NOTE 8 RESTRUCTURING

In July 2012, the Company, at the direction of its Board of Directors, conducted a corporate restructuring under which the number of employees was significantly reduced, retaining only those employees necessary to continue the Company’s efforts to obtain marketing approval for Northera in the United States. This reduction in force primarily, but not exclusively, impacted those positions that had been filled in 2011 and 2012 to support the planned commercialization of Northera in the United States. In addition, the Company’s Chief Executive Officer, or CEO, and its Vice President of Sales and Marketing left the Company. The Company’s Vice President of Operations was appointed Interim President and CEO as the Board evaluates candidates for that position. At the Board level, the Chairman of the Board stepped down, but remains a director, while another existing director assumed the role of Chairman. The former CEO and two other directors also resigned from the Board.

Other than severance payments that continue to be made to its former CEO per the terms of his severance agreement, the Company has completed all other severance payments related to the reduction in force as of September 30, 2013. As a component of the former CEO’s departure, the Company accelerated the vesting of all unvested options that had been previously granted to its former CEO and extended the period in which those options could be exercised from 90 days from the date of termination of July 10, 2012, to two years from that date. For the directors that resigned from the Board, the Company accelerated the vesting of all unvested options that had been previously granted and extended the period in which those options can be exercised from 180 days from the date of separation of July 9, 2012, to one year from that date. As of September 30, 2013, those former directors had exercised options for the purchase of 65,000 shares and options for the purchase of 335,000 shares remained unexercised and have expired (see Note 3). For the former Vice President of Sales and Marketing, the Company agreed that options would continue to vest and could be exercised until the end of his severance period plus 90 days. As of September 30, 2013, all options that had been issued to the former Vice President of Sales and Marketing remained unexercised and have expired (see Note 3). For purposes of determining the accounting impact of these modifications, it is assumed that the original grants are cancelled and new grants are issued. The calculation based upon such assumptions resulted in adjustments being recorded to true-up stock-based compensation expense recorded for those options in 2012 based upon an adjusted fair value.

During 2012, the Company established a reserve related to the costs of the restructuring totaling approximately $2.5 million. As of September 30, 2013, the Company had made cash payments of approximately $2.0 million related to this reserve and had made other non-cash adjustments of approximately $0.1 million. The activity associated with the reserve established by the Company for restructuring charges associated with these actions as of September 30, 2013 are as follows:

	Restructuring						Adjustments,		Restructuring
	Liabilities as of						Non-cash items		Liabilities as of
	December 31,		Charges to the		Cash		and Changes		September 30,
	2012		Reserve		Payments		to Estimates		2013
Employee related costs:
Severance, salary continuation and related costs	$	841,184	$	-	$	(446,235)	$	-	$	394,949
Other costs		-		-		-		-		-
Totals	$	841,184	$	-	$	(446,235)	$	-	$	394,949