JUNIPER PHARMACEUTICALS INC - FORM 10-Q/A

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - JUNIPER PHARMACEUTICALS INC	exhibit322.htm
EX-32.1 - EXHIBIT 32.1 - JUNIPER PHARMACEUTICALS INC	exhibit321.htm
EX-3.2 - EXHIBIT 31I.2 - JUNIPER PHARMACEUTICALS INC	exhibit31i2.htm
EX-31.1 - EXHIBIT 31I.1 - JUNIPER PHARMACEUTICALS INC	exhibit31i1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2010

[ ]	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 1-10352

COLUMBIA LABORATORIES, INC.

(Exact name of Registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		59-2758596 (I.R.S. EmployerIdentification No.)
354 Eisenhower Parkway Livingston, New Jersey (Address of principal executive offices)		07039 (Zip Code)

Registrant's telephone number, including area code: (973) 994-3999

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 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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes No ___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ] Accelerated filer [X]

Non-accelerated filer [ ] (Do not check if a smaller reporting company)Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

[ ] Yes [X] No

Number of shares of Common Stock of Columbia Laboratories, Inc. issued and outstanding as of December 28, 2010: 80,953,987.

EXPLANATORY NOTE

Columbia Laboratories, Inc. (the “Company”) is filing this Amendment No. 1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (“Quarterly Report on Form 10-Q”), which was filed with the Securities and Exchange Commission (“SEC”) on August 5, 2010, to: (i) amend Item 1 – “Financial Statements” to restate our financial statements for the quarter ended June 30, 2010 to reflect the reclassification of certain warrants from equity to liabilities, as discussed below and (ii) to amend Item 4 – “Controls and Procedures” to reflect a reassessment of our disclosure controls and procedures, and internal control over financial reporting, as of June 30, 2010 in light of the restatement of our financial statements for the quarter ended June 30, 2010.

Other than the foregoing, and the new certifications required by Rule 13a-14 under the Securities and Exchange Act of 1934 (“Exchange Act”), our Quarterly Report on Form 10-Q is not being amended or updated in any respect. This Amendment No. 1 continues to describe the conditions as of the date of the Quarterly Report on Form 10-Q, and, except as contained herein, we have not modified or updated the disclosures contained in the Quarterly Report on Form 10-Q. This Amendment No. 1 should be read in conjunction with our filings made with the SEC subsequent to the filing of the Quarterly Report on Form 10-Q, including any amendment to those filings.

In connection with a review of the Company's Annual Report among the Audit Committee and the Company's management, with the assistance of BDO USA, LLP (“BDO”), the Company's independent registered public accounting firm, and the Company's outside legal advisors, the Company has reassessed the accounting classification of certain warrants issued by the Company in October 2009 governed by ASC 815 "Derivatives and Hedging - Contracts in Entity's Own Equity," formerly known as Emerging Issues Task Force Issue 00-19, "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock" (“ASC 815”). The review was conducted to respond to certain comments raised by the Staff of the SEC in connection with its periodic review of the Company's SEC filings.

The warrants at issue are warrants to purchase 5,450,000 shares of the Company’s common stock issued in October 2009 in a registered offering of common stock and warrants (the “Warrants”). The Warrants expire in April 2015 and are exercisable at an exercise price of $1.52 per share.

The Company has historically accounted for its warrants, which prior to October 2009 were issued in private offerings, as equity instruments. The Warrants generally provide that, in the event the related registration statement is not available for the issuance of the Warrant shares, the holder may exercise the Warrant on a cashless basis (i.e., applying a portion of the Warrant shares to the payment of the exercise price). However, notwithstanding the availability of cashless exercise, ASC 815, as interpreted, appears to establish a presumption that, in the absence of express language to the contrary, warrants providing for the issuance of registered shares may be subject to net cash settlement if the issuer fails to deliver such shares, as it is not within the absolute control of the Company to provide registered shares in all circumstances. Net cash settlement would involve paying the holder of the Warrant the value of the Warrant shares after deducting the exercise price in lieu of issuing shares of common stock. After extensive discussion, the Company's management and BDO concluded that, although the interpretation and applicability of ASC 815 as it relates to registered warrants is complex, it should be applied based on a strict reading of the authoritative literature without regard to any evaluation of remoteness or probability.

Applying such a strict reading, the Audit Committee, together with management and in consultation with BDO, determined that, notwithstanding the highly-remote and theoretical possibility of net cash settlement, the Warrants identified above should have been recorded as liabilities, measured at fair value on the date of issue, with changes in the fair values recognized in the Company's quarterly statement of operations in its Annual Report and Quarterly Reports. Accordingly, the Audit Committee also concluded on December 10, 2010 that the Company's previously-filed consolidated financial statements for the fiscal year ended December 31, 2009 on Form 10-K/A; BDO’s reports on the financial statements and the effectiveness of internal control over financial reporting for the fiscal year ended December 31, 2009; each of the consolidated financial statements included in the Company's Quarterly Reports on Form 10-Q/A or 10-Q for the periods ended March 31, 2010, June 30, 2010, and September 30, 2010; and all related earnings releases and similar communications issued by the Company with respect to the foregoing, should no longer be relied upon.

The revaluation of the Warrants at each subsequent balance sheet date to fair value will result in a change in the carrying value of the liability, which change will be recorded as "Change in fair value of common stock warrant liability" in the consolidated statement of operations. Volatility in the closing price of the Company’s common stock on future measurement dates could result in a material change in the carrying value of the liability.

The restatements that are being implemented reflect the reclassification of the Warrants from equity to a liability in an amount equal to the fair value of the Warrants, as of the date of issuance, which fair value calculated using the Black Scholes option pricing model is approximately $4 million. The effect of the restatements on the consolidated statement of operations was immaterial for the quarter ended June 30, 2010. The restatements have no impact on amounts previously reported for Assets; Revenues; Operating Expenses; Cash Flows; Accounts Payables; and Contractual Obligations. The restatements have no effect on the Company's development programs, including Prochieve® 8% for the prevention of preterm birth, or business strategy.

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements

The following unaudited, condensed consolidated financial statements of Columbia Laboratories, Inc. (“Columbia” or the “Company”) have been prepared in accordance with the instructions to Form 10-Q and therefore omit or condense certain footnotes and other information normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”). In the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the financial information for the interim periods reported have been made. Results of operations for the three and six months ended June 30, 2010 are not necessarily indicative of the results for the year ending December 31, 2010. It is suggested that these financial statements be read in conjunction with the financial statements and related disclosures for the year ended December 31, 2009, included in the Company’s Annual Report on Form 10-K/A (the “2009 Annual Report”) filed with SEC on April 30, 2010.

COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2010 (Restated)*			2009 (Restated)*

	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents of which $8,211,306 in 2010 and $12,225,732 in 2009 is interest bearing	$	24,878,162		$	14,757,615
Accounts receivable, net of allowances for doubtful accounts of $100,000 in 2010 and 2009, respectively		4,239,934			4,262,851
Inventories		3,030,217			2,532,722
Prepaid expenses and other current assets		670,679			1,097,525
Total current assets		32,818,992			22,650,713

Property and equipment, net		590,655			691,479
Intangible assets - net		16,247,968			18,770,332
Other assets		1,221,593			1,644,695

TOTAL ASSETS	$	50,879,208		$	43,757,219

LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Current portion of financing agreements	$	-		$	144,897
Accounts payable		2,681,586			3,662,091
Accrued expenses		6,498,806			4,588,088
Derivative embedded within convertible notes, fair value		4,829,036			-
Common stock warrant liability		4,057,817			4,057,817
Total current liabilities		18,067,245			12,452,893

Notes payable		34,558,425			32,965,863
Deferred revenue		296,183			328,367
Long-term portion of financing agreements		31,466,525			15,234,406
Long-term accrued interest		50,000			-
TOTAL LIABILITIES		84,438,378			60,981,529

COMMITMENTS AND CONTINGENCIES

Contingently Redeemable Series C Preferred Stock, 600 shares issued and outstanding in 2010 and 2009, respectively (liquidation preference of $600,000)		600,000			600,000

SHAREHOLDERS' DEFICIT:
Preferred stock, $.01 par value;1,000,000 shares authorized
Series B Convertible Preferred Stock, 130 shares issued and outstanding (liquidation preference of $13,000)		1			1
Series E Convertible Preferred Stock, 59,000 shares issued and outstanding (liquidation preference of $5,900,000)		590			590
Common Stock $.01 par value; 100,000,000 shares authorized; 65,715,056 and 65,761,986 shares issued in 2010 and 2009, respectively		657,150			657,619
Capital in excess of par value		239,770,257			238,579,829
Less cost of 155,305 and 131,935 treasury shares in 2010 and 2009, respectively		(309,243	)		(280,813	)
Accumulated deficit		(274,452,141	)		(256,979,263	)
Accumulated other comprehensive income		174,216			197,727
Shareholders' deficit		(34,159,170	)		(17,824,310	)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$	50,879,208		$	43,757,219

* - See Note 2 - Restatement of Previously Reported Interim Period.

See notes to condensed consolidated financial statements

COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

		Six Months Ended				Three Months Ended
		June 30,				June 30,
		2010		2009		2010		2009

NET REVENUES	$	16,621,984	$	15,744,891	$	9,449,085	$	8,423,704

COST OF REVENUES		3,262,235		4,119,369		2,085,656		2,339,351
Gross profit		13,359,749		11,625,522		7,363,429		6,084,353

OPERATING EXPENSES:
Selling and distribution		5,956,631		5,902,367		2,706,312		3,109,131
General and administrative		8,111,718		5,560,999		3,985,400		3,072,446
Research and development		4,575,135		3,947,372		2,233,317		1,701,987
Amortization of licensing right		2,522,364		2,522,364		1,261,182		1,261,182
Total operating expenses		21,165,848		17,933,102		10,186,211		9,144,746

Loss from operations		(7,806,099)		(6,307,580)		(2,822,782)		(3,060,393)

OTHER INCOME (EXPENSES):
Interest income		2,209		28,744		589		9,547
Interest expense		(4,820,092)		(4,205,335)		(2,517,298)		(2,157,234)
Change in fair value of derivative		(4,829,036)		-		1,019,114		-
Other, net		(17,660)		(73,127)		93,025		(32,581)
Total other expenses		(9,664,579)		(4,249,718)		(1,404,570)		(2,180,268)

Loss before taxes		(17,470,678)		(10,557,298)		(4,227,352)		(5,240,661)
State income taxes		(2,200)		(16,930)		-		-
NET LOSS	$	(17,472,878)	$	(10,574,228)	$	(4,227,352)	$	(5,240,661)

NET LOSS PER COMMON SHARE:
Basic and diluted	$	(0.27)	$	(0.19)	$	(0.06)	$	(0.10)

WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
Basic and diluted		65,385,125		54,367,610		65,381,371		54,437,754

See notes to condensed consolidated financial statements

COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

		Six Months Ended		Three Months Ended
		June 30,		June 30,
		2010	2009	2010	2009

NET LOSS		$	$	$ -	$ -

Other comprehensive income (loss):
	Foreign currency translation	(23,511)	18,841	(14,693)	6,208

COMPREHENSIVE LOSS		$ (23,511)	$ 18,841	$ (14,693)	$ 6,208

See notes to condensed consolidated financial statements

COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(17,472,878	)	$	(10,574,228	)
Adjustments to reconcile net loss to net
cash used in operating activities-
Depreciation and amortization		3,053,736			2,773,421
Amortization on beneficial conversion features		918,710			801,093
Amortization on warrant valuation		673,852			597,427
Change in value of derivative		4,829,036			-
Provision for sales returns		1,515,754			577,097
Writedown of inventories		29,085			1,496
Stock based compensation		1,204,959			972,035
Non-cash interest expense on financing agreements		1,137,222			976,119
Changes in assets and liabilities-
(Increase) decrease in:
Accounts receivable		22,917			(80,904	)
Inventories		(526,580	)		(558,552	)
Prepaid expenses and other current assets		426,846			444,759
Other assets		(294	)		(5,617	)
Increase (decrease) in:
Accounts payable		(980,506	)		159,903
Other accrued expenses		405,325			(54,391	)
Deferred revenue		(32,184	)		(25,448	)
Net cash used in operating activities		(4,795,000	)		(3,995,790	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(7,152	)		(43,399	)
Net cash used in investing activities		(7,152	)		(43,399	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from the sale of common stock		-			750,000
Proceeds from financing agreements		15,000,000			-
Payments for purchase of treasury stock		(28,430	)		(73,008	)
Dividends paid		(15,000	)		(17,188	)
Net cash provided by financing activities		14,956,570			659,804

(continued)

COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Continued)

		Six Months Ended June 30,
		2010	2009

EFFECT OF EXCHANGE RATE CHANGES ON CASH		(33,871)	51,786

NET INCREASE (DECREASE) IN CASH		10,120,547	(3,327,599)

CASH, BEGINNING OF PERIOD		14,757,615	12,497,382

CASH END OF PERIOD		$ 24,878,162	$ 9,169,783

NON-CASH FINANCING ACTIVITIES

	Conversion of Series C and Series E preferred shares	$ -	$ 175,000

SUPPLEMENTAL INFORMATION

	Interest paid	$ 1,600,000	$ 1,600,002

	Taxes paid	$ 60,552	$ 31,634

See notes to condensed consolidated financial statements

COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Restatement of Historical Financial Statements

The accompanying Consolidated Balance Sheets as of June 30, 2010 and December 31, 2009 have been restated in this report to reclassify certain warrants based on a reassessment of the applicable accounting guidance, as discussed in Note 2.

(1)	SIGNIFICANT ACCOUNTING POLICIES:

The significant accounting policies followed for quarterly financial reporting are the same as those disclosed in Note (1) of the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K/A for the fiscal year ended December 31, 2009.

(2)	RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

We have restated our previously issued consolidated financial statements (Balance Sheets only) and related disclosures for the quarter ended June 30, 2010 to correct errors in the accounting for certain warrants. Specifically, we previously classified as equity instruments warrants that should have been classified as derivative liability instruments based on the terms of the warrants and the applicable accounting guidance.

In the fourth quarter 2009, the Company issued 10,900,000 shares of Common Stock and 5,450,000 warrants to purchase Common Stock in a registered offering with proceeds net of offering costs of $10,706,305. The warrants generally provide that, in the event the related registration statement is not available for the issuance of the warrant shares, the holder may exercise the warrant on a cashless basis (i.e., applying a portion of the warrant shares to the payment of the exercise price). However, notwithstanding the availability of cashless exercise, ASC 815, as interpreted, appears to establish a presumption that, in the absence of express language to the contrary, warrants providing for the issuance of registered shares may be subject to net cash settlement if the issuer fails to deliver such shares, as it is not within the absolute control of the Company to provide registered shares in all circumstances. Net cash settlement would involve paying the holder of the warrant the value of the warrant shares after deducting the exercise price in lieu of issuing shares of common stock.

The restatement reflects the reclassification of the warrants issued with the October 2009 stock issuance from equity to a liability in the following amount which represents the fair value of the warrants, as of the issuance date, calculated using the Black-Scholes option pricing model.

Issuance Date

Number of

Warrants Issued

Exercise Price

Expiration of

Warrants

Fair Value of

Warrants at

Issuance Date

(In thousands)

October 23, 2009

5,450,000

1.52

April 30, 2015

4,057

Company management has determined that the effect of the adjustment of the liability to mark to market and the corresponding effect on the income statement was immaterial and, accordingly, this adjustment was not reflected in the liability on the consolidated balance sheet at June 30, 2010 or in the consolidated statement of operations for the quarter and six months ended June 30, 2010.

The following table summarizes the effect of the restatement on the specific items presented in the historical consolidated financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010:

Consolidated Balance Sheet	June 30, 2010		June 30, 2010
(in thousands)	(As previously reported)		(As restated)

Current Liabilities:
Common stock warrant liability	$	-	$	4,058
Total Current Liabilities		14,009		18,067

Total Liabilities		80,380		84,438

Stockholders’ Deficit:
Additional paid-in-capital		243,828		239,770
Total Stockholders’ Deficit		(30,101)		(34,159)

(3)	SALES RETURN RESERVES:

Revenues from the sale of products are recorded at the time goods are shipped to customers. The Company believes it has not made any shipments in excess of its customers' ordinary course of business inventory levels. The Company’s return policy allows product to be returned for a period beginning three months prior to the product expiration date and ending twelve months after the product expiration date. Provisions for returns on sales to wholesalers, distributors and retail chain stores are estimated based on a percentage of sales, using such factors as historical sales information, distributor inventory levels and product prescription data, and are recorded as a reduction to sales in the same period as the related sales are recognized. The Company assumes that its customers are using the first-in, first-out method in filling orders so that the oldest saleable product is used first. The Company records a provision for returns on a quarterly basis using an estimated rate and adjusts the provision when necessary.

An analysis of the reserve for sales returns follows:

	Six Months Ended June 30,
	2010	2009

Balance at beginning of year	$ 1,883,623	$ 1,864,316

Provision:
Related to current period sales	694,913	327,097
Related to prior period sales	820,841	250,000
	1,515,754	577,097

Returns:
Related to current period sales	(36,220)	(11,123)
Related to prior period sales	(552,322)	(853,696)
	(588,542)	(864,819)

Balance at end of quarter	$ 2,810,835	$ 1,576,594

The Company believes the greatest potential for uncertainty in estimating sales returns is the estimation of future prescriptions. Historically, they have been wholly dependent on the Company’s ability to sell and market its products, and following the closing on July 2, 2010 of the Watson Transactions (See Notes 14 and 15 included in “Item 1. Financial Statements.”), they are dependent on the ability of Watson Pharmaceuticals, Inc. (“Watson”) to sell and market CRINONE® (progesterone gel). If prescriptions are lower in future periods, then the current reserve may not be adequate.

(4)	INVENTORIES:

Inventories consisted of the following:

	June 30,	December 31,
	2010	2009
Finished goods	$ 1,965,561	$ 1,343,742
Raw materials	1,064,656	1,188,980

	$ 3,030,217	$ 2,532,722

(5)	NOTES PAYABLE:

On December 22, 2006, the Company raised approximately $40 million in gross proceeds to the Company from the sale of convertible subordinated notes (the "Notes") to a group of existing institutional investors. The Notes bear interest at a rate of 8% per annum and are subordinated to the STRIANT Agreement (see Note 6) and mature on December 31, 2011. They are convertible into a total of approximately 7.6 million shares of common stock (“Common Stock”) at a conversion price of $5.25. Investors also received warrants to purchase 2,285,714 shares of Common Stock at an exercise price of $5.50 per share. The warrants expire on December 22, 2011, unless earlier exercised or terminated. The Company used the proceeds of this offering to acquire from Merck Serono S.A ("Merck Serono") the U.S. marketing rights to CRINONE for $33.0 million and purchased Merck Serono’s existing inventory of that product. The balance of the proceeds was used to pay other costs related to the transaction and for general corporate purposes.

The Company recorded original issue discounts of $6.3 million to the notes based upon the fair value of warrants granted. In addition, beneficial conversion features totaling $8.5 million have been recorded as a discount to the notes. These discounts are being amortized at an imputed rate over the five-year term of the related notes. For the three and six month periods ended June 30, 2010, $0.8 million and $1.6 million, respectively, of amortization related to these discounts were classified as interest expense in our consolidated statements of operations. Unamortized discounts of $5.4 million and $7.0 million have been reflected as a reduction to the face value of the Notes in our consolidated balance sheet as of June 30, 2010 and December 31, 2009, respectively.

The notes contain an embedded derivative that allows the holders to redeem the notes at face value in the event of the sale of substantially all of the assets of the Company. Prior to the signing of the Watson Transactions (See Note 14 included in “Item 1. Financial Statements.”) on March 3, 2010, this feature was assigned a nominal value as the Company assessed the potential for such sale to be remote. The Watson Transactions would result in the sale of substantially all of the assets of the Company and, therefore, the associated value of the embedded derivative was increased to the difference between the fair value of the consideration, as determined on March 31, 2010, to be paid at the closing of the Watson Transactions and the carrying value of the notes. Accordingly, the Company recorded a non-cash charge of $5,848,150 on March 31, 2010.

The value of the embedded derivative will fluctuate in future periods, as long as the notes remain outstanding, based on any changes in the fair value of the consideration and the carrying value of the notes. Accordingly, on June 30, 2010, the Company adjusted the non-cash charge downward by $1,019,114 to $4,829,036. The value of the embedded derivative is reversed with the closing of the Watson Transactions; in addition, a charge to operations representing the loss on the debt extinguishment will be made as of the closing date. (See Note 15 included in “Item 1. Financial Statements.”) The embedded derivative is classified as a Level 2 valuation as described in Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 820-10, “Fair Value Measurements and Disclosures.”

On March 4, 2010, the Company announced that it had entered into contingent agreements to pre-pay the Notes. Note holders were to receive their proportional share of the following: $26 million in cash, warrants to purchase 7.75 million shares of Columbia's Common Stock at an exercise price of $1.35, and $10 million in shares of Columbia's Common Stock (the cash, warrants, and common stock together being the “Consideration”). The closings of the transactions (See Note 15 included in “Item 1. Financial Statements.”) under the Notes pre-payment agreements occurred on July 2, 2010.

(6)	FINANCING AGREEMENTS-STRIANT:

In an agreement dated March 5, 2003 (the “STRIANT Agreement”), PharmaBio Development Inc. ("PharmaBio") agreed to pay the Company $15 million in five quarterly installments commencing with the signing of the STRIANT Agreement. In return, PharmaBio received a 9% royalty on net sales of STRIANT in the United States up to agreed annual sales revenues and a 4.5% royalty on net sales above those levels. The royalty term was seven years. Royalty payments commenced in the 2003 third quarter and were subject to minimum ($30 million) and maximum ($55 million) amounts; because the minimum amount exceeded the $15 million received by the Company, the Company recorded the amounts received as liabilities. The excess of the minimum ($30 million) to be paid by the Company over the $15 million received by the Company was recognized as interest expense over the seven-year term of the STRIANT Agreement, assuming an interest rate of 15%. The Company paid PharmaBio approximately $13.5 million through June of 2010. Interest expense was $1.2 million and $1.1 million for the six months ended June 30, 2010 and June 30, 2009, respectively. The balance of the minimum royalty payments, estimated to be $16.5 million as of June 30, 2010, was due November 2010.

Long term liabilities from the STRIANT financing agreement consisted of the following:

	June 30,	December 31,
	2010	2009
STRIANT Agreement	$ 16,466,525	$ 15,379,303
Less: current portion	-	144,897
	$ 16,466,525	$ 15,234,406

On July 22, 2009, the Company and PharmaBio entered into an amendment (the “Second Amendment”) to the STRIANT Agreement, in which they agreed that when the minimum royalty payment is due the Company may, in its sole discretion, either pay the balance due under the STRIANT Agreement or issue to PharmaBio a secured promissory note for that balance. In consideration for the right to issue the secured promissory note, the Company has (a) agreed that during the period from July 22, 2009 through November 30, 2010, the Company will escrow any proceeds from sales of assets outside the ordinary course of business in excess of $15.0 million but not exceeding the difference between the amount of royalties actually received by PharmaBio under the STRIANT Agreement and $30.0 million, and (b) granted PharmaBio a warrant to purchase 900,000 shares of the Company’s Common Stock, par value $.01 per share . In further consideration for the right to issue the secured promissory note, the Company has agreed that if it issues the secured promissory note on November 30, 2010, the Company will on that date grant PharmaBio a second warrant to purchase 900,000 shares of the Company’s Common Stock. Each warrant is exercisable beginning November 30, 2010 and expires on the date five years from its issue date. The warrants are exercisable at $1.15 per share, permit cashless exercise, and provide piggyback registration rights. If the Company issues the secured promissory note, it would bear interest quarterly in arrears at the rate of 10% per annum, be due on November 30, 2011, be secured by Columbia’s assets, and contain customary representations, warranties, and events of default. Using the Black-Scholes valuation model, the Company determined the value of the initial warrant to purchase 900,000 shares of the Company’s Common Stock to be $719,904, or $0.80 per share, which is being amortized over the 16 months through November 2010. The amortization expense recorded in the six months ended June 30, 2010 was approximately $270,000. (See Notes 14 and 15 included in “Item 1. Financial Statements.”) On the closing of the Watson Transactions on July 2, 2010, the amortization of the remaining balance of $225,000 was accelerated and the STRIANT Agreement was terminated.

(7)	FINANCING AGREEMENTS-WATSON NOTE:

On June 1, 2010, the Company borrowed $15,000,000 from Watson pursuant to a forgivable Term Loan Promissory Note, dated June 1, 2010, (the “Watson Note”). Amounts due under the Watson Note bear interest at the rate of 4% per annum. If the Watson Transactions close prior to December 31, 2011, all amounts otherwise due and payable under the Watson Note are to be forgiven in full; however, if the Company engages in a Fundamental Transaction (as defined in the Watson Note) with any party other than as contemplated pursuant to the Watson Transactions, the Watson Note would accelerate, and the Company would be required to repay all amounts due under the Watson Note, plus accrued interest, on the earlier of (i) the date upon which all of the obligations in respect of the Company’s Notes were paid in full or (ii) 21 Trading Days (as defined in the Watson Note) after the occurrence of such Fundamental Transaction. If neither the Watson Transactions nor another Fundamental Transaction closed, the Watson Note would become due and payable on December 31, 2011. If the Company were required to repay the Watson Note by reason of the occurrence of a Fundamental Transaction prior to August 31, 2011, then the Company would be required to pay to Watson on the date the Watson Note is to be repaid, in addition to all other amounts due and payable thereunder, a $2 million prepayment fee.

The proceeds of the Watson Note are intended to be used by the Company for purposes of financing product development activities as described in the Watson Note and for general corporate purposes.

Long term liabilities from the Watson Note financing agreement consisted of the following:

	June 30,	December 31,
	2010	2009
Watson Note	$ 15,050,000	$ -
Less: current portion	-	-
Accrued interest long term	50,000	-
	$ 15,000,000	$ -

The Watson Note is unsecured and subordinate in right of payment to the Company’s obligations to PharmaBio under the STRIANT Agreement. As required by the STRIANT Agreement, pursuant to a Letter Agreement dated June 1, 2010 between the Company and PharmaBio, PharmaBio consented to the Company entering into, and incurring the debt under, the Watson Note. The Watson Note is also subordinate in right of payment to the Company’s Notes. The Watson Note contains certain covenants and representations and warranties, including a covenant which prohibits the Company from incurring any additional indebtedness that would rank senior or pari passu to the Watson Note, subject to certain exceptions specified in the Watson Note.

The Watson Note contains customary events of default and acceleration provisions. Upon the occurrence of a default under the Watson Note and so long as the same remained continuing, all unpaid amounts thereunder, together with all accrued but unpaid interest thereon, would become payable.

On the closing of the Watson Transactions on July 2, 2010, the Watson Note and the accrued interest were forgiven. (See Note 15 included in “Item 1. Financial Statements.”)

(8)	GEOGRAPHIC INFORMATION:

The Company and its subsidiaries are engaged in one line of business, the development, licensing and sale of pharmaceutical products. The Company conducts its international business through its Bermuda subsidiary which contracts with various manufacturers located in the United Kingdom, Switzerland and Italy, to make product for both its international and domestic operations. Most arrangements with licensees are made by the Bermuda company. These customers sell their products into several countries. The Company’s two largest international customers are Merck Serono and to a lesser extent going forward, Lil’ Drug Store Products.

The following table shows selected information by geographic area:

		Net	Identifiable
		Revenues	Assets

As of and for the six months
ended June 30, 2010
	United States	$ 10,744,125	$ 46,149,267

	Switzerland	5,400,948	4,729,941
	Other countries	476,911	-
	Total International	5,877,859	4,729,941
	Total	$ 16,621,984	$ 50,879,208

As of and for the six months
ended June 30, 2009
	United States	$ 9,913,896	$ 33,205,823

	Switzerland	5,830,995	6,557,863
	Other countries	-	-
	Total International	5,830,995	6,557,863
	Total	$ 15,744,891	$ 39,763,686

(9)	LOSS PER COMMON AND POTENTIAL COMMON SHARE:

The calculation of basic and diluted loss per common and common equivalent share is as follows:

		Six Months Ended		Three Months Ended
		June 30,		June 30,
		2010	2009	2010	2009
Net loss		$ (17,472,878)	$ (10,574,228)	$(4,227,352)	$(5,240,661)
	Less: Preferred stock dividends	(15,000)	(17,188)	(7,500)	(7,500)

Net loss applicable to
	common stock	$ (17,487,878)	$ (10,591,416)	$(4,234,852)	$(5,248,161)

Basic and diluted:
	Weighted average number of
	common shares outstanding	65,385,125	54,367,610	65,381,371	54,437,754

	Basic and diluted net loss per common share	$ (0.27)	$ (0.19)	$ (0.06)	$ (0.10)

Basic loss per share is computed by dividing the net loss plus preferred dividends by the weighted-average number of shares of Common Stock outstanding during the period. The diluted earnings per share calculation gives effect to dilutive options, warrants, convertible notes, convertible preferred stock, and other potential Common Stock including selected restricted shares of Common Stock outstanding during the period. Shares to be issued upon the exercise of the outstanding options and warrants or the conversion of the Notes and convertible preferred stock are not included in the computation of diluted loss per share as their effect is anti-dilutive. Shares to be issued upon the exercise of the outstanding options and warrants or the conversion of the Notes, convertible preferred stock and selected restricted shares of Common Stock excluded from the calculation amounted to 27,625,310 and 21,624,672 at June 30, 2010, and 2009, respectively.

(10)	LEGAL PROCEEDINGS:

Claims and lawsuits have been filed against the Company from time to time. Although the results of pending claims are always uncertain, the Company does not believe the results of any such actions, individually or in the aggregate, will have a material adverse effect on the Company’s financial position or results of operation. Additionally, the Company believes that it has adequate reserves or adequate insurance coverage in respect of these claims, but no assurance can be given as to the sufficiency of such reserves or insurance in the event of any unfavorable outcome resulting from these actions.

In connection with the 1989 purchase of the assets of Bio-Mimetics, Inc., which assets consisted of the patents underlying the Company's bioadhesive delivery system (BDS), other patent applications, and related technology, the Company agreed to pay Bio-Mimetics a royalty equal to two percent of the net sales of products based on the assets up to an aggregate of $7.5 million, subject to other conditions. The contract terminates, however, when the last of the relevant patents expire even if the Company has paid aggregate royalties less than $7.5 million. The Company determined that the obligation to pay royalties on STRIANT, PROCHIEVE, and CRINONE terminated in September of 2006, with the expiration of a certain Canadian patent, but continued on future sales, if any, of Replens® and RepHresh®. On December 28, 2007, Bio-Mimetics filed a complaint in the United States District Court ("District Court") for Massachusetts (Bio-Mimetics, Inc. v. Columbia Laboratories, Inc.) alleging breach of contract and unfair or deceptive trade practices for the Company’s failure to continue royalty payments on STRIANT, PROCHIEVE, and CRINONE. Bio-Mimetics later added a claim for correction of inventorship, which challenges the inventorship of certain Company patents related to the STRIANT, PROCHIEVE, and CRINONE products. To date, the Company has paid approximately $3.9 million in royalty payments and Bio-Mimetics seeks a judgment that we are obligated to pay the remaining $3.6 million in full. On March 31, 2010, the District Court granted summary judgment to the Company on Bio-Mimetics’ unfair or deceptive practices and correction of inventorship claims. On May 26, 2010, the District Court granted summary judgment to Bio-Mimetics on its breach of contract claim. The Company has filed an appeal of that decision to the United States Court of Appeals for the First Circuit, which will review the case de novo (i.e., from the beginning) to determine if the District Court properly construed the parties’ contract. Bio-Mimetics has filed a cross-appeal.

(11)	STOCK-BASED COMPENSATION:

The Company’s net loss for the six months ended June 30, 2010 and June 30, 2009 included $1.2 million and $1.0 million, respectively, of stock based compensation expense.

	Six Months Ended June 30,
Stock Based Compensation	2010	2009

Cost of revenues	$ 37,831	$ 70,613

Selling and distribution	326,782	175,798

General and administrative	777,610	647,353

Research and development	62,736	78,271

Total	$ 1,204,959	$ 972,035

(12)	FAIR VALUE OF FINANCIAL INSTRUMENTS:

Effective January 1, 2008, we adopted FASB ASC 820-10-25, “Fair Value Measurement and Disclosures.” This standard establishes a framework for measuring fair value and expands disclosure about fair value measurements. We did not elect fair value accounting for any assets and liabilities allowed by FASB ASC 825,”Financial Instruments.”

FASB ASC 820-10 defines fair value as the amount that would be received for an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. FASB ASC 820-10 describes the following three levels of inputs that may be used:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets and liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data.

Level 3: Unobservable inputs when there is little or no market data available, thereby requiring an entity to develop its own assumptions. The fair value hierarchy gives the lowest priority to Level 3 inputs.

The estimated fair value of the Notes payable embedded derivative related to the sale of substantially all of the assets of the Company as of June 30, 2010 was $4,829,036 and had a nominal fair value at December 31, 2009, and is included in the estimated fair value as reported above. This value is determined based on the Company’s assessment of the likelihood of such sale and its estimate of the related fair value of consideration to be paid, and classified as a level 2 measurement.

The estimated fair value of the common stock warrant liability as of June 30, 2010 and December 31, 2009 was $4,057,817. This value was determined based on the Company’s stock price at the measurement date, exercise price of the warrants, risk-free rates and historical volatility, and is classified as a Level 2 measurement.

The estimated fair value of the Notes and beneficial conversion feature amounted to $40,166,438 and $34,507,598 at June 30, 2010 and December 31, 2009, respectively. This value is the aggregate of the estimated future cash flows associated with the settlement of the Notes, determined through consideration of market conditions, including available interest rates, credit spreads and the Company’s liquidity, and the intrinsic value of the beneficial conversion feature. The carrying value of the Notes and beneficial conversion feature amounted to $34,558,425 and $32,965,863 at June 30, 2010 and December 31, 2009, respectively. The fair value of accounts receivable, accounts payable and the financing agreements described in Note 4 approximate their carrying amount.

(13)	RECENT ACCOUNTING PRONOUNCEMENTS:

In October 2009, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements (a consensus of the FASB Emerging Issues Task Force), which amends ASC 605-25, Revenue Recognition: Multiple-Element Arrangements. ASU No. 2009-13 addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting and how to allocate consideration to each unit of accounting in the arrangement. This ASU replaces all references to fair value as the measurement criteria with the term selling price and establishes a hierarchy for determining the selling price of a deliverable. ASU No. 2009-13 also eliminates the use of the residual value method for determining the allocation of arrangement consideration. Additionally, ASU No. 2009-13 requires expanded disclosures. This ASU will become effective for revenue arrangements entered into or materially modified after the fiscal year 2010. Earlier application is permitted with required transition disclosures based on the period of adoption. We are currently evaluating the application date and the impact of this standard on our consolidated financial statements.

In February 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2010-11, which amends the Subsequent Events Topic of the Accounting Standards Codification (ASC) to eliminate the requirement for public companies to disclose the date through which subsequent events have been evaluated. The Company will continue to evaluate subsequent events through the date of the issuance of the financial statements, however, consistent with the guidance, this date will no longer be disclosed. ASU 2010-11 does not have any impact on the Company’s results of operations, financial condition or liquidity.

(14)	WATSON TRANSACTIONS AND DEBT RESTRUCTURING:

On March 3, 2010, the Company, Watson Pharmaceuticals, Inc., as a guarantor of the Buyer’s obligations (“Watson”), and Coventry Acquisition, Inc., a subsidiary of Watson (the “Buyer”), entered into a Purchase and Collaboration Agreement (the “Purchase Agreement”). Pursuant to the Purchase Agreement, the Company agreed to sell, subject to shareholder approval, to the Buyer (i) substantially all of its assets primarily relating to the research, development, regulatory approval, manufacture, distribution, marketing, sale and promotion of pharmaceutical products containing progesterone as an active ingredient, including CRINONE 8% progesterone gel, PROCHIEVE 4% progesterone gel and PROCHIEVE 8% progesterone gel, each sold by the Company in the U.S. (collectively, the “Progesterone Products”), including certain intellectual property, promotional materials, contracts, product data and regulatory approvals and regulatory filings (the “Purchased Assets”), and (ii) 11,200,000 shares (the “Shares”) of the Company’s Common Stock. After the closing, the Company will retain certain assets and rights relating to its progesterone business, including all rights necessary to perform its obligations under its agreement with Merck Serono. The transactions pursuant to the Purchase Agreement and the ancillary agreements thereto are referred to collectively herein as the “Watson Transactions.”

At the closing of the Watson Transactions, in consideration for the sale of the Purchased Assets and the Shares, the Buyer will pay the Company $47 million in cash and assume certain liabilities associated with the Purchased Assets. In addition, the Buyer agreed to pay the Company up to $45.5 million in cash upon the achievement of several contingent milestones. The Buyer also agreed to make royalty payments to the Company of 10 to 20 percent of annual net sales of certain progesterone products; provided, however that royalty rates would be reduced by 50% in a particular country if a generic entry by a third party occurs in such country and certain other circumstances are fulfilled. In addition, if the Buyer commercializes a product through a third party outside of the U.S., in lieu of royalties, the Company will be entitled to 20% of gross profits associated with such commercialization. If the Buyer or its affiliates effects a generic entry with respect to a progesterone product in a country in the circumstances permitted by the Purchase Agreement, in lieu of royalties payable in respect of net sales for such generic product, the Company will be entitled to 20% of the gross profits associated with the commercialization of such generic product in such country.

Pursuant to the Purchase Agreement, the Company and the Buyer have also agreed to collaborate with respect to the development of progesterone products. In connection therewith, the parties agreed to establish a joint development committee to oversee and supervise all development activities. The Company will be responsible for completion of the PREGNANT Study and such other activities as determined by the joint development committee. The Company will be responsible for the costs of conducting the PREGNANT Study and the preparation, filing and approval process of the related new drug application (or the supplemental new drug application) up to a maximum of $7 million incurred after January 1, 2010. All other development costs incurred in connection with the development collaboration will be paid by the Buyer.

The parties also agreed to enter into various ancillary agreements, including an Investor’s Rights Agreement (pursuant to which the Buyer will have the right to designate a member of the Company’s board of directors for the period set forth therein, the Buyer will obtain certain registration rights pertaining to the Shares and the Buyer will agree to certain transfer restrictions pertaining to the Shares), a Supply Agreement pursuant to which the Company will supply PROCHIEVE 4%, PROCHIEVE 8% and CRINONE 8% to the Buyer for sale in the U.S. at a price equal to 110% of cost of goods sold, and a License Agreement relating to the grant of certain intellectual property licenses.

The closing of the Watson Transactions is subject to customary closing conditions, including Company stockholder approval.

As part of the Purchase Agreement, from the date of the closing of the Watson Transactions until the second anniversary of the date on which the Company and the Buyer terminate their relationship with respect to the joint development of progesterone products, the Company agreed not to manufacture, develop or commercialize products containing progesterone or any other products for the preterm birth indication, subject to certain exceptions. The joint development collaboration is terminable by either party five years after the closing of the Watson Transactions.

The Shares are being offered and sold to the Buyer under the Purchase Agreement in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(2) under the Securities Act and Rule 506 promulgated thereunder, based on the nature of the Buyer and certain representations made by the Buyer to the Company.

PharmaBio Amendment

On March 3, 2010, the Company entered into an amendment (the “PharmaBio Amendment”) with PharmaBio to the STRIANT Agreement . The PharmaBio Amendment provides for the early termination of the PharmaBio Agreement by permitting the Company to make certain payments required thereunder on an accelerated and discounted basis on the date the Company consummates (and contingent upon the Company consummating) a transfer of assets, sale of stock, licensing agreement and/or similar transaction yielding gross cash proceeds to the Company of $40 million or more.

Note Purchase and Amendment Agreements

On March 3, 2010, the Company entered into Note Purchase and Amendment Agreements (the “Note Purchase Agreements”) with all of the holders (the “Holders”) of the Company’s Convertible Subordinated Notes due December 31, 2011. Under the Note Purchase Agreements, the Company agreed to purchase, subject to the satisfaction of certain conditions, the approximately $40 million in aggregate principal amount of Notes held by the Holders. The aggregate purchase price for the Notes is $26 million in cash (plus accrued and unpaid interest through but excluding the date of the closing of the Note purchases), warrants to purchase 7,750,000 shares of Common Stock at an exercise price of $1.35 per share (the “Warrants”) and 7,407,407 shares of Common Stock. The closings of the transactions contemplated by the Note Purchase Agreements are subject to various conditions, including the consummation of the Watson Transactions. Pursuant to the Note Purchase Agreements, the Holders consented, effective on March 3, 2010, to an amendment to the Notes (the “Amendment”) that eliminates the right of any holder of the Notes to cause the Company to redeem the Notes by virtue of the Watson Transactions. The Amendment terminates if the note purchase closings do not occur on or prior to August 31, 2010 and in certain other circumstances. Each Note Purchase Agreement may be terminated in certain circumstances, including, among others, by any party thereto, if the closings thereunder do not occur on or prior to August 31, 2010.

The warrants to be issued under the Note Purchase Agreements will be exercisable, subject to the limitations set forth therein, during the period commencing 180 days after, and ending on the fifth anniversary of their issuance, unless earlier exercised or terminated as provided in such warrants.

Under the terms of the Note Purchase Agreements, the Company has granted the Holders who are “Affiliates” (as defined under Rule 405 of the Securities Act) of the Company certain registration rights with respect to the resale of the shares of the Company’s Common Stock to be issued under the Note Purchase Agreements and the shares of Company Common Stock issuable upon the exercise of the warrants to be issued under the Note Purchase Agreements.

Under the Note Purchase Agreements, until 45 days after the Company’s announcement of the results of the PREGNANT Study, if the Company issues any shares of Company Common Stock (or common stock equivalents) for a price that is less than $2.00 per share, the Company must offer the Holders, subject to certain exceptions, the right to exchange their warrants for cash payments of up to an aggregate of $3,999,996.

The shares and warrants to be issued under the Note Purchase Agreements are being offered and sold in reliance on exemptions from the registration requirements of the Securities Act pursuant to Section 4(2) under the Securities Act and Rule 506 promulgated thereunder, based on the nature of the Holders and certain representations made by them to the Company.

None of the Shares or the shares and warrants to be issued under the Note Purchase Agreements have been registered under the Securities Act (or the laws of any state or other jurisdiction) and may not be offered or sold in the U.S. absent registration or an applicable exemption from the registration requirements thereof. This Form 10-Q does not constitute an offer for the sale of any securities of the Company or a solicitation of any offer to buy any securities of the Company.

The foregoing is a summary of the terms of the Purchase Agreement (and the related ancillary agreements), the Note Purchase Agreements, the Warrants, the Amendment and the PharmaBio Amendment, and does not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement (and the related ancillary agreements), the Note Purchase Agreements, the Warrants, the Amendment and the PharmaBio Amendment, which were more fully summarized and filed as exhibits to the Company’s current report on Form 8-K filed with the SEC on March 4, 2010.

Accounting Treatment of the Watson Transactions

Upon closing the Watson Transactions, the Company will allocate the $47 million initial proceeds plus the $15 million in forgiven Watson Note proceeds plus accrued interest to the then fair value of the 11.2 million shares of Common Stock and the elimination of the remaining book value of the CRINONE intangible assets (which was $16.2 million as of June 30, 2010). The excess, if any, will be recorded as revenue to be amortized over the remaining research and development period for the PREGNANT Study including the Company's filing with, and the Food and Drug Administration's ("FDA") acceptance of, the related new drug application which is expected to occur in the first half of 2011. Further, at the closing of the Watson Transactions, the value of the embedded derivative related to the Note Purchase Agreement will be reversed as non-cash income. In addition, the fair value of our contingent obligation to purchase the warrants issued under the Note Purchase Agreement, if we issue shares of Common Stock (or equivalents) for a price less than $2.00 per share until 45 days after the Company's public announcement of the results of the PREGNANT study, will be determined under the Black-Scholes model and recorded as a liability at the closing of the Watson Transactions and adjusted in future reporting period for changes in the calculated fair value for up to 45 days after the Company's public announcement of the results of the PREGNANT Study. Thereafter, the obligation is transferred to capital in excess of par value. Lastly, a charge will be recognized for the extinguishment of debt for the Notes, PharmaBio debt and the write-off of the remaining balance of the deferred financing costs.

In addition, royalties on net sales of all progesterone products by Watson will be recognized as revenue when earned. Future contingent milestone payments under the Purchase Agreement related to the successful completion of the PREGNANT Study, acceptance of the related FDA filing, first commercial sale in the U.S., acceptance of an ex-US filing and ex-U.S. approval will be recognized as revenue when these milestones are achieved.

(15)	SUBSEQUENT EVENTS:

On July 2, 2010, the Company closed the sale of its progesterone related assets and 11.2 million shares of Common Stock to Watson (See Note 14 included in “Item 1. Financial Statements.”). Columbia's business now consists of its royalty and manufacturing revenues, potential milestone payments, its collaboration with Watson on the development of next-generation progesterone products, and its novel bioadhesive drug delivery technologies and other products.

At the closing, the Company received from Watson $47 million in cash. In addition, Watson forgave all principal and accrued interest on the $15 million Watson Note. Columbia will receive royalties of 10 to 20 percent of annual net sales of certain progesterone products. The Company is also eligible for additional amounts of up to $45.5 million based on success milestones in the potential preterm birth indication. Watson will fund the development of second-generation vaginal progesterone products as part of a comprehensive life-cycle management strategy.

Columbia retains certain assets and rights to its progesterone business, including all rights necessary to perform its obligations under its agreement with Merck Serono. Merck Serono holds marketing rights to and makes payments to Columbia related to CRINONE® (progesterone gel) sales in all countries outside the United States.

Columbia used approximately $16 million of the initial proceeds of the Watson Transactions to pre-pay the balance of the minimum royalty payments due in November 2010 to PharmaBio under the STRIANT Agreement, and $26 million, together with stock and warrants, to pre-pay 100% of the $40 million in Notes due December 31, 2011.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations Section (“MD&A”) is intended to help the reader understand the Company’s financial condition and results of operations. The MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying notes thereto.

Historically, we received revenues from our Progesterone Products that we either promote through our own sales force to reproductive endocrinologists, obstetricians, and gynecologists, and sell to wholesalers and specialty pharmacies, or sell to licensees. We supplement our Progesterone Product revenue by selling other products that use our Bioadhesive Delivery System (“BDS”) which we refer to as “Other Products.”

	Products

Progesterone Products	● CRINONE® 8% (progesterone gel) marketed and sold by us in the U.S. through July 2, 2010 and sold to Watson for resale in the U.S. beginning after July 2, 2010 ● CRINONE® 8% sold to Merck Serono for resale outside the U.S. ● PROCHIEVE® 8% (progesterone gel) sold by us in the U.S. through July 1, 2010 and sold to Watson for resale in the U.S. beginning after July 2, 2010 ● PROCHIEVE® 4% sold to Ascend Therapeutics, Inc., for resale in the U.S., pursuant to an agreement that terminated on July 23, 2010 and sold to Watson for resale in the U.S. beginning after July 2, 2010.

Other Products	● STRIANT® (testosterone buccal system) marketed and sold by us in the U.S. ● STRIANT® sold to Mipharm, S.p.A. for resale in Italy. ● Royalty, licensing and manufacturing revenues.

In 2009, we also sold Replens® Vaginal Moisturizer and RepHresh® Vaginal Gel to Lil’ Drug Store Products, Inc. (“Lil’ Drug Store”) for resale pursuant to a supply agreement that expired on October 31, 2009. During 2010, we have received and intend to fulfill additional orders for Replens and Rephresh products from Lil’ Drug Store.

On March 3, 2010, we entered into a definitive agreement to sell substantially all of our progesterone related assets and 11.2 million shares of Common Stock to Watson Pharmaceuticals, Inc. for a $47 million upfront payment plus royalties of 10 to 20 percent of annual net sales of certain progesterone products. On July 2, 2010, the Company closed this transaction. On June 1, 2010, we entered into a $15 million loan from Watson that was forgiven upon closing of the Watson Transactions on July 2, 2010. This increased the upfront proceeds upon closing to $62 million. Columbia's business now consists of its royalty and manufacturing revenues, potential milestone payments, its collaboration with Watson on the development of next-generation progesterone products, and its novel bioadhesive drug delivery technologies and other products. Additional payments up to $45.5 million can be earned by the successful completion of clinical development milestones in the ongoing PREGNANT Study, regulatory filings, receipt of regulatory approvals and product launches. Watson will fund the development of a second-generation vaginal progesterone product as part of a comprehensive life-cycle management strategy. (See Notes 14 and 15 included in “Item 1. Financial Statements.)

With the closing of the Watson Transactions, all CRINONE and PROCHIEVE products will be marketed and sold in the U.S. by Watson. We will manufacture and sell product to Watson; we will receive royalty payments going forward equal to a minimum of 10% of net sales of these products.

Future recurring revenues will be derived primarily from royalty streams from our partners, Watson and Merck Serono, in addition to manufacturing revenues and sales of Striant. Non-recurring revenues will be realized based upon the upfront payments received from Watson amortized over the relevant development period. Future non-recurring milestone payments will be recognized when the milestones are achieved. Operating expenses attributable to product selling, marketing and distribution activities will be eliminated. General and administrative expenses will be reduced and research and development expenses will decrease as the PREGNANT Study and related NDA filing are completed.

All of our products are manufactured in Europe by third parties on behalf of our foreign subsidiaries who sell the products to our worldwide licensees, and to the Company, in the case of the products commercialized ourselves in the United States. Because our European revenues reflect these sales and are reduced only by our product manufacturing costs, we have historically shown a profit from our foreign operations.

Revenues from our United States operations principally relate to the Company’s products that we promoted to physicians through our sales representatives, as well as royalty income from products that we have licensed. The Company charges our United States operations all selling and distribution expenses that support our marketing, sales and distribution efforts. Research and development expenses are charged to our United States operations for product development which principally supports new products and new label indications for products to be sold in this country. In addition, the majority of our general and administrative expenses represent the Company’s management activities as a public company and are charged to our United States operations. The amortization of the repurchase of the U.S. rights to CRINONE was also charged to our United States operations. As a result, we have historically shown a loss from our United States operations that has been significantly greater than, and offsets, the profits from our foreign operations.

On March 3, 2010 we also entered into contingent agreements with the holders of our senior debt and our convertible subordinated notes (the “Notes”) under which, upon the closing of the Watson Transactions and the satisfaction of other conditions to consummation of such agreements, we would repay our outstanding debt on an accelerated and discounted basis and issue the Note holders shares of Common Stock and warrants to purchase Common Stock. On July 2, 2010, the Company closed this transaction. (See Notes 14 and 15 included in “Item 1. Financial Statements.”)

On May 18, 2010, our license and supply agreement with Merck Serono for the sale of CRINONE outside the U.S. was renewed for an additional five year term.

Results of Operations - Six Months Ended June30, 2010 versus Six Months Ended June 30, 2009

Net revenues increased 6% in the six months ended June 30, 2010 to $16.6 million as compared to $15.7 million in the six months ended June 30, 2009.

Total net revenues from progesterone products increased 37% to $15.2 million in the six months ended June 30, 2010 as compared to $11.1 million in the six months ended June 30, 2009 on a 35% volume increase. Combined U.S. net revenues for CRINONE and PROCHIEVE increased 38% in the six months ended June 30, 2010, over the same period in 2009 with unit volume up 45%. This increase was dampened by an increase in reserves for returned goods. Domestic CRINONE net revenues increased by 47%, despite the additional returns reserves, as a result of a 58% increase in volume. Total prescriptions for CRINONE for the six months ended June 30, 2010 are higher than in the same period in 2009 by 15%. These increases were achieved despite a major economic downturn impacting patients’ decisions to postpone or forego elective infertility procedures that are not reimbursed by health insurers in many major markets, including California. Net revenues from international sales of CRINONE® 8% increased 34% over the first six months of 2009 on a 33% volume increase. Net revenues from other products were $1.5 million in the six months ended June 30, 2010 as compared with $4.6 million in the six months ended June 30, 2009, a 67% decrease. The expiration in October 2009 of Columbia's contract with Lil’ Drug Store Products, Inc.("LDS"), for the OTC products, RepHresh® and Replens®, resulted in a $2.5 million decrease in net revenues in the first half of 2010. In addition, STRIANT net revenues were $0.5 million lower in the 2010 period attributable primarily to the increase in returns reserves.

Gross profit improved by 16% from $11.6 million to $13.4 million; gross margin as a percentage of net revenues improved from 74% in the six months ended June 30, 2009 to 80% in the six months ended June 30, 2010, reflecting the shift in product mix toward higher-margin Progesterone Products.

Selling and distribution expenses increased 0.9% to $6.0 million in the six months ended June 30, 2010, as compared to $5.9 million in the six months ended June 30, 2009, primarily due to increased spending on marketing programs highlighting the several favorable papers and abstracts regarding CRINONE presented at the American Society for Reproductive Medicine Annual Meeting in October 2009, as well as $0.2 million in severance costs. Selling and distribution expenses include payroll, employee benefits, equity compensation and other personnel-related costs associated with sales and marketing personnel, and advertising, market research, market data capture, promotions, tradeshows, seminars, other marketing related programs and distribution costs. In summary, in the first six months of 2010, sales force and management costs were $3.7 million (including $0.2 million of severance), product marketing expenses were $1.7 million and sales information and distribution costs were $0.6 million. The comparable costs for the first six months of 2009 were $3.5 million for sales force and management costs, $1.9 million in product marketing expenses and $0.5 million for sales information and distribution costs.

General and administrative expenses increased 46% to $8.1 million in the six months ended June 30, 2010 as compared to $5.6 million in the six months ended June 30, 2009. The increased expense in 2010 was attributable to $2.5 million in costs related to the Watson Transactions and $0.4 million in severance costs. General and administrative expenses include payroll, employee benefits, equity compensation and other personnel-related costs associated with the finance, legal, regulatory affairs, information technology, facilities, certain human resources and other administrative personnel, as well as legal costs and other administrative fees.

Research and development expenses increased 16% to $4.6 million in the six months ended June 30, 2010, as compared to $3.9 million in the six months ended June 30, 2009. The increase was driven by higher costs of the PREGNANT Study as we completed enrollment in the second quarter of 2010. Research and development expenses include payroll, employee benefits, equity compensation and other personnel-related costs associated with product development, as well as the cost of conducting and administering clinical studies and regulatory costs for our products.

We purchased the U.S. marketing rights for CRINONE from Merck Serono in December 2006 for $33.0 million. In the second quarter of 2007, we recognized a $1.0 million adjustment to the purchase price to reflect contingent liabilities for Merck Serono sales returns. The $33.0 million charge is being amortized over 6.75 years, and the $1.0 million charge is being amortized over 6.5 years. Amortization of the acquisition cost for the CRINONE U.S. marketing rights for each of the six months ended June 30, 2010 and 2009 was $2.5 million.

Other income/expense for the six months ended June 30, 2010 consisted primarily of interest expense of $4.8 million associated with the $40.0 million Notes, the financing agreements and warrant amortization with PharmaBio, and $4.8 million representing the non-cash charge for the embedded derivative related to the Notes that are to be repaid as part of the Watson Transactions.

As a result, the net loss for the six months ended June 30, 2010 was $17.5 million or $(0.27) per basic and diluted share as compared to the net loss for the six months ended June 30, 2009 of $10.6 million or $(0.19) per basic and diluted share.

Results of Operations - Three Months Ended June 30, 2010 versus Three Months Ended June 30, 2009

Net revenues increased 13% in the three months ended June 30, 2010 to $9.4 million as compared to $8.4 million in the three months ended June 30, 2009.

Total net revenues from Progesterone Products increased 48% to $8.4 million in the three months ended June 30, 2010, as compared to $5.7 million in the three months ended June 30, 2009, primarily as a result of increased sales of CRINONE in both domestic and foreign markets. In the three months ended June 30, 2010, CRINONE net revenues from non-U.S. sales were 62% higher than the same period in 2009 and can be attributed to a number of factors, including a 50% increase in unit volumes and higher net selling prices offset by the unfavorable effects of a stronger dollar. Net revenues from domestic CRINONE sales in the three months ended June 30, 2010 increased 59% over the same period in 2009, with unit volume accounting for about 62% of the increase. Total prescriptions for CRINONE for the three months ended June 30, 2010 are higher than in the same period in 2009 by 11%. This increase was achieved despite a major economic downturn impacting patients’ decisions to postpone or forego elective procedures that are not reimbursed in several major markets (e.g., California). PROCHIEVE net revenues for the three months ended June 30, 2009 declined by 52% as compared with net revenues for the same period in 2009.

Net revenues from Other Products decreased 59% to $1.0 million in the three months ended June 30, 2010, as compared to $2.7 million in the three months ended June 30, 2009. The expiration in October 2009 of Columbia's contract with LDS for the OTC products, RepHresh® and Replens®, resulted in a $1.4 million decrease in net revenues in the second quarter of 2010. In addition, STRIANT net revenues were $0.2 million lower in the 2010 period attributable primarily to higher sales return reserves.

Gross profit increased 23% from $6.1 million in the three months ended June 30, 2009 to $7.4 million for the three months ended June 30, 2010, primarily reflecting the increase in net revenues. Gross margin as a percentage of sales improved from 72% in the second quarter of 2009 to 78% in the second quarter of 2010. The primary reason for the improved margins was a product mix favoring higher margin Progesterone Products and favorable effects of changes in foreign exchange rates on our contract manufacturing costs.

Selling and distribution expenses decreased 13% to $2.7 million in the three months ended June 30, 2010, as compared to $3.1 million in the three months ended June 30, 2009. The primary reason for the decrease was lower marketing and market research expenses. Selling and distribution expenses include payroll, employee benefits, equity compensation and other personnel-related costs associated with sales and marketing personnel, and advertising, market research data capture, promotions, tradeshows, seminars, other marketing related programs and distribution costs. In summary, in the three months ended June 30, 2010, sales force and management costs were $1.6 million, product marketing expenses were $0.8 million and sales information and distribution costs were $0.3 million. The comparable costs for the three months ended June 30, 2009 were $1.8 million for sales force and management costs, $1.0 million in product marketing expenses and $0.3 million for sales information and distribution costs.

General and administrative expenses increased 30% to $4.0 million in the three months ended June 30, 2010 as compared to $3.1 million in the three months ended June 30, 2009. General and administrative expenses include payroll, employee benefits, equity compensation and other personnel-related costs associated with the finance, legal, regulatory affairs, information technology, facilities, certain human resources and other administrative personnel, as well as legal costs and other administrative fees. The increase in the second quarter 2010 general and administration expenses versus the same period in 2009 were primarily attributable to $1.0 million in costs related to the Watson Transactions and personnel related costs of $0.4 million for severance payments.

Research and development expenses increased by 31% to $2.2 million in the three months ended June 30, 2010, as compared to 2009. Research and development expenses include payroll, employee benefits, equity compensation and other personnel-related costs associated with product development, as well as the cost of conducting and administering clinical studies and regulatory for our products. Research and development expenses include expenses for the PREGNANT Study including the completion of the enrollment of patients, which resulted in an increase of $0.6 million in clinical trial expenses for the PREGNANT Study over the quarter ended June 30, 2009.

Amortization of the acquisition cost for the CRINONE U.S. marketing rights for each of the quarters ended June 30, 2010 and 2009 was $1.3 million.

Other income/expense for the three months ended June 30, 2010, consisted primarily of interest expense of $2.5 million associated with the $40 million Notes, the amortization of financing costs and warrant amortization with PharmaBio, and income of $1.0 million representing the non-cash change in the fair value for the embedded derivative related to the Notes that are to be repaid as part of the Watson Transactions.

As a result, the net loss for the three months ended June 30, 2010, was $4.2 million or $(0.06) per basic and diluted share, as compared to the net loss for the three months ended June 30, 2009 of $5.2 million or $(0.10) per basic and diluted share.

Liquidity and Capital Resources

Cash and cash equivalents were $24.9 million and $14.8 million at June 30, 2010 and December 31, 2009, respectively. Following the closing of the Watson Transactions, the Company believes its cash on hand will sustain its operations for the foreseeable future.

Cash provided by (used in) operating, investing and financing activities is summarized as follows:

	Six Months Ended
	June 30,
	2010	2009
Cash flows:
Operating activities	$(4,795,000)	$(3,995,790)
Investing activities	(7,152)	(43,399)
Financing activities	14,956,570	659,804

Operating Activities:

Net cash used in operating activities for the six months ended June 30, 2010 resulted primarily from $4.1 million in net operating losses after applying non-cash charges and increases in working capital of $0.7 million. The net loss of $17.5 million in the first half of 2010 included non-cash items for depreciation, amortization, a change in the fair value of a derivative, stock-based compensation, provision for sales returns, and non-cash interest expense, which totaled $13.4 million, leaving a net cash loss, of $4.1 million for the first half of 2010. Accounts receivable remained unchanged from the fourth quarter of 2009. Inventories grew by $0.5 million during the period to meet specific customer orders. Accounts payable decreased by $1.0 million and other accrued expenses increased by $0.4 million. The decrease in accounts payable is due primarily to payments for marketing programs and for the PREGNANT Study. The increase in other accrued expenses of $0.4 million related to the accruals for severance payments.

Net cash used in operating activities of $4.0 million for the six months ended June 30, 2009 resulted primarily from $3.9 million in net operating losses after applying non-cash charges and increases in working capital of $0.1 million. The net loss of $10.6 million in the six months ended June 30, 2009 included non-cash items for depreciation, amortization, stock-based compensation, provision for sales returns and non-cash interest expense, which totaled $6.7 million, leaving a net cash loss, net of non-cash items, of $3.9 million for the six months ended June 30, 2009. Inventories grew by $0.6 million during the period to meet specific customer orders. Accounts payable increased by $0.2 million and other accrued expenses decreased by $0.1 million. The increase in accounts payable is due primarily to higher inventory levels and increased expenses for the PREGNANT Study. The reduction in other accrued expenses of $0.1 million related to the distributor service fees and professional fees paid during the six months ended June 30, 2009.

Investing activities:

Net cash used in investing activities was $0.0 million in each the six months ended June 30, 2010 and 2009.

Financing Activities:

Net cash provided by financing activities in the six months ended June 30, 2010 was $15.0 million, consisting of proceeds from the Watson Note.

Net cash provided by financing activities in the six months ended June 30, 2009 was $0.7 million which included the sale of 451,807 shares of Common Stock for proceeds of $0.75 million.

The Company has an effective registration statement on Form S-3 that it filed with the SEC using a shelf registration process. Under the shelf registration process, we may offer from time to time Common Stock, preferred stock, debt securities and warrants up to an aggregate amount of $50 million. To date, the Company has sold approximately $12.5 million in Common Stock under the registration statement. We cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact our ability to conduct our business.

On July 22, 2009, the Company and PharmaBio entered into an amendment (the “Second Amendment”) to the STRIANT Agreement, in which they agreed that when the minimum royalty payment is due the Company may, in its sole discretion, either pay the balance due under the STRIANT Agreement or issue to PharmaBio a secured promissory note for that balance. In consideration for the right to issue the secured promissory note, the Company has (a) agreed that during the period from July 22, 2009 through November 30, 2010, the Company will escrow any proceeds from sales of assets outside the ordinary course of business in excess of $15.0 million but not exceeding the difference between the amount of royalties actually received by PharmaBio under the STRIANT Agreement and $30.0 million, and (b) granted PharmaBio a warrant to purchase 900,000 shares of the Company’s Common Stock. In further consideration for the right to issue the secured promissory note, the Company has agreed that if it issues the secured promissory note on November 30, 2010, the Company will on that date grant PharmaBio a second warrant to purchase 900,000 shares of the Company’s Common Stock. Each warrant is exercisable beginning on November 30, 2010 and expires on the date five years from its issue date. The warrants are exercisable at $1.15 per share, permit cashless exercise, and provide piggyback registration rights. If the Company issues the secured promissory note, it would bear interest quarterly in arrears at the rate of 10% per annum, be due on November 30, 2011, be secured by Columbia’s assets, and contain customary representations, warranties, and events of default. On the closing of the Watson Transactions on July 2, 2010, the Company prepaid its remaining obligations under the STRIANT Agreement and the STRIANT Agreement was terminated.

On March 3, 2010, we entered into contingent agreements with PharmaBio and the holders of our convertible Notes under which, subject to the closing of the Watson Transactions and satisfaction of the other conditions to consummation of such agreements, we would repay our outstanding debt on an accelerated and discounted basis and issue the holders of convertible Notes shares of Common Stock and warrants to purchase Common Stock. (See Notes 14 and 15 included in "Item 1. Financial Statements.”)

On October 22, 2009, the Company entered into a Placement Agent Agreement with Oppenheimer & Co. Inc. (Oppenheimer") and The Benchmark Company, LLC ("Benchmark"), as placement agents (collectively, the “Placement Agents”), relating to a registered direct offering of 10,900,000 shares of the Company’s Common Stock and warrants to purchase 5,450,000 shares of Common Stock (the “Offering”). On October 28, 2009 the Company consummated the sale of 10,900,000 shares of its Common Stock and warrants to purchase 5,450,000 shares of its Common Stock in a registered direct offering for gross proceeds of $11,722,000. The Common Stock and warrants were sold in units, with each unit consisting of one share of Common Stock and a warrant to purchase 0.5 shares of Common Stock at a price of $1.08 per unit. The warrants will be exercisable at an exercise price of $1.52 per share of Common Stock, subject to adjustments, at any time on or after April 30, 2010 and ending on April 30, 2015. The Company received net proceeds of approximately $10,709,000 from the offering after offering-related fees and expenses. The Company paid the Placement Agents a fee equal to 6.5% of the gross proceeds received by the Company from the Offering. The shares and warrants were offered pursuant to the Company's existing effective shelf registration statement on Form S-3.

As of June 30, 2010, the Company had outstanding exercisable options and warrants that, if exercised, would result in approximately $51.4 million of additional capital and would cause the number of shares outstanding to increase. Options and warrants outstanding at June 30, 2010 were 5,539,479 and 10,942,755, respectively. However, there can be no assurance that any such options or warrants will be exercised. The aggregate intrinsic value of exercisable options and warrants at June 30, 2010 and June 30, 2009 was $0.0 million and $0.0 million, respectively.

Significant expenditures anticipated by the Company in the near future are concentrated on maintaining our status as a public company, research and development related to new products, new indications for currently approved products and other general corporate purposes.

Watson Transactions

On March 3, 2010, Columbia entered into a definitive agreement to sell, subject to stockholder approval, substantially all of its progesterone related assets, including its preterm birth patents and applications and 11.2 million shares of Common Stock, to Watson Pharmaceuticals, Inc. (the “Watson Transactions”) for upfront and milestone payments of up to $92.5 million. These include a $47 million upfront payment plus royalties of 10 to 20 percent of annual net sales of certain progesterone products. Additional payments up to $45.5 million can be earned by the successful completion of clinical development milestones in the ongoing PREGNANT Study, regulatory filings, receipt of regulatory approvals and product launches. Watson will fund the development of a second-generation vaginal progesterone product as part of a comprehensive life-cycle management strategy. On June 1, 2010, we entered into a $15 million loan from Watson forgivable upon closing of the Watson Transactions.

Columbia will retain certain assets and rights to its progesterone business, including all rights necessary to perform its obligations under its agreement with Merck Serono. The Watson Transactions closed on July 2, 2010. (See Notes 14 and 15 included in "Item 1. Financial Statements.”) As a result, Columbia is now debt-free with over $25 million in cash and approximately 84 million common shares outstanding.

Contractual Obligations, Commercial Commitments and Off-Balance Sheet Arrangements

There have been a number of changes to the disclosures related to the Company's contractual obligations, commercial commitments and off-balance sheet arrangements disclosures in its Annual Report on Form 10-K/A for the year ended December 31, 2009, resulting from the closing of the Watson Transactions and the elimination of the Company’s debt and interest payments. (See Notes 14 and 15 included in "Item 1. Financial Statements.”)

Recent Accounting Pronouncements

Critical Accounting Policies and Estimates

The Company has identified the policies below as critical to its business operations and the understanding of its results of operations. For a detailed discussion on the application of these and other accounting policies, see Note 1 of the consolidated financial statements included in Item 15 of the Annual Report on Form 10-K/A for the year ended December 31, 2009, beginning on page F-10. Note that the preparation of this Quarterly Report on Form 10-Q requires the Company to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.

Revenue Recognition. The Company’s revenue recognition is significant because revenue is a key component of our results of operations. In addition, revenue recognition determines the timing of certain expenses, such as commissions and royalties. Revenue results are difficult to predict, and any shortfall in revenue or delay in recognizing revenue could cause operating results to vary significantly from quarter to quarter. License fees are recorded over the life of the license. Royalty revenues, based on sales by licensees, are recorded as revenues as those sales are made by licensees.

Sales Returns. Revenues from the sale of products are recorded at the time goods are shipped to customers. The Company believes that it has not made any shipments in excess of its customers' ordinary course of business inventory levels. Except for sales to licensees, our return policy allows product to be returned for a period beginning three months prior to the product expiration date and ending twelve months after the product expiration date. Products sold to licensees is not returnable to us. Provisions for returns on sales to wholesalers, distributors and retail chain stores are estimated based on a percentage of sales, using such factors as historical sales information, distributor inventory levels and product prescription data, and are recorded as a reduction to sales in the same period as the related sales are recognized. We also continually analyze the reserve for future sales returns and increase such reserve if deemed appropriate. The Company purchases prescription data on all its products from IMS Health, a leading provider of market intelligence to the pharmaceutical and healthcare industries. The Company also purchases certain information regarding inventory levels from its larger wholesale customers. This information includes for each of the Company’ products, the quantity on hand, the number of days of inventory on hand, and a 28 day forecast of sales by units. Using this information and historical information, the Company estimates potential returns by taking the number of product units sold by the Company by expiration date and then subtracting actual units and potential units that may be sold to end users (consumers) based on prescription data up to five months prior to the product’s expiration date. The Company records a provision for returns on a quarterly basis using an estimated rate and adjusts the provision if its analysis indicates that the potential for product non-salability exists. Sales adjustments for international sales are estimated to recognize changes in foreign exchange rates and government tenders that may fluctuate within a year.

Accounting For PharmaBio Agreements. In March 2003, the Company entered into the STRIANT Agreement with PharmaBio under which the Company received upfront money paid in quarterly installments in exchange for royalty payments on certain of the Company’s products to be paid to PharmaBio for a fixed period of time. The royalty payments were subject to minimum and maximum amounts. Because the minimum amount exceeds the amount received by the Company, the Company recorded the monies received as liabilities. We recorded the excess of the minimum to be paid by the Company over the amount received by the Company as interest expense over the term of the agreement. The Company prepaid its remaining obligation to PharmaBio on July 2, 2010, and the STRIANT Agreement was terminated.

Stock-Based Compensation – Employee Stock-Based Awards. Commencing January 1, 2006, the Company adopted ASC 718, “Share Based Payment”, formerly SFAS 123(R), which requires all share based payments, including grants of stock options, to be recognized in the income statement as an operating expense, based on their fair values. In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (“SAB 107”) providing supplemental implementation guidance for SFAS 123(R). The Company has applied the provisions of SAB 107 in its adoption of ASC 718. During the first half of 2010, there were no options granted.

	Six Months Ended
	June 30,
	2010	2009
Risk free interest rate	-	1.72%
Expected term	-	4.16 years
Dividend yield	-	0
Expected volatility	-	92.70%

Fair Value of Financial Instruments- The estimated fair value of the Notes and beneficial conversion feature amounted to $40,166,438 and $34,507,598 at June 30, 2010 and December 31, 2009, respectively. This value is the aggregate of the estimated future cash flows associated with the settlement of the Notes, determined through consideration of market conditions, including available interest rates, credit spreads and the Company’s liquidity, and the intrinsic value of the beneficial conversion feature. The carrying value of the Notes and beneficial conversion feature amounted to $34,558,425 and $32,965,863 at June 30, 2010 and December 31, 2009, respectively. The fair value of accounts receivable, accounts payable and the financing agreements described in Note 4 approximate their carrying amount.

The Notes embedded derivative related to the sale of substantially all of the assets of the Company had an estimated fair value as of June 30, 2010 of $4,829,036 and had a nominal fair value at December 31, 2009, and is included in the estimated fair value as reported above. This value is determined based on the Company’s assessment of the likelihood of such sale and its estimate of the related fair value of consideration to be paid.

Forward-Looking Information

This Report contains forward-looking statements, which statements are indicated by the words “may,” “will,” “plans,” “believes,” “expects,” “anticipates,” “potential,” and similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those projected in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date on which they are made.

Factors that might cause future results to differ include, but are not limited to, the following: the successful marketing of CRINONE® (progesterone gel) by Watson Pharmaceuticals, Inc., in the United States; the successful marketing of CRINONE by Merck Serono outside the United States; the timely and successful completion of the ongoing Phase III PREGNANT (PROCHIEVE® (progesterone gel) Extending Gestation A New Therapy) Study of PROCHIEVE 8% to reduce the risk of preterm birth in women with a short cervix at mid-pregnancy; successful development of a next-generation vaginal progesterone product; success in obtaining acceptance and approval of new products and new indications for current products by the U.S. FDA and international regulatory agencies; the impact of competitive products and pricing; the timely and successful negotiation of partnerships or other transactions; the strength of the United States dollar relative to international currencies, particularly the euro; competitive economic and regulatory factors in the pharmaceutical and healthcare industry; general economic conditions; and other risks and uncertainties that may be detailed, from time-to-time, in Columbia’s reports filed with the SEC.

All forward-looking statements contained herein are neither promises nor guarantees. Columbia does not undertake any responsibility to revise or update any forward-looking statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company does not believe that it has material exposure to market rate risk. The Company may, however, require additional financing to fund future obligations and no assurance can be given that the terms of future sources of financing will not expose the Company to material market risk.

Expenditures primarily related to manufacturing in the six months ended June 30, 2010 were approximately $0.2 million less than they would have been if the average 2009 exchange rates had been in effect in 2010.

Item 4. Controls And Procedures

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Prior to the filing of this Amendment No. 1 and based on their evaluation at June 30, 2010, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.

In connection with the preparation of this Amendment No. 1, our Chief Executive Officer and our Chief Financial Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2010. In making this evaluation, they considered the material weakness related to the classification of warrants discussed below. Solely as a result of the material weakness, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of June 30, 2010.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Claims and lawsuits have been filed against the Company and its subsidiaries from time to time. Although the results of pending claims are always uncertain, the Company does not believe the results of any such actions, individually or in the aggregate, will have a material adverse effect on the Company’s financial position or results of operation. Additionally, the Company believes that it has adequate reserves or insurance coverage in respect of these claims, but no assurance can be given as to the sufficiency of such reserves or insurance in the event of any unfavorable outcome resulting from these actions.

Item 1A. Risk Factors

There have been a number of changes to the risk factors disclosed in Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2009 primarily resulting from the closing of the Watson Transactions and the elimination of the Company’s debt. These risk factors have been updated below to reflect such changes.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results, and current and potential stockholders may lose confidence in our financial reporting.

We are required by the SEC to establish and maintain adequate internal control over financial reporting that provides reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles, or GAAP. We are likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses in those internal controls.

As described elsewhere in this Amendment No. 1, in connection with the restatement process, we identified a material weakness with regard to accounting for warrant instruments in our internal control over financial reporting, specifically with regard to our prior interpretation of ASC 815, as it related to the initial classification and subsequent accounting of registered warrants as either liabilities or equity instruments dating back to October 2009. Upon a reassessment of those financial instruments, in light of GAAP as currently interpreted, we determined that we should have accounted for certain warrant instruments as liabilities instead of equity. Given this material weakness with regard to warrants, management concluded that we did not maintain effective internal control over financial reporting as of June 30, 2010.

Given the determination regarding this material weakness, we plan to devote significant effort and resources to the remediation and improvement of our internal control over financial reporting. While we have processes to identify and intelligently apply developments in accounting, we plan to enhance these processes to better evaluate our research and understanding of the nuances of increasingly complex accounting standards. Our plans include the following: enhanced access to accounting literature, research materials and documents; and increased communication among our legal and finance personnel and third party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time and we can offer no assurance that these initiatives will ultimately have the intended effects. Any failure to maintain such internal controls could adversely impact our ability to report our financial results on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis as required by the SEC and NASDAQ, we could face severe consequences from those authorities. In either case, there could result a material adverse effect on our business. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock. We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weaknesses identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our consolidated financial statements.

Our Phase III PREGNANT Study to reduce the incidence of preterm birth may not be successful.

Our lead research and development opportunity is the PREGNANT study of PROCHIEVE 8% to reduce the risk of preterm birth in women with a short cervix as measured by transvaginal ultrasound in mid-pregnancy. This randomized, double-blind, placebo-controlled clinical trial will evaluate the effect of PROCHIEVE 8% on reducing the risk of preterm birth in women with a cervical length between 1.0 and 2.0 centimeters as measured by transvaginal ultrasound at mid-pregnancy. The primary endpoint is a reduction in the incidence of preterm birth at less than or equal to 32 weeks gestation vs. placebo. Enrollment in the study was completed in June 2010, and we expect study results around the end of 2010. The study may not demonstrate the safety or efficacy of the product for this indication. In addition, the study may provide insufficient safety or efficacy data to meet FDA requirements for approval of the indication. In such event, a substantial portion of the contingent payments under the Watson Transactions would not be paid.

Our business is heavily dependent on the continued sale of CRINONE/PROCHIEVE 8% by Merck Serono and Watson.

Our operating results are heavily dependent on the revenues and royalties derived from the sale of CRINONE 8% to Merck Serono for sale outside the U.S. and from Watson for sale in the U.S. Revenues from the sales to Merck Serono in 2009 constituted approximately 27% of our total net revenues. We do not control the amount and timing of marketing resources that Merck Serono devotes to our product. The failure of Merck Serono to effectively market CRINONE 8% in its territories outside the U.S. could have a material adverse effect on our business, financial condition and results of operations. On May 18, 2010, our license and supply agreement with Merck Serono was renewed for an additional five-year term.

Net revenues from CRINONE/PROCHIEVE 8% in the U.S. in 2009 totaled approximately $15.2 million or approximately 47% of our total net revenues. The contribution margin from those sales after manufacturing, sales, marketing and distribution costs was $1.7 million. It is noted that sales by Watson will have to increase to $17 million if our royalty streams at 10% are to equal the contribution margin for 2009. We do not control the amount and timing of marketing resources that Watson devotes to our product. The failure of Watson to effectively market CRINONE/PROCHIEVE 8% in the U.S. could have a material adverse effect on our business, financial condition and results of operations and require us to raise additional funds.

The price of our Common Stock has been and may continue to be volatile.

Historically, the market price of our Common Stock has fluctuated over a wide range. Between 2007 and 2008, our Common Stock traded in a range from $.92 to $5.25 per share. In 2009, our Common Stock traded in a range from $.65 to $1.74 per share. In the first six months of 2010, our stock traded in a range of $.93 to $1.43 per share. It is likely that the price of our Common Stock will continue to fluctuate. The market prices of securities of small specialty pharmaceutical companies, including ours, from time to time experience significant price and volume fluctuations. In particular, the market price of our Common Stock may fluctuate significantly due to a variety of factors, including: the results of clinical trials for our product candidates; FDA’s determination with respect to new drug applications for new products and new indications; and our ability to develop additional products. In addition, the occurrence of any of the risks described in these “Risk Factors” could have a material and adverse impact on the market price of our Common Stock.

We have a history of losses and we may not have sufficient funds to continue operations unless we are able to raise additional funds, which may not be available to us.

We have had a history of losses since our founding. For the year ended December 31, 2009, we had a net loss of $21.9 million. If we and our partners are unable to successfully develop and market our products, and otherwise increase sales of our products, and contain our operating expenses, we may not have sufficient funds to continue operations unless we are able to raise additional funds from sales of securities or otherwise. Additional financing may not be available to us on acceptable terms, if at all

The current stock market and credit market conditions are extremely volatile and may restrict our ability to raise additional funds to meet our capital needs.

The current stock market and credit market conditions are extremely volatile. It is difficult to predict whether these conditions will continue or worsen and, if so, whether the conditions would impact the Company and whether the impact would be material. In particular, constriction and volatility in the equity and debt markets may restrict our future ability to access these markets should it become necessary to raise additional funds.

A decline in the price of our Common Stock could affect our ability to raise further working capital and adversely impact our ability to continue operations.

A prolonged decline in the price of our Common Stock could result in a reduction in the liquidity of our Common Stock and a reduction in our ability to raise capital. Because a significant portion of our operations has been and will continue to be financed through the sale of equity securities and equity linked securities (warrants and convertible debt), a decline in the price of our Common Stock could be especially detrimental to our liquidity and our operations. Such reductions may force us to reallocate funds from other planned uses and may have a significant negative effect on our business plans and operations, including our ability to develop our product candidates and continue our current operations. If we are unable to raise sufficient capital in the future, and we are unable to generate funds from operations sufficient to meet our obligations, we will not be able to have the resources to continue our normal operations.

If we do not meet the continued listing requirements of the NASDAQ Global Market, our Common Stock may be delisted.

Our Common Stock is listed on the NASDAQ Global Market. The NASDAQ Global Market requires us to continue to meet certain listing standards. During 2009, the closing price of our Common Stock on the NASDAQ Global Market ranged from $0.65 to $1.74. On December 9, 2009, we received a letter from the NASDAQ Global Market indicating that for 30 consecutive business days the Company’s Common Stock did not maintain a minimum closing bid price of $1.00 (“Minimum Bid Price Requirement”) per share as required by NASDAQ Listing Rule 5450(a)(1). On January 13, 2010, we received a notice from the NASDAQ Global Market indicating that the Company had regained compliance with the Minimum Bid Price Requirement for continued listing on the NASDAQ Global Market as set forth in Marketplace Rule 5450(a)(1). The notice stated that the closing bid price of the Company's Common Stock had been at or above the required minimum $1.00 per share for the previous 10 consecutive business days. While we are currently in compliance with the NASDAQ Global Market continued listing requirements, we cannot assure you that we will remain in compliance. If we do not meet the NASDAQ Global Market’s continued listing standards, we will be notified by the NASDAQ Global Market and we will be required to take corrective action to meet the continued listing standards; otherwise our Common Stock will be delisted from the NASDAQ Global Market. A delisting of our Common Stock on the NASDAQ Global Market would reduce the liquidity and market price of our Common Stock and the number of investors willing to hold or acquire our Common Stock, which could negatively impact our ability to access the public capital markets. A delisting would also reduce the value of our equity compensation plans, which could negatively impact our ability to retain key employees.

The development of our pharmaceutical products is uncertain and subject to a number of significant risks.

Some of our pharmaceutical products are in various stages of development. In the U.S. and most foreign countries, we must complete extensive human clinical trials that demonstrate the safety and efficacy of a product in order to apply for regulatory approval to market the product.

The process of developing product candidates involves a degree of risk and may take several years. Product candidates that appear promising in the early phases of development may fail to reach the market for several reasons, including:

	●	Clinical trials may show our product candidates to be ineffective for the indications studied or to have harmful side effects;

	●	Product candidates may fail to receive regulatory approvals required to bring the products to market;

	●	Manufacturing costs or other factors may make our product candidates uneconomical; and

	●	The proprietary rights of others and their competing products and technologies may prevent our product candidates from being effectively commercialized.

Success in early clinical trials does not ensure that large-scale clinical trials will be successful. Clinical results are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals.

The length of time necessary to complete clinical trials and to submit an application for marketing approval for a final decision by a regulatory authority varies significantly and may be difficult to predict. The speed with which we can complete clinical trials and applications for marketing approval will depend on several factors, including the following:

	●	The rate of patient enrollment which is a function of factors including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the study, and the nature of the study protocol;

	●	Institutional Review Board, or IRB, approval of the study protocol and the informed consent form;

	●	Prior regulatory agency review and approval;

	●	Analysis of data obtained from clinical activities, which are susceptible to varying interpretations and which interpretations could delay, limit or prevent regulatory approval;

	●	Changes in the policies of regulatory authorities for drug approval during the period of product development; and

	●	The availability of skilled and experienced staff to conduct and monitor clinical studies and to prepare the appropriate regulatory applications.

In addition, developing product candidates is very expensive and will continue to have a significant impact on our ability to generate profits. Factors affecting our product development expenses include:

	●	Our ability to raise any additional funds that we need to complete our trials;

	●	The number and outcome of clinical trials conducted by us and/or our collaborators;

	●	The number of products we may have in clinical development;

	●	In licensing or other partnership activities, including the timing and amount of related development funding, license fees or milestone payments; and

	●	Future levels of our revenue.

Clinical trials are expensive and can take years to complete, and there is no guarantee that the clinical trials will demonstrate sufficient safety and/or efficacy of the products to meet FDA requirements, or those of foreign regulatory authorities.

We may experience adverse events in clinical trials, which could delay or halt our product development.

Our product candidates may produce serious adverse events. These adverse events could interrupt, delay or halt clinical trials of our product candidates and could result in FDA or other regulatory authorities denying approval of our product candidates for any or all targeted indications. An IRB or independent data safety monitoring board, the FDA, other regulatory authorities, or we ourselves may suspend or terminate clinical trials at any time. Our product candidates may prove not to be safe for human use.

Delays or failures in obtaining regulatory approvals may delay or prevent marketing of the products that we are developing.

Other than PROCHIEVE 8% (progesterone gel) which is being evaluated for the reduction of the risk of preterm birth in women with a short cervix at mid-pregnancy, and PROCHIEVE 4% (progesterone gel), which is being evaluated for the prevention of endometrial hyperplasia in women with an intact uterus undergoing estrogen replacement therapy, none of our product candidates have received regulatory approval from the FDA or any foreign regulatory authority. The regulatory approval process typically is extremely expensive, takes many years, and the timing or likelihood of any approval cannot be accurately predicted. Delays in obtaining regulatory approval can be extremely costly in terms of lost sales opportunities and increased clinical trial costs. If we fail to obtain regulatory approval for our current or future product candidates or expanded indications for currently marketed products, we will be unable to market and sell such products and indications and therefore may never be profitable.

As part of the regulatory approval process, we must conduct clinical trials for each product candidate to demonstrate safety and efficacy. The number of clinical trials that will be required varies depending on the product candidate, the indication being evaluated, the trial results, and the regulations applicable to any particular product candidate.

The results of initial clinical trials of our product candidates do not necessarily predict the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy despite having progressed through initial clinical trials. The data collected from the clinical trials of our product candidates may not be sufficient to support FDA or other regulatory approval. In addition, the continuation of a particular study after review by an IRB or independent data safety monitoring board does not necessarily indicate that our product candidate will achieve the clinical endpoint.

The FDA and other regulatory agencies can delay, limit or deny approval for many reasons, including:

	●	A product candidate may not be deemed to be safe or effective;

	●	The manufacturing processes or facilities we have selected may not meet the applicable requirements; and

	●	Changes in their approval policies or adoption of new regulations may require additional clinical trials or other data.

Any delay in, or failure to receive, approval for any of our product candidates could prevent us from growing our revenues or achieving profitability.

Healthcare insurers and other payors may not pay for our products or may impose limits on reimbursement.

Our ability or the ability of our partners to commercialize our prescription products will depend, in part, on the extent to which reimbursement for our products is available from third-party payors, such as health maintenance organizations, health insurers and other public and private payors. If we succeed in bringing new prescription products to market or expand the approved label for existing products, we cannot be assured that third-party payors will pay for such products, or establish and maintain price levels sufficient for realization of an appropriate return on our investment in product development.

Many health maintenance organizations and other third-party payors use formularies, or lists of drugs for which coverage is provided under a healthcare benefit plan, to control the costs of prescription drugs. Each payor that maintains a drug formulary makes its own determination as to whether a new drug will be added to the formulary and whether particular drugs in a therapeutic class will have preferred status over other drugs in the same class. This determination often involves an assessment of the clinical appropriateness of the drug and, in some cases, the cost of the drug in comparison to alternative products. Our products or products marketed by our partners from which we derive royalties may not be added to payors’ formularies, our products may not have preferred status to alternative therapies, and formulary decisions may not be conducted in a timely manner. Once reimbursement at an agreed level is approved by a third-party payor, reimbursement may be lost entirely or be reduced compared to competitive products. As reimbursement is often approved for a period of time, this risk is greater at the end of the time period, if any, for which the reimbursement was approved. We or our partners may also decide to enter into discount or formulary fee arrangements with payors, which could result in lower or discounted prices for CRINONE, PROCHIEVE, STRIANT or future products.

We face significant competition from pharmaceutical companies, which may adversely impact our market share.

We and our marketing partners compete against established pharmaceutical companies that market products addressing similar needs. Further, numerous companies are developing, or may develop, enhanced delivery systems and products that compete with our present and proposed products. It is possible that we may not have the resources to withstand these and other competitive forces. Some of these competitors may possess greater financial, research and technical resources than our company or our partners. Moreover, these companies may possess greater marketing capabilities than our company or our partners, including the resources to implement extensive advertising campaigns.

The pharmaceutical industry is subject to change as new delivery technologies are developed, new products enter the market, generic versions of available drugs become available, and treatment paradigms evolve to reflect these and other medical research discoveries. We face significant competition in all areas of our business. The rapid pace of change in the pharmaceutical industry continually creates new opportunities for existing competitors and start-ups, and can quickly render existing products less valuable. Customer requirements and physician and patient preferences continually change as new treatment options emerge, are more or less heavily promoted, and become less expensive. As a result, we may not gain, and may lose, market share.

CRINONE/PROCHIEVE, a natural progesterone product, competes in markets with other progestins, both synthetic and natural, including Endometrin® (progesterone vaginal insert) marketed by Ferring, Prometrium® (oral micronized progesterone) marketed by Solvay, pharmacy-compounded injections and pharmacy-compounded vaginal suppositories. In June 2007, Ferring obtained FDA approval for and launched Endometrin®, a competing product for use in infertility. Ferring is one of the leading companies in the infertility market and, in addition to Endometrin, offers gonadotropin hormones generally used for the treatment of infertility. Ferring may have greater awareness among key reproductive endocrinology opinion leaders than our Company or our partners.

STRIANT competes against other testosterone products that can be delivered by injection, transdermal patch and transdermal gel. Some of the more successful testosterone products include AndroGel® (testosterone gel) marketed by Solvay, Testim® (testosterone gel) marketed by Auxilium, and Androderm® (testosterone transdermal system) marketed by Watson. Competition is based primarily on delivery method. Transdermal testosterone gels currently have the largest market share and transdermal testosterone patches have the next largest market share, followed by injectable products. STRIANT is priced comparably to the gels and patches.

The amount of net proceeds that we will receive from the Watson Transactions is subject to uncertainties.

The milestone and royalty payments contemplated by the Purchase Agreement are subject to uncertainties, many of which are beyond our control. It is possible that these payments may be materially less than we expect or may not be owed to us at all.

Our products could demonstrate hormone replacement risks.

In the past, certain studies of female hormone replacement therapy products, such as estrogen, have reported an increase in health risks. Progesterone is a natural female hormone present at normal levels in most women through their lifetimes. However, some women require progesterone supplementation due to a natural or chemical-related progesterone deficiency. It is possible that data suggesting risks or problems may come to light in the future which could demonstrate a health risk associated with progesterone or progestin supplementation or our 8% and 4% progesterone gels. It is also possible that future study results for hormone replacement therapy could be negative and could result in negative publicity about the risks and benefits of hormone replacement therapy. As a result, physicians and patients may not wish to prescribe or use progestins, including our progesterone gels.

Similarly, while testosterone is a natural male hormone, present at normal levels in most men through their lifetimes, some men require testosterone replacement therapy, or TRT, to normalize their testosterone levels. It is possible that data suggesting risks or problems may come to light in the future that could demonstrate a health risk associated with TRT or STRIANT. It is also possible that future study results for hormone replacement therapy could be negative and could result in negative publicity about the risks and benefits of TRT. As a result, physicians and patients may not wish to prescribe or use TRT products, including STRIANT.

We may be exposed to product liability claims.

We could be exposed to future product liability claims by consumers. Although we presently maintain product liability insurance coverage at what we believe is a commercially reasonable level, such insurance may not be sufficient to cover all possible liabilities. An award against us in an amount greater than our insurance coverage could have a material adverse effect on our operations. Some customers require us to have a minimum level of product liability insurance coverage before they will purchase or accept our products for distribution. If we fail to satisfy insurance requirements, our ability to achieve broad distribution of our products could be limited. This could have a material adverse effect upon our business and financial condition.

Steps taken by us to protect our proprietary rights might not be adequate; in which case, competitors may infringe on our rights or develop similar products. The U.S. and foreign patents upon which our original Bioadhesive Delivery System was based have expired.

Our success and competitive position are partially dependent on our ability to protect our proprietary position for our technology, products and product candidates. We rely primarily on a combination of patents, trademarks, copyrights, trade secret laws, third-party confidentiality and nondisclosure agreements, and other methods to protect our proprietary rights. The steps we take to protect our proprietary rights, however, may not be adequate. Third parties may infringe or misappropriate our patents, copyrights, trademarks, and similar proprietary rights. Moreover, we may not be able or willing, for financial, legal or other reasons, to enforce our rights.

Bio-Mimetics, Inc. held the patent upon which our original Bioadhesive Delivery System, or BDS, was based and granted us a license under that patent. Bio-Mimetics’ patent contained broad claims covering controlled release products that include a bioadhesive. However, this U.S. patent and its corresponding foreign patents expired in November 2003. Based upon the expiration of the original Bio-Mimetics patent, other parties will be permitted to make, use or sell products covered by the claims of the Bio-Mimetics patent, subject to other patents, including those which we hold. We have obtained numerous patents with claims covering improved methods of formulating and delivering therapeutic compounds using the BDS. We cannot assure you that any of these patents will enable us to prevent infringement, or that our competitors will not develop alternative methods of delivering compounds, potentially resulting in competitive products outside the protection that may be afforded by our patents. Other companies may independently develop or obtain patent or similar rights to equivalent or superior technologies or processes. Additionally, although we believe that our patented technology has been independently developed and does not infringe on the proprietary rights of others, we cannot assure you that our products do not and will not infringe on the proprietary rights of others. In the event of infringement, we may be required to modify our technology or products, obtain licenses or pay license fees. We may not be able to do so in a timely manner or upon acceptable terms and conditions. This may have a material adverse effect on our operations.

The standards that the U.S. Patent and Trademark Office and its foreign counterparts use to grant patents are not always applied predictably or uniformly and can change. Limitations on patent protection in some countries outside the U.S., and the differences in what constitutes patentable subject matter in these countries, may limit the protection we seek outside of the U.S. For example, methods of treating humans are not patentable subject matter in many countries outside of the U.S. In addition, laws of foreign countries may not protect our intellectual property to the same extent as would laws of the U.S. In determining whether or not to seek a patent or to license any patent in a particular foreign country, we weigh the relevant costs and benefits, and consider, among other things, the market potential of our product candidates in the jurisdiction and the scope and enforceability of patent protection afforded by the law of the jurisdiction.

Our licensee markets STRIANT (testosterone buccal system) in the United Kingdom. We hold patents that expire in August 2019 on the product formulation around the world, including the United Kingdom.

Merck Serono holds marketing authorizations for CRINONE in approximately 63 countries outside the United States. With respect to those countries in which sales of CRINONE are material, we hold patents that expire in May 2014 on the delivery system for the product in Australia, Canada, Germany, Ireland, Italy, Russia, and the United Kingdom, but we do not hold patents in Brazil, China, South Korea, Taiwan, and Turkey.

These patents, however, may not afford us adequate protection or we may not have the financial resources to enforce our rights under these patents.

We are the defendant in a lawsuit to recover past and future royalties on our products and we may not prevail.

The Company continues to incur defense costs and other expenses in connection with this lawsuit. We believe we have meritorious defenses and intend to defend the Company vigorously. A judgment against us could require us to pay approximately $2 million in past due royalties and pre-judgment interest, and to resume paying the 2% royalty on future sales of our products subject to the contractual conditions. We have no insurance coverage in this matter.

We are subject to government regulation, which could affect our ability or our partners’ ability to sell products.

Nearly every aspect of the development, manufacture and commercialization of our pharmaceutical products is subject to time-consuming and costly regulation by various governmental entities, including the FDA, the Drug Enforcement Administration and state agencies, as well as regulatory agencies in those foreign countries in which our products are manufactured or distributed. The FDA has the power to seize adulterated or misbranded products and unapproved new drugs, to require their recall from the market, to enjoin further manufacture or sale, and to publicize certain facts concerning a product.

We employ various quality control measures in our efforts to ensure that our products conform to their intended specifications and meet the standards required under applicable governmental regulations, including FDA’s current Good Manufacturing Practices regulations. Notwithstanding our efforts, our products or the ingredients we purchase from our suppliers for inclusion in our products may contain undetected defects or non-conformities with specifications. Such defects or non-conformities could compel us to recall the affected product, make changes to or restrict distribution of the product, or take other remedial actions. The occurrence of such events may harm our relations with or result in the loss of customers, injure our reputation, impair market acceptance of our products, harm our financial results, and, in certain circumstances, expose us to product liability or other claims.

We are dependent on third-party suppliers of raw materials for our products, the loss of whom could impair our ability to manufacture and sell our products.

Medical grade, cross-linked polycarbophil, the polymer used in our BDS-based products is currently available from only one supplier, Lubrizol, Inc., or Lubrizol. We believe that Lubrizol will supply as much of the material as we require because our products rank among the highest value-added uses of the polymer. In the event that Lubrizol cannot or will not supply enough of the product to satisfy our needs, we will be required to seek alternative sources of polycarbophil. An alternative source of polycarbophil may not be available on satisfactory terms or at all, which would impair our ability to manufacture and sell our products.

While we purchase polycarbophil from Lubrizol, Inc. from time to time, we do not have an agreement with them concerning future purchases. The Company’s policy is to have in inventory at least a 12 month supply of polycarbophil.

We currently purchase testosterone from only one supplier and progesterone from two suppliers. If our suppliers are unable or unwilling to satisfy our needs, we will be required to seek alternative sources of supply. While several alternative sources of progesterone and testosterone exist, the time needed to obtain regulatory approvals for new suppliers may impair our ability to manufacture and sell our products.

We are dependent upon third-party developers and manufacturers, the loss of which could result in a loss of revenues.

We rely on third parties to develop and manufacture our products, including Fleet, which manufacturers our vaginal gel products in bulk, Maropack, which fills our vaginal gel products into applicators and Mipharm which manufacturers STRIANT. These third parties may not be able to satisfy our needs in the future, and we may not be able to find or obtain FDA approval of alternate developers and manufacturers. Delays in the development and manufacture of our products could have a material adverse effect on our business. This reliance on third parties could have an adverse effect on our profit margins. Any interruption in the manufacture of our products would impair our ability to deliver our products to customers on a timely and competitive basis, and could result in the loss of revenues.

The loss of our key executives could have a significant impact on our company.

Our success depends in large part upon the abilities and continued service of our executive officers and other key employees. Our employment agreements with our executive officers are terminable by them on short notice. The loss of key employees may result in a significant loss in the knowledge and experience that we, as an organization, possess, and could cause significant delays in, or outright failure of, the development and commercialization of our products and product candidates. If we are unable to attract and retain qualified and talented senior management personnel, our business may suffer.

We may be limited in our use of our net operating loss carryforwards.

As of December 31, 2009, we had certain net operating loss carryforwards of approximately $162.0 million that may be used to reduce our future U.S. federal income tax liabilities. Our ability to use these loss carryforwards to reduce our future U.S. federal income tax liabilities could be lost if we were to experience more than a 50% change in ownership within the meaning of Section 382(g) of the Internal Revenue Code. If we were to lose the benefits of these loss carryforwards, our future earnings and cash resources would be materially and adversely affected.

Sales of large amounts of Common Stock may adversely affect our market price. The issuance of preferred stock or convertible debt may adversely affect rights of common stockholders.

As of July 15, 2010, we had 84,134,294 shares of Common Stock outstanding, of which 67,885,041 shares were freely tradable by non-affiliates. As of that date, approximately 16,249,263 shares of Common Stock were held by affiliates. We also have the following securities outstanding: series B convertible preferred stock, series C convertible preferred stock, series E convertible preferred stock, convertible subordinated notes, warrants, and options. If all of these securities are exercised or converted, an additional 25,517,676 shares of Common Stock will be outstanding, all of which are available for resale under the Securities Act. The exercise and conversion of these securities is likely to dilute the book value per share of our Common Stock. In addition, the existence of these securities may adversely affect the terms on which we can obtain additional equity financing.

In March 2002, our Board of Directors authorized shares of series D junior participating preferred stock in connection with its adoption of a stockholder rights plan, under which we issued rights to purchase series D convertible preferred stock to holders of our Common Stock. Upon certain triggering events, such rights become exercisable to purchase shares of Common Stock (or, in the discretion of our Board of Directors, series D convertible preferred stock) at a price substantially discounted from the then current market price of our Common Stock.

Under our certificate of incorporation, our Board of Directors has the authority to issue up to 1.0 million shares of preferred stock and to determine the price, rights, preferences and privileges of those shares without any further vote or action by our stockholders. In addition, we may issue convertible debt without shareholder approval. The rights of the holders of Common Stock are subject to, and may be adversely affected by, the rights of the holders of any shares of preferred stock or convertible debt that may be issued in the future. While we have no present intention to authorize or issue any additional series of preferred stock or convertible debt, such preferred stock or convertible debt, if authorized and issued, may have other rights, including economic rights senior to the Common Stock, and, as a result, their issuance could have a material adverse effect on the market value of our Common Stock.

Our corporate compliance program cannot guarantee that we are in compliance with all potentially applicable regulations.

We are a relatively small company and we rely heavily on third parties to conduct many important functions. As a pharmaceutical company, we are subject to a large body of legal and regulatory requirements. In addition, as a publicly traded company we are subject to significant regulations, including the Sarbanes-Oxley Act of 2002, some of which have either only recently been adopted or are currently proposals subject to change. We cannot assure you that we are or will be in compliance with all potentially applicable laws and regulations. Failure to comply with all potentially applicable laws and regulations could lead to the imposition of fines, cause the value of our Common Stock to decline, impede our ability to raise capital or lead to the de-listing of our stock.

We could be negatively impacted by future interpretation or implementation of federal and state fraud and abuse laws, including anti-kickback laws, false claims laws and federal and state anti-referral laws.

Various federal and state laws pertain to health care fraud and abuse, including anti-kickback laws, false claims laws and physician self-referral laws. Violations of these laws are punishable by criminal and/or civil sanctions, including, in some instances, imprisonment and exclusion from participation in federal and state health care programs, including Medicare, Medicaid, and veterans’ health programs. We do not currently participate in government programs; including Medicare (except Medicare Part D), Medicaid and veteran’s health programs and we have not been challenged by a governmental authority under any of these laws and believe that our operations are in compliance with such laws.

However, because of the far-reaching nature of these laws, we may be required to alter one or more of our practices to be in compliance with these laws. Health care fraud and abuse regulations are complex, and even minor, inadvertent irregularities can potentially give rise to claims that the law has been violated. Any violations of these laws could result in a material adverse effect on our business, financial condition and results of operations. If there is a change in law, regulation or administrative or judicial interpretations, we may have to change our business practices or our existing business practices could be challenged as unlawful, which could have a material adverse effect on our business, financial condition and results of operations.

We could become subject to false claims litigation under federal or state statutes, which can lead to civil money penalties, criminal fines and imprisonment, and/or exclusion from participation in federal health care programs. These false claims statutes include the federal False Claims Act, which allows any person to bring suit alleging the false or fraudulent submission of claims for payment under federal programs or other violations of the statute and to share in any amounts paid by us to the government in fines or settlement. Such suits, known as qui tam actions, have increased significantly in recent years and have increased the risk that companies like us may have to defend a false claim action. We could also become subject to similar false claims litigation under state statutes. If we are unsuccessful in defending any such action, such action may have a material adverse effect on our business, financial condition and results of operations.

Anti-takeover provisions could impede or discourage a third-party acquisition of our company. This could prevent stockholders from receiving a premium over market price for their stock.

We are a Delaware corporation. Anti-takeover provisions of Delaware law impose various obstacles to the ability of a third party to acquire control of our company, even if a change in control would be beneficial to our existing stockholders. In addition, our Board of Directors has adopted a stockholder rights plan and has designated a series of preferred stock that could be used defensively if a takeover is threatened. Our incorporation under Delaware law, our stockholder rights plan, and our ability to issue additional series of preferred stock, could impede a merger, takeover or other business combination involving our company or discourage a potential acquirer from making a tender offer for our Common Stock. This could reduce the market value of our Common Stock if investors view these factors as preventing stockholders from receiving a premium for their shares.

We are exposed to market risk from foreign currency exchange rates.

With two operating subsidiaries and third party manufacturers in Europe, economic and political developments in the European Union can have a significant impact on our business. All of our products are currently manufactured in Europe. We are exposed to currency fluctuations related to payment for the manufacture of our products in Euros and other currencies and selling them in U.S. dollars and other currencies.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. (Removed and Reserved)

None.

Item 5. Other Information

None.

Item 6. Exhibits

(a)

Exhibits

3.1	Certificate of Amendment to Restated Certificate of Incorporation of Columbia Laboratories, Inc., filed with the Secretary of State of Delaware July 1, 2010. (4)
4.1	Watson Term Loan Promissory Note, dated June 1, 2010. (3)
4.2	Form of Warrant to Purchase Common Stock. (4)
10.1†	Amended and Restated Employment Agreement by and between Columbia Laboratories, Inc. and Frank C. Condella, Jr., dated May 4, 2010. (1)
10.2	Second Amended and Restated License and Supply Agreement between Columbia Laboratories (Bermuda) Ltd., and Ares Trading S.A., effective May 19, 2010. (2)

10.3	Investor’s Rights Agreement, dated July 1, 2010. (4)
10.4	Watson Supply Agreement, dated July 2, 2010. (4)
10.5	Watson License Agreement, dated July 2, 2010. (4)
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of the Company.*
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of the Company.*
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

Filed herewith.

Furnished herewith.

†

Management contract or compensatory plans or arrangements

(1)

Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated May 4, 2010

(2)

Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated May 14, 2010

(3)

Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated June 1, 2010

(4)

Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated July 1, 2010

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

COLUMBIA LABORATORIES, INC.

/s/ Lawrence A. Gyenes

Lawrence A. Gyenes

Senior Vice President,

Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)

DATE: December 28, 2010

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