Updated from 9:57 a.m. EST

Having issued a string of bad news announcements in recent months, aaiPharma ( AAII) unleashed a wave of financial setback disclosures late Tuesday, leading to the stomping of the company's already-beaten-down stock on Wednesday.

Shares of the Wilmington, N.C., drug company lost $1.48, or 18.1%, to $6.70. The stock fell as low as $5.95 in early trading.

About two hours after the markets had closed Tuesday, aaiPharma announced that it was in violation of certain bond covenants; faces a de-listing from Nasdaq, having failed to file its annual report on time; expects to make a "material adjustment" to its fourth-quarter 2003 financial report; and may be required to make similar adjustments to other quarterly reports from 2003.

In addition, the company has been informed that it may receive a subpoena from the Securities and Exchange Commission and/or a grand jury subpoena from the Justice Department concerning sales activities now being examined by independent board members and an outside law firm. The company said late Thursday that it has not yet received subpoenas.

The company, whose CEO was replaced earlier this week by aaiPharma's founder and chairman, asked the SEC March 1 for an extension in filing its 10-K annual report. The company said it needed time to investigate what it calls "unusual sales" during the second half of 2003.

The original filing deadline was March 15; but aaiPharma missed the March 30 extended deadline. "Although the inquiry is progressing expeditiously, no timetable has been set for the completion of the review, the completion of the audit of the company's 2003 financial statements or the filing of the form 10-K," aaiPharma said in a prepared statement Tuesday.

The company noted that failure to make a timely 10-K filing "results in a default under (our) senior secured credit facility." Lenders have informed aaiPharma that under the $100 million revolving credit portion of this agreement the company cannot borrow under the revolving credit facility.

"In addition, failure to timely file the 10-K may result in a default under the indenture governing the company's $175 million senior subordinated notes due 2010 if the filing does not occur within 60 days after notice," aaiPharma said.

An interest payment of $9.6 million is due on the senior subordinated notes on April 1. The company is negotiating with lenders so it can make the interest payment by April 30, even though the terms of the senior secured credit facility enable lenders to block the company from making that interest payment.

And if the company fails to make the interest payment within 30 days after April 1, it would be in default.

The company added that interim chief operating officer, Gregory F. Rayburn, a management consulting firm executive and an expert in financial restructuring, is talking to creditors. Rayburn was hired earlier this week, replacing David Hurley, who resigned last month to lead a start-up drug company.

Tuesday's revelations didn't immediately change opinions of Wall Street analysts on Wednesday, in part because many had downgraded the stock in recent months to hold or sell.

Donald B. Ellis, the lonely bull on aaiPharma among seven Wall Street analysts, maintained his outperform rating in a Wednesday report to clients.

"Much of the information revealed Tuesday was not unforeseen," said Ellis, who follows the company for Thomas Weisel Partners, a firm that has held a favorable rating on the stock since January 2002. "We expect the hiring of Gregory Rayburn to aid in the restructuring process and the successful negotiation of credit terms."

Ellis added that "the market has more than priced in the worst possible case." (He doesn't own shares, but his firm is a market maker in aaiPharma's stock and has had an investment banking relationship with the company in the past 12 months.)

Banc of America characterized aaiPharma as going "from boom to bust in five months." But it kept its neutral rating on the stock Wednesday, with analyst David W. Maris saying the company's underlying value is greater than today's stock price.

Maris wrote to clients that aaiPharma's announcement late Tuesday "was the company's worst-case disclosure of what could happen," adding that the company "will eventually emerge from these issues." (He doesn't own shares but his firm is a market maker in aaiPharma's stock, and it has had an investment banking relationship in the past 12 months.)

The company's woes also extend to the Nasdaq stock market, which told aaiPharma that its delay in filing a 10-K statement could cause its stock to be delisted by April 8 unless the company requested a hearing. The company said it will seek a hearing. And effective April 1, Nasdaq will change the company's stock symbol from AAII to AAIIE to denote the company's 10-K filing delay.