 123(R) requires
`companies to estimate the fair value of share-based payment awards on the date of the grant using an option-pricing model. The Company has adopted the simplified method to calculate the beginning balance
`of the additional paid-in capital, or APIC, pool of excess tax benefits, and to determine the subsequent effect on the APIC pool and statement of cash flows of the tax effects of stock-based compensation awards.
`Income Taxes
` The Company makes certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and
`liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes. As part of the process of preparing the financial statements, the Company is
`required to estimate income taxes in each of the jurisdictions in which it operates. This process involves the Company estimating its current tax exposure under the most recent tax laws and assessing temporary
`differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in the balance sheets.
` The Company assesses the likelihood that it will be able to recover its deferred tax assets. It considers all available evidence, both positive and negative, including the historical levels of income and losses,
`expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. If the Company does not
`consider it more likely than not that it will recover its deferred tax assets, the Company records a valuation allowance against the deferred tax assets that it estimates will not ultimately be recoverable. At
`June 30, 2009 and December 31, 2008, the Company believed that the amount of its deferred income taxes would not be ultimately recovered. Accordingly, the Company recorded a full valuation allowance for
`deferred tax assets. However, should there be a change in the Company’s ability to recover its deferred tax assets, the Company would recognize a benefit to its tax provision in the period in which it determines
`that it is more likely than not that it will recover its deferred tax assets.
`Net Loss Per Common Share
` Basic net loss per common share is computed using the weighted-average number of shares of common stock outstanding during the period less the weighted-average number of shares of common stock
`subject to repurchase. Potentially dilutive securities were not included in the net loss per common share calculation for the three months and six months ended June 30, 2009 and 2008, because the inclusion of
`such shares would have had an anti-dilutive effect.
`Recently Issued Accounting Pronouncements
` In June 2009, the Financial Accounting Standards Board (“FASB”) issued SFAS 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles — a
`replacement of FAS No 162 (“SFAS 168”). SFAS 168 states that that the codification will become the source of authoritative United States generally accepted accounting principles (“GAAP”). Once the
`codification is in effect, all of its content will carry the same level of authority. Thus, the GAAP hierarchy will be modified to include only two levels of GAAP, authoritative and nonauthoritative. SFAS 168
`will be effective for us in the quarter ended September 30, 2009. The Company does not expect the adoption of SFAS 168 to have an impact on its financial position or results of operations.
` In May 2009, the FASB issued SFAS 165, Subsequent Events (“SFAS 165”). SFAS 165 provides guidance on management’s assessment of subsequent events. SFAS 165 includes existing guidance that was
`previously included in United States auditing
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`literature. In addition, SFAS 165 clarifies that management is responsible for evaluating events and transactions occurring after the balance sheet date and through the financial statement issuance date that
`should be disclosed as subsequent events. The evaluation and assessment must be performed for interim and annual reporting periods. SFAS 165 is effective for the Company for the quarter ending June 30,
`2009. The adoption of SFAS 165 did not have a material impact of the Company’s financial position or results of operations.
` In April 2009, the FASB issued FASB Staff Position No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (“FSP FAS 115-2 and FSP FAS 124-2”). FSP FAS
`115-2 and FSP FAS 124-2 are intended to provide greater clarity to investors about the credit and noncredit component of another-than-temporary impairment event and to more effectively communicate when
`an other than temporary impairment event has occurred. This guidance applies to debt securities only and requires separate display of losses related to credit deterioration and losses related to other market
`factors. When an entity does not intend to sell the security and it is more likely than not that an entity will not have to sell the security before recovery of its cost basis, it must recognize the credit component of
`an other than temporary impairment in earnings and the remaining portion in other comprehensive income. FSP FAS 115-2 and FSP FAS 124-2 are effective for the Company for the quarter ending June 30,
`2009. The adoption of FSP FAS 115-2 and FSP FAS 124-2 did not have a material impact of the Company’s financial position or results of operations.
` In April 2009, the FASB issued FASB Staff Position No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying
`Transactions That Are Not Orderly (“FSP FAS 157-4”). FSP FAS 157-4 provides additional authoritative guidance to assist both issuers and users of financial statements in determining whether a market is
`active or inactive, and whether a transaction is distressed. FSP FAS 154-4 is effective for the Company for the quarter ending June 30, 2009. The adoption of FSP FAS 157-4 did not have a material impact on
`our financial position or results of operations.
` In April 2009, the FASB issued FASB Staff Position No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (“FSP FAS 107-1 and APB 28-1”). FSP FAS 107-1 and
`APB 28-1 requires disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. FSP FAS 107-1 and APB 28-1 will be
`effective for us for the quarter ending June 30, 2009. The adoption of FAS 107-1 and APB 28-1 did not have an impact on our financial position or results of operations.
` In February 2008, the FASB issued FASB Staff Position No. FSP FAS 157-2, Effective Date of FASB Statement No. 157 (“FSP FAS 157-2”), which defers the effective date of SFAS No. 157, Fair Value
`Measurements, for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), for fiscal
`years beginning after November 15, 2008 and interim periods within those fiscal years for items within the scope of FSP FAS 157-2. The adoption of FSP FAS 157-2 did not have a material impact on the
`Company’s financial position and results of operations.
` In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (“SFAS 141(R)”), which replaced SFAS No. 141, Business Combinations. SFAS 141(R) establishes principles and
`requirements for how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any controlling interest; recognizes
`and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature
`and financial effects of the business combination. SFAS 141(R) is to be applied prospectively to business combinations for which the acquisition date is on or after an entity’s fiscal year that begins after
`December 15, 2008. The Company will assess the impact of SFAS 141(R) if and when a future acquisition occurs.
` In November 2007, the EITF issued EITF Issue No. 07-1, Accounting for Collaborative Arrangements Related to the Development and Commercialization of Intellectual Property (“EITF 07-1”). Companies
`may enter into arrangements with other companies to jointly develop, manufacture, distribute, and market a product. Often the activities associated with these arrangements are conducted by the collaborators
`without the creation of a separate legal entity (that is, the arrangement is operated as a “virtual joint venture”). The arrangements generally provide that the collaborators will share, based on contractually
`defined calculations, the profits or losses from the associated activities. Periodically, the collaborators share financial information related to product revenues generated (if any) and costs incurred that may
`trigger a sharing payment for the combined profits or losses. The consensus requires collaborators in such an arrangement to present the result of activities for which they act as the principal on a gross basis and
`report any payments received from (made to) other collaborators based on other applicable GAAP or, in the absence of other applicable GAAP, based on analogy to authoritative accounting literature or a
`reasonable, rational, and consistently applied accounting policy election. EITF 07-1 is effective
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`for collaborative arrangements in place at the beginning of the annual period beginning after December 15, 2008. The adoption of EITF 07-1 did not have a material impact on the Company’s financial position
`and results of operations.
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`3. Cash, Cash Equivalents and Short-Term Investments
` A summary of cash and cash equivalents and short-term investments, classified as available-for-sale and carried at fair value is as follows (in thousands):
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`Amortized
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`Cost
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`June 30, 2009
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`Cash and cash equivalents
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`7,101
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`Short-term investments:
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`Commercial paper
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`2,948
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`Certificates of deposit
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`3,671
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`U.S. Treasury and agencies
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`2,050
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`Total
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`8,669
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`December 31, 2008
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`Cash and cash equival