14.

Subsequent events:

Endo License Agreement

On January 5, 2012, the Company, Arius and Arius Two, entered into a definitive License and Development Agreement with Endo (the "Endo Agreement"), pursuant to which the Company, Arius and Arius Two agreed to grant to Endo an exclusive commercial world-wide license to develop, manufacture, market and sell the Company's BEMA^® Buprenorphine product and to complete U.S. development of the Product for purposes of seeking FDA approval.

Pursuant to the License Agreement, the Company is responsible for the completion of all clinical trials regarding BEMA^® Buprenorphine necessary to submit an NDA to the FDA in order to obtain approval of BEMA^® Buprenorphine in the United States, pursuant to a development plan set forth in the Endo Agreement (as it may be amended pursuant to the Endo Agreement). The Company is responsible for all development activities through the filing of the NDA in the U.S., while Endo is responsible for the development following the NDA submission as well as the manufacturing, distribution, marketing and sales of BEMA^® Buprenorphine on a worldwide basis. In addition, Endo is responsible for all filings required to be in order to obtain regulatory approval of BEMA^® Buprenorphine.

Pursuant to the Endo Agreement, the Company will receive the following payments (some portion(s) of which will be utilized by the Company to support its development obligations under the License Agreement with respect to the Product):

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$30 million non-refundable payment by January 19, 2012 (received January 17, 2012);

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up to an aggregate of $95 million in potential milestone payments based on pre-defined intellectual property, clinical development and regulatory events, including $15 million upon issuance of a certain patent covering the Product; and

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up to an aggregate of $55 million based on the achievement of certain potential sales milestones.

Such milestone payments are further subject to certain other conditions, adjustments and qualifications set forth in the Endo Agreement.

In addition to the milestone payments set forth above, the Company is also entitled to receive a tiered, mid- to upper-teen royalty on net sales of BEMA^® Buprenorphine in the United States and a mid- to high-single digit royalty on net sales of BEMA^® Buprenorphine outside the United States, which royalty payments are subject to certain restrictions and adjustment features.

The term of the Endo Agreement shall last, on a country-by-country basis, until the later of: (i) 10 years from the date of the first commercial sale of BEMA^® Buprenorphine in a particular country or (ii) the date on which the last valid claim of the Company's patents covering BEMA^® Buprenorphine in a particular country has expired or been invalidated. The Endo Agreement shall be subject to termination: (i) by Endo, at any time, upon a specific amount of prior written notice to the Company, (ii) by Endo and the Company upon their mutual written agreement, (iii) by either party upon a material default or breach of the Endo Agreement and such default or breach is not cured within a specified timeframe, (iv) the voluntary or involuntary bankruptcy of either party or (v) by the Company if Endo does not meet certain diligence obligations outside of the United States.

Conclusion of BEMA^® Purchase From Tolmar

On January 5, 2012, the Company and Arius Two executed a letter agreement with Tolmar and its parent company, TOLMAR Holding, Inc., whereby the parties agreed that, if Arius Two paid Tolmar $1.05 million by February 28, 2012, Tolmar would accept such payment as satisfaction in full of the remaining $2 million outstanding under the Tolmar note (pursuant to which the Company acquired the North American rights to the BEMA^® technology) and, upon receipt of such payment (i) the related security agreements, security interests, liens, guaranties and payment obligations with respect to such note and the assets securing its repayment would terminate, (ii) Tolmar would execute a corresponding release and (iii) neither the Company nor Arius Two will have any further payment obligations to Tolmar under the note or BEMA^® acquisition documents, except with respect to certain indemnification obligations of Arius Two. Arius Two paid the $1.05 million contemplated by the letter agreement on January 6, 2012, fully satisfying the outstanding balance of the note, and Tolmar subsequently executed its final release of the related security interests contemplated by the letter agreement. As a result, the Company now owns all rights to the BEMA^® technology on a worldwide basis.

Extension of BEMA^®-Related Patent

On February 16, 2012, the Company announced that the U.S. Patent and Trademark Office ("USPTO") issued a Notice of Allowance regarding the Company's patent application (No. 13/184306) and, once the patent is granted, will extend the exclusivity of the BEMA^® drug delivery technology for its BEMA^® Buprenorphine and BEMA^® Buprenorphine/Naloxone products from 2020 to 2027. As a result, pursuant to the Endo Agreement, the Company is entitled to a milestone payment in the amount of $15 million upon the final granting of this patent and an additional milestone payment of $20 million at the time of approval of a NDA for BEMA^® Buprenorphine for the treatment of chronic pain.

Renewal of Shelf Registration Statement

In February 2012, the Company's universal shelf registration statement pursuant to which it could issue up to $50 million of its securities from time to tiem and subject to certain conditions expired. In January 2012, the Company filed a renewal of its shelf registration statement which registered up to $40 million of the Company's securities for potential future issuance, and such registration statement was declared effective on February 24, 2012.

Stay Granted in MonoSol Litigation

On March 7, 2012, the court in the Company's lawsuit with MonoSol Rx, LLC granted the Company's motion for a stay of further litigation. The court ordered that the case would be stayed pending resolution by the USPTO of reexamination proceedings and follows the prior rejection by the USPTO of all claims in all three patents asserted by MonoSol against the Company and its commercial partners for ONSOLIS^®. Management estimates that up to $1.0 million of expense previously budgeted for the defense of the MonoSol litigation could be saved by the stay of the litigation, although such estimate may vary depending on future circumstances.

Reformulation of ONSOLIS^®

On March 12, 2012, the Company announced the postponement of the U.S. relaunch of ONSOLIS^® until the product formulation can be modified to address two appearance issues raised by the FDA following an inspection of the ONSOLIS^® manufacturing facility. Specifically, the FDA identified the formation of microscopic crystals and a slight fading of the color during the 24-month shelf life of the product. Management estimates that the total cost of the ONSOLIS^® reformulation project will be between $0.6 million and $1.2 million, although such project in its early stages and such estimate may vary.