United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Delaware | 88-0464853 |
(310) 444-4300
Title of Each Class | Name of Each Exchange On Which Registered | |
---|---|---|
Common Stock, $0.0001 par value | American Stock Exchange LLC |
Securities registered pursuant to Section 12(g) of the Act: None
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. YESþ NOo
Portions of the registrant’s proxy statement for its 2004 annual meeting of stockholders to be held on June 18, 2004, are incorporated by reference into Part III of this report.
PART I | 2 | ||
ITEM 1. BUSINESS | 2 | ||
ITEM 2. PROPERTY | 19 | ||
ITEM 3. LEGAL PROCEEDINGS | 19 | ||
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS | 20 | ||
PART II | 21 | ||
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS | 21 | ||
ITEM 6. SELECTED FINANCIAL DATA | 22 | ||
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 23 | ||
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 27 | ||
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | 28 | ||
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 42 | ||
ITEM 9A. CONTROLS AND PROCEDURES | 42 | ||
PART III | 43 | ||
PART IV | 44 | ||
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K | 44 | ||
SIGNATURES | 46 | ||
EXHIBIT INDEX |
2 | ||
3 | ||
4 | ||
5 | ||
6 | ||
7 | ||
- broad awareness
- focused target market initiatives
- Hythiam™
- HANDS™
- The HANDS Patient Protocol™
- HANDS Treatment Protocol™
8 | ||
Name | Age | Position | Director Since |
Terren S. Peizer | 44 | Director, Chairman of the Board of Directors and Chief Executive Officer | 2003 |
Anthony M. LaMacchia | 50 | Director, Chief Operating Officer | 2003 |
Chuck Timpe | 57 | Chief Financial Officer | |
James W. Elder | 52 | Senior Vice President - Marketing and Business Development | |
David E. Smith, M.D. | 64 | Senior Vice President - Medical Affairs, Chair of Clinical Advisory Board | |
Leslie F. Bell, Esq. | 63 | Director, Chair of Audit Committee, Member of Compensation Committee | 2003 |
Hervé de Kergrohen, M.D. | 46 | Director, Chair of Nominations and Governance Committee, Member of Audit Committee | 2003 |
Richard A. Anderson | 34 | Director, Member of Audit Committee | 2003 |
Ivan M. Lieberburg, Ph.D., M.D. | 54 | Director, Chair of Compensation Committee, Chair of Scientific Advisory Board, Member of Clinical Advisory Board | 2003 |
Juan José Legarda, Ph.D. | 48 | Director, Member of Nominations and Governance Committee, Member of Scientific Advisory Board, Member of Clinical Advisory Board | 2003 |
9 | ||
10 | ||
11 | ||
12 | ||
13 | ||
14 | ||
15 | ||
16 | ||
17 | ||
18 | ||
19 | ||
20 | ||
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is listed for trading on the American Stock Exchange under the symbol “HTM.” Prior to December 15, 2003, the stock was quoted on the OTC BulletinBoard. As of March 23, 2004, there were approximately 200 record holders and approximately 800 beneficial owners of our common stock.Following is a list by fiscal quarters of the sales prices of the stock:
Sales Prices | |||||||
2003 | High |
|
| Low | |||
4th Quarter | $ | 7.50 | $ | 6.70 | |||
3rd Quarter(2)(4) | $ | 7.10 | $ | 7.10 | |||
2nd Quarter(2) | $ | 0.54 | $ | 0.52 | |||
1st Quarter(3) | -- | -- |
Sales Prices | |||||||
2002 | High | Low | |||||
4th Quarter(2) | $ | 0.54 | $ | 0.50 | |||
3rd Quarter(1)(2) | $ | 0.54 | $ | 0.54 | |||
2nd Quarter(1) | -- | -- | |||||
1st Quarter(1) | -- | -- |
21 | ||
(In thousands, except per share amounts) | Period from February 13, 2003 (Inception) through December 31, 2003 | ||
STATEMENT OF OPERATIONS DATA | |||
Revenues | $ | 75 | |
Operating expenses | |||
General and administrative | |||
Salaries and benefits | 1,617 | ||
Other expenses, including $337 related to stock-based payments | 1,928 | ||
Depreciation and amortization | 75 | ||
Total operating expenses | 3,620 | ||
Loss from operations | (3,545 | ) | |
Interest income | 41 | ||
Loss before provision for income taxes | (3,504 | ) | |
Provision for income taxes | — | ||
Net loss | $ | (3,504 | ) |
Basic and diluted loss per share | $ | (.21 | ) |
Weighted average shares outstanding | 16,888 | ||
BALANCE SHEET DATA (as of December 31, 2003) | |||
Cash and cash equivalents | $ | 3,444 | |
Total current assets | 17,344 | ||
Total assets | 22,580 | ||
Total liabilities | 2,092 | ||
Stockholders' equity | 20,488 | ||
CASH FLOW STATEMENT DATA | |||
Net cash used in operating activities | $ | (1,675 | ) |
Net cash used in investing activities | (16,226 | ) | |
Net cash provided by financing activities | 21,345 |
22 | ||
23 | ||
Quarters Ended | |||||||||||
March 31 |
| June 30 |
| September 30 |
| December 31 | |||||
(in thousands except per share amounts) | |||||||||||
Revenues | $ | - | $ | - | $ | 44 | $ 31 | ||||
Operating expenses | |||||||||||
General and administrative | |||||||||||
Salaries and benefits | - | 63 | 364 | 1,190 | |||||||
Other expenses | - | 138 | 515 | 1,275 | |||||||
Depreciation and amortization | - | - | 9 | 66 | |||||||
Loss from operations | - | (201 | ) | (844 | ) | (2,500) | |||||
Interest income | - | - | 3 | 38 | |||||||
Net loss | $ | - | $ | (201 | ) | $ | (841 | ) | $ (2,462) | ||
Basic and diluted loss per share | $ | - | $ | (0.02 | ) | $ | (0.06 | ) | $ (0.13) | ||
24 | ||
Contractual Obligations |
|
| Total |
|
| Less than1 year |
|
| 1 - 3 years |
|
| 3 - 5 years |
|
| More than5 years | |
Operating lease obligations(1) | $ | 2,992,000 | $ | 392,000 | $ | 822,000 | $ | 874,000 | $ | 904,000 | ||||||
Lease build-out/furniture andequipment commitments(2) | 333,000 | 333,000 | - | - | - | |||||||||||
$ | 3,325,000 | $ | 725,000 | $ | 822,000 | $ | 874,000 | $ | 904,000 | |||||||
25 | ||
26 | ||
27 | ||
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(Dollars in thousands, except per share data) | ||||
ASSETS | ||||
Current assets | ||||
Cash and cash equivalents | $ | 3,444 | ||
Marketable securities | 13,196 | |||
Receivables | 455 | |||
Prepaids and other current assets | 249 | |||
Total current assets | 17,344 | |||
Long-term assets | ||||
Property and equipment, net | 1,981 | |||
Intellectual property, net | 2,772 | |||
Deposits and other assets | 483 | |||
$ | 22,580 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
Current liabilities | ||||
Accounts payable | $ | 1,259 | ||
Accrued compensation and benefits | 318 | |||
Other accrued liabilities | 451 | |||
Total current liabilities | 2,028 | |||
Long-term liabilities | ||||
Deferred rent liability | 64 | |||
Commitments and contingencies | ||||
Stockholders' equity | ||||
Preferred stock, $.0001 par value; 50,000,000 shares authorized, no shares issued and outstanding | — | |||
Common stock, $.0001 par value; 200,000,000 shares authorized, and 24,607,000 issued and | ||||
outstanding | 3 | |||
Additional paid-in capital | 24,113 | |||
Deficit accumulated during the development stage | (3,628 | ) | ||
Total stockholders' equity | 20,488 | |||
$ | 22,580 | |||
28 | ||
(In thousands except per share amounts) | ||||
Revenues | $ | 75 | ||
Operating expenses | ||||
General and administrative | ||||
Salaries and benefits | 1,617 | |||
Other expenses, including $337 related to stock-based payments | 1,928 | |||
Depreciation and amortization | 75 | |||
Total operating expenses | 3,620 | |||
Loss from operations | (3,545 | ) | ||
Interest income | 41 | |||
Loss before provision for income taxes | (3,504 | ) | ||
Provision for income taxes | — | |||
Net loss | $ | (3,504 | ) | |
Basic and diluted loss per share | $ | (0.21 | ) | |
29 | ||
(In thousands) | ||||||||||||||||||||||
Preferred stock | Common stock | Additional paid-in- | Deficit | |||||||||||||||||||
Shares | Amount | Shares | Amount | capital | stage | Total | ||||||||||||||||
Common stock issued at inception | - | $ | - | 13,740 | $ | - | $ | 1 | $ | - | $ | 1 | ||||||||||
Common stock issued in merger transaction | - | - | 1,120 | 1 | (1 | ) | - | - | ||||||||||||||
Preferred stock and warrants issued for cash | 1,876 | 2 | - | - | 4,688 | - | 4,690 | |||||||||||||||
Beneficial conversion feature of preferred stock | - | - | - | - | 124 | (124 | ) | - | ||||||||||||||
Common stock issued in private placement offering, net of expenses | - | - | 7,035 | 7 | 16,647 | - | 16,654 | |||||||||||||||
Conversion of preferred stock to common stock | (1,876 | ) | (2 | ) | 1,876 | 2 | - | - | - | |||||||||||||
Par value change from $0.001 to $0.0001 | - | - | - | (8 | ) | 8 | - | - | ||||||||||||||
Common stock and options issued for intellectual property acquired | - | - | 836 | 1 | 2,280 | - | 2,281 | |||||||||||||||
Stock options and warrants issued for outside services | - | - | - | - | 366 | - | 366 | |||||||||||||||
Net loss | - | - | - | - | - | (3,504 | ) | (3,504 | ) | |||||||||||||
Balance at December 31, 2003 | - | $ | - | 24,607 | $ | 3 | $ | 24,113 | $ | (3,628 | ) | $ | 20,488 | |||||||||
30 | ||
(In thousands) | ||||
Operating activities | ||||
Net loss | $ | (3,504 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | ||||
Depreciation and amortization | 75 | |||
Deferred rent liability | 64 | |||
Stock-based expense | 337 | |||
Changes in current assets and liabilities: | ||||
Increase in receivables | (455 | ) | ||
Increase in prepaids and other current assets | (220 | ) | ||
Increase in accounts payable | 1,259 | |||
Increase in accrued compensation and benefits | 318 | |||
Increase in accrued liabilities | 451 | |||
Net cash used in operating activities | (1,675 | ) | ||
Investing activities | ||||
Purchases of marketable securities | (18,240 | ) | ||
Proceeds from sales and maturities of marketable securities | 5,044 | |||
Purchase of property and equipment | (2,009 | ) | ||
Cash deposited as collateral for letter of credit | (350 | ) | ||
Deposits made on equipment | (133 | ) | ||
Cost of intellectual property | (538 | ) | ||
Net cash used in investing activities | (16,226 | ) | ||
Financing activities | ||||
Net proceeds from the sale of common and preferred stock and warrants | 21,345 | |||
Net cash provided by financing activities | 21,345 | |||
Net increase in cash and cash equivalents | 3,444 | |||
Cash and cash equivalents at beginning of period | — | |||
Cash and cash equivalents at end of period | $ | 3,444 | ||
Supplemental disclosure of non-cash activity | ||||
Common stock and options issued for intellectual property | $ | 2,281 | ||
Common stock and warrants issued to consultants | 139 | |||
Common stock and warrants issued as commissions on private placement | 265 | |||
Fair Market Value | Less than 1 Year | 1–5 Years | 5-10 Years | More than 10 Years | ||||||||||||
Short-term variable rate taxable municipal securities | $ | 8,955,000 | $ | - | $ | - | $ | - | $ | 8,955,000 | ||||||
Short-term variable rate auction preferred securities | 4,000,000 | 4,000,000 | - | - | - | |||||||||||
Certificates of deposit | 241,000 | 241,000 | - | - | - | |||||||||||
$ | 13,196,000 | $ | 4,241,000 | - | - | $ | 8,955,000 | |||||||||
The cost of the above securities approximated fair market value.
32 | ||
Fair Value of Financial Instruments and Concentration of Credit Risk
33 | ||
Period from February 13, 2003 (Inception) through December 31, 2003 | ||||
Net loss | $ | (3,504,000 | ) | |
Less: Beneficial conversion feature of preferred stock | (124,000 | ) | ||
Net loss available to common stockholders | $ | (3,628,000 | ) | |
Basic and diluted loss per share | $ | (0.21 | ) | |
Weighted average common shares used to compute basic net loss per share | 16,888,000 | |||
Effect of dilutive securities | — | |||
Weighted average common shares used to compute diluted net loss per share | 16,888,000 | |||
All share and per share data have been restated to reflect a stock split of 100 to 1 declared on July 1, 2003.
As reported | $ | (3,504,000 | ) | |
Less: Stock based compensation expense determined underfair value based method | (73,000 | ) | ||
Pro forma net loss | (3,577,000 | ) | ||
Less: Beneficial conversion feature of preferred stock | (124,000 | ) | ||
Net loss available to common stockholders | $ | (3,701,000 | ) | |
As reported – basic | $ | (0.21 | ) | |
Pro forma – basic | $ | (0.22 | ) | |
As reported – diluted | $ | (0.21 | ) | |
Pro forma – diluted | $ | (0.22 | ) | |
0 | % | |||
Risk-free interest rate | 4.09 | % | ||
Expected lives | 10 years | |||
Expected dividend yield | 0 | % |
34 | ||
35 | ||
License fees receivable | $ | 16,000 | ||
Payroll tax refunds | 110,000 | |||
Tenant improvement allowance(1) | 301,000 | |||
Other receivables | 42,000 | |||
469,000 | ||||
Less-allowance for doubtful accounts | ( 14,000 | ) | ||
$ | 455,000 | |||
36 | ||
Leasehold improvements | $ | 1,080,000 | ||
Furniture and equipment | 918,000 | |||
1,998,000 | ||||
Less-accumulated depreciation | ( 17,000 | ) | ||
$ | 1,981,000 | |||
Deferred tax asset | ||||
Net operating losses | $ | 1,182,000 | ||
Temporary differences | 59,000 | |||
Valuation allowance | (1,241,000 | ) | ||
$ | - | |||
Federal statutory rate | (34 | %) | ||
State taxes | ( 9 | %) | ||
Stock-based expense | 4 | % | ||
Other | 3 | % | ||
Change in valuation allowance | 36 | % | ||
- | % | |||
37 | ||
Shares | Weighted Average Exercise Price | ||||||
Granted | 4,000,000 | $ | 2.56 | ||||
Exercised | - | - | |||||
Cancelled | (60,000 | ) | (2.50 | ) | |||
Balance, December 31, 2003 | 3,940,000 | $ | 2.56 | ||||
Options Outstanding | Options Exercisable | |||||||||||||||
Range of Exercise Prices |
|
| Options Outstanding |
|
| Weighted Average Remaining Contractual Life |
|
| Weighted Average Exercise Price |
|
| Options Exercisable |
|
| Weighted Average Exercise Price | |
$ 2.50 to $ 2.75 | 3,940,000 | 8.1 years | $ | 2.56 | 25,000 | $ | 2.50 |
38 | ||
Description |
| Shares |
| Weighted Average Remaining ContractualLife |
| Weighted Average ExercisePrice | ||||
Options issued for intellectual property | 532,000 | 8.2 years | $ | 2.50 | ||||||
Warrants issued to preferred stockholders | 385,000 | 4.0 years | 2.50 | |||||||
Warrants issued in connection with equity offering | 237,000 | 3.1 years | 2.68 | |||||||
Warrants issued for future services | 80,000 | 4.8 years | 2.50 | |||||||
1,234,000 | 5.7 years | $ | 2.54 | |||||||
Period ending December 31, | Base Rental Payments | |||
2004 | $ | 392,000 | ||
2005 | 405,000 | |||
2006 | 417,000 | |||
2007 | 431,000 | |||
2008 | 443,000 | |||
Thereafter | 904,000 | |||
Total | $ | 2,992,000 | ||
39 | ||
Quarter Ended | ||||||||||||
March 31 | June 30 | September 30 | December 31 | Total 2003 | ||||||||
(In thousands, except per share) | ||||||||||||
Net revenues |
| $ - | $ | - | $ 44 | $ 31 | $ 75 | |||||
Operating loss | - | (201) | (844) | (2,500) | (3,545) | |||||||
Net loss | - | (201) | (841) | (2,462) | (3,504) | |||||||
Basic and diluted loss per share | - | (0.02) | (0.06) | (0.13) | (0.21) |
40 | ||
41 | ||
42 | ||
The information required by Items 10 through 14 of Part III is incorporated by reference from Item 1 of this report and from registrants’ proxy statement that will be mailed to stockholders in connection with the registrant’s 2004 annual meeting of stockholders.
43 | ||
PART IV
Balance Sheet as of December 31, 2003 | 28 |
Statement of Operations for the periodfrom February 13, 2003 (Inception) through December 31, 2003 | 29 |
Statement of Stockholder’s Equity for the periodfrom February 13, 2003 (Inception) through December 31, 2003 | 30 |
Statement of Cash Flows for the periodfrom February 13, 2003 (Inception) through December 31, 2003 | 31 |
Notes to Financial Statements | 32 |
Report of Independent Public Accountants | 41 |
44 | ||
Exhibit No. | Description |
2.1 | Asset Purchase Agreement among Alaska Freightways, Inc., Donald E. Nelson, Richard L. Strahl and Brady L. Strahl, dated September 29, 2003* |
2.2 | Agreement and Plan of Merger among Alaska Freightways, Inc., Hythiam Acquisition Corporation, Hythiam, Inc., a New York corporation, and certain Stockholders, dated September 29, 2003* |
2.3 | Agreement and Plan of Merger between Alaska Freightways, Inc. and Hythiam, Inc., a Delaware corporation, dated September 29, 2003* |
3.1 | Certificate of Incorporation of Hythiam, Inc., a Delaware corporation, filed with the Secretary of State of Delaware on September 29, 2003* |
3.2 | By-Laws of Hythiam, Inc., a Delaware corporation* |
14.1 | Code of Conduct and Ethics |
14.2 | Code of Ethics for CEO and Senior Financial Officers |
16.1 | Letter from Hawkins Accounting dated October 10, 2003, confirming that there have been no disagreements with management on any matter of accounting principles or practices, financial statement disclosure, auditing scope or procedure, or any reportable events† |
31.1 | Certification by the Chief Executive Officer, pursuant to Rule 13-a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 | Certification by the Chief Financial Officer, pursuant to Rule 13-a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 | Certification by the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2 | Certification by the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
99.1 | 2003 Stock Incentive Plan* |
45 | ||
HYTHIAM, INC. | ||
| | |
Date: March 26, 2004 | By: | /s/ TERREN S. PEIZER |
Terren S. Peizer President and Chief Executive Officer |
Signature | Title(s) | Date |
/s/ TERREN S. PEIZER Terren S. Peizer | Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer) | March 26, 2004 |
/s/ CHUCK TIMPE Chuck Timpe | Chief Financial Officer (Principal Financial and Accounting Officer) | March 26, 2004 |
/s/ ANTHONY M. LAMACCHIA Anthony M. LaMacchia | Director and Chief Operating Officer | March 26, 2004 |
/s/ LESLIE F. BELL Leslie F. Bell | Director | March 26, 2004 |
/s/ HERVÉ DE KERGROHEN Hervé de Kergrohen | Director | March 26, 2004 |
/s/ RICHARD A. ANDERSON Richard A. Anderson | Director | March 26, 2004 |
/s/ IVAN M. LIEBERBURG Ivan M. Lieberburg | Director | March 26, 2004 |
46 | ||
Exhibit No. | Description |
2.1 | Asset Purchase Agreement among Alaska Freightways, Inc., Donald E. Nelson, Richard L. Strahl and Brady L. Strahl, dated September 29, 2003* |
2.2 | Agreement and Plan of Merger among Alaska Freightways, Inc., Hythiam Acquisition Corporation, Hythiam, Inc., a New York corporation, and certain Stockholders, dated September 29, 2003* |
2.3 | Agreement and Plan of Merger between Alaska Freightways, Inc. and Hythiam, Inc., a Delaware corporation, dated September 29, 2003* |
3.1 | Certificate of Incorporation of Hythiam, Inc., a Delaware corporation, filed with the Secretary of State of Delaware on September 29, 2003* |
3.2 | By-Laws of Hythiam, Inc., a Delaware corporation* |
14.1 | Code of Conduct and Ethics |
14.2 | Code of Ethics for CEO and Senior Financial Officers |
16.1 | Letter from Hawkins Accounting dated October 10, 2003, confirming that there have been no disagreements with management on any matter of accounting principles or practices, financial statement disclosure, auditing scope or procedure, or any reportable events† |
31.1 | Certification by the Chief Executive Officer, pursuant to Rule 13-a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 | Certification by the Chief Financial Officer, pursuant to Rule 13-a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 | Certification by the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2 | Certification by the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
99.1 | 2003 Stock Incentive Plan* |
* Incorporated by reference to exhibit of the same number to the registrant’s Form 8-K filed September 30, 2003.
† Incorporated by reference to exhibit of the same number to the registrant’s Form 8-K/A filed October 21, 2003.