UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
|X| Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended March 31, 2000
|_| Transaction report under Section 13 or 15 (d) of the Exchange Act For the
transition period from ____________ to ____________
Commission file number 0-22245
NEXMED, INC.
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Nevada 87-0449967
- ------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
350 Corporate Boulevard, Robbinsville, NJ 08691
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(609) 208-9688
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(Issuer's Telephone Number, Including Area Code)
N/A
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 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 |_|
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: as of May 12, 2000, 19,747,048
shares of Common Stock, par value $0.001 per share, were issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes |_| No |X|
<PAGE>
Item 2. Management's Discussion and Analysis
General.
We have been in existence since 1987. Since 1994, we have positioned
ourselves as a pharmaceutical and medical technology company with a focus on
developing and commercializing therapeutic products based on proprietary
delivery systems. We, together with our subsidiaries, are currently focusing our
efforts on:
(i) new and patented pharmaceutical products based on a penetration
enhancement topical delivery technology known as NexACT(R), which may enable the
active drug to be better absorbed through the skin. Currently, we are focusing
on development efforts on Alprox-TD(R), an alprostadil cream for the treatment
of male erectile dysfunction and Femprox(TM), also an alprostadil-based cream
for the treatment of female sexual arousal disorder.
We have completed Phase I clinical studies on the Alprox-TD(R) and
Femprox(TM) creams. During February 2000, we began the dosing phase of our Phase
II clinical program on the Alprox-TD(R) cream which is being conducted at 12
urological research sites throughout the U.S. The Phase II program on the
Alprox-TD(R) cream consists of double-blind, placebo-controlled studies that
evaluate the safety and efficacy of the product in approximately 300 patients.
With respect to the Femprox(TM) cream, pending FDA clearance, we intend to begin
the proposed Phase II program during the third quarter 2000.
We have engaged in discussions with several large pharmaceutical companies
regarding the licensing of the Alprox-TD(R) cream but we cannot assure you that
we will be able to conclude an arrangement on a timely basis, if at all, or on
terms acceptable to us; and
(ii) the Viratrol(R) device, a therapeutic medical device for the
treatment of herpes simplex diseases without the use of drugs. We believe that
the minute electrical current, which is topically delivered by the device to an
infected site, may block lesions from forming or may significantly shorten
healing time once lesions develop. We intend to complete the commercial product
design of the Viratrol(R) herpes treatment device for marketing in the U.S., and
initiate its proposed Phase II/III study in late 2000.
If sufficient funding is forthcoming, we intend to (1) pursue our
research, development, and marketing activities and capabilities, both
domestically and internationally, with regard to our proprietary pharmaceuticals
products and (2) execute a business strategy with the goal of achieving a level
of development sufficient to enable us to attract potential strategic partners
with resources sufficient to further develop and market our proprietary
products.
Comparison of Results of Operations Between the Three Months Ended March 31 of
2000 and of 1999.
Revenues. We recorded no revenues during the first three months of
operations in 2000 as compared to $1,097,767 during the same period in 1999. Our
1999 revenues represent revenues of NexMed Pharmaceuticals (Zhongshan) Ltd., our
joint-venture in China which we sold in May 1999.
<PAGE>
Cost of Products Sold: The cost of products sold was nil and $1,040,844 in
2000 and 1999, respectively. The cost of products sold in 1999 was attributable
to the manufacturing operations of our joint-venture in China which we sold in
May 1999.
Research and Development Expenses. Our research and development expenses
for the first three months of operation in 2000 and 1999 were $1,026,396 and
$318,960, respectively. The increase is attributable to our ongoing U.S. Phase
II clinical development program on the Alprox-TD(R) cream and preparation for
the FemproxTM U.S. Phase II program.
General and Administrative Expenses. Our general and administrative
expenses were $380,150 during the first three months of operation in 2000 as
compared to $477,343 during the same period in 1999. The decrease is largely
attributed to the divestiture of our Asian operations, offset by increased G&A
expenses in the U.S. for new personnel and programs to support our ongoing
development activities.
Interest Income and Expense. Interest income was $130,594 during the first
three months of 2000, compared with ($91,034) during the same period in 1999.
The increase in attributable to the improvement in our cash position resulting
from our capital raises and elimination of expenses associated with borrowing
activities.
Net Loss. The net loss applicable to common shareholders was $1,238,939 or
a loss of $0.07 per share for the first three months of operation in 2000,
compared with $768,824 or a loss of $0.09 per share for the same period in 1999.
The increase in net loss is primarily due to the advances in our U.S. clinical
programs for our various products under development.
Liquidity and Capital Resources.
We have experienced net losses and negative cash flow from operations each
year since our inception. Through March 31, 2000, our accumulated deficit
amounted to $16,689,246. Since we became a medical and pharmaceutical technology
company in 1994, we have financed our operations primarily through private
placements of equity and debt securities.
Our expenditures and capital requirements will depend on numerous factors,
but will mainly be affected by the progress of (1) our research and development
programs, (2) our pre-clinical and clinical testing, (3) our ability to raise
adequate funding, and (4) our ability to complete corporate partnership
agreements. In the course of our development and operational activities, we have
incurred significant losses and expect to incur substantial additional
development costs.
In January 2000, we received approximately $6.1 million in gross proceeds
from the exercise of warrants issued pursuant to a private placement of our
common stock on September 30, 1999. In accordance with the terms of the warrant
agreements issued as part of the private placement, when the closing price per
share of our common stock reached $4.00 for at least fifteen consecutive trading
days, we issued a notice on December 14, 1999, for the exercise of the warrants
at $2.25 per share, or redemption at the par value of our common stock. 83,332
of the warrants were exercised in December 1999 and 2,723,494 warrants were
exercised in January 2000. We also redeemed 29,000 warrants at $0.001 per
warrant share.
<PAGE>
In February 2000, we received full payment for the two promissory notes,
each for $1,000,000, issued in connection with the sale of our Asian operations
in May 1999. The total purchase price for all of the issued and outstanding
shares of capital stock of NexMed (Asia) Limited was $4,000,000, comprised of
$2,000,000 in cash received in May 1999 and payment of the two promissory notes
as referenced above. As part of the sale, we also granted Vergemont
International Limited warrants to purchase 2,000,000 shares of our common stock,
exercisable at $3.00 per share. We anticipate that we will receive by June 30,
2000, an additional $6 million from the exercise of these warrants, which by
their terms, expire on June 30, 2000.
In April 2000, we received $3,135,000 from the sale of 220,000 shares of
our common stock at $14.25 per share, pursuant to an off-shore private
placement. We paid a six percent cash commission to a Hong Kong based investment
firm on the gross proceeds from this private placement.
We have allocated our cash reserves for our operational requirements for
the next twelve months, and the Phase II U.S. clinical studies on the
Alprox-TD(R) and Femprox(TM) creams. We believe that our current cash reserves
are adequate to support the Company's continuing operations for at least the
next twelve months.
We are currently debt-free. However, we will require additional financing
for the next phase of our development programs and are seeking financing which
may include equity or debt, from private and public sources as well as from
collaborative licensing and/or marketing arrangements with third parties. There
is no assurance that such funds will be available to us on acceptable terms, if
at all.
Other Factors Which May Affect Operating Results.
Our operations are subject to numerous risks associated with the
establishment and development of products based upon innovative or novel
technologies. As a result, we must be evaluated in light of the problems,
delays, uncertainties and complications encountered in connection with newly
found businesses. Some of these unanticipated problems may include development,
regulatory, manufacturing, distribution and marketing difficulties and be beyond
our financial or technical abilities to resolve satisfactorily. These and other
risks are discussed in further detail in our Form 10-KSB filing for the period
ended December 31, 1999.
Computer Systems and Year 2000 Issues.
The Year 2000 issue concerned the potential exposures related to the
automated generation of business and financial misinformation resulting from the
application of computer programs which were written using two digits rather than
four, to define the applicable year of business transactions. We believe that
through our compliance review process we adequately addressed the Year 2000
concerns as they related to our internal information technologies. We
experienced no system failures or computer errors associated with the Year 2000.
We have concluded our compliance review process and anticipate no further Year
2000 compliance issues or expenditures. Our expenditures on our Year 2000
program initiatives were minimal.
<PAGE>
Disclosure Regarding Forward-Looking Statements.
This report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, including statements regarding
our plans, objectives, expectations and intentions. Although we believe the
statements and projections are based upon reasonable assumptions, actual results
may differ from those that we have projected.
PART II
OTHER INFORMATION
Reports on Form 8-K
We did not file any Form 8-K during the three months ended March 31, 2000.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NEXMED, INC.
Date: May 12, 2000 /s/ Y. Joseph Mo
------------ -----------------------------------
Y. Joseph Mo
Chairman of the Board of Directors,
President and C.E.O.
Date: May 12, 2000 /s/ Vivian H. Liu
------------ -----------------------------------
Vivian H. Liu
Vice President, Chief Financial
Officer and Secretary
<PAGE>
NexMed, Inc.
Condensed Consolidated Balance Sheets
31-Mar
2000
Assets
Current assets:
Cash and cash equivalents $ 9,636,642
Certificates of Deposit 1,804,000
Marketable Securities 99,469
Inventories --
Notes receivable, net of deferred gain --
Prepaid expenses and other assets 314,193
------------
Total current assets 11,854,304
Furniture and equipment, net 470,454
------------
Total assets $ 12,324,758
============
Liabilities and stockholders' equity
Current liabilities:
Line of credit $--
Notes payable --
Due to officer --
Accounts payable 376,562
Accounts payable and accrued expenses 46,199
------------
Total current liabilities 422,761
------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 10,000,000
shares authorized, none issued and outstanding --
Common stock, $.001 par value, 40,000,000
shares authorized, 19,464,128 issued
and outstanding, respectively 19,464
Additional paid-in capital 28,574,053
Accumulated deficit (16,689,246)
Deferred compensation (10,970)
Unrealized loss marketable securities (799)
Cumulative translation adjustments 9,495
------------
Total stockholders' equity 11,901,997
------------
Total liabilities and stockholders' equity $ 12,324,758
============
See notes to unaudited condensed consolidated financial statements
<PAGE>
NexMed, Inc.
Condensed Consolidated Statement of Operations (Unaudited)
For the three months
ended March 31,
--------------------------
2000 1999
---- ----
Revenue
Product sales $ -- $ 1,097,767
License fees -- --
------------ ------------
Total revenues -- 1,097,767
------------ ------------
Operating expenses
Cost of product sales -- 1,040,844
Selling, general and administrative 380,150 477,343
Research and development 1,026,396 318,960
------------ ------------
Total operating expenses 1,406,546 1,837,147
------------ ------------
Loss from operations (1,406,546) (739,380)
Other income (expense)
Interest income (expense), net 130,594 (91,034)
Other income 37,742 --
------------ ------------
Total other income (expense) 168,336 (91,034)
------------ ------------
Loss before minority interest (1,238,210) (830,414)
Minority interest -- 61,590
------------ ------------
Net loss $ (1,238,210) $ (768,824)
------------ ------------
Other comprehensive income
Foreign currency translation adjustments 70 70,501
Unrealized loss on available-for-sale securities (799) --
------------ ------------
Total other comprehensive income (729) 70,501
Comprehensive Loss (1,238,939) (698,323)
============ ============
Basic and diluted loss per share $ (0.07) $ (0.09)
------------ ------------
Weighted average common shares outstanding
used for basic and diluted loss per share 18,828,728 8,401,703
------------ ------------
See notes to unaudited condensed consolidated financial statements
<PAGE>
NexMed, Inc.
Condensed Consolidated Statement of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31,
--------------------------
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities
Net loss $(1,238,210) $ (768,824)
Adjustments to reconcile net loss to net cash from operating
activities, net of effects of sale of subsidiary
Depreciation and amortization 26,439 58,588
Minority interest -- (61,590)
Non-cash compensation expense 8,000 8,958
Amortization of unearned compensation 609
Decreae in accounts receivable -- 69,158
Decrease in notes receivable 2,000,000 --
Increase in inventories -- (94,915)
Increae/(decrease) in prepaid expenses and other assets (144,198) 11,271
(Decrease)/Increase in account payable
and accrued expenses (133,903) 300,560
----------- -----------
Net cash used in operating activities 518,737 (476,794)
----------- -----------
Cash flow from investing activities
Capital expenditures (151,676) (318,045)
Purchase of marketable securities (100,268) --
Purchase of certificates of deposit (1,804,000) --
Advances to Joint Venture Partner -- (125,640)
----------- -----------
Net cash used in investing activities (2,055,944) (443,685)
----------- -----------
Cash flow from financing activities
Issuance of common stock, net of offering
costs 6,213,278 --
Issuance of notes payable -- 62,563
Decrease in due to officer (33,092) 254,312
Net repayments of line of credit -- (604,413)
Repayment of notes payable (133,838)
----------- -----------
Net cash from financing activities 6,046,348 (287,538)
----------- -----------
Net increase in cash 4,509,141 (1,208,017)
Effect of foreign exchange on cash 8,652 70,501
Cash, beginning of period 5,118,849 1,681,336
----------- -----------
Cash, end of period $ 9,636,642 $ 543,820
=========== ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements
<PAGE>
NEXMED, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10 - QSB and Article 10
- - 01 of Regulation S - B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for annual financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three months ended
March 31, 2000 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2000. For further information, refer to
the financial statements and notes thereto dated March 1, 2000 included in the
NexMed, Inc. (the "Company") Form 10 - KSB.
2. LOSS PER SHARE
Since the Company incurred net losses in all periods presented, outstanding
options and warrants to purchase shares of Common Stock were not included in
diluted per share calculations, as their effect would be antidilutive.
3. SUBSEQUENT EVENTS
In April 2000, an officer exercised her options to acquire 60,000 shares of
common stock at $0.25 per share.
In April 2000, the Company granted 22,500 options to employees under the
Incentive Plan at an exercise price of $8.00 per share, which was the estimated
fair value of the common stock on the date of grant. All of such options vest in
equal installments over three years and expire in 2010.
In April 2000, the Company granted 5,000 options to a consultant under the
Recognition plan at an exercise price of $8.00 per share, which was the
estimated fair value of the common stock on the date of grant. The Company will
record approximately $17,000 of expense based upon the fair value of such
options on the date of grant in the second quarter of 2000. All of such options
vested immediately and expire in 2002.
In April 2000, the Company completed a private placement of its securities at
$14.25 per share pursuant to Regulation S of the Securities Act of 1933, as
amended, raising gross proceeds of $3,135,000 and net proceeds, after deducting
commissions, of $2,946,900.
On April 3, 2000, the Company declared a dividend distribution of one preferred
share purchase right (the "Right") for each outstanding share of the Company's
common stock to shareholders of record at the close of business on April 21,
2000. One Right will also be distributed for each share of Common Stock issued
after April 21, 2000, until the Distribution Date, described in the next
paragraph. Each Right entitles the registered holder to purchase from the
Company a unit consisting of one one-hundredths of a share (a "Unit") of Series
A Junior Participating Preferred Stock, $.001 par value per share (the
"Preferred Stock"), at a Purchase Price of $100.00 per Unit, subject to
adjustment. 1,000,000 shares of the Company's preferred stock has been set-aside
for the Rights Plan.
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) ten (10) business days
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 15% or more of the outstanding shares of
Common Stock (the "Stock Acquisition Date"), or (ii) ten (10) business days
following the public announcement of a tender offer or exchange offer that
would, if consummated, result in a person or group
<PAGE>
beneficially owning 15% or more of such outstanding shares of Common Stock,
subject to certain limitations.
Under the terms of the Rights Agreement, Dr. Y. Joseph Mo, who beneficially owns
approximately 12.12% of the outstanding shares of the Company's Common Stock
will be permitted to continue to own such shares and to increase such ownership
to up to 25% of the outstanding shares of Common Stock, without becoming an
Acquiring Person and triggering a Distribution Date. The Rights Agreement which
includes the Certificate of Designation setting forth the terms of the Series A
Junior Participating Preferred Stock, the Form of the Rights Certificate and the
Summary of Rights to Purchase Shares, was filed on April 10, 2000 with the
Securities and Exchange Commission as an exhibit to the Company's Form 8-A and
as an exhibit to the Company's current report on Form 8-K and incorporated
herein by reference.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 9,636,642
<SECURITIES> 99,469
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,854,304
<PP&E> 631,963
<DEPRECIATION> 161,509
<TOTAL-ASSETS> 12,324,758
<CURRENT-LIABILITIES> 422,761
<BONDS> 0
0
0
<COMMON> 19,464
<OTHER-SE> 11,882,533
<TOTAL-LIABILITY-AND-EQUITY> 12,324,758
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,406,546
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (130,594)
<INCOME-PRETAX> (1,238,210)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,238,210)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,238,210)
<EPS-BASIC> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
