4.	Legal Proceedings

On August 3, 2009, SICOR Società Italiana Corticosteroidi S.R.L., or Sicor, filed a lawsuit in the Court of Milan to obtain the Court’s assessment that we were bound to source a chemical compound, whose chemical name is BBR2778, from Sicor according to the terms of a supply agreement executed between Sicor and Novuspharma on October 4, 2002. We assert that the supply agreement in question was properly terminated and that we have no further obligation to comply with its terms. Sicor alleges that the agreement was not terminated according to its terms. A final hearing has been scheduled for June 27, 2013 for the definitive submissions of the findings. No estimate of a loss, if any, can be made at this time in the event that we do not prevail.

On December 10, 2009, CONSOB sent us a notice claiming, among other things, violation of the provisions of Section 114, paragraph 1 of the Italian Legislative Decree no. 58/98 due to the asserted late disclosure of the contents of the opinion expressed by Stonefield Josephson, Inc., an independent registered public accounting firm, with respect to our 2008 financial statements. The sanctions established by Section 193, paragraph 1 of the Italian Legislative Decree no. 58/98 for such violations could require us to pay a pecuniary administrative sanction amounting to between $6,000 and $641,000 upon conversion from euros as of March 31, 2013.

The ITA issued notices of assessment to CTI (Europe) based on the ITA’s audit of CTI (Europe)’s VAT returns for the years 2003, 2005, 2006 and 2007. The ITA audits concluded that CTI (Europe) did not collect and remit VAT on certain invoices issued to non-Italian clients for services performed by CTI (Europe). We believe that the services invoiced were non-VAT taxable consultancy services and that the VAT returns are correct as originally filed. We are vigorously defending ourselves against the assessments both on procedural grounds and on the merits of the case. We received favorable rulings in 2012, which remain subject to further appeal, and our remaining deposit for the VAT assessments was refunded to us in January 2013. Due to the change of the position for the VAT assessment cases, we reversed the entire reserve for VAT assessed as of December 31, 2012. If the final decisions of the lower tax courts (i.e. the Provincial Tax Court or the Regional Tax Court) or of the Supreme Court are unfavorable to us, we may incur up to $12.1 million in losses for the VAT amount assessed including penalties, interest and fees upon conversion from euros on March 31, 2013.