Organization and Basis of Presentation

9 Months Ended

Sep. 30, 2012

Organization and Basis of Presentation

1. Organization and Basis of Presentation

Zogenix, Inc. (the Company) is a pharmaceutical company commercializing and developing products for the treatment of central nervous system disorders and pain. The Company’s first commercial product, Sumavel^® DosePro^® (sumatriptan injection) Needle-free Delivery System, offers fast-acting, easy-to-use, needle-free subcutaneous delivery of sumatriptan for the acute treatment of migraine and cluster headache in a pre-filled, single-use delivery system. Sumavel DosePro was approved by the U.S. Food and Drug Administration (FDA) on July 15, 2009 and was launched in the United States in January 2010.

The Company was incorporated in the state of Delaware on May 11, 2006 as SJ2 Therapeutics, Inc. and commenced operations on August 25, 2006. On August 28, 2006, the Company changed its name to Zogenix, Inc.

The Company has incurred significant net losses since inception and has relied on its ability to fund its operations through equity financings, debt financings, revenues from the sale of its product Sumavel DosePro and proceeds from business collaborations. As the Company continues to incur losses, successful transition to profitability is dependent upon achieving a level of revenues adequate to support the Company’s cost structure. This may not occur and, unless and until it does, the Company will continue to need to raise additional cash.

On July 27, 2012, the Company completed a public offering (Offering) of common stock and warrants for net proceeds of $65,363,000 (including over-allotment purchase), after deducting underwriting discounts and commissions of $4,205,000 and offering expenses of $549,000. The Company sold a total of 32,500,000 shares of its common stock and warrants to purchase 14,625,000 shares of common stock (excluding over-allotment purchase) in the Offering, at a purchase price of $1.99 per share of common stock and $0.01 per share underlying each warrant. The underwriters were granted a 30-day option to cover over-allotments, if any, to purchase up to an additional 4,875,000 shares of common stock and warrants to purchase 2,193,750 shares of common stock. The underwriters exercised their option to purchase over-allotment warrants for 1,151,235 shares of common stock concurrent with the July 27, 2012 public offering at a purchase price of $0.01 per warrant and then exercised their option with respect to 2,558,300 shares of common stock at a purchase price of $1.99 per share on a subsequent date. The warrants will be exercisable beginning on July 27, 2013 at an exercise price of $2.50 per share and will expire on July 27, 2017, which is five years from the date of issuance.

Management expects operating losses and negative cash flows to continue for at least the next several years as the Company continues to incur costs related to the continued development of its product candidates and commercialization of its approved product. Management may pursue additional opportunities to raise additional capital through public or private equity offerings, debt financings, receivables financings or through collaborations or partnerships with other companies if required to further support its planned operations. There can be no assurance that the Company will be able to obtain any source of financing on acceptable terms, or at all.