8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  March 20, 2007

ADVANCED LIFE SCIENCES HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	000-51436	30-0296543
(State or other jurisdiction	(Commission	(I.R.S. Employer
of incorporation)	File Number)	Identification No.)
	1440 Davey Road
	Woodridge, Illinois	60517
	(Address of principal executive offices)	(Zip Code)

(630) 739-6744

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.  Results of Operations and Financial Condition.*

On March 21, 2007, Advanced Life Sciences Holdings, Inc. (the “Company”) issued a press release announcing financial results for the fourth quarter and full year ended December 31, 2006.  The Company also provided financial and operational highlights from the beginning of 2007 to date and financial and operational guidance for the remainder of 2007.  A copy of the press release is attached hereto as Exhibit 99.1.

Item 5.05.  Amendments to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics.

On March 20, 2007, the Company’s Board of Directors approved by Unanimous Written Consent an amended Code of Business Conduct and Ethics (the “Code”).  The amendment reiterates the Company’s commitment to the highest standards of business conduct and ethics and applies to all of the Company’s employees, officers and directors.  Pursuant to the amendment, the Company’s employees, officers and directors are required to sign an acknowledgment confirming that each has received, read, understands, and agrees to comply with the Code.   Each year, the Company’s employees, officers and directors are required to sign an acknowledgment indicating continued understanding and willingness to comply with the Code.  The amended Code also provides for a confidential reporting hotline through which any employee may report instances of misconduct anonymously.

The foregoing summary of the amendment to the Code is qualified in its entirety by reference to the amended Code, a copy of which is furnished herewith as Exhibit 99.2 and is incorporated herein by reference.

Item 9.01.  Financial Statements and Exhibits.

(d)	Exhibits:
99.1*	Press Release dated March 21, 2007.
99.2	Amended Code of Business Conduct and Ethics, approved March 20, 2007

*     The information furnished under Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

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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 hereunto duly authorized.

	ADVANCED LIFE SCIENCES HOLDINGS, INC.
Dated: March 22, 2007	By:    /s/ Michael T. Flavin
	Name:    Michael T. Flavin, Ph.D.
	Title:      Chairman and Chief Executive Officer

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Exhibit Index

Exhibit No.	Description
99.1*	Press Release dated March 21, 2007.
99.2	Amended Code of Business Conduct and Ethics, approved March 20, 2007

*       The information furnished under Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

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EX-99.1

Exhibit 99.1

1440 Davey Road Woodridge, IL  60517 Phone: 630-739-6744 Fax: 630-739-6754 www.advancedlifesciences.com

For Immediate Release

Investor Relations Contact: Edward P. Flavin (630) 739-6744

Advanced Life Sciences Announces Fourth Quarter and Full Year
 2006 Results

Enrollment in first of two pivotal phase III trials for cethromycin completed

WOODRIDGE, IL, March 21, 2007/PRNewswire/: — Advanced Life Sciences Holdings, Inc. (Nasdaq: ADLS), a biopharmaceutical company engaged in the discovery, development and commercialization of novel drugs in the therapeutic areas of infection, cancer and inflammation, today announced its financial results for the fourth quarter and full year ended December 31, 2006.

The net loss allocable to common shareholders for the three months ended December 31, 2006 was $5.9 million or ($.21) per share compared to a net loss allocable to common shareholders of $2.6 million or ($.15) per share for the three months ended December 31, 2005.  The net loss allocable to common shareholders for the full year 2006 was $20.7 million or ($.78) per share compared to a net loss allocable to common shareholders of $6.6 million or ($.49) per share for 2005.  The increase in the net loss for both periods is due to increasing costs involved in the ongoing clinical development of the Company’s lead compound cethromycin.

“During 2006, Advanced Life Sciences initiated 200 clinical sites in 16 countries and made substantial progress in the enrollment of our two phase III clinical trials for cethromycin in community acquired pneumonia (CAP),” said Michael T. Flavin, Ph.D., chairman and chief executive officer of the Company.  “In addition, during this past year, we set the stage for a timely and robust NDA submission and commercial partnership negotiations to insure a successful market launch of cethromycin. The competitive landscape has narrowed due to patent expirations and regulatory changes, creating an increased market opportunity for cethromycin.”

“We are looking forward to the achievement of key clinical and commercial milestones in 2007,” continued Dr. Flavin.  “In conjunction with this we are pleased to announce the completion of enrollment for one of our two pivotal phase III clinical trials and we expect enrollment in our second trial to finish in the near future,”

The Company ended 2006 with cash, cash equivalents and investments totaling approximately $27.1 million.  Cash used was $5.0 million in the fourth quarter and $21.8 million for the full year period.

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Operating Expense Analysis 2006 versus 2005:

·Research and development expense.  Total research and development expense increased $14.1 million to approximately $17.2 million for the twelve months ended December 31, 2006 from approximately $3.1 million for the twelve months ended December 31, 2005.  The increase in R&D expense is related to ongoing clinical trials associated with the Company’s lead product cethromycin.

·General and administrative expense.  General and administrative expense increased $2.2 million to $5.5 million for the twelve months ended December 31, 2006.  Incremental costs as we operated as a public company for a full year totaled $1.7 million, representing an increase of $1.1 million over the previous year.  Marketing expenses totaled $557,000, an increase of $487,000 over the previous year, which was the result of an expanded presence at key scientific conferences held throughout 2006.  The remaining increase of $613,000 was primarily attributable to overall expenses of additional personnel hired throughout the year as well as higher patent protection costs for our proprietary portfolio of compounds.

Fourth Quarter Expense Analysis 2006 versus 2005:

·Research and development expense.  Total research and development expense increased $4.1 million to approximately $5.6 million for the three months ended December 31, 2006 from approximately $1.5 million for the three months ended December 31, 2005.  The increase in R&D expense is related to ongoing clinical trials associated with the Company’s lead product cethromycin.

·General and administrative expense.  General and administrative expense increased $0.3 million to $1.5 million for the three months ended December 31, 2006 from approximately $1.2 million for the three months ended December 31, 2005.  This increase is mainly due to increased personnel costs and increased costs associated with operating as a public company.

Operational and Financial Highlights:

Advanced Life Sciences is developing cethromycin, a novel once-a-day ketolide antibiotic, in response to the emerging antibiotic resistance observed in the treatment of community acquired pneumonia (CAP).  Cethromycin has previously been tested in approximately 4,400 human subjects during clinical trials, and the Company has initiated pivotal phase III clinical trials for the treatment of mild-to-moderate CAP.

Advanced Life Sciences accomplished the following milestones in the first quarter of 2007:

·Completed enrollment of approximately 500 patients in cethromycin Phase III pivotal trial CL-06 in Europe, Israel and South America

·Initiated a formal competitive process with prospective commercial partners to assist in the sales and marketing activities associated with cethromycin

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·Received FDA Orphan Drug designation for the use of cethromycin in the prophylactic treatment of patients exposed to inhalation anthrax

·Completed successful non-human primate pharmacokinetic studies to support cethromycin dosing selection in inhalation anthrax

·Completed dosing portion of anthrax efficacy study under FDA’s animal rule comparing cethromycin to ciprofloxacin and placebo

·Successfully manufactured batches of cethromycin active pharmaceutical ingredient and final dosage form at scale to support the CMC section of the NDA submission

·Engaged key expert advisors and Octagon Research as resources in the anticipated NDA submission for cethromycin

·Continued preparation of ALS-357 clinical supplies and began to identify clinical trial sites for our Phase I/II in-transit metastatic melanoma trial.

Advanced Life Sciences completed the following activities in 2006:

Cethromycin Milestones—

·Initiated 200 clinical sites in 16 countries and enrolled patients in two pivotal phase III clinical trials with cethromycin in CAP

·Hosted an infectious disease and hepatology expert panel call and webcast series to discuss antimicrobial drug development

·Began investigating the use of cethromycin in the prophylactic treatment of inhalation anthrax in non-human primates

·Sponsored a satellite symposium on CAP treatment options and presented data on cethromycin in CAP, bronchitis and anthrax in five posters and one oral presentation at the 46th Interscience Conference on Antimicrobial Agents and Chemotherapy (ICAAC)

·Presented key clinical data in sinusitis in two posters which were selected for an oral summary presentation at the 44th Annual Infectious Disease Society of America (IDSA) conference

·Engaged DSM and Cardinal Health as manufacturing partners for cethromycin.

Corporate and Scientific Milestones—

·Elected Theron (Ted) Odlaug, Ph.D., a pharmaceutical industry veteran with extensive commercial and regulatory experience, to our board of directors

·Completed the sale of our interest in the HIV drug Calanolide A to the government of Sarawak, Malaysia

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·Raised gross proceeds of $36 million in our March, 2006 equity offering

·Presented data on the ALS-357/melanoma analogue program at the 232nd American Chemical Society National Meeting.

2007 Operational and Financial Guidance:

The Company anticipates the following upcoming milestones in the clinical and commercial development of cethromycin:

·Release of top-line data from cethromycin pivotal phase III CAP clinical program in June of 2007

·Complete a partnership agreement with a commercial partner to support the launch and sales of cethromycin

·Report top-line efficacy data from prophylactic treatment of anthrax post-exposure in primate study in the second quarter of 2007

·Submit a new drug application (NDA) for cethromycin in CAP.

Advanced Life Sciences anticipates cash requirements of $15.0 million for first half 2007 operating activities.

With the current cash on hand, we believe we have sufficient financial resources to complete the cethromycin clinical trial program during the first half of 2007.  In order to fund our post-NDA cethromycin development costs, we intend to consummate a commercial partnership in the second half of 2007 to support marketing, commercialization and general corporate activities.

Conference Call Details:

Advanced Life Sciences will host a conference call and live webcast at 10:00 a.m. Eastern Time on Thursday, March 22, 2007 to discuss the Company’s fourth quarter financial results.

The conference call will be webcast simultaneously over the Internet.  Please visit the Investor Relations section of Advanced Life Sciences’ corporate website at www.advancedlifesciences.com.  Alternatively, callers may participate in the conference call by dialing 866-356-3377 (domestic) or 617-597-5392 (international).  The passcode for the conference call is 35320290.  A replay of the conference call will be available until April 22, 2007.  Callers may access the telephone replay by dialing 888-286-8010 (domestic) or 617-801-6888 (international), passcode 70415045.

About Advanced Life Sciences

Advanced Life Sciences is a biopharmaceutical company engaged in the discovery, development and commercialization of novel drugs in the therapeutic areas of infection, cancer and inflammation.  The Company’s lead candidate, cethromycin, is a novel once-a-day ketolide antibiotic in late-stage clinical development for the treatment of respiratory tract infections including CAP.

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Forward-Looking Statements

Any statements contained in this press release that relate to future plans, events or performance are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.  These risks and uncertainties include, among others, those relating to technology and product development, market acceptance, government regulation and regulatory approval processes, intellectual property rights and litigation, dependence on collaborative relationships, ability to obtain financing, competitive products, industry trends and other risks identified in Advanced Life Sciences’ filings with the Securities and Exchange Commission.  Advanced Life Sciences undertakes no obligation to update or alter these forward-looking statements as a result of new information, future events or otherwise.

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ADVANCED LIFE SCIENCES HOLDINGS, INC. AND SUBSIDIARY

(A Development Stage Company)

	Year Ended December 31 ,
CONSOLIDATED BALANCE SHEETS	2006			2005
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	27,054,947		$	4,749,932
Investments - available for sale	—			10,475,000
Accounts receivable - related party	—			6,160
Prepaid insurance	380,083			362,241
Prepaid clinical trial expenses	2,364,512			4,500
Other prepaid expenses and deposits	273,572			113,763
Total current assets	30,073,114			15,711,596
PROPERTY AND EQUIPMENT:
Furniture and fixtures	250,308			147,275
Laboratory equipment	142,928			142,928
Computer software and equipment	231,022			187,771
Leasehold improvements	182,839			40,646
Total property and equipment—at cost	807,097			518,620
Less accumulated depreciation	(398,486		)	(267,372		)
Property and equipment—net	408,611			251,248
OTHER LONG-TERM ASSETS:
Deferred financing costs	26,502			53,004
Other assets	1,452			6,062
Total other long-term assets	27,954			59,066
TOTAL ASSETS	$	30,509,679		$	16,021,910
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	1,011,396		$	294,816
Accrued clinical trial expenses	1,410,894			83,186
Other accrued expenses	226,881			157,575
Accrued interest payable	22,756			5,334
Short-term lease payable	19,437			14,114
Short-term grant payable	476,708			—
Short-term notes payable - related party	2,000,000			—
Total current liabilities	5,168,072			555,025
Long-term lease payable	20,076			13,166
Accrued interest payable - related party	—			765,514
Long-term grant payable	23,292			500,000
Notes payable - net of $11,266 debt discount December 31, 2006 & $22,532 December 31, 2005	3,903,734			3,892,468
Long-term notes payable - related party	—			2,000,000
Total liabilities	9,115,174			7,726,173
COMMITMENTS AND CONTINGENCIES:
MINORITY INTEREST	—			—
STOCKHOLDERS’ EQUITY:
Common stock, $0.01 par value—60,000,000 shares authorized;
December 31, 2006 28,282,677 issued and outstanding; December 31, 2005
17,990,322 shares issued and outstanding;	282,827			179,903
Additional paid-in capital	88,370,853			54,834,373
Deficit accumulated during the development stage	(67,259,175		)	(46,718,539		)
Total stockholders’ equity	21,394,505			8,295,737
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	30,509,679		$	16,021,910

ADVANCED LIFE SCIENCES HOLDINGS, INC. AND SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three months ended December 31,						Twelve months ended December 31,
	2006			2005			2006			2005
Revenue:
Management fees	$	—		$	8,358		$	—		$	61,239
Grant	4,661			60,212			39,788			60,212
Royalty—related party	—			—			—			—
Total revenue and income	4,661			68,570			39,788			121,451
Expenses:
Research and development	5,632,428			1,516,867			17,202,113			3,121,616
Contracted research and development—
related party	—			—			—			—
Selling, general and administrative	1,479,881			1,159,751			5,457,395			3,237,997
Total expenses	7,112,309			2,676,618			22,659,508			6,359,613
Loss from operations	(7,107,648		)	(2,608,048		)	(22,619,720		)	(6,238,162		)
Other (income) expense:
Interest Income	(384,483		)	(174,504		)	(1,651,916		)	(272,216		)
Interest expense	118,358			138,126			511,884			478,300
Gain on sale of interest in Sarawak-
MediChem Pharmaceuticals Joint Venture	(939,052		)	—			(939,052		)	—
Net other (income) expense	(1,205,177		)	(36,378		)	(2,079,084		)	206,084
Net loss	(5,902,471		)	(2,571,670		)	(20,540,636		)	(6,444,246		)
Less accumulated preferred dividends for the period	43,750			43,750			175,000			175,000
Net loss allocable to common shareholders	$	(5,946,221	)	$	(2,615,420	)	$	(20,715,636	)	$	(6,619,246	)
Basic and diluted net loss per share available to common shareholders	$	(0.21	)	$	(0.15	)	$	(0.78	)	$	(0.49	)
Weighted average number common shares
outstanding- basic and diluted	28,280,651			17,990,322			26,546,785			13,610,694

EX-99.2

Exhibit 99.2

ADVANCED LIFE SCIENCES HOLDINGS, INC.

CODE OF BUSINESS CONDUCT AND ETHICS

(As Amended March 20, 2007)

INTRODUCTION

This Code of Business Conduct and Ethics (“Code”) applies to all employees, officers, and directors of Advanced Life Sciences Holdings, Inc. and its subsidiary Advanced Life Sciences, Inc.  (“ADLS” or “Company”).  It has been adopted by the Company’s Board of Directors (the “Board”) and summarizes the Company’s commitment to conduct business in an honest and ethical manner.

We are committed to maintaining the highest standards of business conduct and ethics.  We expect every employee, officer and director to read and understand the Code and its application to the performance of his or her business responsibilities. References in the Code to employees are intended to cover officers and, as applicable, directors.

Officers, managers and other supervisors are expected to develop in employees a sense of commitment to the spirit, as well as the letter, of the Code. Nothing in the Code alters the at-will employment policy of ADLS. The ADLS Employee Handbook supplements the Code in certain areas and should be read in conjunction with the Code.

The Code addresses conduct that is particularly important to proper dealings with the people and entities with whom we interact, but reflects only a part of our commitment. From time to time we may adopt additional policies and procedures with which our employees, officers and directors are expected to comply, if applicable to them. However, it is the responsibility of each employee to apply common sense, together with his or her own highest personal ethical standards, in making business decisions where there is no stated guideline in the Code.

CONFLICTS OF INTEREST

An employee is considered to have a conflict of interest when an interest or activity influences or appears to influence the ability of an employee to exercise objectivity or impairs the employee’s ability to perform his or her employment responsibilities in the best interests of the Company.

The Company has a Conflict of Interest Policy that governs this matter.  Employees are encouraged to read the Conflict of Interest Policy for more detailed guidance in situations where a conflict of interest may exist.  As a general rule, employees are obligated to avoid and disclose ethical, legal, financial, or other conflicts of interest involving the Company, and remove themselves from a position of decision-making authority with respect to any conflict situation involving the Company.

POLITICAL ACTIVITIES & CONTRIBUTIONS

ADLS supports active participation in the political process and encourages you to support the candidates and issues of your choice.  However, there are specific legal restrictions imposed on ADLS.  These include the following:

·ADLS may not expend or employ its funds, directly or indirectly, on behalf of any political organization, campaign or candidate for public office, except as permitted by certain federal and state laws.

·Reimbursement for fund-raising events for candidates or political organizations is strictly prohibited.  Personal services on behalf of a candidate, political organization or campaign on company time may be deemed a contribution and are prohibited.

·Any payment, gift, or entertainment for the private benefit of any government official or employee is prohibited, unless the Chief Legal Officer of ADLS determines the gift, or entertainment is lawful and prior written approval is obtained from the Chief Legal Officer of ADLS.

PERSONAL AND FAMILY RELATIONSHIPS

No person shall give or be given any preferred conditions of employment because of familial or personal relationships.  Personnel decisions must be based upon sound management practices and the individual merits of applicants.

COMPLIANCE WITH LAWS AND REGULATIONS

Part of your job and ethical responsibility is to help enforce this Code.  You are expected to understand, respect and comply with all of the laws, regulations, policies and procedures that apply to you in your position with ADLS.  You should be alert to possible violations and report possible violations to your manager, the Company’s Compliance Officer, or the Company’s Chief Legal Officer.  You must cooperate in any internal or external investigations of possible violations.

If you have any questions about this Code or any actual or potential conflict of interest or business ethics situations, please contact the Chief Legal Officer of ADLS.  A more detailed presentation of compliance requirements issues is found in the ADLS Employee Handbook.

BUSINESS STANDARDS

ADLS will compete in the global marketplace on the merits of its products and services.  All purchases and commitments, whether verbally or written, on behalf of ADLS shall be made solely on a sound commercial basis considering quality, price, scope, timing and the needs of the business.  Commitments must be pre-approved according to Company policies and procedures.  Marketing activities shall be conducted fairly and honestly.   Under no circumstances should you discuss or commit to arrangements with competitors or others with respect to pricing or marketing policies

FINANCIAL AND ACCOUNTING STANDARDS

ADLS has the highest standards for achieving its operating and financial goals.  ADLS’s books and records must accurately, completely and properly reflect all assets, liabilities, revenues and expenses in accordance with generally accepted accounting principles (GAAP) and Senior Financial Officers must use their best judgments where necessary.  False or misleading entries, unrecorded funds or assets are strictly prohibited.  Payments or transfers will not be made without proper financial approval and appropriate supporting documentation.

As a public company, it is of critical importance that ADLS’s filings with the United States Securities and Exchange Commission be accurate and timely.  Depending on your position with ADLS, you may be called upon to provide necessary information to assure that ADLS’s public reports are complete, fair, accurate and understandable.  ADLS expects you to take this responsibility very seriously and to provide prompt and accurate answers to inquiries related to ADLSs public disclosure requirements.

Senior Financial Officers are responsible for full, fair, accurate, timely and understandable disclosure in the periodic reports to be filed by the Company with the Securities and Exchange Commission.  Accordingly, it is the responsibility of each Senior Financial Officer promptly to bring to the attention of the Audit Committee and the Chief Legal Officer the following reportable situations.  Reportable situations include, but are not limited to the following:

·any untrue statement of a material fact and any omission of a material fact pertaining to information that (a) affects the disclosures made by the Company in its public filings or (b) must otherwise be disclosed pursuant to the Company’s policies and procedures regarding accounting standards and documentation;

·any information concerning (a) significant deficiencies in the design or operation of internal controls that could adversely affect the Company’s ability to record, process, summarize and report financial data or (b) any fraud, whether or not material, that involves any associate who has a significant role in the Company’s financial reporting, disclosures or internal controls;

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·any information concerning any violation of this Code, including any actual or apparent conflicts of interest between personal and professional relationships involving any employee who has a significant role in the Company’s financial  reporting disclosures or internal controls;

·any information concerning evidence of a material violation of the securities or other laws, rules or regulations applicable to the Company and the operation of its business, by the Company or any associate or agent thereof; and

The Board of Directors shall determine, or designate appropriate persons to determine, appropriate actions to be taken in the event of violations of this Code by the Senior Financial Officers.  Such actions shall be reasonably designed to deter wrongdoing and to promote accountability for adherence to this Code, including disciplinary action up to and including termination of employment.  In determining what action is appropriate in a particular case, the Board of Directors or its designee shall take into account all relevant information, including (a) the nature and severity of the violation, (b) whether the violation was a single occurrence or repeated occurrences, (c) whether the violation appears to have been intentional or inadvertent, (d) whether the individual in question had been advised prior to the violation as to the proper course of action, (e) whether or not the individual in question had committed other violations in the past, and the penalties imposed, if any, in the past for comparable violations, and (f) any other factors deemed relevant by the Board of Directors.

RECORD RETENTION

The retention or proper disposal of ADLS records shall follow the Company’s Document Retention Policy and applicable statutory and legal requirements.  Special circumstances, such as litigation or government investigations may require the Chief Legal Officer to determine and identify that certain records cannot be destroyed.

GIFTS, BRIBES & KICKBACKS

As a general rule, Interested Persons may not receive or offer any gift or anything else of significant value for the purpose of influencing the action of the Company or of the recipient. Gifts (except those generally valued at $200 or less) received from vendors, suppliers, consultants, and grantees as part of normal business practice must be given to the Company or shared with the Company generally, and if acknowledgement is appropriate, acknowledged on behalf of the Company. This guideline is not intended to prohibit normal business practices, such as meetings over meals, corporate items given to participants in meetings and conferences, or token hosting gifts, as long as they are of nominal and reasonable value and promote the Company’s legitimate business interests. If an Interested Person believes there is an appropriate reason to make an exemption to this policy for an individual situation, he or she should contact the Compliance Officer prior to giving or accepting the gift.

FOREIGN CORRUPT PRACTICES ACT

The Foreign Corrupt Practices Act (the “FCPA”) prohibits offering anything of value to foreign officials for the purpose of improperly influencing an official decision.  It also prohibits unlawful political contributions to obtain or retain business.  Violations of the FCPA are punishable by fines and/or imprisonment.  You shall not authorize any payment or use of any funds or assets for a bribe, “kickback” or similar payment, which is directly or indirectly for the benefit of any individual (including any government official), company or organization in the United States or any other country, whether or not such payments is designed to secure favored treatment for ADLS.  ADLS’s policy in this regard applies regardless of whether such a payment is lawful under the laws of any particular country.

INSIDER TRADING

Employees, officers and directors come into possession of non-public, sensitive information every day.  As discussed more fully in the Company’s Insider Trading Policy, this information may not be used by you for your own profit by buying and selling securities yourself, or passing on the information to others to enable them to profit or for them to profit on your behalf.  Insider traders can be penalized by fines and jail time and may be subjected to civil liability in private lawsuits

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OUTSIDE REQUESTS FOR INFORMATION

Any outside requests for information, including inquiries made by investors and/or the media, should be routed directly to the Company’s President.

CONFIDENTIAL INFORMATION

Business information relating to ADLS and its customers, subsidiaries and affiliates must be kept secure, must be used solely as authorized by ADLS and must not be used for personal interests nor given to unauthorized persons inside or outside of ADLS.  Information related to the operations, planning and financial status of any ADLS company shall be kept confidential.  All such confidential information is proprietary, and any unauthorized disclosure or use is a serious offense.  Violators may be subject to disciplinary action (up to and including termination) and, in more serious situations, civil and criminal penalties.  Do not discuss confidential information with friends, relatives and acquaintances.

Confidential information includes, but is not limited to, information that:

·is owned by a customer, supplier or other third party;

·is a trade secret;

·reveals ADLS’s marketing strategies and/or assessments of the marketplace;

·ADLS intends to release only under licensing/confidential disclosure agreements;

·contains facts relating to personnel data, health records or financial forecasts, recommendations or plans; or

·contains material, nonpublic information.

The above examples are intended to be illustrative and should not be considered an exhaustive list.  If you have any questions about whether information is confidential, contact the Chief Legal Officer of ADLS.

This confidentiality requirement continues after the termination of employment with ADLS.  In the event you violate this confidentiality requirement after termination of your employment, ADLS may take legal action to enforce this Code and may seek both injunctive relief and monetary damages.

COMPANY PROPERTY

All employees, officers and directors must safeguard Company property from loss or theft, and shall not take Company property for personal use.  Employees who use Company equipment, telecommunications, and information systems should have no expectation of personal privacy in any material created, stored, received, or sent.  Theft, carelessness and waste have a direct impact on the Company’s profitability.

AMENDMENT

This Code may be amended or modified only by the Board.

MONITORING AND REPORTING

If you have any questions or think that you might be in violation of this Code, or know of a situation that has occurred or may occur which may violate this Code, please contact the Chief Legal Officer of ADLS.

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DISCIPLINE FOR VIOLATIONS

Violation of law, this Code, or other Company policies or procedures can lead to disciplinary action for the following:

1.Authorization or participation in actions that violate the Code.

2.Failure to report a violation of the Code.

3.Refusal to cooperate in the investigation of possible violation.

4.Failure by a violator’s supervisor(s) to detect and report a violation, if such failure reflects inadequate supervision.

5.Retaliation against an individual for reporting a possible violation.

6.Submission of a false report of a violation of the Code

The nature of any disciplinary action taken will depend on the nature of the violation and the circumstances involved.  When appropriate, the disciplinary action may include dismissal.

WAIVERS

Any waiver of this Code for executive officers (including, where required by applicable laws, our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions) or directors may be authorized only by the Board, to the extent permitted by the rules of Nasdaq, a committee of the Board and will be disclosed to stockholders as required by applicable laws, rules and regulations.

REPORTING VIOLATIONS

To facilitate compliance with this Code, we have implemented a program of Code awareness, training and review. The Compliance Officer and /or the Chief Legal Officer are resources to whom you can address any questions or concerns. In addition to fielding questions or concerns with respect to potential violations of this Code, the Compliance Officer and the Chief Legal Officer are responsible for:

·investigating possible violations of the Code;

·training new employees in Code policies;

·distributing copies of the Code periodically to each employee with a reminder that each employee is responsible for reading, understanding and complying with the Code;

·updating the Code as needed and alerting employees to any updates, with appropriate approval of the Nominating & Corporate Governance Committee of the Board of Directors, to reflect changes in the law, ADLS operations and in recognized best practices; and

·otherwise promoting an atmosphere of responsible and ethical conduct.

Your most immediate resource for any matter related to the Code is your supervisor. He or she may have the information you need or may be able to refer the question to another appropriate source. There may, however, be times when you prefer not to go to your supervisor. In these instances, you should feel free to discuss your concern with the Compliance Officer and /or the Chief Legal Officer. If you are uncomfortable speaking with the Compliance Officer and /or the Chief Legal Officer because he or she works in your department or is one of your supervisors, please contact the Chief Financial Officer or Chief Executive Officer. Of course, if your concern involves potential misconduct by another person and relates to questionable accounting or auditing matters under the

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Company’s Employee Complaint Policy and Procedures For Accounting and Auditing Matters, you may report that violation as set forth in the such policy.

We have also established a procedure under which complaints regarding violations of this Code may be reported anonymously. Employees may anonymously report these concerns by calling the Complaint Hotline at ###-###-####, administered by [Hotline Administrator], an outside service hired by the Company. You can utilize this Hotline anonymously in order to maintain your confidentiality.  Complaints may also be sent via fax to National Hotlines Services at ###-###-####.

For all Code complaints submitted via [Hotline Administrator], the report will be sent directly to the Chairman of the Audit Committee, with a copy to the Chief Financial Officer and the Chief Legal Officer.  Those individuals will work to resolve the mater in accordance with the terms of this Code.

[Certificate of Compliance follows]

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CERTIFICATE OF COMPLIANCE

Employees, officers and directors are accountable for knowing and abiding by this Code.  You are required to sign an acknowledgment confirming that you have received, read, understand, and agree to comply with the Code.  The signed acknowledgment form will be kept in your personnel file.  Each year you will be asked to sign an acknowledgment indicating your continued understanding and willingness to comply with the Code.

Signature                                                                               Date

Name (please print)

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