EXHIBIT 99.01
CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Private Securities Litigation Reform Act of 1995 provides public companies with a safe
harbor from liability for forward-looking statements if those statements are accompanied by
meaningful cautionary statements identifying important factors that could cause actual results to
differ materially from those contained in the forward-looking statements. The Company hereby
identifies the following important factors which could cause the Companys actual results to differ
materially from those contained in any forward-looking statements made by the Company from time to
time in any report, proxy statement, registration statement, or other written communication or in
oral forward-looking statements made from time to time by the Companys officers, directors,
employees, or agents.
THE COMPANY HAS A DEPENDENCE ON A MAJOR CUSTOMER
The Company depends on adequate royalty income from Novartis to fund continuing operations.
Currently the Company has no other licensing arrangements in place. The Company was without an
income stream as a result of Novartis making a voluntary product recall of the Companys licensed
products in June 2006. Subsequently, the Company has rejuvenated its revenue stream with the
launch by Novartis of an adult vapor patch during the last half of 2007. Royalties resulting from
the launch of the new adult vapor patch are uncertain because of the acceptance of the product in
the market place, severity of the cough, cold, flu season, marketing efforts by Novartis, and other
factors that Company is unable to control.
PATENTS AND OTHER PROPRIETARY RIGHTS PROVIDE UNCERTAIN PROTECTION OF OUR PROPRIETARY
INFORMATION AND OUR INABILITY TO PROTECT A PATENT OR OTHER PROPRIETARY RIGHT MAY ADVERSELY AFFECT
OUR BUSINESS
The patent position of companies engaged in the sale of products such as ours is uncertain and
involves complex legal and factual questions. Issued patents can later be held invalid by the
patent office issuing the patent or by a court. We cannot assure you that our patents will not be
challenged, invalidated, or circumvented, or that the rights granted there under will provide us a
competitive advantage. In addition, many other organizations are engaged in research and
development of products similar to our therapeutic consumer products. Such organizations may
currently have, or may obtain in the future, legally blocking proprietary rights, including patent
rights, in one or more products or methods under development or consideration by us. The Company
has taken steps and incurred expenses to protect and evaluate its patent portfolio in an effort to
verify and determine validity of the Companys patent rights. The outcome of this evaluation is
uncertain and could be challenged.
We also rely on trade secrets and other unpatented proprietary information related to the
manufacturing of our therapeutic consumer products. To the extent we rely on confidential
information to maintain our competitive position, there can be no assurance that other parties will
not independently develop the same or similar information.
There has been substantial litigation regarding patent and other intellectual property rights
in the consumer products industry. Litigation could result in substantial costs and a diversion of
our effort, but may be necessary to enforce any patents issued to us, protect our trade secrets or
know-how, defend against claimed infringement of the rights of others, or determine the scope and
validity of the proprietary rights of others. We cannot assure you that third parties will not
pursue litigation that could be costly to us. An adverse determination in any litigation could
subject us to significant liabilities to third parties, require us to seek licenses from or pay
royalties to third parties or prevent us from manufacturing or selling our products, any of which
could have a material adverse effect on our business.
WE HAVE A HISTORY OF LOSSES
The Company incurred a net loss for 2007 and 2006, due primarily to receiving inadequate
royalty income to cover operating expenses. Although we have generated differing levels of net
income (losses) over the last few years, the Company has been unprofitable over the last three
years because royalty and licensing fee income was not sufficient to cover operating expenses. We
may incur future losses if royalty and licensing fee income is not sufficient to cover operating
expenses.
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IF
LICENSEES OF OUR PATENTS DO NOT COMPLY WITH REGULATORY REQUIREMENTS WHEN MARKETING PRODUCTS WHICH RELY ON OUR PATENTS, OUR ROYALTIES COULD BE
NEGATIVELY
AFFECTED
The research, development, manufacture, labeling, distribution, marketing, and advertising of
products that are sold by licensees in reliance on our patents are subject to extensive regulation
by governmental regulatory authorities in the United States and other countries. Failure by such
licensees to comply with regulatory requirements for marketing their products could subject them to
regulatory or judicial enforcement actions, including, but not limited to, product recalls or
seizures, injunctions, civil penalties, criminal prosecution, refusals to approve new products and
suspensions and withdrawals of existing approvals. This in turn could decrease the revenues
generated by such patent licensees and thereby decrease our royalty income.
IF PRODUCTS RELYING ON OUR PATENTS ARE NO LONGER REGULATED AS OVER-THE-COUNTER PRODUCTS, OUR
ROYALTIES COULD BE NEGATIVELY AFFECTED
Currently, many of the therapeutic consumer products that are or could be sold in reliance on
our patents are regulated as over-the-counter products. We cannot assure you that the FDA will
continue to regulate these products as over-the-counter products. If the FDA changed its approach
to regulating such therapeutic consumer products, the licensees would be faced with significant
additional costs and may be unable to sell some or all of the products. Any such change could have
a negative affect on the licensees revenues, which in turn could decrease our royalty income.
WE HAVE LIMITED STAFFING
Our success is dependent upon the efforts of the Board of Directors. The Company currently
has one full time employee whose efforts are focused on the external reporting requirements of the
Company and maintaining the day-to-day operations. Furthermore the Company is considered a small
business issuer, as defined under the rules of the Securities and Exchange Commission (SEC).
Current legislation related to the Sarbanes-Oxley Act of 2002 (SOX), has impacted the Company.
Efforts to become compliant under the parameters of SOX have been and are expected to be costly to
the Company despite the internal controls the Company has in place. If this key employee or
members of the Board of Directors decide to depart from the Company, we could be adversely affected
if suitable replacement personnel or directors are not quickly recruited. The current condition of
the Company may make it difficult to retain and attract, if necessary, qualified personnel.
THE PRICE OF OUR COMMON STOCK COULD BE HIGHLY VOLATILE DUE TO A NUMBER OF FACTORS
The trading price of our common stock may fluctuate widely as a result of a number of factors,
including:
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trading of our common stock on the OTC Bulletin Board and fluctuations in price
and volume due to investor speculation, internet message postings, and other factors that may not be tied to
the financial performance by the Company; |
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performance of products sold and advertised by licensees in the marketplace; |
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regulatory developments in both the United States and foreign countries; |
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market perception and customer acceptance of products sold by licensees; |
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outcomes related to the Companys efforts to protect its patent portfolio; |
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increased competition; |
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relationships with licensees; |
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economic and other external factors; |
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period-to-period fluctuations in financial results. |
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