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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 June 30, 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.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
NEVADA 87-0449967
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
350 CORPORATE BOULEVARD, ROBBINSVILLE, NJ 08691
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(Address of Principal Executive Offices)
(609) 208-9688
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(Issuer's Telephone Number, Including Area Code)
N/A
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(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 August 10, 2000,
24,885,304 shares of Common Stock, par value $0.001 per share, were issued and
outstanding.
Transitional Small Business Disclosure Format (check one):
Yes |X| No |_|
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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 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 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 are in the process of completing 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 200 patients. Upon completion of the Phase II
program, we intend to submit the data to the FDA for review. Subject to FDA
concurrence, we intend to initiate our planned Phase III clinical development
program this Fall. With respect to the Femprox(TM) cream, we intend to begin the
proposed Phase II program during the third quarter of 2000.
We have engaged in discussions with several large pharmaceutical
companies regarding a strategic partnership for 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. With our current cash reserves,
we may elect to proceed with our planned U.S. Phase III program on the
Alprox-TD(R) cream, assuming we receive FDA clearance, while concurrently
pursuing the ongoing discussions; 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 are in the process of completing the
commercial product design of the Viratrol(R) herpes treatment device for the
U.S. market, and intending to 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 pharmaceutical
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 SIX MONTHS ENDED JUNE 30, 2000
AND 1999.
REVENUES. We recorded no revenues during the first six months of
operations in 2000 as compared to $1,491,746 during the same period in 1999. Our
1999 revenues represent revenues
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of NexMed Pharmaceuticals (Zhongshan) Ltd., a joint-venture in China. We sold
our interest in the joint-venture in May 1999.
COST OF PRODUCTS SOLD. The cost of products sold was nil and $1,415,002
in 2000 and 1999, respectively. The cost of products sold in 1999 was
attributable to the manufacturing operations of the China joint-venture. We sold
our interest in the joint-venture in May 1999.
GENERAL AND ADMINISTRATIVE EXPENSES. Our general and administrative
expenses were $1,143,767 during the first six months of operation in 2000 as
compared to $955,986 during the same period in 1999. The increase is largely
attributable to G&A expenses in the U.S. for new personnel and programs to
support our ongoing development activities and partially offset by the
divestiture of our Asian operations.
RESEARCH AND DEVELOPMENT EXPENSES. Our research and development
expenses for the first six months of operation in 2000 and 1999 were $2,879,458
and $679,197, respectively. The increase is attributable to activities for our
Phase II program for the Alprox-TD(R) cream and Phase I program for the
FemproxTM cream and the availability of funds to accelerate clinical development
by initiating concurrent studies and activities.
INTEREST INCOME AND EXPENSE. Interest income was $272,517 during the
first six months of 2000, compared with $(181,745) during the same period in
1999. The increase is attributable to the improvement in our cash position
resulting from our financing activities and elimination of expenses associated
with borrowing activities.
NET LOSS. The net loss applicable to common shareholders was $3,707,438
or a loss of $0.19 per share for the first six months of operation in 2000,
compared with $1,666,252 or a loss of $0.20 per share for the same period in
1999. The decrease is largely attributable to the divestiture of our Asian
operations. The increase in absolute dollars is primarily due to the revenue
loss from the sale of our interest in the China joint-venture and the increase
in research and development expenses.
COMPARISON OF RESULTS OF OPERATIONS BETWEEN THE THREE MONTHS ENDED JUNE 30, 2000
AND 1999.
REVENUES. For the second quarter in 2000, we recorded no revenues as
compared to $393,979 during the same period in 1999. Our 1999 revenues represent
revenues of NexMed Pharmaceuticals (Zhongshan) Ltd., a joint-venture in China.
We sold our interest in the joint-venture in May 1999.
COST OF PRODUCTS SOLD. The cost of products sold was nil and $374,158
for the second quarter in 2000 and 1999, respectively. The cost of products sold
in 1999 was attributable to the manufacturing operations of the China
joint-venture. We sold our interest in the joint-venture in May 1999.
GENERAL AND ADMINISTRATIVE EXPENSES. Our general and administrative
expenses were $763,617 during the second quarter in 2000 as compared to $478,643
during the same period in 1999. The increase is largely attributable to the
expenditures for new personnel and programs to support our ongoing development
activities and partially offset by the divestiture of our Asian operations.
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RESEARCH AND DEVELOPMENT EXPENSES. Our research and development
expenses for the three months of operation in 2000 and 1999 were $1,853,062 and
$360,237, respectively. The increase is attributable to our ongoing U.S. Phase
II program for the Alprox-TD(R) cream and Phase I program for the FemproxTM
cream and the availability of funds to accelerate clinical development by
initiating concurrent studies and activities.
INTEREST INCOME AND EXPENSE. Interest income was $141,923 during the
three months of operation in 2000, compared with $(90,711) during the same
period in 1999. The increase is attributable to the improvement in our cash
position resulting from our financing activities and elimination of expenses
associated with borrowing activities.
NET LOSS. The net loss applicable to common shareholders was $2,469,228
or a loss of $0.13 per share for the second quarter of 2000, compared with
$897,428 or a loss of $0.11 per share for the same period in 1999. The increase
in absolute dollars is primarily due to the revenue loss from the sale of our
interest in the China joint-venture and the increase in expenditures for our
U.S. clinical development programs.
LIQUIDITY AND CAPITAL RESOURCES.
We have experienced net losses and negative cash flow from operations
each year since our inception. Through June 30, 2000, our accumulated deficit
amounted to $19,158,474. 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 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 commission of six percent in cash to a Hong Kong based
investment consulting firm on the gross proceeds from this private placement. In
June 2000, we received $6 million in gross proceeds from the exercise of
2,000,000 warrants issued pursuant to the sale of our Asian operations in May
1999.
In August 2000, we received approximately $26.85 million in gross
proceeds from the sale of units comprised of our common stock and warrants.
We sold 3,138,256 shares of our common stock and warrants to purchase an
additional 1,282,891 shares. We paid a commission of 7.5% in cash and
10% in warrants to two investment firms on the gross proceeds from the
sales.
We are currently debt-free and have over $40 million in cash and cash
equivalents. We have allocated our cash reserves for our operational
requirements, and for the U.S. clinical studies on the Alprox-TD(R) and
Femprox(TM) creams and the development program on the Viratrol(R) device. In
addition, we intend to acquire a manufacturing facility for our proprietary
topical treatment products. We believe that our current cash reserves are
adequate to support the Company's continuing operations for at least the next
twelve months. However, we may require additional financing for the next phase
of our development programs and may seek financing
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from equity or debt and 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.
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 June 30,
2000.
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NexMed, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30,
2000
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 14,374,070
Restricted Cash 100,000
Certificates of Deposit 2,269,000
Marketable Securities 714,994
Prepaid expenses and other assets 689,807
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Total current assets 18,147,871
Furniture and equipment, net 612,103
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Total assets $ 18,759,974
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LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 212,100
Accounts payable and accrued expenses 106,129
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Total current liabilities 318,229
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Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 10,000,000
shares authorized, none issued and outstanding --
Common stock, $.001 par value, 80,000,000
shares authorized, 21,747,128 issued
and outstanding, respectively 21,747
Additional paid-in capital 37,595,410
Accumulated deficit (19,158,474)
Deferred compensation (10,361)
Unrealized loss marketable securities (16,295)
Cumulative translation adjustments 9,718
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Total stockholders' equity 18,441,745
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Total liabilities and stockholders' equity $ 18,759,974
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</TABLE>
See notes to unaudited condensed consolidated financial statements
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NexMed, Inc.
Condensed Consolidated Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
For the six months For the three months
ended June 30, ended June 30,
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2000 1999 2000 1999
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenue
Product sales $ -- $ 1,491,746 $ -- $ 393,979
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Operating expenses
Cost of product sales -- 1,415,002 -- 374,158
Selling, general and administrative 1,143,767 955,986 763,617 478,643
Research and development 2,879,458 679,197 1,853,062 360,237
------------ ----------- ------------ -----------
Total operating expenses 4,023,225 3,050,185 2,616,679 1,213,038
------------ ----------- ------------ -----------
Loss from operations (4,023,225) (1,558,439) (2,616,679) (819,059)
Other income (expense)
Interest income (expense), net 272,517 (181,745) 141,923 (90,711)
Other income 43,270 -- 5,528 --
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Total other income (expense) 315,787 (181,745) 147,451 (90,711)
Loss before minority interest (3,707,438) (1,740,184) (2,469,228) (909,770)
Minority interest -- 73,932 -- 12,342
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Net loss $ (3,707,438) $(1,666,252) $ (2,469,228) $ (897,428)
------------ ----------- ------------ -----------
Other comprehensive income
Foreign currency translation adjustments 36 (47,792) (34) 22,709
Unrealized loss on available-for-sale securities (16,295) -- (15,496) --
------------ ----------- ------------ -----------
Total other comprehensive income (16,259) (47,792) (15,530) 22,709
Comprehensive Loss (3,723,697) (1,714,044) (2,484,758) (874,719)
============ =========== ============ ===========
Basic and diluted loss per share $ (0.19) $ (0.20) $ (0.13) $ (0.11)
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Weighted average common shares outstanding
used for basic and diluted loss per share 19,362,818 8,414,797 19,680,518 8,427,747
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</TABLE>
See notes to unaudited condensed consolidated financial statements
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NexMed, Inc.
Condensed Consolidated Statement of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For the six months
ended June 30,
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2000 1999
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<S> <C> <C>
Cash flows from operating activities
Net loss $ (3,707,438) $(1,666,252)
Adjustments to reconcile net loss to net cash from operating
activities, net of effects of sale of subsidiary
Depreciation and amortization 67,356 15,611
Non-cash compensation expense 63,740 14,333
Amortization of unearned compensation 1,219 --
Gain on sale of marketable securities (325) --
Decrease in notes receivable 2,000,000 --
Decrease in inventories -- (46,600)
(Increase) in prepaid expenses and other assets (519,812) (9,598)
(Decrease)/Increase in account payable
and accrued expenses (238,435) 158,048
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Net cash used in operating activities (2,333,695) (1,534,458)
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Cash flow from investing activities
Capital expenditures (335,098) (81,143)
Purchase of marketable securities (764,061) --
Purchase of certificates of deposit (2,369,000) --
Proceeds from sale of marketable securities 38,109 --
Proceeds from sale of subsidiary, net -- 343,441
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Net cash used in investing activities (3,430,050) 262,298
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Cash flow from financing activities
Issuance of common stock, net of offering
costs 15,181,178 412,500
Issuance of notes payable -- 87,163
Net proceeds from line of credit -- 50,290
Net decrease in due to/from related party -- (68,517)
Decrease in due to officer (33,092) (583,271)
Repayment of notes payable (133,838) (238,155)
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Net cash from financing activities 15,014,248 (339,990)
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Net increase in cash 9,250,503 (1,612,150)
Effect of foreign exchange on cash 4,718 (47,792)
Cash, beginning of period 5,118,849 1,681,336
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Cash, end of period $ 14,374,070 $ 21,394
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</TABLE>
See notes to unaudited condensed consolidated financial statements
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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 six months ended June
30, 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. LINE OF CREDIT
The Company modified its line of credit with the Bank to increase its advance
limit to $100,000 from $50,000. Interest on the line of credit is payable
monthly, at the bank's prime rate plus 1%. Additionally, the repayment of the
line of credit is no longer guaranteed by an officer and director of the Company
but by the Company itself. Accordingly, the Company has obtained a $100,000
certificate of deposit, which is held by the bank as collateral on the line of
credit, which is payable upon demand.
4. SUBSEQUENT EVENTS
In August 2000, the Company completed unit offerings of 3,138,256 shares of its
common stock and warrants to acquire 1,282,891 shares of its common stock to 25
accredited individuals and financial institutions. The warrants have an exercise
price of $13.50 to $16.20 per share and a term of eighteen months. The price of
the units ranged from $16.54 to $18.00, depending on the date of closing and/or
amount of warrant coverage. The Company raised $26,851,288 in gross proceeds in
connection with these offerings.
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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: AUGUST 11, 2000 /s/ Y. JOSEPH MO
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Y. Joseph Mo
Chairman of the
Board of
Directors,
President and
C.E.O.
Date: AUGUST 11, 2000 /s/ VIVIAN H. LIU
------------------------------------------
Vivian H. Liu
Vice President, Chief Financial Officer
and Secretary
