##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K/A
 Amendment No. 1
 þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2006
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 COMMISSION FILE NUMBER 0-31114
 JAVELIN PHARMACEUTICALS, INC.
  Delaware
    
    88-0471759(State or other jurisdiction of incorporation or organization)
    
    (IRS Employer Identification No.)
  
   
    o þ
 o þ
 þ o
 þ
  o þ o
 o þ




---



##### 



EXPLANATORY NOTE
      1




---



##### 



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 PageReports
of Independent Registered Public Accounting Firms
    
    
    3Consolidated Balance Sheets as of December 31, 2005 and 2006
    
    
    7Consolidated Statements of Operations for the years ended December 31, 2004, 2005 and 2006,
and the cumulative period from February 23, 1998 (inception) to December 31, 2006
    
    
    8Consolidated Statements of Redeemable Preferred Stock and Stockholders Equity (Deficit)
for the period from February 23, 1998 (inception) to December 31, 2006, including the
years ended December 31, 2004, 2005 and 2006
    
    
    9Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2005 and 2006,
and the cumulative period from February 23, 1998 (inception) to December 31, 2006
    
    
    11Notes to the Consolidated Financial Statements
    
    
    12
 2




---



##### 



Report of
    Independent Registered Public Accounting Firm
  
          Internal ControlIntegrated Framework




---



##### 



Report of
    Independent Registered Public Accounting Firm
      Managements Annual Report On Internal
    Control Over Financial Reporting Internal ControlIntegrated Framework
        Internal
    ControlIntegrated Framework Internal ControlIntegrated
    Framework
 4




---



##### 



/s/ McGladrey & Pullen, LLPBurlington, MassachusettsMarch 14, 2007 5




---



##### 



Report of Independent Registered Public Accounting Firm
 
   
 6




---



##### 



Javelin Pharmaceuticals Inc. and Subsidiaries
(A Development Stage Enterprise)
 
 Consolidated Balance Sheets
 December 31,2006
    
    
    2005AssetsCurrent assets:Cash and cash equivalents
    
    $
    9,273,479
    
    
    $
    33,307,449Short term marketable securities available for sale
    
    
    11,461,674
    
    
    
    Grant receivable
    
    
    113,645
    
    
    
    573,501Prepaid expenses and other current assets
    
    
    245,593
    
    
    
    343,958Total current assets
    
    
    21,094,391
    
    
    
    34,224,908Fixed assets, at cost, net of accumulated depreciation
    
    
    237,163
    
    
    
    161,866Other assets
    
    
    109,223
    
    
    
    52,188Total assets
    
    
    21,440,777
    
    
    
    34,438,962Liabilities and Stockholders EquityCurrent liabilities:Accounts payable and accrued expenses
    
    
    3,151,379
    
    
    
    1,207,626Deferred revenue
    
    
    
    
    
    
    19,522Deferred lease liability
    
    
    57,869
    
    
    
    9,871Total current liabilities
    
    
    3,209,248
    
    
    
    1,237,019Commitments and contingenciesStockholders equityPreferred stock, $0.001 par value, 5,000,000 shares
authorized as of December 31, 2006 and 2005, none of
which are outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value; 200,000,000 and
100,000,000 shares authorized as of December 31, 2006
and December 31, 2005, respectively; 40,409,421 and
40,404,977 shares issued and outstanding at December
31, 2006 and 2005, respectively.
    
    
    40,409
    
    
    
    40,404Additional paid-in capital
    
    
    97,634,546
    
    
    
    95,355,368Other comprehensive income (loss)
    
    
    (5,117
    )
    
    
    Unearned compensation
    
    
    
    
    
    
    (553,756
    )Deficit accumulated during the development stage
    
    
    (79,438,309
    )
    
    
    (61,640,073
    )Total stockholders equity
    
    
    18,231,529
    
    
    
    33,201,943Total liabilities and stockholders equity
    
    $
    21,440,777
    
    
    $
    34,438,962
  7




---



##### 



Javelin Pharmaceuticals Inc. and Subsidiaries
(A Development Stage Enterprise)
 
 Consolidated Statements of Operations
 Cumulative fromFebruary 23,1998(inception) toYear Ended December 31,
    
    
    December 31,2006
    
    
    2005
    
    
    2004
    
    
    2006Revenues:Government grants and contracts
    
    $
    842,171
    
    
    $
    1,547,753
    
    
    $
    836,841
    
    
    $
    5,804,824Operating expenses:Research and development
    
    
    10,854,116
    
    
    
    7,212,801
    
    
    
    4,806,073
    
    
    
    57,217,713Selling, general and administrative
    
    
    9,608,598
    
    
    
    5,222,104
    
    
    
    2,702,673
    
    
    
    29,730,593
    (1)Depreciation and amortization
    
    
    61,008
    
    
    
    44,321
    
    
    
    31,796
    
    
    
    178,613Total operating expenses
    
    
    20,523,722
    
    
    
    12,479,226
    
    
    
    7,540,542
    
    
    
    87,126,919Operating loss
    
    
    (19,681,551
    )
    
    
    (10,931,473
    )
    
    
    (6,703,701
    )
    
    
    (81,322,095
    )Other income (expense):Interest expense
    
    
    (47
    )
    
    
    (65
    )
    
    
    (356,370
    )
    
    
    (943,959
    )Interest income
    
    
    1,282,604
    
    
    
    319,766
    
    
    
    9,016
    
    
    
    2,222,760Other income
    
    
    600,758
    
    
    
     
    
    
    
    4,227
    
    
    
    604,9851,883,315
    
    
    
    319,701
    
    
    
    (343,127
    )
    
    
    1,883,786Net loss
    
    
    (17,798,236
    )
    
    
    (10,611,772
    )
    
    
    (7,046,828
    )
    
    
    (79,438,309
    )Deemed dividend related to beneficial
conversion feature of Series B redeemable
convertible preferred stock
    
    
     
    
    
    
     
    
    
    
     
    
    
    
    (3,559,305
    )Net loss attributable to common stockholders
    
    $
    (17,798,236
    )
    
    $
    (10,611,772
    )
    
    $
    (7,046,828
    )
    
    $
    (82,997,614
    )Net loss per share attributable to common
stockholdersBasic and diluted
    
    ($
    0.44
    )
    
    ($
    0.38
    )
    
    ($
    0.64
    )Weighted average shares
    
    
    40,179,543
    
    
    
    27,831,188
    
    
    
    10,936,922
 
 (1)
    
    Includes related party transaction of $1,075,182 cumulative from February 23, 1998
(inception) through December 31, 2006 (see note 12).  8




---



##### 



Javelin Pharmaceuticals, Inc.
(A Development Stage Enterprise)
 
 Statements of Redeemable Preferred Stock and
Stockholders Equity (Deficit)
 DeficitSeries A
    
    Series B
    
    Series C
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock
    
    
    
    
    
    AccumulatedFor the period from February 23, 1998 (inception) to
    
    Redeemable
    
    Redeemable
    
    Redeemable
    
    
    
    
    
    
    
    
    
    Additional
    
    Unearned
    
    Sub-
    
    Other
    
    During the
    
    TotalDecember 31, 2006, including the years ended
    
    Preferred Stock
    
    Preferred Stock
    
    Preferred Stock
    
    Common Stock
    
    Paid-in
    
    Com-
    
    scription
    
    Comprehensive
    
    Development
    
    StockholdersDecember 31, 2004, 2005 and 2006
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    pensation
    
    Receivable
    
    Income
    
    Stage
    
    EquitySale of Common Stock to founders at inception for cash ($0.001 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,540,812
    
    
    $
    4,541
    
    
    $
    457
    
    
    
    
    
    
    
    ($3,749
    )
    
    
    
    
    
    
    
    
    
    $
    1,249Value of services provided by an affiliate (see Note 12)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89,531
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89,531Net loss for the period February 23, 1998 (inception) to December 31, 1998
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ($470,200
    )
    
    
    (470,200
    )Balance at December 31, 1998
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,540,812
    
    
    
    4,541
    
    
    
    89,988
    
    
    
    
    
    
    
    (3,749
    )
    
    
    
    
    
    
    (470,200
    )
    
    
    (379,420
    )Issuance of 236,128 warrants in June in connection with
bridge financing (see Note 7)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101,564
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101,564Issuance of Common Stock to consultant in June for services (see Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    192,985
    
    
    
    193
    
    
    
    93,263
    
    
    
    
    
    
    
    (106
    )
    
    
    
    
    
    
    
    
    
    
    93,350Issuance of 204,336 warrants to consultants in August for services (see Note 7)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98,598
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98,598Value of services provided by an affiliate (see Note 12)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    155,917
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    155,917Net loss for the year ended December 31, 1999
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,205,559
    )
    
    
    (1,205,559
    )Balance at December 31, 1999
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,733,797
    
    
    
    4,734
    
    
    
    539,330
    
    
    
    
    
    
    
    (3,855
    )
    
    
    
    
    
    
    (1,675,759
    )
    
    
    (1,135,550
    )Issuance of 15,522 warrants to an advisor for services in connection
with sales of Series A redeemable preferred stock in August (see Note 6)
    
    
    
    
    
    ($
    55,790
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55,790
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55,790Exercise of warrants by consultants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    204,336
    
    
    
    204
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    198Issuance of Common Stock in connection with acquisition
of a license in September (see Note 1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,174,257
    
    
    
    5,175
    
    
    
    18,599,825
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,605,000Sale of 160.565 Units for cash in September ($100,000 per Unit),
net of offering expenses of $1,157,572
    
    
    4,014,125
    
    
    
    14,898,928Issuance of Preferred A warrants in September (see Note 6)
    
    
    
    
    
    
    (960,361
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    960,361
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    960,361Issuance of Preferred A Finders Units for services in September (see Note 6)
    
    
    
    
    
    
    (107,825
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    107,825
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    107,825Payment of stock subscription receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,201
    
    
    
    
    
    
    
    
    
    
    
    3,201Non-cash compensation in connection with issuance of stock options
to non-employees in August and November (see Note 10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    707,550
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    707,550Value of services provided by an affiliate (see Note 12)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    163,376
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    163,376Net loss for the year ended December 31, 2000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,023,842
    )
    
    
    (23,023,842
    )Balance at December 31, 2000
    
    
    4,014,125
    
    
    
    13,774,952
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,112,390
    
    
    
    10,113
    
    
    
    21,134,051
    
    
    
    
    
    
    
    (654
    )
    
    
    
    
    
    
    (24,699,601
    )
    
    
    (3,556,091
    )Issuance of Series B Preferred with a beneficial conversion feature for
cash in December (see Note 6)
    
    
    
    
    
    
    
    
    
    
    989,991
    
    
    $
    1,935,044
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,559,305
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,559,305Expenses in connection with sale of Series B stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (474,317
    )Deemed dividend related to beneficial conversion feature of
Series B stock (see Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,559,305
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,559,305
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,559,305
    )Payment of stock subscription receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    544
    
    
    
    
    
    
    
    
    
    
    
    544Exercise of warrants by a consultant
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,522
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15Exercise of bridge warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,893
    
    
    
    16
    
    
    
    138
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    154Value of services provided by an affiliate (see Note 12)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    481,299
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    481,299Net loss for the year ended December 31, 2001
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,067,699
    )
    
    
    (8,067,699
    )Balance at December 31, 2001
    
    
    4,014,125
    
    
    
    13,774,952
    
    
    
    989,991
    
    
    
    5,020,032
    
    
    
    
    
    
    
    
    
    
    
    10,143,805
    
    
    
    10,144
    
    
    
    21,615,488
    
    
    
    
    
    
    
    (110
    )
    
    
    
    
    
    
    (32,767,300
    )
    
    
    (11,141,778
    )Issuance of compensatory stock options to members of the
Board of Directors (see Note 10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,431,498
    
    
    
    ($1,431,498
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,264,522
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,264,522Value of services provided by an affiliate (see Note 12)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    185,059
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    185,059Non-cash compensation in connection with issuance of stock options to
a non-employee in September (see Note 10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,564
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,564Reversal of subscription receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110
    
    
    
    
    
    
    
    
    
    
    
    110Net loss for the period ended December 31, 2002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,059,081
    )
    
    
    (8,059,081
    )Balance at December 31, 2002
    
    
    4,014,125
    
    
    
    13,774,952
    
    
    
    989,991
    
    
    
    5,020,032
    
    
    
    
    
    
    
    
    
    
    
    10,143,805
    
    
    
    10,144
    
    
    
    23,294,609
    
    
    
    (166,976
    )
    
    
    
    
    
    
    
    
    
    
    (40,826,381
    )
    
    
    (17,688,604
    )
 9




---



##### 



Javelin Pharmaceuticals, Inc.
(A Development Stage Enterprise)
Statements of Redeemable Preferred Stock and
Stockholders Equity (Deficit)
 DeficitSeries A
    
    Series B
    
    Series C
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock
    
    
    
    
    
    AccumulatedFor the period from February 23, 1998 (inception) to
    
    Redeemable
    
    Redeemable
    
    Redeemable
    
    
    
    
    
    
    
    
    
    Additional
    
    Unearned
    
    Sub-
    
    Other
    
    During the
    
    TotalDecember 31, 2006, including the years ended
    
    Preferred Stock
    
    Preferred Stock
    
    Preferred Stock
    
    Common Stock
    
    Paid-in
    
    Com-
    
    scription
    
    Comprehensive
    
    Development
    
    StockholdersDecember 31, 2004, 2005 and 2006
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    pensation
    
    Receivable
    
    Income
    
    Stage
    
    EquityAmortization of unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    113,069
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    113,069Issuance of Series C Preferred as license payment in August (see Note 8)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,360
    
    
    $
    100,000Conversion of Merger Note to Series C stock in August (see Note 7)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    339,736
    
    
    
    519,795Sale of Series C Preferred for cash in August ($1.53 per share), net of
issuance expenses of $132,496
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,549,254
    
    
    
    3,767,856Non-cash compensation in connection with issuance of stock
options to a non-employee in October (see Note 10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,672
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,672Exercise of bridge warrants (see Note 7)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,270
    
    
    
    2
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22Net loss for the period ended December 31, 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,155,092
    )
    
    
    (3,155,092
    )Balance at December 31, 2003
    
    
    4,014,125
    
    
    
    13,774,952
    
    
    
    989,991
    
    
    
    5,020,032
    
    
    
    2,954,350
    
    
    
    4,387,651
    
    
    
    10,146,075
    
    
    
    10,146
    
    
    
    23,352,301
    
    
    
    (53,907
    )
    
    
    
    
    
    
    
    
    
    
    (43,981,473
    )
    
    
    (20,672,933
    )Conversion of Series A, B and C Preferred Stock to
Common Stock (see Note 6)
    
    
    (4,014,125
    )
    
    
    (13,774,952
    )
    
    
    (989,991
    )
    
    
    (5,020,032
    )
    
    
    (2,954,350
    )
    
    
    (4,387,651
    )
    
    
    8,187,259
    
    
    
    8,187
    
    
    
    23,174,448
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,182,635Sale of common stock in a private placement
(net of expense of $1,853,224) (see Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,139,913
    
    
    
    6,140
    
    
    
    16,227,307
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,233,447Merger transaction with Intrac, Inc. (see Note 1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,153,190
    
    
    
    1,153
    
    
    
    (1,153
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-cash compensation in connection with issuance of
stock options to non-employees (see Note 10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132,501
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132,501Issuance of compensatory stock options to employees (see Note 10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,094,793
    
    
    
    (1,094,793
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    198,351
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    198,351Issuance of 226,314 warrants in November in connection with
Bridge Debenture financing (see Note 7)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    314,795
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    314,795Net loss for the period ended December 31, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,046,828
    )
    
    
    (7,046,828
    )Balance at December 31, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,626,437
    
    
    
    25,626
    
    
    
    64,294,992
    
    
    
    (950,349
    )
    
    
    
    
    
    
    
    
    
    
    (51,028,301
    )
    
    
    12,341,968Sale of common stock in a private placement
(net of expense of $2,225,411) (see Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,222,215
    
    
    
    14,222
    
    
    
    29,760,351
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,774,573Cancellation of compensatory stock options to employees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,921
    )
    
    
    50,921
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Modification of employee stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125,897
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125,897Issuance of 80,184 warrants to consultants (see Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    152,290
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    152,290Issuance of 40,000 options to consultants (see Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95,200Exercise of 1999 Bridge Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    217,964
    
    
    
    217
    
    
    
    1,962
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,179Exercise of Series A Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,518
    
    
    
    27
    
    
    
    102,598
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102,625Issuance of stock for license payment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    169,735
    
    
    
    170
    
    
    
    499,830
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500,000Exercise of Stock Options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,241
    
    
    
    1
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12Issuance of stock for liquidation damages
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    140,867
    
    
    
    141
    
    
    
    373,158
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    373,299Amortization of unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    345,672
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    345,672Net loss for the period ended December 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,611,772
    )
    
    
    (10,611,772
    )Balance at December 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,404,977
    
    
    
    40,404
    
    
    
    95,355,368
    
    
    
    (553,756
    )
    
    
    
    
    
    
    
    
    
    
    (61,640,073
    )
    
    
    33,201,943Net loss for the period ended December 31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,798,236
    )
    
    
    (17,798,236
    )Unrealized loss on investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,117
    )
    
    
    
    
    
    
    (5,117
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,803,353
    )Exercise of 2005 private placement warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,444
    
    
    
    4
    
    
    
    9,995
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,999Reclassification of unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (553,756
    )
    
    
    553,756
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,822,939
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,822,939Balance at December 31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,409,421
    
    
    
    40,409
    
    
    
    97,634,546
    
    
    
    
    
    
    
    
    
    
    
    (5,117
    )
    
    
    (79,438,309
    )
    
    
    18,231,529
 
 10




---



##### 



Javelin Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
 
 Consolidated Statement of Cash Flows
 Cumulative fromYear Ended
    
    
    
    
    
    
    February 23, 1998December 31,
    
    
    
    
    
    
    (inception) to2006
    
    
    2005
    
    
    2004
    
    
    December 31, 2006Cash flows from operating activities:Net loss
    
    $
    (17,798,236
    )
    
    $
    (10,611,772
    )
    
    $
    (7,046,828
    )
    
    $
    (79,438,309
    )Adjustments to reconcile net loss to net cash used
in operating activities:Depreciation
    
    
    61,008
    
    
    
    44,321
    
    
    
    31,796
    
    
    
    178,613Stock based compensation expense
    
    
    2,822,939
    
    
    
    
    
    
    
    
    
    
    
    2,822,939Amortization of premium/discount on marketable
securities
    
    
    (36,174
    )
    
    
    
    
    
    
    
    
    
    
    (36,174
    )Amortization of deferred financing costs
    
    
    
    
    
    
    
    
    
    
    25,000
    
    
    
    252,317Amortization of original issue discount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101,564Amortization of unearned compensation
    
    
    
    
    
    
    345,672
    
    
    
    
    
    
    
    345,672Non-cash expense recognized with issuance of
Common Stock in connection with acquisition of a
license
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,600,000Non-cash expense recognized with issuance of
Preferred Stock for license milestone
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000Non-cash expense recognized with issuance of
Common Stock in connection with liquidation
damages
    
    
    
    
    
    
    373,299
    
    
    
    
    
    
    
    373,299Amortization of discount on debenture
    
    
    
    
    
    
    
    
    
    
    314,795
    
    
    
    314,795Stock options and warrants issued in
consideration for services rendered
    
    
    
    
    
    
    373,387
    
    
    
    330,852
    
    
    
    3,003,076Non-cash expense contributed by affiliate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,075,182Changes in assets and liabilities:(Increase) decrease in grant receivable
    
    
    459,856
    
    
    
    (458,327
    )
    
    
    59,863
    
    
    
    (113,645
    )Increase) decrease in prepaid expenses, other
current assets and other assets
    
    
    41,329
    
    
    
    (276,410
    )
    
    
    13,799
    
    
    
    (335,022
    )(Decrease) increase in accounts payable,
accrued expenses and other liabilities
    
    
    1,943,756
    
    
    
    (1,088,846
    )
    
    
    1,306,129
    
    
    
    3,151,382Increase in deferred revenue
    
    
    (19,522
    )
    
    
    19,522
    
    
    
    
    
    
    
    (Decrease) increase in deferred lease liability
    
    
    47,998
    
    
    
    (7,230
    )
    
    
    7,075
    
    
    
    57,869Increase in due to Licensor
    
    
    
    
    
    
    
    
    
    
    500,000
    
    
    
    500,000Net cash used in operating activities
    
    
    (12,477,046
    )
    
    
    (11,286,384
    )
    
    
    (4,457,519
    )
    
    
    (49,046,442
    )Cash flows from investing activities:Purchases of short term marketable securities
    
    
    (23,250,617
    )
    
    
    
    
    
    
    

    
    
    
    (23,250,617
    )Redemption of short term marketable securities
    
    
    11,820,000
    
    
    
    
    
    
    
    
    
    
    
    11,820,000Capital expenditures
    
    
    (136,306
    )
    
    
    (68,536
    )
    
    
    (118,629
    )
    
    
    (415,777
    )Net cash (used in) provided by investing
activities
    
    
    (11,566,923
    )
    
    
    (68,536
    )
    
    
    (118,629
    )
    
    
    (11,846,394
    )Cash flows from financing activities:Proceeds from exercise of warrants
    
    
    9,999
    
    
    
    104,804
    
    
    
    
    
    
    
    115,567Proceeds from exercise of stock options
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    12Proceeds from sale of Common Stock
    
    
    
    
    
    
    31,999,984
    
    
    
    18,086,671
    
    
    
    50,096,274Proceeds from sale of Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,451,201Expenses associated with sale of Common Stock
    
    
    
    
    
    
    (2,225,411
    )
    
    
    (1,853,224
    )
    
    
    (4,078,635
    )Expenses associated with sale of Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,764,385
    )Proceeds from notes payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,015,000Proceeds from issuance of debenture
    
    
    
    
    
    
    
    
    
    
    1,000,000
    
    
    
    1,000,000Repayment of debenture
    
    
    
    
    
    
    
    
    
    
    (1,000,000
    )
    
    
    (1,000,000
    )Expenses associated with notes payable
    
    
    
    
    
    
    
    
    
    
    (25,000
    )
    
    
    (153,719
    )Repayment of notes payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,515,000
    )Net cash provided by financing activities
    
    
    9,999
    
    
    
    29,879,389
    
    
    
    16,208,447
    
    
    
    70,166,315Net increase in cash and cash equivalents
    
    
    (24,033,970
    )
    
    
    18,524,469
    
    
    
    11,632,299
    
    
    
    9,273,479Cash and cash equivalents at beginning of period
    
    
    33,307,449
    
    
    
    14,782,980
    
    
    
    3,150,681
    
    
    
    Cash and cash equivalents at end of period
    
    $
    9,273,479
    
    
    $
    33,307,449
    
    
    $
    14,782,980
    
    
    $
    9,273,479Supplemental disclosures:Cash paid for interest:
    
    $
    
    
    
    $
    
    
    
    $
    16,575
    
    
    $
    271,633Supplemental disclosure of noncash investing and
financing activities:Non cash issuance of common stock
    
    $
    
    
    
    $
    500,000
    
    
    $
    
    
    
    $
    500,000Options and warrants issued for services and
financings
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,222,574Conversion of Merger Note and accrued interest to
Series C stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    519,795Recapitalization in connection with Merger with
Intrac
    
    
    
    
    
    
    
    
    
    $
    1,153
    
    
    $
    1,153
 11




---



##### 



Javelin Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
 
 Notes to the Consolidated Financial Statements
 1. Organization and Business
     12




---



##### 



2. Summary of Significant Accounting Policies
 Basis of Preparation
   Use of Estimates
  Concentrations of Credit Risk
  Cash and Cash Equivalents
  Marketable Securities
  13




---



##### 



Fixed Assets
   Leaseholds
    
    3 yearsLaboratory equipment
    
    7 yearsFurniture and fixtures
    
    5 yearsComputer equipment and software
    
    3 years
 Revenue Recognition
   Research and Development Costs
  Patents
  Net Loss Per Share
  14




---



##### 



Deferred Financing Costs
  Comprehensive Loss
  Impairment of Long-Lived Assets
  Stock-Based Compensation
    15




---



##### 



Income Taxes
  Recent Accounting Pronouncements
   Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109
 3. Marketable Securities
  Carrying
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedValue
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueDecember 31, 2006:Short-term marketable securities:Certificates of Deposit
    
    $
    1,698,006
    
    
    $
    713
    
    
    $
    (137
    )
    
    $
    1,698,582U.S. Government Securities
    
    
    2,398,785
    
    
    
    
    
    
    
    (5,693
    )
    
    
    2,393,092Taxable Auction Securities
    
    
    7,370,000
    
    
    
    
    
    
    
    
    
    
    
    7,370,000Total short term marketable securities
    
    $
    11,466,791
    
    
    $
    713
    
    
    $
    (5,830
    )
    
    $
    11,461,674
  16




---



##### 



Less than 12 months
    
    
    12 Months or More
    
    

    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesDecember 31, 2006:Certificates of Deposit
    
    $
    496,800
    
    
    $
    (137
    )
    
    $
    
    
    
    $
    
    
    
    $
    496,800
    
    
    $
    (137
    )U.S. Government Securities
    
    
    2,393,092
    
    
    
    (5,693
    )
    
    
    
    
    
    
    
    
    
    
    2,393,092
    
    
    
    (5,693
    )Total
    
    $
    2,889,892
    
    
    $
    (5,830
    )
    
    $
    
    
    
    $
    
    
    
    $
    2,889,892
    
    
    $
    (5,830
    )
  4. Fixed Assets
  December 31,2006
    
    
    2005Leaseholds
    
    $
    15,435
    
    
    $
    4,824Furniture and fixtures
    
    
    113,474
    
    
    
    60,800Laboratory equipment
    
    
    114,593
    
    
    
    116,901Computer equipment
    
    
    136,204
    
    
    
    76,175Computer software
    
    
    33,764
    
    
    
    20,771413,470
    
    
    
    279,471Less, Accumulated depreciation
    
    
    (176,307
    )
    
    
    (117,605
    )$
    237,163
    
    
    $
    161,866
  5. Accounts Payable and Accrued Expenses
  December 31,2006
    
    
    2005Accounts payable
    
    $
    685,400
    
    
    $
    557,252Accrued professional fees
    
    
    220,333
    
    
    
    434,886Accrued research and development
    
    
    964,944
    
    
    
    56,897Accrued compensation and benefits
    
    
    878,808
    
    
    
    133,044Accrued sales and marketing consulting costs
    
    
    325,165
    
    
    
    Accrued other expenses
    
    
    76,729
    
    
    
    25,547$
    3,151,379
    
    
    $
    1,207,626
 6. Stockholders Equity
   17




---



##### 



18




---



##### 



7. Notes Payable
 a.
    
    During 1998, we issued two notes payable to two banks with principal amounts of
$145,000 and $80,000, respectively (the Notes). The Notes were due in September 2000
bearing interest of 1% over the Eurodollar rate and the banks prime rate,
respectively. The Notes were guaranteed by one of our investors. At December 31,
1999, the outstanding balances on the Notes were $145,000 and $80,000, respectively,
accrued interest totaled $1,400 and the weighted average interest rate was 7.5%.
During 2000, the $145,000 Note was increased to $245,000.Both Notes were repaid in October 2000, following the issuance of Series A Stock (see
Note 6).b.
    
    During 1999, we raised $1.04 million by issuing notes payable (the Bridge
Notes) and warrants (the Bridge Warrants). The Bridge Notes accrued interest at 12%
per annum for the first twelve months and 15% per annum for up to an additional year.
At December 31, 1999, accrued interest on the Bridge Notes was approximately $86,000.
In November, 2000, after the issuance of Series A Stock, the principal plus accrued
interest totaling approximately $1,238,000 was repaid.In connection with the Bridge Notes, Bridge Warrants to purchase up to 236,127
shares of Common Stock, with an exercise price of approximately $0.01 per share,
were issued to the Bridge Noteholders. The Bridge Warrants contain anti-dilution
provisions and were to expire in September 2005. The fair value of the Bridge
Warrants at the date of issue was $101,564. Accordingly, the Bridge Notes were
recorded at an original issue discount of $101,564, which was amortized to interest
expense over the term of the Bridge Notes. At December 31, 1999, the Bridge Notes
were recorded at $980,256. During the years ended December 31, 2001, 2003 and 2005,
Bridge Warrants to purchase 15,893 shares, 2,270 shares and 217,964 shares of common
stock, respectively, were exercised. At December 31, 2005, all Bridge Warrants had
been exercised (see Note 11).Professional fees incurred in connection with the issuance of the Bridge Notes,
amounting to $128,719, were accounted for as deferred financing costs.In 1999, we issued to three consultants who had arranged the sale of Bridge Notes
warrants to purchase up to 204,336 shares of common stock at an exercise price of
approximately $0.001 per share. The fair value of the warrants, which were accounted
for as deferred financing costs, at the issuance date was $98,598. All of the
warrants were exercised in 2000.
 19




---



##### 



c.
    
    In July 2000, we issued a one-year note to a commercial bank in the principal
amount of $150,000 and bearing interest, payable monthly, based on the Eurodollar rate
plus 1%. The note was guaranteed by one of our investors. In October 2000, following
the closing of the sale of Series A Stock, the note was repaid.d.
    
    In November 2002, we issued a $500,000 convertible note, due on November 24,
2004, to eXegenics, Inc., pursuant to an agreement for the termination of a proposed
merger with eXegenics, Inc. (the Merger Note). The Merger Note was bearing interest
at prime plus 1%, as defined, which interest was due and payable annually. The unpaid
principal and accrued interest on the Merger Note was to
automatically convert into shares of our equity securities in the event that we completed a private placement, as
defined, before November 24, 2004, or in the event of a consolidation, merger,
combination, or reorganization, as defined. In the event of a private placement, the
Merger Note and accrued interest was to be converted into the same series of securities
offered in the private placement, at the same per share price paid by investors. At
December 31, 2002, accrued interest on the Merger Note totaled $2,625. In August 2003,
following a private placement, the principal and accrued interest, totaling $519,795,
was converted into 339,736 shares of Series C Redeemable Preferred Stock (see Note 6).e.
    
    In November 2004, we entered into a Securities Purchase Agreement and raised
$1.0 million by issuing a Senior Secured Debenture (the Bridge Debentures) and
warrants (the Warrants). The Bridge Debentures accrued interest at 10% per annum for
a maximum term of 12 months. Subject to certain terms and conditions we granted to
investors in the Bridge Debenture a security interest in certain of our assets. At
December 6, 2004, upon the sale of common stock (see Note 6), the principal plus
accrued interest totaling $1,008,611 was repaid, and the security interest in our
assets was released.In connection with the issuance of the Bridge Debentures, we issued warrants to
purchase up to 226,314 shares of common stock, with an exercise price of $2.65 per
share to the purchasers of the Bridge Debentures. The warrants contain
anti-dilution provisions and expire in November 2009. We allocated the total
proceeds to the fair value of the Bridge Debentures and the Warrants in accordance
with APB No. 14, which resulted in $314,795 being allocated to the warrants. This
amount was accounted for as debt discount and amortized to interest expense over the
term of the Bridge Debentures. Professional fees incurred in connection with the
Bridge Debentures, amounting to $25,000, were accounted for as deferred financing
costs and amortized as additional interest expense during the year ended December
31, 2004.
 8. Commitments and Contingencies
 a.
    
    Operating LeasesWe recognize rental expense for leases on the straight-line basis over the life of the
lease.On September 5, 2002, we entered into a sublease (the Sublease) for office space
in New York, New York with a term from December 7, 2002 through December 30, 2003.
Minimum rent for the Sublease was $371,000 per annum, payable in equal monthly
installments of $30,917, except that no rent payment was due for the first 30 days
of the Sublease term (the Free Rent Period). In addition, upon execution of the
Sublease, we prepaid rent for the first two months following the Free Rent Period
and the last two months of the Sublease term, totaling $123,667. We also were
required to pay additional rent, as defined. On September 22, 2003, we entered into
a lease for office space in New York, New York with a term from December 1, 2003
through November 30, 2006. Minimum rent for the lease was initially $125,000 per
annum with a 3% rent escalation every 12 months thereafter, payable in equal monthly
installments, except that no rent payment was due for the first 60 days of the lease
term (the Free Rent Period). In addition, upon execution of the lease, we paid a
security deposit of $31,250. We vacated the New York office
 20




---



##### 



space upon termination of the lease, and received the remainder of our security
deposit in January 2007.On May 1, 2005, we entered into a lease for office space in Cambridge,
Massachusetts, which lease was amended effective June 1, 2006. Prior to the
amendment, minimum rent for the lease was payable in equal monthly installments of
$6,810 over the lease term. As a result of the amendment, we assumed additional
office space in our Cambridge facility, the lease term was extended to May 31, 2012,
and the minimum monthly rent for the lease was increased to $15,450 for the first
twelve months, with rent escalations every twelve months thereafter. At December
31, 2006, our security deposit related to the lease was $97,615.In August 2006, we entered into a new lease for office space in Lake Success, New
York with a three-year extendable term, which commenced on October 1, 2006. Minimum
rent for the lease is initially $57,477 per annum, with an annual 3.5% rent
escalation. In addition, upon execution of the lease, we paid a security deposit of
$9,580.For the years ended December 31, 2006, 2005 and 2004, we recognized rent
expense of $326,301, $176,771 and $122,355, respectively. A deferred lease
liability of $57,869, $9,871 and $17,101 at December 31, 2006, 2005 and 2004,
respectively, was recorded for rent expense in excess of amounts paid; the amount of
additional rent paid was immaterial.In December 2006, we entered into a three month extendable term lease for office
space in the United Kingdom for Javelin Pharmaceuticals UK Ltd., effective January
1, 2007. Minimum rent is approximately $1,000 per month. We also paid a security
deposit of approximately $2,000.Future minimum lease payments under operating leases having initial or remaining
noncancellable lease terms in excess of one year are as follows:
 As ofDecember 31, 20062007
    
    $
    294,9882008
    
    
    340,2452009
    
    
    336,6672010
    
    
    306,3202011
    
    
    320,108Thereafter
    
    
    135,210$
    1,733,538
 b.
    
    Legal ProceedingsFrom time to time, we are involved in disputes or legal proceedings
arising in the ordinary course of business. However, we do not believe that
any such disputes or pending litigation would have a material adverse effect on
our financial position, results of operations or cash flows.c.
    
    Research Collaboration, Licensing and Consulting Agreements
 (i)
    
    In September 2000, we assumed a license agreement, dated
February 25, 1998, between the Predecessor Company and Stuart Weg, M.D. The
license granted us exclusive worldwide rights, including the right to grant
sublicenses, for the intellectual property surrounding transnasal ketamine. In
connection therewith, we made an upfront payment to Dr. Weg, Herbert Brotspies,
and Calgar & Associates (collectively the Founders)
and issued the Founders shares of common stock, of which a portion is held in escrow and will be
released to the Founders, if at all, upon the successful completion of the
Phase III trial. The release of the shares from escrow is not contingent on the
Founders performance. We also reimbursed the Founders for patent and other
costs. We will pay
 21




---



##### 



semi-annual royalty payments to the Founders based on a percentage of net
sales of transnasal ketamine by us or our sublicensees. In addition, we
shall pay the Founders a defined percentage of all sublicensing fees or
other lump sum payments. Under the terms of the license agreement, we are
also obligated to make aggregate future payments upon the earlier of certain
defined dates or satisfaction of certain clinical and regulatory milestones,
which include the filing of a New Drug Application (NDA) with the Food &
Drug Administration (FDA), the approval of an NDA by the FDA and the first
commercial sale of a licensed product. A defined percentage of such
milestone payments shall be creditable against royalties earned; provided,
however, that in no event shall royalties earned be reduced by more than a
certain percentage in any applicable semi-annual period. We may satisfy a
portion of the milestone payments through the issuance of shares of our
common stock provided that we are publicly traded at the time such milestone
payment accrues. In April 2003 the license agreement was amended to allow
for the August 2003 milestone to be paid in cash and Series C Stock. The
Founders agreed to accept 65,360 shares of Series C Stock, valued at $0.1
million plus $0.15 million in cash as payment in full for the milestone. In
November 2004, the license agreement was amended to defer payment of the
$500,000 milestone from August 25, 2004, to a date on or before December 31,
2004. We were required to pay interest, at a rate of 4.75% per annum, on
the amount of the milestone payment for the period from August 25, 2004 to
the amended payment date. On December 21, 2004 we paid the milestone
payment plus accrued interest totaling $507,964. On December 31, 2004 we
accrued the final milestone payment of $500,000 and on April 7, 2005, we
entered into an agreement and issued 169,735 shares of common stock as
settlement of this final milestone payment, under the license agreement. The
fair value of the shares issued was $500,000, as determined by the equity
price of $2.95 on the date of grant.(ii)
    
    In connection with the license agreement described above, in
February 1998 the Predecessor Company entered into a three year Consulting
Agreement, renewable upon mutual consent, with each of Dr. Weg and Dr. Gary,
pursuant to which both Dr. Weg and Dr. Gary were to provide us with such
consulting services as we may reasonably request. In consideration for such
services, we agreed to pay to each of Dr. Weg and Dr. Gary a consulting fee
equal to $75,000 per year, payable in equal monthly installments. These
agreements expired March 2001 and were not renewed.(iii)
    
    On August 25, 2000, we entered into a license agreement with
West Pharmaceutical Services, Inc. (West) for rights to develop and
commercialize intranasal morphine, fentanyl and other products. Under the
terms of the agreement, we were granted an exclusive, worldwide, royalty
bearing license, including the right to grant sublicenses, for the rights to
the intellectual property covering these products. The license agreement will
expire with the last to expire of the license patents in 2016. In consideration
of the license, we paid and expensed on September 22, 2000 an up front fee. In
addition, we are obligated to make royalty payments to West based upon net
sales of products by us or our sublicensees, if any, as defined. We are also
obligated to pay West a minimum annual royalty for each licensed product that
receives approval by a regulatory agency to be marketed in any major market
country, as defined, and to pay West a defined amount of any up-front license
fees in the event that we sublicense any rights to any third party. In
addition, under a Development Milestone and Option Agreement entered into in
connection with the license agreement, we are obligated to make aggregate
future payments totaling $5.0 million upon reaching certain defined development
milestones, including the filing of an NDA with the FDA and the approval of an
NDA by the FDA of a licensed product. Milestone payments can be paid in cash
or equity upon the satisfaction of certain clinical and regulatory milestones
and provided that we are publicly traded at the time such milestone payment
accrues. Our ability to pay the upfront payment for the license agreement and
the M-6-G fee (see below) was guaranteed
 22




---



##### 



by an affiliate of ours. The guarantee expired upon the payments by us of
amounts owed to West. In addition, we granted West the right of first
refusal to enter into a clinical manufacturing agreement for nasal morphine
(see (iv) (a) below).
  (iv)
    
    In connection with the West license agreement, we entered into
the following additional agreements:
 (a)
    
    A clinical manufacturing agreement, whereby we
would buy from West 100% of the nasal morphine product required for
conducting the clinical trials subject to Wests ability to supply 100%
of the required product. West would manufacture and package the
clinical product for us. This agreement was terminated effective
September 2002.(b)
    
    An option agreement, whereby we were granted an
option to include morphine -6- glucuronide (M-6-G) as an identified
compound under the license agreement. We paid and expensed a
non-refundable fee in consideration of the option, which expired
unexercised on December 22, 2000.(c)
    
    On October 24, 2000, we expanded our license
agreement to include an additional development agreement with West for
rights to develop and commercialize intranasal fentanyl. Pursuant to
the development agreement, we would undertake a development program for
intranasal fentanyl with West, and the parties would endeavor to
complete the development program within the defined time table.
However, we could use other suppliers should West be unable to either
provide competitive cost bids or complete the program within a
reasonable timeframe. In addition, under the development agreement, we
were obligated to make aggregate future payments totaling $6.3 million
upon reaching certain defined development milestones, which included
completion of proof-of-principle studies, successful completion of a
phase I/II clinical trial, commencement of a phase III clinical trial,
filing of an NDA with the FDA and the approval of an NDA by the FDA of
a licensed product. These milestone payments could be paid in cash or
equity upon the satisfaction of certain clinical and regulatory
milestones and provided that we were publicly traded at the time such
milestone payment accrues. In October 2003, we and West amended the
license agreement to exclude further development of fentanyl by us.
All rights, duties and obligations between us and West related to
fentanyl were terminated, including aggregate remaining future
milestone payments of $6.3 million.(d)
    
    On November 17, 2000, we entered into a
clinical manufacturing agreement with West to manufacture, package,
purchase and sell to us nasal ketamine clinical product according to
agreed upon clinical product specifications and price schedule. The
agreement expired in November 2001.
 (v)
    
    On February 8, 2005, we consented to the assignment of the
license agreements with West to Archimedes Pharma Limited (Archimedes) in
connection with the sale of Wests Drug Delivery business to Archimedes. Under
the terms of the assignment, Archimedes assumed all of Wests obligations and
liabilities under the assigned agreements that by their respective terms are
required to be paid, performed or discharged.
 23




---



##### 



(vi)
    
    On December 14, 2001 (the Effective Date), we entered into an
agreement (the Shimoda Agreement) with Shimoda Biotech (Proprietary) Ltd. and
certain affiliated entities (Shimoda), for an exclusive worldwide license to
commercialize formulations of pharmaceutical products containing diclofenac.
We would pay: (i) a license fee to Shimoda and reimbursement for expenses, if
certain defined events occur; (ii) two percent of the net proceeds, as defined,
of our initial public offering (IPO) to Shimoda, but not less than $1 million
or in excess of $2 million; (iii) aggregate future milestone payments of $6.0
million payable upon the satisfaction of certain clinical and regulatory
milestones which includes submission of an NDA with the FDA, approval of an NDA
by the FDA and one year following the date of first sale of a licensed product;
and (iv) royalty payments to Shimoda based upon the sales of products by us or
our sublicensees, if any, as defined. Upon achievement of a milestone, Shimoda
has the option to receive payment in cash or shares of common stock. In the
event Shimoda elects to receive common stock, the number of shares to be issued
is based on a formula whereby the defined milestone payment is divided by the
per share price of our common stock in an IPO as defined. Should common stock
be issued in satisfaction of milestones, we will record a non-cash charge based
on the fair value of the consideration paid at the date the milestone is
achieved. Such charge could be material and could result in a material
dilution to per share amounts. The Shimoda Agreement may be terminated (i) by
either party due to breach by the other party that is not cured within 60 days
of written notice; (ii) by Shimoda in the event of default by us for
non-payment of amounts due that is not cured with 60 days of written notice; or
(iii) by us at any time by giving 90 days written notice to Shimoda.(vii)
    
    In December 2005, we amended the license agreement with
Shimoda. Under the terms of the amendment, the total aggregate future
milestone payments of $6.0 million payable upon the satisfaction of certain
clinical and regulatory milestones remains unchanged although as amended
include allowance of an MAA by the MHRA, submission of an NDA with the FDA,
approval of an NDA by the FDA and one year following the date of first sale of
a licensed product.(viii)
    
    In May 2006, we further amended the license agreement with Shimoda. Under the
previous agreement, we were required to launch a commercial product by December
14, 2007 or risk termination of the license at Shimodas option. Under the
terms of the amendment, we are no longer required to launch a commercial
product by December 14, 2007. Rather, we will be considered to be compliant
with the Agreement if we diligently continue to pursue regulatory approval as
of that date.(ix)
    
    In February 2007, we entered into a Commercial Supply Agreement
(the Supply Agreement) with Precision Pharma Services, Inc. (Precision).
The initial term of the Supply Agreement is two years, and it is renewable in
one-year increments. Under the Supply Agreement, Precision agreed to
manufacture our requirements for the supply of Dyloject, in accordance with
U.S. and E.U. good manufacturing practices. We committed to purchase at least
$7,650,000 worth of product during the two year period beginning on April 1,
2007. Either party may terminate the Supply Agreement upon written notice if
the other party is in material breach of any provision thereof, subject to
applicable thirty (30) or ninety (90) day cure periods. Either party may also
terminate the Supply Agreement upon sixty (60) days prior written notice upon
the occurrence of certain events involving the bankruptcy or insolvency of the
other party, and the Supply Agreement shall automatically terminate upon the
occurrence of certain events specified therein. Moreover, we may elect to
terminate the Supply Agreement if Precision fails to meet its performance
obligations regarding the manufacture of Dyloject in accordance with good
manufacturing practices, and under certain other conditions.
 24




---



##### 



9. Net Loss per Share
   2006
    
    
    2005
    
    
    2004Numerator:Net loss, basic and diluted
    
    ($
    17,798,236
    )
    
    ($
    10,611,772
    )
    
    ($
    7,046,828
    )Denominator:Weighted average common shares
    
    
    40,179,543
    
    
    
    27,831,188
    
    
    
    10,936,922Net loss per share, basic and diluted
    
    ($
    0.44
    )
    
    ($
    0.38
    )
    
    ($
    0.64
    )
  For the Years Ended December 31,2006
    
    
    2005
    
    
    2004Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    WeightedWeighted
    
    
    Average
    
    
    Weighted
    
    
    Average
    
    
    Weighted
    
    
    AverageAverage
    
    
    Exercise
    
    
    Average
    
    
    Exercise
    
    
    Average
    
    
    ExerciseNumber

    
    
    Price
    
    
    Number

    
    
    Price
    
    
    Number
    
    
    
    PriceOptions
    
    
    6,120,904
    
    
    $
    2.99
    
    
    
    4,889,467
    
    
    $
    2.91
    
    
    
    3,730,257
    
    
    $
    3.06Warrants
    
    
    2,830,051
    
    
    
    2.62
    
    
    
    1,922,888
    
    
    
    2.81
    
    
    
    770,226
    
    
    
    2.65Convertible Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,648,919Total
    
    
    8,950,955
    
    
    
    
    
    
    
    6,812,355
    
    
    
    
    
    
    
    12,149,402
 10. Share Based Compensation
 Adoption of SFAS 123(R)
   25




---



##### 



2006Research and development
    
    $
    924,218Selling, general and administrative
    
    
    1,898,721Total impact on results of operations
    
    $
    2,822,939Per share impact on results of operations
    
    $
    0.07
   2006Expected volatility
    
    
    80%Expected life
    
    5.0 yearsDividend yield
    
    
    0%Risk free interest rate
    
    
    4.5% - 5.2
    %Weighted average per share grant date fair value
    
    
    $2.50
  Stock Incentive Plans
 Omnibus Plans
  26




---



##### 















Options Outstanding
    

    Options ExercisableWeighted-AverageRemaining
    
    Weighted-
    
    
    
    
    
    Weighted-Range of Exercise
    
    Number
    
    Contractual
    
    Average
    
    Number
    
    AveragePrices
    
    Outstanding
    
    Life
    
    Exercise Price
    
    Exercisable
    
    Exercise Price$1.50 - $1.90
    
    
    711,969
    
    
    5.1 years
    
    $
    1.53
    
    
    
    678,636
    
    
    $
    1.51$1.91 - $1.97
    
    
    1,424,418
    
    
    6.8 years
    
    $
    1.96
    
    
    
    1,101,921
    
    
    $
    1.96$1.98 - $2.80
    
    
    705,250
    
    
    7.2 years
    
    $
    2.70
    
    
    
    463,584
    
    
    $
    2.69$2.81 - $3.27
    
    
    709,000
    
    
    9.2 years
    
    $
    3.06
    
    
    
    153,000
    
    
    $
    2.85$3.28 - $3.87
    
    
    735,921
    
    
    9.0 years
    
    $
    3.59
    
    
    
    84,254
    
    
    $
    3.67$3.88 - $4.19
    
    
    727,367
    
    
    8.4 years
    
    $
    4.06
    
    
    
    73,685
    
    
    $
    4.05$4.20 - $5.40
    
    
    360,552
    
    
    3.4 years
    
    $
    5.37
    
    
    
    360,552
    
    
    $
    5.37$1.50 - $5.40
    
    
    5,374,477
    
    
    7.2 years
    
    $
    2.88
    
    
    
    2,915,632
    
    
    $
    2.54




Options Outstanding
    

    Options ExercisableWeighted-AverageRemaining
    
    Weighted-
    
    
    
    
    
    Weighted-Range of Exercise
    
    Number
    
    Contractual
    
    Average
    
    Number
    
    AveragePrices
    
    Outstanding
    
    Life
    
    Exercise Price
    
    Exercisable
    
    Exercise Price$1.50
    
    
    661,969
    
    
    7.2 years
    
    $
    1.50
    
    
    
    661,969
    
    
    $
    1.50$1.90
    
    
    50,000
    
    
    9.5 years
    
    $
    1.90
    
    
    
    -
    
    
    
    -$1.96
    
    
    1,451,743
    
    
    8.1 years
    
    $
    1.96
    
    
    
    704,912
    
    
    $
    1.96$1.97
    
    
    6,620
    
    
    8.5 years
    
    $
    1.97
    
    
    
    6,620
    
    
    $
    1.97$2.60
    
    
    50,000
    
    
    9.5 years
    
    $
    2.60
    
    
    
    -
    
    
    
    -$2.70
    
    
    635,750
    
    
    9.3 years
    
    $
    2.70
    
    
    
    150,000
    
    
    $
    2.70$2.80
    
    
    75,000
    
    
    9.2 years
    
    $
    2.80
    
    
    
    -
    
    
    
    -$2.85
    
    
    260,000
    
    
    9.7 years
    
    $
    2.85
    
    
    
    75,000
    
    
    $
    2.85$3.05
    
    
    9,000
    
    
    9.6 years
    
    $
    3.05
    
    
    
    -
    
    
    
    -$3.33
    
    
    75,000
    
    
    9.6 years
    
    $
    3.33
    
    
    
    -
    
    
    
    -$3.45
    
    
    25,000
    
    
    9.7 years
    
    $
    3.45
    
    
    
    -
    
    
    
    -$3.87
    
    
    50,921
    
    
    6.7 years
    
    $
    3.87
    
    
    
    50,921
    
    
    $
    3.87$5.36
    
    
    309,631
    
    
    4.1 years
    
    $
    5.36
    
    
    
    309,631
    
    
    $
    5.36$5.40
    
    
    50,921
    
    
    6.3 years
    
    $
    5.40
    
    
    
    50,921
    
    
    $
    5.40$1.50 - $5.40
    
    
    3,711,555
    
    
    8.0 years
    
    $
    2.49
    
    
    
    2,009,974
    
    
    $
    2.56  27




---



##### 



Weighted-
    
    
    
    
    
    
    Weighted-Number of
    
    
    Average
    
    
    Number
    
    
    Averageshares
    
    
    Exercise Price
    
    
    Exercisable
    
    
    Exercise PriceBalance outstanding, December 31, 2003
    
    
    1,996,630
    
    
    $
    2.53
    
    
    
    456,781
    
    
    $
    4.59Granted
    
    
    1,101,413
    
    
    $
    1.96
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    (385,468
    )
    
    $
    1.64
    
    
    
    
    
    
    
    Balance outstanding, December 31, 2004
    
    
    2,712,575
    
    
    $
    2.32
    
    
    
    1,405,358
    
    
    $
    2.66Granted
    
    
    1,313,750
    
    
    $
    2.75
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    (314,770
    )
    
    $
    2.14
    
    
    
    
    
    
    
    Balance outstanding, December 31, 2005
    
    
    3,711,555
    
    
    $
    2.49
    
    
    
    2,009,974
    
    
    $
    2.56Granted
    
    
    1,935,182
    
    
    $
    3.72
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    (272,260
    )
    
    $
    3.77
    
    
    
    
    
    
    
    Balance outstanding, December 31, 2006
    
    
    5,374,477
    
    
    $
    2.88
    
    
    
    2,915,632
    
    
    $
    2.54
      28




---



##### 









Non-Plan options






Options Outstanding
    
    Options ExercisableWeightedAverageRemaining
    
    Weighted
    
    
    
    
    
    WeightedRange
of
    
    Number
    
    Contractual
    
    Average
    
    Number
    
    AverageExercise Prices
    
    Outstanding
    
    Life
    
    Exercise Prices
    
    Exercisable
    
    Exercise Price$3.87
    
    
    1,184,058
    
    
    3.4 years
    
    $
    3.87
    
    
    
    1,184,058
    
    
    $
    3.87




Options Outstanding
    
    Options ExercisableWeightedAverageRemaining
    
    Weighted
    
    
    
    
    
    WeightedRange
of
    
    Number
    
    Contractual
    
    Average
    
    Number
    
    AverageExercise Prices
    
    Outstanding
    
    Life
    
    Exercise Prices
    
    Exercisable
    
    Exercise Price$3.87
    
    
    1,184,058
    
    
    4.9 years
    
    $
    3.87
    
    
    
    1,184,058
    
    
    $
    3.87  Number
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-of
    
    
    Average
    
    
    Number
    
    
    AverageShares
    
    
    Exercise Price
    
    
    Exercisable
    
    
    Exercise PriceBalance outstanding, December 31, 2003
    
    
    1,340,529
    
    
    $
    3.87
    
    
    
    1,340,529
    
    
    $
    3.872004: Canceled
    
    
    (155,230
    )
    
    $
    3.87
    
    
    
    
    
    
    $
    3.87Balance outstanding, December 31, 2004
    
    
    1,185,299
    
    
    $
    3.87
    
    
    
    1,185,299
    
    
    $
    3.872005: Exercised
    
    
    (1,241
    )
    
    $
    0.01
    
    
    
    
    
    
    $
    0.01Balance outstanding, December 31, 2005 and 2006
    
    
    1,184,058
    
    
    $
    3.87
    
    
    
    1,184,058
    
    
    $
    3.87
 29




---



##### 



Pro-forma Disclosure
  Year Ended December 31,2005
    
    
    2004Net loss as reported
    
    $
    (10,611,772
    )
    
    $
    (7,046,828
    )Add: Stock-based employee compensation
included in net loss under APB No. 25
    
    
    345,672
    
    
    
    198,351Deduct: Total stock-based employee
compensation expense determined under fair
value base method for all awards
    
    
    (1,796,017
    )
    
    
    (1,469,442
    )Pro forma net loss
    
    $
    (12,062,117
    )
    
    $
    (8,317,919
    )Proforma net loss per share (basic and diluted)
    
    ($
    0.43
    )
    
    ($
    0.76
    )
  2005
    
    2004Expected volatility
    
    
    80%
    
    
    
80%Expected life
    
    
5
    
    
    
5Dividend yield
    
    
0%
    
    
    
0%Risk free interest rate
    
    
3.4 - 4.5%
    
    
    
4.5%
  11. Warrants and Units
  Placement
    
    
    Debenture
    
    
    Bridge
    
    
    Investor
    
    
    Consultants
    
    
    FindersWarrants
    
    
    Warrants
    
    
    Warrants
    
    
    Warrants
    
    
    Warrants
    
    
    UnitsIssuance of Bridge Warrants (see Note 7)
    
    
    
    
    
    
    
    
    
    
    236,127Issuance of Consultants Warrants (see Note 7)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    204,336Balance outstanding, December 31, 1999
    
    
    
    
    
    
    
    
    
    
    236,127
    
    
    
    
    
    
    
    204,336
    
    
    
    Issuance of Preferred A Warrants (see Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    415,403Exercise of Consultants Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (204,336
    )Issuance of Finders Units (see Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.83
    (1)Issuance of Consultants Warrants (see Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,523Balance outstanding, December 31, 2000
    
    
    
    
    
    
    
    
    
    
    236,127
    
    
    
    415,403
    
    
    
    15,523
    
    
    
    15.83Exercise of Bridge Warrant
    
    
    
    
    
    
    
    
    
    
    (15,893
    )Exercise of Consultants Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,523
    )Balance outstanding, December 31, 2001 and 2002
    
    
    
    
    
    
    
    
    
    
    220,234
    
    
    
    415,403
    
    
    
    
    
    
    
    15.83Exercise of Bridge Warrants (see Note 7)
    
    
    
    
    
    
    
    
    
    
    (2,270
    )Balance outstanding, December 31, 2003
    
    
    
    
    
    
    
    
    
    
    217,964
    
    
    
    415,403
    
    
    
    
    
    
    
    15.83Issuance of Debenture Warrants (see Note 7)
    
    
    
    
    
    
    226,314Issuance of Placement Warrants (see Note 6)
    
    
    920,987
 30




---



##### 



Placement
    
    
    Debenture
    
    
    Bridge
    
    
    Investor
    
    
    Consultants
    
    
    FindersWarrants
    
    
    Warrants
    
    
    Warrants
    
    
    Warrants
    
    
    Warrants
    
    
    UnitsBalance outstanding, December 31, 2004
    
    
    920,987
    
    
    
    226,314
    
    
    
    217,964
    
    
    
    415,403
    
    
    
    
    
    
    
    15.83Exercise of Bridge and Investor Warrants
    
    
    
    
    
    
    
    
    
    
    (217,964
    )
    
    
    (26,518
    )Expiry of Preferred A Warrant (see Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (388,885
    )Issuance of Consultants Warrants (see Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80,184Issuance of 2005 Investor Warrants (see Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    711,111Issuance of 2005 Placement Warrants (see Note
6)
    
    
    853,333Balance outstanding, December 31, 2005
    
    
    1,774,320
    
    
    
    226,314
    
    
    
    
    
    
    
    711,111
    
    
    
    80,184
    
    
    
    15.83Exercise of 2005 Investor Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,444
    )Balance outstanding, December 31, 2006
    
    
    1,774,320
    
    
    
    226,314
    
    
    
    
    
    
    
    706,667
    
    
    
    80,184
    
    
    
    15.83
 
 (1)
    
    Each Finders Unit entitles the holder to purchase 28,459 shares of common stock. Total
issuance entitles holders to purchase 450,506 shares common stock.  12. Related Party Transactions
  13. Income Taxes
   December 31, 2006
    
    
    December 31, 2005Deferred tax assets and valuation allowance:Net operating loss carry forwards
    
    $
    20,230,000
    
    
    $
    12,969,000Other deferred tax assets
    
    
    5,127,000
    
    
    
    3,612,000Research and development tax credit carryforwards
    
    
    2,882,000
    
    
    
    1,970,000Valuation allowance
    
    
    (28,239,000
    )
    
    
    (18,551,000
    )
    
    
    
    
  2006
    
    
    2005
    
    
    2004Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentPre tax income (loss)
    
    $
    (17,798,236
    )
    
    
    
    
    
    $
    10,611,772
    )
    
    
    
    
    
    $
    (7,046,828
    )Federal tax provision (benefit) at statutory rate
    
    
    (6,051,400
    )
    
    
    34.0
    %
    
    
    (3,608,002
    )
    
    
    34.0
    %
    
    
    (2,395,922
    )
    
    
    34.0
    %State income tax benefit net of federal tax
benefit
    
    
    (1,834,003
    )
    
    
    10.3
    %
    
    
    (748,462
    )
    
    
    7.1
    %
    
    
    (722,216
    )
    
    
    10.2
    %Permanent differences
    
    
    382,663
    
    
    
    -2.2
    %
    
    
    427,039
    
    
    
    -4.0
    %
    
    
    163,617
    
    
    
    -2.2
    %R & D credit
    
    
    (1,108,705
    )
    
    
    6.3
    %
    
    
    (776,328
    )
    
    
    7.3
    %
    
    
    (432,225
    )
    
    
    6.1
    %Change in valuation allowance
    
    
    9,688,000
    
    
    
    -54.4
    %
    
    
    3,679,000
    
    
    
    -34.7
    %
    
    
    3,510,000
    
    
    
    -49.8
    %Change in rate
    
    
    
    
    
    
    
    %
    
    
    911,066
    
    
    
    -8.6
    %
    
    
    
    
    
    
    0.0
    %Other
    
    
    (1,076,555
    )
    
    
    6.0
    %
    
    
    115,687
    
    
    
    -1.1
    %
    
    
    (123,254
    )
    
    
    1.7
    %Total income tax provision / (benefit)
    
    $
    0
    
    
    
    0.0
    %
    
    $
    0
    
    
    
    0.0
    %
    
    $
    0
    
    
    
    0.0
    %
 31




---



##### 



14. Other Income
  15. Subsequent Events
  32




---



##### 



SUPPLEMENTARY FINANCIAL INFORMATION (UNAUDITED)
  2006 Quarterly results of operations
 Unaudited Quarter endedMarch 31,
    
    June 30,
    
    September 30,
    
    December 31,(In thousands, except per share data)
    
    2006
    
    2006
    
    2006
    
    2006Government grants and contract revenue
    
    $
    82
    
    
    $
    491
    
    
    $
    155
    
    
    $
    114Operating expensesResearch and development
    
    
    1,324
    
    
    
    3,013
    
    
    
    3,694
    
    
    
    2,823Selling, general and administrative
    
    
    1,688
    
    
    
    2,310
    
    
    
    2,484
    
    
    
    3,127Depreciation and amortization
    
    
    11
    
    
    
    13
    
    
    
    17
    
    
    
    20Operating loss
    
    
    (2,941
    )
    
    
    (4,845
    )
    
    
    (6,040
    )
    
    
    (5,856
    )Other income (expense)
    
    
    916
    
    
    
    315
    
    
    
    343
    
    
    
    310Net loss attributable to common
stockholders
    
    
    (2,025
    )
    
    
    (4,530
    )
    
    
    (5,697
    )
    
    
    (5,546
    )Net loss per share attributable to
common stockholders:Basic and diluted
    
    $
    (0.05
    )
    
    $
    (0.11
    )
    
    $
    (0.14
    )
    
    $
    (0.14
    )Weighted average shares
    
    
    40,178
    
    
    
    40,178
    
    
    
    40,180
    
    
    
    40,182
 2005 Quarterly results of operations
 Unaudited Quarter EndedMarch 31,
    
    June 30,
    
    September 30,
    
    December 31,(In thousands, except per share data)
    
    2005
    
    2005
    
    2005
    
    2005Government
grants and contract revenue(1)
    
    $
    368
    
    
    $
    643
    
    
    $
    99
    
    
    $
    438Operating expensesResearch and development
    
    
    1,127
    
    
    
    2,226
    
    
    
    2,415
    
    
    
    1,445General and administrative
    
    
    1,021
    
    
    
    1,279
    
    
    
    1,202
    
    
    
    1,720Depreciation and amortization
    
    
    10
    
    
    
    12
    
    
    
    12
    
    
    
    10Operating loss
    
    
    (1,790
    )
    
    
    (2,874
    )
    
    
    (3,530
    )
    
    
    (2,737
    )Other income (expense)
    
    
    
    
    
    
    46
    
    
    
    55
    
    
    
    218Net loss attributable to common stockholders
    
    
    (1,790
    )
    
    
    (2,828
    )
    
    
    (3,475
    )
    
    
    (2,519
    )Net loss per share attributable to
common stockholders:Basic and diluted
    
    $
    (0.07
    )
    
    $
    (0.11
    )
    
    $
    (0.13
    )
    
    $
    (0.07
    )Weighted average shares
    
    
    25,399
    
    
    
    25,563
    
    
    
    25,824
    
    
    
    34,458
 
 (1)
    
    Grant and contract revenue during the quarter ended June 30, 2005
was overstated by approximately $147,000 due to an error in the
allocation of costs among projects. The overstatement was
corrected in the quarter ended September 30, 2005, resulting in
an understatement of grant and contract revenue for the quarter.
In addition, we had not been appropriately recognizing revenue
and receivables related to reimbursable indirect project costs
that were earned in prior periods, resulting in an understatement
of revenue of approximately $57,000 and $52,000 for the years
ended December 31, 2003 and 2004, respectively. The error also
resulted in a $14,000 overstatement of revenue for the quarter
ended March 31, 2005 and a $12,000 understatement of revenue for
the quarter ended June 30, 2005. We corrected the cumulative
effect of this error during the quarter ended September 30, 2005,
resulting in an overstatement of grant and contract revenue by
approximately $107,000 for the quarter ended September 30, 2005. 33




---



##### 



PART IV
 Item 15.  Exhibits and Financial Statement Schedules
 (a)(3) Exhibits
 23.1
    
    Consent of McGladrey & Pullen, LLP, independent registered public accounting firm23.2
    
    Consent of PricewaterhouseCoopers,
LLP, independent registered public accounting firm31.1
    
    Certification of our Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    
    Certification of our Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32.1
    
    Certification of our Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.32.2
    
    Certification of our Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 34




---



##### 



SIGNATURES
  JAVELIN PHARMACEUTICALS, INC.By:
Name:
Title:
    
    /s/ Daniel B. Carr

Daniel B. Carr, M.D.
Chief Executive Officer and
Chief Medical Officer
 35