Note 5 - Asset Impairment

3 Months Ended

Mar. 31, 2013

5. Asset Impairment

The Company assesses the carrying value of its long-lived assets whenever an indicator of impairment is present. On March 5, 2013, an advisory committee to the FDA concluded that the benefits of salmon calcitonin products, including Fortical, do not outweigh the potential risks associated with their use and as a result, should not continue to be broadly marketed. Subsequent to the FDA recommendation, the Company reassessed its manufacturing operations and held discussions with USL in regards to anticipated future purchase orders for Fortical. Based on this assessment, it was determined that there would be no additional purchase orders submitted for Fortical in the near future and as a result, the Company ceased its manufacturing operations in late March 2013 and implemented a reduction in force on April 1, 2013, which included all personnel directly contributing to Fortical production. As a result of the lack of any anticipated production of Fortical and uncertainty related to any future Fortical manufacturing revenues and royalties, the Company concluded that all of its assets that pertain to Fortical are impaired as of March 31, 2013. The change in the carrying amount of the Company’s long-lived assets during the three months ended March 31, 2013 is summarized as follows:

	Inventories			Fixed Assets			Patents
Balance at December 31, 2012	$	1,961,675		$	2,651,819		$	1,920,574
Additions		374,015			--			44,784
Impairment Charges		(1,635,818	)		(675,065	)		(308,925	)
Depreciation and Amortization		--			(122,901	)		(34,463	)

Balance at March 31, 2013	$	699,872		$	1,853,853		$	1,621,970

The impairment charge to inventory is reflected within cost of goods sold and the impairment charges to fixed assets and patents are reflected within the impairment charges line item in the accompanying statement of operations for the three months ended March 31, 2013. The balance of long-lived assets at March 31, 2013 is comprised of the following: (i) inventories of approximately $700,000 primarily consisting of materials to be provided to Nordic Bioscience pursuant to a joint venture agreement (see Note 12) and laboratory materials; (ii) fixed assets of approximately $1,854,000 primarily consisting of tableting machinery and equipment utilized in supporting the Company’s Biotechnologies SBU and leasehold improvements at the corporate offices; and (iii) patents of approximately $1,622,000 related to the Company’s oral drug delivery technology, its Phase II oral PTH product and pre-clinical obesity (UGP 281) and diabetes (UGP 302) therapeutic assets.