UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004, OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________________ TO _______________________
Commission file number 001-16043
ALTEON INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 13-3304550
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6 CAMPUS DRIVE, PARSIPPANY, NEW JERSEY 07054
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(Address of principal executive offices) (Zip Code)
(201) 934-5000
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
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Common Stock, Par Value $.01 per share American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined by Exchange Act Rule 12b-2). Yes [X] No [ ]
The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the Registrant, based on the American Stock Exchange closing
price of the common stock ($1.18 per share), as of June 30, 2004, was
$47,636,963.
At March 1, 2005, 57,996,711 shares of the Registrant's common stock, par value
$.01 per share, were outstanding.
Documents Incorporated By Reference
The following documents (or parts thereof) are incorporated by reference into
the following parts of this Form 10-K: certain information required in Part III
of this Annual Report on Form 10-K is incorporated from the Registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on June 29, 2005.
EXPLANATORY NOTE
The Company is filing this Amendment No. 1 to its Annual Report on Form 10-K for
the year ended December 31, 2004, as filed with the Securities and Exchange
Commission on March 15, 2005. This amendment reports the following changes
resulting from the Company's and the Company's Independent Registered Public
Accounting Firm's completed analysis of internal control over financial
reporting as required under Section 404 of the Sarbanes-Oxley Act of 2002:
- Replaces Item 9A, "Controls and Procedures";
- Adds the report on internal control over financial reporting from
J.H. Cohn LLP, Independent Registered Public Accounting Firm;
- Provides an additional Consent of J.H. Cohn LLP, Independent
Registered Public Accounting Firm; and
- Replaces the Section 302 certifications from the President and
Chief Executive Officer and the Vice President, Finance.
This amendment does not reflect the restatement of any previously reported
financial statements, results of operations or any other related financial
disclosures.
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ITEM 9A. CONTROLS AND PROCEDURES
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
The Company's management has evaluated, with the participation of the Company's
Chief Executive Officer and the Vice President of Finance, the effectiveness of
the Company's disclosure controls and procedures as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of
December 31, 2004. Based on this evaluation the Company's Chief Executive
Officer and the Vice President of Finance concluded that as of December 31,
2004, the Company's disclosure controls and procedures were not effective
because of the material weaknesses in internal control over financial reporting
described below.
(b) MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting. Our internal control over financial reporting
is a process designed under the supervision of our principal executive and
principal financial officer to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external reporting purposes in accordance with accounting principles
generally accepted in the United States of America.
Our internal control over financial reporting includes policies and procedures
that:
- pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect transactions and dispositions of our
assets;
- provide reasonable assurance that our transactions are recorded as
necessary to permit preparation of financial statements in accordance
with U.S. generally accepted accounting principles;
- provide reasonable assurances that our receipts and expenditures are
being made only in accordance with authorizations of our management and
directors; and
- provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could
have a material effect on the financial statements.
Internal control over financial reporting includes the controls themselves,
monitoring and internal auditing practices and actions taken to correct
deficiencies as identified.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
As of December 31, 2004, management, with the participation of our principal
executive officer and principal financial officer, assessed the effectiveness of
our internal control over financial reporting based on the framework established
in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Management's assessment
included an evaluation of the design of our internal control over financial
reporting and testing of the operational effectiveness of our internal control
over financial reporting. Management reviewed the results of its assessment with
the Audit Committee of our Board of Directors, and based on this assessment,
management has determined that as of December 31, 2004, there were three
material weaknesses in our internal control over financial reporting. In light
of these material weaknesses, management has concluded that, as of December 31,
2004, Alteon did not maintain effective internal control over financial
reporting. As defined by the Public Company Accounting Oversight Board ("PCAOB")
Auditing Standard No. 2, a material weakness is a significant control deficiency
or a combination of significant control deficiencies, that results in there
being more than a remote likelihood that a material misstatement of the annual
or interim financial statements will not be prevented or detected. J.H. Cohn
LLP, our independent registered public accounting firm, has issued its
attestation report on our management's assessment of our internal control over
financial reporting, which appears below.
None of these material weaknesses resulted in the restatement of any previously
reported financial statements or any other related financial disclosure.
The material weaknesses as of December 31, 2004 were as follows:
1. INTERNAL CONTROL REVIEW -- AUDIT COMMITTEE EFFECTIVENESS. The Audit
Committee of the Company's Board of Directors and management initially
underestimated the complexity and depth of work that would be
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required to comply with the internal control review required under Section 404
of the Sarbanes-Oxley Act of 2002, as well as the comprehensive nature of the
internal control assessment. As a result, this process was begun later than
appropriate and certain remediation efforts were not completed or tested until
after December 31, 2004.
Management and the Audit Committee have now implemented remedial measures
to address these matters, including establishment of a Disclosure Committee,
more rigorous and documented internal sub-certification procedures, and
commitment of additional resources to document and monitor ongoing changes to
the Company's internal control over financial reporting, and document Audit
Committee involvement with all of the foregoing.
2. INFORMATION TECHNOLOGY CONTROLS AND PROCESS CONTROLS. Management has
determined that the Company has not adequately documented and implemented
certain controls over information technology. These areas include certain change
management and vendor management procedures. In addition, certain financial
computer program application controls and related access controls relating to
information security were not adequately implemented. Back-up and recovery
processes were not adequately documented, and testing of recovery procedures was
not implemented. The Company has drafted, and is in the process of implementing,
remedial procedures to address these matters.
3. CONTROLS OVER CASH DISBURSEMENTS. Management has determined that
inadequate internal controls existed over the Company's processing of cash
disbursements. Specifically, during the fiscal year ended December 31, 2004, a
number of checks, which the Company believes to be not greater than nine, were
issued from the Company's account without signature, and a number of checks, in
amounts greater than $7,500, which the Company believes to be not greater than
eight, were issued from the Company's account with only one signature, when the
Company's internal policy requires that checks greater than that amount be
issued with two signatures. In all instances reviewed by the Company, the
disbursements had been appropriately authorized and were valid disbursements.
The Company has implemented remedial controls to address this matter, involving
a review of checks prior to issuance to ensure their signature. Such remediation
procedures have been tested subsequent to December 31, 2004.
The Company believes that the corrective actions described above, taken as a
whole, will remediate the internal control deficiencies identified in this
report, but the Company and the Audit Committee will continue to monitor the
effectiveness of these actions and will make any other changes or take such
other actions as management determines to be appropriate.
(c) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
Except for the changes in controls described above, no change in the Company's
internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) occurred during the fourth quarter ended
December 31, 2004, that has materially affected or is reasonably likely to
materially affect, the Company's internal control over financial reporting.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Alteon Inc.
We have audited management's assessment, included in the accompanying
Management's Report on Internal Control, that Alteon Inc. (the "Company") did
not maintain effective internal control over financial reporting as of December
31, 2004, because of the effect of the material weaknesses identified in
management's assessment based on criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. The Company's management is responsible for maintaining
effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on management's assessment and an
opinion on the effectiveness of the Company's internal control over financial
reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinions.
A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
A material weakness is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected. The following material weaknesses have been identified and included
in management's assessment:
Internal Control Assessment - Effectiveness of Audit Committee
The Company's overall control environment, of which "tone at the top" is an
integral part, involves a number of pervasive aspects. The Company's Audit
Committee Charter establishes the responsibility of the Audit Committee to
provide oversight to ensure that the Company meets it regulatory requirements.
The Audit Committee was ineffective in its oversight role, which resulted in
delays in management's implementation of the "404 process", resulting in a lack
of time and resources to effectively remediate and retest control deficiencies.
Controls over Information Technology
As of December 31, 2004, certain control procedures relating to information
technology were not documented and implemented, as follows:
- Change management;
- Application controls;
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- Information security;
- Back-up and recovery; and
- Vendor management.
Controls over Cash Disbursements
As of December 31, 2004, the Company did not maintain effective controls over
cash disbursements. There were several disbursements throughout 2004 without
signatures on the checks. In addition, the Company's policy of requiring dual
signatures for checks in excess of a specified amount was not always complied
with.
These material weaknesses were considered in determining the nature, timing, and
extent of audit tests applied in our audit of the 2004 financial statements, and
this report does not affect our report dated February 25, 2005, on these
financial statements.
In our opinion, management's assessment that the Company did not maintain
effective internal control over financial reporting as of December 31, 2004, is
fairly stated, in all material respects, based on criteria established in
Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Also, in our opinion, because of the
effects of the material weaknesses described above on the achievement of the
objectives of the control criteria, the Company has not maintained effective
internal control over financial reporting as of December 31, 2004, based on
criteria established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
We do not express an opinion or any other form of assurance on management's
statements relating to new controls being implemented and tested.
/s/ J.H. Cohn LLP
Roseland, New Jersey
April 22, 2005
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ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS.
(a) Exhibits.
The exhibits required to be filed are listed on the "Exhibit Index"
attached hereto, which is incorporated herein by reference.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Amendment
No. 1 to the report to be signed on its behalf by the undersigned, thereunto
duly authorized this 22nd day of April 2005.
ALTEON INC.
By: /s/ Kenneth I. Moch
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Kenneth I. Moch
President and Chief Executive Officer
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EXHIBIT INDEX
Exhibit
No. Description of Exhibit
23.1 Consent of J.H. Cohn LLP.
31.1 Certification of Principal Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of Principal Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.