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The Company is a leader in the development, manufacture and sale of active drug transport systems used to treat local inflammation in the sports and occupational medicine and physical therapy markets. The Company’s current product line is based on proprietary iontophoretic drug delivery technology. The majority of the Company’s revenues have been generated through the sale of the Phoresor system and related products that employ its proprietary technology. The Company is seeking opportunities to market or develop new products designed to improve the quality and efficiency of medical care it its served markets. In addition, the Company is seeking collaborative opportunities to develop its non-invasive drug transport technology to satisfy substantial unmet medical needs. The Company has proprietary technologies in various stages of research and product development for the treatment of acute local inflammation and for the treatment of ophthalmic disease. Since its inception, the Company has generally incurred operating losses as a result of costs associated with internally funded research and development activities. As of June 30, 2002, the Company’s accumulated deficit was approximately $33.9 million. The Company’s ability to achieve and sustain profitability will depend on its ability to achieve market acceptance and successfully expand sales of its existing products and successfully complete the development of, receive regulatory approvals for, and successfully manufacture and market its products under development, as to which there can be no assurance.

Research and Development Expense. Research and development expenditures increased 140% to $7.7 million in fiscal 2001 from $3.2 million in fiscal 2000, which reflected the Company’s investment in key internal research and product development programs. During fiscal 2001 and 2000, the Company invested $4.4 million and $1.2 million, respectively, in product development and Phase III clinical studies related to its local inflammation program. In addition, during fiscal 2001, the Company invested further into the pre-clinical development of its proprietary ophthalmic pharmaceutical systems.

Uncertainties Related to Product Development. The Company may be required to undertake time-consuming and costly product development activities, including clinical trials, and seek regulatory approval for new applications and products. Product revenues may not be realized from the sale of any such products for several years, if at all. The Company can give no assurance that its product development efforts, either alone or in collaboration with other parties, will ever be successfully completed, that it can obtain required regulatory approvals of its products, that products under development can be manufactured at acceptable cost or with appropriate quality, or that its products can meet market needs or achieve market acceptance.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company also relies on trade secrets and other unpatented proprietary information in its product development activities. The Company seeks to protect trade secrets and proprietary knowledge, in part, through confidentiality agreements with its employees, consultants, advisors and collaborators. To the extent the Company relies on confidential information to maintain its competitive position, there can be no assurance other parties may not independently develop the same or similar information. These agreements may not effectively prevent disclosure of the Company’s confidential information and may not provide the Company with an adequate remedy in the event of unauthorized disclosure of such information. The Company’s failure to obtain or maintain patent and trade secret protection, for any reason, could have a material adverse effect on the Company’s business, financial position and results of operations. Also, the effect of potential legislative changes on the Company’s intellectual property is uncertain.

The Company’s current dose controllers are manufactured under a contract with a third party electronics manufacturer. There can be no assurance that its present supplier can manufacture sufficient quantities of dose controllers that meet quality and performance standards on a timely basis. If the supplier cannot meet the Company’s requirements, or in the event of an interruption of its supply, the Company would be required to identify, qualify and validate an alternate supply source within a reasonable period of time.

Products and Products Under Development

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Leung C-H, Zhong H-J, Chan DS-H& Ma D-L

9. Group 17: the halogens

Rambeck WA& Wehr U

A recent paper has concluded that bromine is an essential trace element for all animals [439], since Br − (on conversion to HOBr) is a required cofactor for peroxidasin-catalysed formation of sulfilimine cross-links in a posttranslational modification essential for tissue development within the collagen IV scaffold of basement membranes [439]. More research is needed to confirm the nutritional benefits of bromine.

Tomljenovic L& Shaw CA

There is about 24 mg of barium (Z=56) in the body. It is not essential and often associated with toxicity. It is best known in medicine for its use in (relatively insoluble) BaSO4 meals administered as a radiopaque contrast agent for X-ray imaging of the gastrointestinal tract, providing radiographs of the oesophagus, stomach and duodenum. Barium sulfate has extremely low solubility in water (3.1 mg l −1 ) and is non-volatile making it unharmful to the body. A small amount of Ba 2+ may be solubilized by gastric HCl. Barium in Brazil nuts is sometimes a concern. There is a report of a man consuming a single dose of 179 mg Ba from 92 g of Brazil nuts, with more than 91% of the dose absorbed [61].