SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) July 25, 2005

aaiPharma Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware	0-21185	04-2687849

(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

2320 Scientific Park Drive
Wilmington, North Carolina 28405
(Address of Principal Executive Offices)
(Zip Code)


		(910) 254-7000

		(Registrant’s Telephone Number, Including Area Code)


		Not Applicable

		(Former name or former address, if changed from 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 (see General Instruction A.2. below):

o Written communication 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-4c))

Preliminary Note

This Amendment No.1 on Form 8-K/A amends the Current Report on Form 8-K (the “Initial Report”) of aaiPharma Inc. (the “Company”) dated July 29, 2005 to include required pro forma financial information of the Company not included in the Initial Report.

Item 9.01. Financial Statements and Exhibits.

(b) Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information is appended at the end of this Item 9.01and is incorporated herein by reference:

Unaudited pro forma consolidated balance sheet at March 31, 2005

Notes to unaudited pro forma consolidated balance sheet

Unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2004

Notes to unaudited pro forma consolidated statements of operations for the year ended December 31, 2004

Unaudited pro forma condensed consolidated statements of operations for the three months ended March 31, 2005

Notes to unaudited pro forma consolidated statements of operations for the three months ended March 31, 2005


		Exhibit 10.1		Asset Purchase Agreement between Xanodyne Pharmaceuticals, Inc., aaiPharma Inc., and aaiPharma LLC dated as of May 6, 2005, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 12, 2005

		Exhibit 10.2		Second Amendment to Asset Purchase Agreement between Xanodyne Pharmaceuticals, Inc., aaiPharma Inc. and aaiPharma LLC dated as of July 18, 2005, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 22, 2005

		Exhibit 10.3		First Amendment to Asset Purchase Agreement between Xanodyne Pharmaceuticals, Inc., aaiPharma Inc. and aaiPharma LLC dated as of June 7, 2005, incorporated by


				reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 22, 2005

		Exhibit 10.4		Master Services Agreement between Xanodyne Pharmaceuticals, Inc. and AAI Development Services, a division of aaiPharma Inc., dated as of July 25, 2005, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 29, 2005

* * *

The following pro forma financial information gives effect to the disposition of substantially all of the assets of the Company’s Pharmaceuticals Division (collectively, the “Pharmaceutical Assets”) to Xanodyne Pharmaceuticals, Inc. (the “Buyer”) pursuant to an Asset Purchase Agreement between the Company, its subsidiary and the Buyer dated May 6, 2005, as amended by a First Amendment to Asset Purchase Agreement dated as of June 7, 2005 and a Second Amendment to Asset Purchase Agreement dated July 18, 2005 (as amended, the “Purchase Agreement”), and the application of the net proceeds from such sale to reduce senior debtor-in-possession debt. The Pharmaceutical Assets included, among other things, the following: (i) substantially all then currently marketed pharmaceutical products (including the inventory of such products); (ii) the rights to three “pipeline” products (i.e. products which the Company was then currently developing); (iii) the option to purchase certain products being developed or which may be developed in the future by the Company, concerning certain compounds, and (iv) a 50% interest in an additional “pipeline” product. The pro forma consolidated balance sheet at March 31, 2005 gives effect to such transactions as if they had occurred on such date and the pro forma consolidated statements of operations for the year ended December 31, 2004 and March 31, 2005 give effect to such transactions as if they had occurred on January 1, 2004.

aaiPharma Inc.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2004
(In thousands, except per share amounts)


				Less
				Divested
	aaiPharma			Pharma			Pro Forma
	Actual			Products (1)			Adjustments			Pro Forma
Net revenues:
Product sales	$	77,776		$	(63,758	)	$	—		$	14,018
Product development		23,987			—			—			23,987
Development services		94,883			—			—			94,883
Reimbursed out-of-pocket		18,684			—			—			18,684

		215,330			(63,758	)		—			151,572


Operating costs and expenses:
Direct costs (excluding depreciation and royalty expense)
Product sales		46,248			(35,999	)		—			10,249
Development services		55,961			—			—			55,961
Reimbursable out-of-pocket		18,684			—			—			18,684

Total direct costs		120,893			(35,999	)		—			84,894


Selling expenses		34,983			(19,945	)		—			15,038
General and administrative expenses		45,875			(5,536	)		—			40,339
Research and development		16,319			—			—			16,319
Depreciation		8,665			(728	)		—			7,937
Professional fees — internal and government investigations		11,042			—			—			11,042
M.V.I. contingent payment		(8,112	)		—			—			(8,112	)
Guaranteed purchase commitments		11,695			(11,695	)		—			—
Restructuring charges		22,392			(3,130	)		—			19,262
Royalty expenses		1,727			(1,674	)		—			53
Intangible asset impairment		93,972			(87,107	)		—			6,865

Total operating costs and expenses		359,451			(165,814	)		—			193,637


Income (loss) from operations		(144,121	)		102,056			—			(42,065	)

Other income (expense):
Interest expense, net		(34,989	)		—			11,919	^(a)		(23,070	)
Other		(8,371	)		6,229			—			(2,142	)

		(43,360	)		6,229			11,919			(25,212	)


Loss before income taxes		(187,481	)		108,285			11,919			(67,277	)
Provision for income taxes		3,690			—			—	^(c)		3,690


Net loss	$	(191,171	)	$	108,285		$	11,919		$	(70,967	)


Basic and diluted loss per share	$	(6.69	)							$	(2.48	)

Weighted average shares outstanding		28,565									28,565

See accompanying notes to unaudited pro forma consolidated statement of operations.

Note (1)

DIVESTED PRODUCTS
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
PRODUCT DIVESTITURE ADJUSTMENTS
For the Year Ended December 31, 2004
(In thousands)


				Actual			Pro Forma
	Actual			Non-Divested			Divested
	Pharma			Pharma			Pharma
	Products			Products			Products
	Results (a)			Results			Results
Net revenues:
Product sales	$	77,776		$	(14,018	)	$	63,758
Product development		—			—			—
Development services		—			—			—
Reimbursed out-of-pocket		—			—			—

		77,776			(14,018	)		63,758


Operating costs and expenses:
Direct costs (excluding depreciation and royalty expense)
Product sales		46,248			(10,249	)		35,999
Development services		—			—			—
Reimbursable out-of-pocket		—			—			—

Total direct costs		46,248			(10,249	)		35,999


Selling expenses		24,330			(4,385	) ^(b)		19,945
General and administrative expenses		6,753			(1,217	) ^(b)		5,536
Research and development		—			—			—
Depreciation		728			—			728
Professional fees — internal and government investigations		—			—			—
M.V.I. contingent payment		(8,112	)		8,112			—
Guaranteed purchase commitments		11,695			—			11,695
Restructuring charges		3,130			—			3,130
Royalty expenses		1,727			(53	)		1,674
Intangible asset impairment		93,972			(6,865	)		87,107

Total operating costs and expenses		180,471			(14,657	)		165,814


Income (loss) from operations		(102,695	)		639			(102,056	)

Other income (expense):
Interest expense, net		—			—			—
Other		(6,229	)		—			(6,229	)

		(6,229	)		—			(6,229	)


Loss before income taxes		(108,924	)		639			(108,285	)
Provision for income taxes		—			—			—


Net loss	$	(108,924	)	$	639		$	(108,285	)

(a) Represents the historical results for the Pharma products for the year ended December 31, 2004.

Income Statement Notes
Pharma Products Divestiture
(in 000’s)

PRO FORMA ADJUSTMENTS

(a)

Adjustment to reflect changes to net interest expense related to the pro forma net cash received in the transaction at the rates indicated below, as if this transaction was completed on January 1, 2004:


Repayment of our senior term loan of $165 million and our revolving loan of $10.5 million at LIBOR plus 8.25% per annum	$	17,188
Interest income generated by the cash received in excess of the term and revolving loan repayments at LIBOR		506
Prepayment premium of 3.5% of the principal amount of the Term Loan prepaid		(5,775	)

Pro forma decrease in net interest expense	$	11,919

(b)

Adjustment to reflect an allocation of Pharma division selling and general and administrative (G&A) expenses between divested and non-divested Pharma products:


Actual Pharma products net revenues	$	77,776

Non-divested Pharma products net revenues	$	14,018

Percentage of revenues related to non-divested Pharma products		18.0	%


Actual Pharma products selling expenses	$	24,330

Pro forma allocation of selling expenses for non-divested Pharma products	$	4,385


Actual Pharma products G&A expenses	$	6,753

Pro forma allocation of G&A expenses for non-divested Pharma products	$	1,217

(c)

No adjustment has been made for income tax benefits due to our belief that it is more likely than not that any deferred tax assets will not be realized.

aaiPharma Inc.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2005
(In thousands, except per share amounts)


				Less
				Divested
	aaiPharma			Pharma			Pro Forma
	Actual			Products (1)			Adjustments			Pro Forma
Net revenues:
Product sales	$	16,166		$	(16,486	)	$	—		$	(320	)
Product development		4,005			—			—			4,005
Development services		20,068			—			—			20,068
Reimbursed out-of-pocket		3,226			—			—			3,226

		43,465			(16,486	)		—			26,979


Operating costs and expenses:
Direct costs (excluding depreciation and royalty expense)
Product sales		8,039			(7,651	)		—			388
Development services		13,030			—			—			13,030
Reimbursable out-of-pocket		3,226			—			—			3,226

Total direct costs		24,295			(7,651	)		—			16,644


Selling expenses		1,804			(397	)		—			1,407
General and administrative expenses		10,285			(1,267	)		—			9,018
Research and development		1,687			—			—			1,687
Depreciation		2,207			(458	)		—			1,749
Professional fees — internal and government investigations		299			—			—			299
Professional fees — debt restructuring		1,553			—			—			1,553
Royalty expenses		101			(93	)		—			8

Total operating costs and expenses		42,231			(9,866	)		—			32,365


Income (loss) from operations		1,234			(6,620	)		—			(5,386	)

Other income (expense):
Interest expense, net		(11,379	)		—			4,635	^(a)		(6,744	)
Other		(398	)		100			—			(298	)

		(11,777	)		100			4,635			(7,042	)


Loss before income taxes		(10,543	)		(6,520	)		4,635			(12,428	)
Provision for income taxes		46			—			—	^(b)		46


Net loss	$	(10,589	)	$	(6,520	)	$	4,635		$	(12,474	)


Basic and diluted loss per share	$	(0.37	)							$	(0.44	)

Weighted average shares outstanding		28,586									28,586

See accompanying notes to unaudited pro forma consolidated statement of operations.

Note (1)

DIVESTED PRODUCTS
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
PRODUCT DIVESTITURE ADJUSTMENTS
For the Three Months Ended March 31, 2005
(In thousands)


				Actual			Pro Forma
	Actual			Non-Divested			Divested
	Pharma			Pharma			Pharma
	Products			Products			Products
	Results (i)			Results			Results
Net revenues:
Product sales	$	16,166		$	320		$	16,486
Product development		—			—			—
Development services		—			—			—
Reimbursed out-of-pocket		—			—			—

		16,166			320			16,486


Operating costs and expenses:
Direct costs (excluding depreciation and royalty expense)
Product sales		8,039			(388	)		7,651
Development services		—			—			—
Reimbursable out-of-pocket		—			—			—

Total direct costs		8,039			(388	)		7,651


Selling expenses		397			—			397
General and administrative expenses		1,267			—			1,267
Research and development		—			—			—
Depreciation		458			—			458
Professional fees — internal and government investigations		—			—			—
Professional fees — debt restructuring		—			—			—
Royalty expense		101			(8	)		93

Total operating costs and expenses		10,262			(396	)		9,866


Income (loss) from operations		5,904			716			6,620

Other income (expense):
Interest expense, net		—			—			—
Other		(100	)		—			(100	)

		(100	)		—			(100	)


Income (loss) before income taxes		5,804			716			6,520
Provision for income taxes		—			—			—


Net income (loss)	$	5,804		$	716		$	6,520

(i) Represents the historical results for the Pharma products for the three months ended March 31, 2005.

Income Statement Notes
Pharma Products Divestiture
(In thousands)

PRO FORMA ADJUSTMENTS

(a)


Repayment of our senior term loan of $165 million and our revolving loan of $10.5 million at LIBOR plus 8.25% per annum	$	4,475
Interest income generated by the cash received in excess of the term and revolving loan repayments at LIBOR		160

Pro forma decrease in net interest expense	$	4,635

(b)

No adjustment has been made for income tax benefits due to our belief that it is more likely than not that any deferred tax assets will not be realized.

aaiPharma Inc.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
March 31, 2005
(In thousands)


				Divested
	aaiPharma			Pharma			Pro Forma
	Actual			Products ^(a)			Adjustments			Pro Forma
ASSETS
Current assets:
Cash and cash equivalents	$	12,367		$	209,250		$	(175,500	) ^(b)	$	46,117
Accounts receivable, net		13,954			—			—			13,954
Work-in-progress		9,334			—			—			9,334
Inventories, net		8,173			(5,752	)		—			2,421
Prepaid and other current assets		8,781			(1,960	)		—	^(c)		6,821

Total current assets		52,609			201,538			(175,500	)		78,647
Property and equipment, net		50,741			(3,306	)		—			47,435
Goodwill, net		13,689			—			—			13,689
Intangible assets, net		187,509			(179,308	)		—			8,201
Other assets		18,775			—			(7,379	) ^(c)		11,396

Total assets	$	323,323		$	18,924		$	(182,879	)	$	159,368


LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt	$	351,591		$	—		$	(175,500	) ^(b)	$	176,091
Accounts payable		17,244			—			—			17,244
Customer advances		12,758			—			—			12,758
Accrued wages and benefits		5,422			—			—			5,422
Interest payable		12,244			—			—			12,244
Deferred product revenue		2,341			—			—			2,341
Other accrued liabilities		45,093			(4,921	)		—			40,172

Total current liabilities		446,693			(4,921	)		(175,500	)		266,272
Other liabilities		9			—			—			9
Stockholders’ equity (deficit):
Common stock		29			—			—			29
Paid-in capital		91,425			—			—			91,425
Accumulated deficit		(218,067	)		23,845			(7,379	) ^(c)(d)		(201,601	)
Accumulated other comprehensive income		3,372			—			—			3,372
Deferred compensation		(138	)		—			—			(138	)

Total stockholders’ equity (deficit)		(123,379	)		23,845			(7,379	)		(106,913	)

Total liabilities and stockholders’ equity (deficit)	$	323,323		$	18,924		$	(182,879	)	$	159,368

See accompanying notes to unaudited pro forma consolidated balance sheet.

Notes to Unaudited Pro Forma Consolidated Balance Sheet
(In thousands)


(a) To reflect the sale of certain Pharma Products:

Cash received from purchaser	$	209,250
Inventory sold to purchaser or written-off		(5,752	)
Write-off of prepaid assets with no future value		(1,960	)
Write-off of fixed assets with no future value		(3,306	)
Write-off of intangible assets related to the divested products		(185,109	)
Value of development services agreements		5,801
Adjustment to write-off liabilities assumed by the seller		11,695
Adjustments to accrue for liabilities for fees and sale-related expenses		(6,774	)

Pro forma net gain on sale	$	23,845


(b) To reflect adjustments to:

Record repayment of current maturities outstanding under our term loan	$	(165,000	)
Record repayment of current maturities outstanding under our revolving loan		(10,500	)

	$	(175,500	)


(c) To reflect an adjustment to eliminate the unamortized deferred financing costs related to our term and revolving loans:

Long-term asset	$	(7,379	)


(d) No adjustment has been made for income tax benefits due to our belief that it is more likely than not that any deferred tax assets will not be realized.

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.

Date: November 9, 2005


	aaiPharma Inc.
	By:	/s/ Matthew E. Czajkowski
		Matthew E. Czajkowski, Chief Administrative Officer
		and Chief Financial Officer

AAIPHARMA INC 8-K/A