<PAGE> 1
As Filed with the Securities and Exchange Commission on June 12, 1996
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-------------------------
ACCESS PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
-------------------------
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<S> <C> <C>
DELAWARE 3841 83-0221517
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
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2600 NORTH STEMMONS FREEWAY, SUITE 210,
DALLAS, TEXAS (214) 905-5100
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
-------------------------
KERRY P. GRAY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ACCESS PHARMACEUTICALS, INC.
2600 NORTH STEMMONS FREEWAY, SUITE 210
DALLAS, TEXAS
(214) 905-5100
(Name, address, including zip code, and
telephone number, including area code, of agent for service)
-------------------------
with copies to:
JOHN J. CONCANNON III
BINGHAM, DANA & GOULD LLP
150 FEDERAL STREET
BOSTON, MA 02110
(617) 951-8000
-------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement is declared effective.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [x]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Title of Securities to Amount to be Registered Proposed Maximum Proposed Maximum Amount of Registration
be Registered Offering Price Per Aggregate Offering Fee
Share* Price*
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<S> <C> <C> <C> <C>
Common Stock $.04 par 9,171,415 shares(1) $ 2.00 $ 18,342,830 $ 6,325.11
value per share
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</TABLE>
* Estimated solely for the purpose of determining the registration fee.
Calculated in accordance with Rule 457(c) under the Securities Act of
1933 based on the average of the bid and ask sale prices reported in
the consolidated trading system of the National Association of
Securities Dealers, Inc. Automated Quotation System Over-the-Counter
Bulletin Board on June 10, 1996.
(1) Includes 600,000 shares issuable to certain selling stockholders upon
exercise of Warrants for the purchase of shares of the Registrant's
Common Stock. (See "Selling Stockholders")
-------------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
<PAGE> 2
ACCESS Pharmaceuticals, Inc.
Cross Reference Sheet
Between Items of Form SB-2 and Prospectus
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ITEM LOCATION IN PROSPECTUS
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1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus . . . . . . Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus . . . . . . . . . . . . . . . Inside Front Cover Page; Outside
Back Cover Page; Additional Information
3. Risk Factors . . . . . . . . . . . . . . . . . . . Risk Factors
4. Use of Proceeds . . . . . . . . . . . . . . . . . . Use of Proceeds
5. Determination of Offering Price . . . . . . . . . . Outside Front Cover Page
6. Dilution. . . . . . . . . . . . . . . . . . . . . . Not Applicable
7. Selling Security Holders. . . . . . . . . . . . . . Selling Stockholders
8. Plan of Distribution. . . . . . . . . . . . . . . . Outside Front Cover Page
9. Description of Securities to be Registered. . . . . Outside Front Cover Page;
Capitalization; Description
of Capital Stock
10. Interests of Named Experts and Counsel. . . . . . . Experts; Legal Opinions
11. Information With Respect to the Registrant:
(a) Description of Business. . . . . . . . . . . . Business; Management's Discussion and
Analysis of Financial Condition and
Results of Operations
(b) Description of Property . . . . . . . . . . . . Business--Properties
(c) Legal Proceedings . . . . . . . . . . . . . . . Risk Factors--Risks Associated With
Pending and Threatened Patent Litigation;
Business--Patents and Proprietary
Technology; Business--Legal Proceedings
(d) Market Price of and Dividends on the
Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . Outside Front Cover Page; Price Range of
Common Stock and Dividend Policy;
Executive Compensation; Description of
Capital Stock
(e) Financial Statements. . . . . . . . . . . . . . Financial Statements; Capitalization
(f) Selected Financial Data . . . . . . . . . . . . Selected Financial Data
(g) Supplementary Financial Information . . . . . . Pro Forma Financial Statements
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ITEM LOCATION IN PROSPECTUS
- ---- ----------------------
<S> <C> <C>
(h) Management's Discussion and Analysis Financial
of Condition and Results of Operations . . . . . Management's Discussion and Analysis
of Financial Condition and Results
of Operations
(i) Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . Not Applicable
(j) Directors, Executive Officers, Promoters and
Control Persons. . . . . . . . . . . . . . . . . Management
(k) Executive Compensation . . . . . . . . . . . . . Executive Compensation
(l) Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . Security Ownership of Certain Beneficial
Owners and Management
(m) Certain Relationships and Related
Transactions . . . . . . . . . . . . . . . . . . Certain Relationships and Related
Transactions
1.2 Disclosure of Commission Position on Indemnification
for Securities Act Liabilities. . . . . . . . . . . Not Applicable
</TABLE>
<PAGE> 4
ACCESS PHARMACEUTICALS, INC.
PROSPECTUS
9,171,415 SHARES OF
COMMON STOCK, $.04 PAR VALUE
This Prospectus ("Prospectus") of ACCESS Pharmaceuticals, Inc. a
Delaware corporation (the "Company" or "ACCESS"), relates to up to 9,171,415
shares (the "Shares") of the Company's common stock, $.04 par value per share
(the "Common Stock"), being sold by certain stockholders of the Company (the
"Selling Stockholders") for their respective accounts. See "Description of
Capital Stock," "Security Ownership of Certain Beneficial Owners and
Management" and "Selling Stockholders." The Company will not receive any
proceeds from the sale of the shares by the Selling Stockholders. None of the
shares have been registered prior to the filing of the Registration Statement
of which this Prospectus is a part.
The Common Stock of the Company is traded on the National Association
of Securities Dealers, Inc. Automated Quotation System ("Nasdaq")
Over-the-Counter Bulletin Board under the symbol AXCS. On June 11, 1996 the
last reported sale price of the Common Stock on Nasdaq was $1.875 per share.
See "Price Range of Common Stock."
<TABLE>
<CAPTION>
=====================================================================================================================
Price to Public Underwriting Discounts and Proceeds to Selling
Commissions Stockholders
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share (1) (1)(2) (1)(2)
- ---------------------------------------------------------------------------------------------------------------------
Total (1) (1)(2) (1)(2)
=====================================================================================================================
</TABLE>
(1) The sale or distribution of the Shares may be effected directly to
purchasers by the Selling Stockholders as principals or through one or more
underwriters, brokers, dealers or agents from time in one or more transactions
(which may involve crosses or block transactions) or (i) on any exchange or in
the over-the-counter market or (ii) in transactions otherwise than in the
over-the-counter market or (iii) through the writing of options (whether such
options are listed on an options exchange or otherwise) on, or settlement of
short sales of, the Shares. Any of such transactions may be effected at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, at varying prices determined at the time of sale or at
negotiated or fixed prices in each case as determined by the Selling
Stockholder or by agreement between the Selling Stockholder and underwriters,
brokers, dealers or agents, or purchasers. If the Selling Stockholders effect
such transactions by selling Shares to or through underwriters, brokers,
dealers or agents, such underwriters, brokers, dealers or agents may receive
compensation in the form of discounts, concessions or commissions from the
Selling Stockholders or commissions from purchasers of Securities for who they
may act as agent (which discounts, concessions or commissions as to particular
underwriters, brokers, dealers or agents may be in excess of those customary in
the types of transactions involved). The Selling Stockholders and any brokers,
dealers or agents that participate in the distribution of the Shares may be
deemed to be underwriters, and any profit on the sale of Shares by them and any
discounts, concessions or commissions received by any such underwriters,
brokers, dealers or agents may be deemed to be underwriting discounts and
commissions under the Securities Act of 1933 ("Securities Act").
Under the securities laws of certain states, the Shares may be sold in such
states only through registered or licensed brokers or dealers. In addition, in
certain states the Shares may not be sold unless the Shares have been
registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
The Company will pay all of the expenses incident to the registration,
offering and sale of the Shares to the public hereunder other than commissions,
fees and discounts of underwriters, brokers, dealers and agents. The Company
has agreed to indemnify the Selling Stockholders and any underwriters against
certain liabilities under the Securities Act. The Company will not receive any
of the proceeds from the sale of any of the Shares
2
<PAGE> 5
by the Selling Stockholders.
See "Plan of Distribution", Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources" and "Selling Stockholders."
(2) The Company has agreed to prepared and file this Prospectus and the
related Registration Statement and supplements and amendments thereto required
by the Securities Act with the Securities and Exchange Commission, to register
or qualify the Shares if required under applicable Blue Sky laws, and to
deliver copies of the Prospectus to the Selling Stockholders. The expenses
incurred in connection with the same, estimated at $63,225, will be borne by
the Company. The Company will not be responsible for any discounts,
concessions, commissions or other compensation due to any broker or dealer in
connection with the sale of any of the shares offered hereby, which expenses
will be borne by the Selling Stockholder.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------------
The date of this Prospectus is June 12, 1996
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information concerning the Company may be inspected and copies may be
obtained (at prescribed rates) at public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and at the regional offices of the Commission located at Seven World Trade
Center, 13th Floor, New York, New York 10048 and at Northwest Atrium Center,
500 W. Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material can also be obtained from the Public Reference Section, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, upon
payment of prescribed rates. The Company's Common Stock is listed on The Nasdaq
Stock Market, and reports, proxy statements and other information concerning
the company can also be inspected the offices of the National Association of
Securities Dealers, Inc. at 1735 K Street, Washington, D.C. 20006.
The Company has filed a Registration Statement on Form SB-2 (the
"Registration Statement") under the Securities Act with the Commission with
respect to the Common Stock being offered pursuant to this Prospectus. As
permitted by the rules and regulations of the Commission, this Prospectus omits
certain of the information contained in the Registration Statement. For further
information with respect to the Company and the Common Stock being offered
pursuant to this Prospectus, reference is hereby made to such Registration
Statement, including the exhibits filed as part thereof. Statements contained in
this Prospectus concerning the provisions of certain documents filed with, or
incorporated by reference in, the Registration Statement are not necessarily
complete, each such statement being qualified in all respects by such reference.
Copies of all or any part of the Registration Statement, including the documents
incorporated by reference therein or exhibits thereto, may be obtained upon
payment of the prescribed rates at the offices of the Commission set forth
above.
Upon request, the Company will provide without charge to each person to
whom a copy of this Prospectus has been delivered a copy of any information
that was incorporated by reference in the Prospectus (other than exhibits to
documents, unless such exhibits are specifically incorporated by reference
into the information incorporated by reference in the Prospectus). The Company
will also provide upon specific request, without charge to each person to whom
a copy of this Prospectus has been delivered, a copy of all documents filed
from time to time by the Company with the Commission pursuant to the Exchange
Act. Requests for such copies should be directed to Stephen B. Thompson, 2600
N. Stemmons Fwy., Suite 210, Dallas, Texas 75207. Telephone requests may be
directed to Mr. Thompson at (214) 905-5100.
3
<PAGE> 6
RISK FACTORS
The following factors should be considered carefully in considering an
investment in the shares of Common Stock offered by this Prospectus.
Certain statements in this Prospectus are forward-looking statements that
involve risks and uncertainties, including but not limited to research and
development focus, uncertainties associated with research and development
activities, future capital requirements and dependence on others, and other
risks set forth below.
Research and Development Focus ACCESS' focus is on commercializing
proprietary biopharmaceutical patents. Although ACCESS is projected to have
royalty income, it is still in the development stage, and its proposed
operations are subject to all the risks inherent in the establishment of a new
business enterprise, including the need for substantial capital. ACCESS has
recorded minimal revenue to date. It is anticipated that ACCESS will remain
principally engaged in research and development activities for an
indeterminate, but substantial, period of time. As a non-revenue producing
company, normal credit arrangements are unavailable to ACCESS and, therefore,
it is likely that ACCESS would be forced to accept unfavorable terms if it
should attempt to raise additional needed funds through borrowing. There can
be no assurance that any such credit arrangements would be available. Further,
it is anticipated that additional losses will be incurred in the future, and
there can be no assurances that ACCESS will ever achieve significant revenues.
Uncertainties Associated with Research and Development Activities Research
and development activities, by their nature, preclude definitive statements as
to the time required and costs involved in reaching certain objectives. Actual
research and development costs, therefore, could exceed budgeted amounts and
estimated time frames may require extension. Cost overruns due to
unanticipated regulatory delays or demands, unexpected adverse side effects or
insufficient therapeutic efficacy will prevent or substantially slow the
research and development effort and ultimately could have a material adverse
effect on ACCESS.
Absence of Operating Revenue Royalties received by ACCESS for sales of
ActinexTM and Amlexanox have not been significant to date. There can be no
assurance of revenue or profits in the future. ACCESS currently has no
products approved for sale and there can be no assurance as to the expenditures
of time and resources that may be required to complete the development of
potential ACCESS products and obtain approval for sale or if such completion
and approval can be realized.
History of Losses; Probability of substantial additional future losses
ACCESS has sustained net operating losses since its inception. Since the
development and commercialization of current and new products will require
substantial expenditures for the foreseeable future, ACCESS expects to incur
further losses. If ACCESS' losses continue, its ability to continue its
operations will depend upon its ability to secure additional funds. ACCESS'
revenue trend and future additional cash needs may display significant
variations due to the introduction of new research and development agreements
and licensing arrangements, the completion or termination of those agreements
and arrangements, the timing and amounts of milestone payments, and the timing
of regulatory approvals and market introduction of products.
Future Capital Requirements ACCESS will require substantial funds for its
research and product development programs, the pursuit of regulatory approvals,
operating expenses, working capital and expansion of its production
capabilities. There can be no assurance that ACCESS will be profitable in the
future and if ACCESS has insufficient funds for its capital needs, there can be
no assurance that additional funds can be obtained on acceptable terms, if at
all. If necessary funds are not available, ACCESS' business would be
materially adversely affected.
Dependence on Others; Collaborations The Company's strategy for the
research, development and commercialization of its potential pharmaceutical
products may require the Company to enter into various arrangements with
corporate and academic collaborators, licensors, licensees and others, in
addition to those already established, and may therefore be dependent upon the
subsequent success of outside parties in performing their responsibilities.
There can be no assurance that the Company will be able to establish additional
collaborative arrangements or license agreements that the Company deems
necessary or acceptable
4
<PAGE> 7
to develop and commercialize its potential pharmaceutical products, or that any
of its collaborative arrangements or license agreements will be successful.
No Marketing, Sales, Clinical Testing or Regulatory Compliance Activities
In view of the development stage of the Company and its research and
development programs, the Company has restricted hiring to research scientists
and a small administrative staff and has made no investment in marketing,
product sales or regulatory compliance resources. If the Company successfully
develops any commercially marketable pharmaceutical products, it may seek to
enter joint venture, sublicense or other marketing arrangements with parties
that have an established marketing capability or it may choose to pursue the
commercialization of such products on its own. There can be no assurance,
however, that the Company will be able to enter into such marketing
arrangements on acceptable terms, if at all. Further, the Company will need to
hire additional personnel skilled in the clinical testing and regulatory
compliance process and in marketing or product sales if it develops
pharmaceutical products with commercial potential that it determines to
commercialize itself. There can be no assurance, however, that it will be able
to acquire such resources or personnel.
Protection of Proprietary Technology ACCESS' ability to compete effectively
with other companies will depend, in part, on its ability to maintain the
proprietary nature of its technology. Although ACCESS has been awarded eight
patents involving glycosaminoglycan, acidic saccharide, carbohydrate and other
endothelial-binding and targeting carriers in combination with drugs and
diagnostic agents formulated by both physical and chemical covalent means; and
eight applications are pending, there can be no assurance that these patents
will not be declared invalid or circumvented, or that pending patents will be
issued. In addition, there may be other patents issued covering technologies
and products which may be required by ACCESS to manufacture, use or sell any
potential products. There can be no assurance that ACCESS could obtain a
license under any such patent on commercially acceptable terms or at all. To
protect their rights in these areas, ACCESS generally requires its respective
employees, consultants, advisors and collaborators to enter into
confidentiality agreements. There can be no assurance, however, that these
agreements will provide meaningful protection for ACCESS' trade secrets,
know-how or other proprietary information in the event of any unauthorized use
or disclosure of such trade secrets, know-how or other proprietary information.
Litigation may be necessary to protect trade secrets or know-how currently
owned by ACCESS to determine the scope and validity of the proprietary rights
of others and could result in substantial cost and diversion of effort by
ACCESS.
Regulation by Government Agencies The pharmaceutical industry is subject to
regulation by the U.S. Food and Drug Administration ("FDA") and comparable
agencies in foreign countries prior to commercial marketing. The process of
obtaining approvals from such agencies for any potential products of ACCESS can
be costly, complicated and time consuming and there can be no assurance that
such approvals will be granted on a timely basis, if ever. The regulatory
process may delay the marketing of any new products for lengthy periods, impose
substantial additional costs and furnish an advantage to competitors who have
greater financial resources. In addition, the extent of potentially adverse
governmental regulations which might arise from future legislative,
administrative or judicial action cannot be determined. ACCESS cannot predict
at this time what effect FDA actions may have on the approval process to which
ACCESS' potential products may be subject.
Drug-related Risks Adverse side effects of treatment of diseases and
disorders in both human and animal patients are business risks in the
pharmaceutical industry. Adverse side effects can occur during the clinical
testing of a new drug on humans or animals which may delay ultimate FDA
approval or even cause a company to terminate its efforts to develop the drug
for commercial use. Even after FDA approval of an NDA, adverse side effects
may develop to a greater extent than anticipated during the clinical testing
phase and could result in legal action against a company. Drug developers and
manufacturers, including ACCESS, may face substantial liability for damages in
the event of adverse side effects or product defects identified with their
products used in clinical tests or marketed to the public. There can be no
assurance that ACCESS will be able to satisfy any claims for which it may be
held liable resulting from the use or misuse of products which it has
developed, manufactured or sold.
Competition The domestic and international markets for the pharmaceutical
industry are highly competitive. Many of ACCESS' competitors have
significantly greater financial, technical, research and development and
5
<PAGE> 8
marketing resources than ACCESS. ACCESS' ability to compete depends primarily
upon scientific and technical superiority, patent protection, timely regulatory
approvals and effective pricing and marketing. ACCESS' future success will
also depend upon, among other factors, its ability to develop, introduce,
manufacture and obtain regulatory approvals on a timely basis for new or
potential products. Other substances or technologies currently existing or
developed in the future may be the basis for competitive products that will
render ACCESS' technology obsolete or non-competitive. There can be no
assurance that any potential products or processes will compete successfully.
Additionally, there can be no assurance that ACCESS' competitors will not
substantially increase the resources devoted to the development and marketing
of products competitive with those of ACCESS.
Dependence Upon Skilled Personnel The business of ACCESS depends heavily
upon the active participation of a number of key management and technical
personnel. The loss of the services of one or more such employees could have a
material adverse effect on the operation of ACCESS' business, financial
condition and results of operations. In addition, both the long and short term
success of ACCESS depend in large part upon its continued ability to attract
and retain skilled scientific, and managerial employees, which may prove
difficult because the market for the services of such individuals is highly
competitive.
Possible Volatility of Stock Price Stock prices for many technology
companies fluctuate widely for reasons which may be unrelated to operating
performance or new product or service announcements. Broad market
fluctuations, earnings and other announcements of other companies, general
economic conditions or other matters unrelated to ACCESS and outside its
control also could affect the market price of the Common Stock.
Effect of Certain Charter and By-Law Provisions; Possible Issuance of
Preferred Stock ACCESS' Certificate of Incorporation and Bylaws contain
provisions that may discourage acquisition bids for ACCESS. This could limit
the price that certain investors might be willing to pay in the future for
shares of Common Stock. In addition, shares of ACCESS Preferred Stock may be
issued in the future without further stockholder approval and upon such terms
and conditions, and having such rights, privileges and preferences, as the
Board of Directors may determine (including, for example, rights to convert
into Common Stock). The rights of the holders of Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of any ACCESS
Preferred Stock that may be issued in the future. The issuance of ACCESS
Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire, or discouraging a third
party from acquiring, a majority of the outstanding voting Common Stock of
ACCESS.
Market Impact of Future Sales of Common Stock Sales of substantial amounts
of shares of ACCESS Common Stock in the public market could adversely affect
the market price of the Common Stock. As of the date of this Prospectus,
12,139,009 shares of Common Stock are unrestricted and freely tradable.
Dr. David Ranney, a Director, Herbert H. McDade, Chairman of the Board, and
Kerry Gray, Chief Executive Officer and President of ACCESS, have entered into
Lock-Up Agreements with ACCESS pursuant to which each of them may not sell any
shares of the Common Stock of ACCESS owned by them until July 25, 1996.
The private placement investors from the $6 million private placement for
8.57 million shares of common stock on March 4, 1996 have agreed not to sell
any of the shares purchased in the offering until 180 days after the closing of
the private placement or until September 5, 1996.
There also are outstanding options, warrants and rights to purchase up to
approximately 4.6 million shares of the Common Stock. The sale of a
substantial amount of these shares could have a material adverse effect on the
future market price of Common Stock.
6
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THE COMPANY
ACCESS was founded in 1974 as Chemex Corporation, a Wyoming corporation, and
in 1983 changed its name to Chemex Pharmaceuticals, Inc ("Chemex"). Chemex
changed its state of incorporation from Wyoming to Delaware on June 30, 1989.
In connection with the merger of ACCESS Pharmaceuticals, Inc., a Texas
Corporation ("API"), with and into the Company on January 25, 1996, the name of
the Company was changed to ACCESS Pharmaceuticals, Inc.
ACCESS' principal executive office is at 2600 North Stemmons Freeway, Suite
210, Dallas, Texas 75207; its telephone number is (214) 905-5100.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of shares by the
Selling Shareholders.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock was traded on the National Association of Securities
Dealers, Inc. Automated Quotation System ("Nasdaq") SmallCap market under the
trading symbol CHMX until April 27, 1995. ACCESS' securities were delisted
from the Nasdaq SmallCap Market on April 27, 1995 for failure to meet certain
financial requirements. ACCESS Common Stock now trades on the Nasdaq
Over-the-Counter ("OTC") Bulletin Board and as of February 1, 1996 trades under
the trading symbol AXCS. The following tables set forth, for the periods
indicated, the high and low closing prices for the Common Stock as reported by
Nasdaq.
<TABLE>
<CAPTION>
Common Stock
-------------------------------
High Low
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<S> <C> <C>
Fiscal Year Ended December 31, 1995
-----------------------------------
First quarter $ 3/4 $ 7/16
Second quarter(1) 1/2 7/16
Second quarter(2) 9/16 1/16
Third quarter 19/32 9/32
Fourth quarter 1-1/8 1/4
Fiscal Year Ended December 31, 1996
-----------------------------------
First quarter 2-11/16 29/32
Second quarter (to May 31, 1996) 2-9/16 1-3/4
</TABLE>
(1) Through April 27, 1995 on NASDAQ SmallCap Market.
(2) After April 27, 1995 on OTC Bulletin Board.
The Company has never declared or paid any cash dividends on its
Common Stock and does not anticipate paying any cash dividends in the
foreseeable future. The Company currently intends to retain all future
earnings, if any, to finance the development and growth of the Company's
business.
7
<PAGE> 10
CAPITALIZATION
The following table sets forth as of March 31, 1996 the actual
capitalization (unaudited) of the Company. This table should be read in
conjunction with the financial statements (including the notes thereto), which
are included in this Registration Statement and Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------
(in 000's)
<S> <C>
Stockholders' equity:
Preferred Stock: $.01 par value, 10,000,000 shares
authorized; no shares issued and outstanding $ -
Common Stock: $.04 par value,
40,000,000 shares authorized; 31,290,182 shares issued and
outstanding(1); 1,252
Additional paid-in capital 17,748
Accumulated deficit during the development stage (12,529)
---------
Total stockholders' equity 6,471
---------
Total capitalization $ 6,471
=========
</TABLE>
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(1) Excludes 1,445,461 shares of Common Stock issuable pursuant to the
exercise of stock options outstanding as of May 31, 1996 at a weighted
average exercise price of $2.22 per share, of which options to purchase
all 1,445,461 shares were then exercisable from the 1987 Stock Awards
Plan. Also excludes (i) 406,000 shares issuable under the 1995 Stock
Option Plan as of May 31, 1996. See "Stock Option Plans".
8
<PAGE> 11
SELECTED FINANCIAL DATA
The following data, insofar as it relates to each of the years in the
five year period ended December 31, 1995, has been derived from the audited
financial statements of ACCESS and notes thereto appearing elsewhere herein.
The data for the three month periods ended March 31, 1996 and 1995 have been
derived from unaudited financial statements also appearing herein and which, in
the opinion of management, include all adjustments (consisting only of normal
recurring adjustments except the merger adjustments discussed below in footnote
(2)) necessary for the fair statement of the financial position and results of
operations for the unaudited interim periods presented. The data should be
read in conjunction with the Financial Statements and Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Prospectus. The unaudited Pro Forma
financial data for the three months ended March 31, 1996 and the year ended
December 31, 1995, gives effect to the merger and the Private Placement
Offering and have been derived from and should be read in conjunction with the
financial data set forth under the unaudited Pro Forma financial statements.
Pro Forma data are not necessarily indicative of future financial position or
future operating results.
<TABLE>
<CAPTION>
Pro Pro
Forma Three Months Ended Forma For the
(1)(2) March 31, (1)(2) Year Ended December 31,
--------- ------------------ -------- ---------------------------------------------------
1996 1996 1995 1995 1995(3) 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total Revenues $ 165 $ 165 $ 135 $ 3,581 $ 690 $ 1,038 $ 322 $ 589 $1,646
Operating Loss (401) (8,715) (286) (817) (1,104) (485) (1,386) (1,009) 358
Other Income 77 30 3 307 5 9 34 106 195
Income (Loss) Before Income
Taxes (324) (8,685) (283) (510) (1,099) (476) (1,352) (903) 553
Income taxes - - - - - - 32 (44) 139
Net income (Loss) (324) (8,685) (283) (510) (1,099) (476) (1,384) 859 414
COMMON STOCK DATA:
Net Income (Loss)
Per Share $ (.01) $ (.34) $ (.10) $ (.02) $ (.35) $ (.16) $ (.47) $ (.29) $ .14
Weighted Average Number
of Common Shares
Outstanding 31,290 25,535 2,918 31,290 3,098 2,918 2,918 2,918 2,916
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
March 31, December 31,
------------------ -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
====================================================================================================================================
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Total Assets $7,230 $816 $ 424 $1,261 $1,079 $2,444 $3,558
Total Liabilities 759 568 772 731 71 53 397
Stockholders' Equity
(Deficit) 6,471 248 (348) 531 1,007 2,391 3,161
====================================================================================================================================
</TABLE>
(1) Gives effect to Pro Forma adjustments related to the acquisition of
Chemex Pharmaceuticals, Inc. ("Chemex") as if the acquisition had
occurred at the beginning of the periods presented. ACCESS
Pharmaceuticals, Inc. a Texas corporation ("API) merged with and into
Chemex on January 25, 1996. Under the terms of the agreement, Chemex
acquired all of the outstanding shares of API in exchange for 13,919,979
shares of registered common stock of Chemex and accordingly API was
merged into Chemex with Chemex as the surviving legal entity. The name
of Chemex was changed to ACCESS Pharmaceuticals, Inc. ("ACCESS" or the
"Company").
As a result of the merger and immediately after the merger, the former
API stockholders owned approximately 60% of the issued and outstanding
shares of the Company. Generally accepted accounting principles require
that a company whose stockholders retain the controlling interest in a
combined business be treated as the acquiror for accounting purposes. As
a consequence, the merger was accounted for as a "reverse acquisition"
for financial reporting purposes and API has been deemed to have acquired
an approximate 60% interest in Chemex. Despite the financial reporting
requirement to account for the acquisition as a "reverse acquisition,"
Chemex remains the continuing legal entity and registrant for Securities
and Exchange Commission reporting purposes; however, as a result of the
merger, the name of Chemex was changed to ACCESS Pharmaceuticals, Inc.
As a result the Selected Financial Data above is the data for ACCESS from
January 25, 1996 to March 31, 1996 and API as of and for the three months
ended March 31, 1995 and as of and for the years ended December 31, 1991
through 1995.
The unaudited balance sheet at March 31, 1996 and related statement of
operations for the three months ended March 31, 1996 include adjustments
to record the "reverse acquisition" as a purchase with API as the
acquirer. The values used in the preparation of the financial statements
at the January 25, 1996 merger date were determined based on negotiations
between Chemex and API using comparable values for companies at API's
stage of development. As a result, common stock and paid in capital of
API were recorded at a $10.0 million valuation. The excess purchase
price over the fair value of Chemex's assets of $8,314,000 was written
off in the first quarter of 1996.
(2) Gives effect to the Pro Forma adjustments related to the receipt by the
Company of the net proceeds of the Private Placement Offering, for $6
million for 8.57 million shares of Common Stock on March 4, 1996
(3) In the fourth quarter of 1995, the Company changed its accounting for
patent and application costs from capitalizing and amortizing initial
patent and application costs (primarily legal and filing fees related to
patents) to expensing these costs as incurred. The change was made to
bring the Company's policy in the line with prevailing industry
practices. As a result of the change, the Company wrote down capitalized
patent and application costs by approximately $246,000.
9
<PAGE> 12
PRO FORMA FINANCIAL STATEMENTS
The accompanying unaudited Pro Forma statements of operations for the year
ended December 31, 1995, and for the three months ended March 31, 1996, are
based on the historical financial statements of the Company adjusted as if the
following events occurred on January 1, 1995: (1) Consummation of the merger of
ACCESS Pharmaceuticals, Inc., a Texas Corporation ("API") with and into the
Company and, (ii) receipt by the Company of the net proceeds of the Private
Placement Offering. The unaudited December 31, 1995 Pro Forma statement of
operations combines the historical operations of API with the historical
operations of Chemex, prior to the date of the merger. The unaudited Pro Forma
Statement of Operations for the three months ended March 31, 1996 reflects the
operations of ACCESS after eliminating the write off of excess purchase price
recorded using the purchase method of accounting.
These statements are based on assumptions set forth in the notes to such
statements and should be read in conjunction with the related financial
statements and notes thereto of the Company and API included elsewhere in this
Prospectus.
The Pro Forma financial statements are not necessarily indicative of ACCESS'
future operating results or what ACCESS results would have been had the merger
and Private Placement Offering been consummated at January 1, 1995.
PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
-------------------------------
HISTORICAL PRIVATE AS
API MERGER PLACEMENT ADJUSTED
-------------- -------------- -------------- --------------
(In thousands except per share date)
<S> <C> <C> <C> <C>
Revenues $ 690 $ 2,891 (A) $ 3,581
Cost and Expenses:
Research and Development 675 1,245 (A) 1,920
General and Administrative 694 1,341 (A) 2,035
Interest 58 6 (A) 64
Depreciation and amortization 367 12 (A) 379
---------- -------- ---------
Total expenses 1,794 2,604 4,398
---------- -------- ---------
Operating income (loss) (1,104) 287 (817)
Other income
Interest and miscellaneous income 5 54 (A) $ 248 (B) 307
---------- -------- ------ ---------
Income (loss) before income taxes (1,099) 341 248 (510)
Income taxes - - - -
- - - -
Net income (loss) $ (1,099) $ 341 $ 248 $ (510)
========== ======== ====== =========
Net income (loss) per share $ (0.09) $ 0.04 $ 0.02 $ (0.02)
========== ======== ====== =========
Weighted average number of
common shares outstanding 11,846 (D) 8,717 (D) 8,571 (E) 29,134
========== ======== ====== =========
</TABLE>
The accompanying notes are an integral part of the Pro Forma Financial
Statements.
10
<PAGE> 13
PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
-------------------------------
HISTORICAL PRIVATE AS
ACCESS MERGER PLACEMENT ADJUSTED
-------------- -------------- -------------- --------------
(In thousands except per share data)
<S> <C> <C> <C> <C>
Revenues $ 165 $ 165
Cost and Expenses:
Research and development 181 181
General and administrative 336 336
Interest 13 13
Depreciation and amortization 36 36
Writeoff of Excess purchase price 8,314 $ (8,314) (C) -
-------- -------- --------
Total expenses 8,880 (8,314) 566
-------- -------- --------
Operating income (loss) (8,715) 8,314 (401)
Other income
Interest and miscellaneous income 30 $ 47 (B) 77
-------- ------- --------
Income (loss) before income taxes (8,685) 8,314 47 (324)
Income taxes - - - -
- - - -
Net income (loss) $ (8,685) $ 8,314 $ 47 $ (324)
======== ======== ======= ========
Net loss per share from
continuing operations $ (0.34) $ (0.01)
======== ========
Weighted average number of
common shares outstanding 25,535 8,717 8,571 31,250
======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of the Pro Forma Financial
Statements.
Notes to Pro Forma Financial Statements
(A) Reflects the historical net revenues and operating expenses of the Company
as if the merger had occurred on January 1, 1995 (adjustments do not
include amounts for operations of Chemex from January 1, 1996 to January 25,
1996, as such amounts were not significant)
(B) Reflects increased interest income earned on proceeds from the private
placement.
(C) Adjustment is made to reflect the elimination of write off of excess
purchase price recorded on January 25, 1996. Such adjustment is considered
nonrecurring and will not have a continuing impact.
(D) The weighted average number of outstanding shares of Historical API gives
retroactive effect to the exchange of 3.824251 shares of Chemex for each
outstanding share of ACCESS.
(E) Reflects shares issued in connection with private placement.
11
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of operation
of the Company should be read in conjunction with the Company's Financial
Statements and Notes thereto, and the other financial information included
elsewhere in this Prospectus.
OVERVIEW
In connection with the merger ("Merger") of ACCESS Pharmaceuticals, Inc., a
Texas corporation ("API"), with and into Chemex Pharmaceuticals, Inc.
("Chemex") on January 25, 1996, the name of Chemex was changed to ACCESS
Pharmaceuticals, Inc. ("ACCESS" or the "Company").
As a result of the merger and immediately after the merger, the former API
Stockholders owned approximately 60% of the issued and outstanding shares of
the Company. Generally accepted accounting principles require that a company
whose stockholders retain the controlling interest in a combined business be
treated as the acquiror for accounting purposes. As a consequence, the merger
was accounted for as a "reverse acquisition" for financial reporting purposes
and API was deemed to have acquired an approximate 60% interest in Chemex.
Despite the financial reporting requirement to account for the acquisition as a
"reverse acquisition," Chemex remains the continuing legal entity and
registrant for Securities and Exchange Commission reporting purposes.
Until the sale of its rights to the drug Amlexanox in September 1995 to Block
Drug Company ("Block"), Chemex focused on the development of novel drugs for
the treatment of various skin diseases and had a diversified portfolio of drugs
under development.
As consideration for the sale of the Company's rights to the drug Amlexanox,
Block (a) made an initial non-refundable upfront royalty payment of $2.5
million; (b) is obligated to pay the Company $1.5 million as a prepaid royalty
at the end of the calendar month during which Block together with any
sublicensee has achieved cumulative worldwide sales of Amlexanox oral products
of $25 million; and (c) after the payment of such $1.5 million royalty, is
obligated to pay the Company a royalty for all sales in excess of cumulative
worldwide sales of Amlexanox oral products of $45 million, as defined in the
agreement.
ACCESS' obligations following such sale are limited to performing reasonable
activities in support of obtaining FDA approval of Amlexanox until the earlier
of (i) three years after FDA approval of Amlexanox, or (ii) the liquidation or
dissolution of ACCESS. An New Drug Application ("NDA") for Amlexanox was filed
in April 1995 and the Company announced on May 20, 1996 that Block has received
an approvable letter from the FDA for Amlexanox. There have been no sales of
Amlexanox to date.
Subsequent to the Merger of API into ACCESS, the Company has been managed by
the former management of API and the focus of the Company has changed to the
development of enhanced delivery of parenteral therapeutic and diagnostic
imaging agents through the utilization of its patented and proprietary
endothelial binding technology which selectively targets sites of disease. The
Company has a broad platform technology for enhancing the site targeting of
intravenous therapeutic drugs, MRI contrast agents and radiopharmaceutical
diagnostic and therapeutic agents. The ACCESS technology is based on natural
carbohydrate carriers.
The technology development of the Company is currently focused on increasing
the therapeutic benefit of oncology agents and improving the efficiency of
oncology diagnosis by selectively targeting sites of disease and accelerating
drug clearance.
The Company has developed four possible product candidates, two of which are
anticipated to be ready to be advanced into human testing in the first half of
1997. These product candidates are new formulations of existing compounds
which increase therapeutic efficacy and reduce toxicity, designed to address
the clinical shortfalls of available treatments.
12
<PAGE> 15
Recent Developments
On April 26, 1996, ACCESS executed a letter of intent to acquire Tacora Corp.,
a privately-held pharmaceutical company based in Seattle. The transaction is
expected to close in the next 60-90 days. Under the terms of the letter of
intent, the purchase price is contingent upon the achievement of certain
milestones. Stock up to a maximum of $14,000,000 could be payable to Tacora's
Shareholders over a 30 month period on an escalating value over the milestone
period. The consummation of the transaction is subject to customary conditions
to closing including completion of due diligence, negotiation of definitive
documents and approval of the stockholders of Tacora Corp.
Liquidity and Capital Resources
The Company's principal source of liquidity as of March 31, 1996, is $6,813,000
of cash and cash equivalents. Working capital as of March 31, 1996 was
$6,419,000, an increase of $6,934,000 as compared to the working capital as of
December 31, 1995 of $(515,000). The increase in working capital was
principally due to $6 million in proceeds from the private placement of 8.57
million shares of common stock in March 1996 and the addition of $1.84 million
in working capital of Chemex resulting from the Merger between Chemex and API.
Based on completion of the private placement, $480,000 was paid to a
consultant. The net cash infusion from the private placement will be used to
continue the development and advancement of the ACCESS technology which focuses
on increasing the therapeutic benefit and improving the efficacy of oncology
therapeutics and diagnostic agents by selectively targeting sites of disease
and accelerating drug clearance. The shares issued in the private placement
were not registered; however, the Company agreed to file this registration
statement within 90 days of the date of the private placement issuance. The
private placement investors have agreed not to sell any of the shares purchased
in the offering until 180 days after the closing of the private placement.
Management believes its working capital will cover planned operations through
December 1997.
Management anticipates that future expansion of the Company's business through
acquisition will be financed through the issuance of stock of the Company.
Currently royalty revenues are not expected during 1996. Research and
development expenditures to advance products into human testing will remain
high for several years and there can be no assurance that the Company will be
successful in attaining a partner or future equity financing to complete the
testing of its products.
RESULTS OF OPERATIONS
Comparison of Three Months Ended March 31, 1996 and 1995
First quarter 1996 revenues were $165,000 as compared to $135,000 in 1995, an
increase of $30,000. The increase in revenues for the first quarter of 1996 as
compared to the comparable 1995 period was principally due to $165,000 of
option payments recorded as income in the first quarter related to a
third-party evaluation of certain of the Company's technology. The company
performing the evaluation elected not to extend the option period beyond March
29, 1996. An additional $110,000 in option payments was converted to a
non-interest bearing loan due to the evaluating pharmaceutical company. First
quarter 1995 revenues were comprised of sponsored research and development
revenues.
Total research spending for the first quarter of 1996 was $181,000 as compared
to $215,000 for the same period in 1995, a decrease of $34,000. The decrease
in expenses was the result of a decrease in external research expenditures.
Research spending will increase in future quarters as the Company has initiated
the hiring of additional scientific management and staff and is accelerating
activities to develop the Company's product candidates.
Total general and administrative expenses were $336,000 for the first quarter
of 1996, an increase of $182,000 as compared to the same period in 1995. The
increase in spending was due to the following: increased professional expenses
due to the Merger and legal costs of being a public company-$100,000; director
fees and director and officer insurance-$39,000; general business consulting
fees and expenses-$15,000; and other increases of $28,000.
13
<PAGE> 16
Excess purchase price over the fair value of Chemex's net assets of $8,314,000
was recorded and written off in the first quarter due to an immediate
impairment of the excess purchase price.
Total expenses were $8,880,000, including $8,314,000 of excess purchase price
written off, which resulted in a loss for the quarter of $8,685,000, or $.34
per share.
Comparison of Years Ended December 31, 1995 and 1994
Revenues in 1995 were $690,000, as compared to the same period in 1994 of
$1,039,000, a reduction of $349,000. The lower revenues in 1995 are due to a
project cancellation in June 1995 by a pharmaceutical company.
Research and development expenses for 1995 were $675,000 as compared to
$714,000 for the same period in 1994, a decrease in spending of $39,000. The
decrease is due mainly to a decrease in external research expenditures.
Research and development expenses are expected to increase in 1996 due to the
funding received from the $6 million private placement in March 1996 (see
Liquidity and Capital Resources).
General and administrative expenses were relatively constant from 1994 to 1995.
These expenses are anticipated to increase in 1996 as compared to 1995. Most
of the emphasis will be on research and development for the company's products.
Interest expense was $39,000 higher in 1995 versus 1994 due to capital lease
obligations incurred late in 1994.
Depreciation and amortization increased to $367,000 in 1995 from $115,000 in
1994, an increase of $252,000. The increase was due to API changing its
accounting for patent and application costs from capitalizing and amortizing
initial patent and application costs (primarily legal and filing fees related
to patents) to expensing these costs as incurred. The change was made to bring
the Company's policy in line with prevailing industry practices. As a result
of the change, the Company wrote down capitalized patent and application costs
by approximately $246,000 in the fourth quarter of 1995.
Comparison of Years ended December 31, 1994 and 1993
Revenues in 1994 were $1,039,000 an increase of $717,000 over 1993. Revenues
in 1994 were only from Corange International, Ltd. and revenues in 1993 were
only from Yamanouchi Pharmaceutical Co., Ltd. In April 1994, ACCESS concluded
agreements,
14
<PAGE> 17
as amended, with Corange. The agreements were to develop drugs based on
ACCESS' endothelial binding technology for the use in the technology area and
an option for a period up to two years, as defined to exclusively license the
product worldwide.
Total research and development expenses were $714,000 for 1994, a reduction of
$128,000 as compared with fiscal 1993. The reduction of spending was due to
wind up costs associated with the completion of the Yamanouchi MRI project and
the start up of the new Corange oncology projects whereas 1993 had a full year
of active project costs.
General, administrative and interest expenses were $695,000 in 1994, a
reduction of $60,000 as compared to 1993. The reduction was due primarily to
lower business professional fees ($70,000), scientific consulting ($19,000),
travel and entertainment ($26,000) offset by higher patent costs ($34,000) and
legal fees ($27,000).
Other income-interest and miscellaneous income was $9,000 for 1994, a reduction
of $25,000 as compared with fiscal 1993. The reduction in other income was due
to lower cash balances on hand.
Total expenses were $1,524,000 for fiscal 1994, as compared to $1,708,000 in
1993, a reduction of $184,000. The net loss in 1994 was $476,000 or a
reduction in loss of $908,000 from 1993. The reduction in net loss for 1994 as
compared to 1993 was principally due to the higher revenues received from
Corange due to the start of the oncology project and the net effect of research
and development and general cost reductions in 1994.
Consequently, the net loss for 1994 was $476,000 or $.16 loss per common share,
as compared to a net loss of $1,384,000 or $.47 loss per common share in 1993.
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," effective for fiscal years beginning
after December 15, 1995, requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. In addition, this statement requires
that long-lived assets and certain identifiable intangibles to be disposed of
be reported at the lower of carrying amount or fair value less cost to sell.
The Company adopted this statement January 1, 1996, and the adoption of SFAS
No. 121 did not have material impact on the financial condition of the Company.
SFAS No. 123, "Accounting for Stock Based Compensation", effective for fiscal
years beginning after December 15, 1995 established financial, accounting and
reporting standards for stock-based employee compensation plans. These plans
include all arrangements by which employees receive shares of stock or other
equity investments of the employer or the employer incurs liabilities to
employees in amounts based on the price of the employer's stock. This
statement also applies to transactions in which an entity issues its equity
instruments to acquire goods or services from non-employees. The Company has
elected to account for employee stock compensation plans under APB 25 and
accordingly, only selected the disclosure requirements of SFAS No. 123. Such
additional disclosure requirements will be presented by the Company in its 1996
Form 10-K.
BUSINESS
OPERATIONS PRIOR TO JANUARY 1996
In June 1990, ACCESS sold its then lead drug, ActinexTM, a drug developed by
ACCESS for the treatment of actinic keratoses (pre-malignant lesions of the
skin) to Block Drug Company ("Block") for a total of $8 million in milestone
payments plus future royalties which to date have not been significant. As of
December 31, 1992, all milestones were achieved and paid, and Block began
selling the drug in November 1992. ACCESS has retained the right to the active
ingredient of ActinexTM for all applications other than the indications for
premalignant lesions of the skin and basal cell carcinoma.
In June 1991, ACCESS entered into a joint venture agreement with Block for the
development, manufacturing and marketing of certain dermatological products
(the "Joint Venture"). Under this Joint Venture, Amlexanox, a drug for canker
sores, was developed.
Following the dissolution of the Joint Venture as of December 31, 1994, ACCESS
jointly owned the rights to Amlexanox with Block. ACCESS was required to share
certain research and development and other expenses relating to the
commercialization of Amlexanox on a 50/50 basis with Block. These agreements
also provided that if ACCESS was unable to fund its shares of such expenses,
ACCESS would be entitled to exercise an option to sell its rights to Amlexanox
to Block in exchange for the right to receive royalties from future sales of
Amlexanox.
Believing that it would not be able to continue to fund its share of the
expenses required for commercialization of Amlexanox and because it was unable
to raise additional equity financing and reach agreement, by letter of intent
or otherwise, on a merger transaction with a third party, ACCESS, on May 30,
1995, exercised an option to sell its rights to Amlexanox to Block. On
September 14, 1995, at a Special Meeting of Stockholders, the ACCESS
Stockholders approved such sale and such transaction was consummated on
September 21, 1995.
As consideration for the sale of ACCESS' share of Amlexanox, Block (a) made a
nonrefundable upfront royalty payment of $2.5 million; (b) is obligated to pay
to ACCESS $1.5 million as a prepaid royalty at the end of the calendar month
during which Block together with any sublicensee has achieved cumulative
worldwide
15
<PAGE> 18
sales of Amlexanox oral products of $25 million; and (c) after the payment of
such $1.5 million royalty, is obligated to pay to ACCESS for all sales in
excess of cumulative worldwide sales of Amlexanox oral products of $45 million:
(1) for all countries where a valid and enforceable patent of Takeda Chemical
Industries, Ltd., ("Takeda"), the licensor of Amlexanox to Block, and or/an
Amlexanox patent for canker sores is in effect at the time of sale:
Ethical formulations: 5%
Over the Counter ("OTC") formulations: 2.5%
(2) for countries where there is no valid and enforceable Takeda patent or
Amlexanox patent for canker sores in effect at the time of a sale:
Ethical formulations: 2.5%
OTC formulations: 1.25%
ACCESS' obligations following such sale are limited to performing reasonable
activities in support of obtaining FDA approval of Amlexanox until the earlier
of (i) three years after FDA approval of Amlexanox, or (ii) the liquidation or
dissolution of ACCESS. An NDA for Amlexanox was filed in April 1995 and the
Company announced on May 20, 1996 that Block has received an approvable letter
from the U.S. Food and Drug Administration for Amlexanox. There have been no
sales of Amlexanox to date.
Until July 1995 and the sale of the drug Amlexanox to Block, ACCESS focused on
the development of novel drugs for the treatment of various skin diseases and
had a diversified portfolio of drugs under development.
Subsequent to the Merger of API into ACCESS, the Company is now managed by the
former management of API and the focus of the Company has changed to the
development of enhanced delivery of parenteral therapeutic and diagnostic
imaging agents through the utilization of its patented and proprietary
endothelial binding technology which selectively targets sites of disease.
This new technology was researched and developed at the University of Texas
Southwestern Medical Center by Dr. David Ranney, API's founder, who was the
Director of the Laboratory of Targeted Diagnosis and Therapy in the departments
of Pathology and Radiology. The technology is being developed to increase the
efficacy and reduce the side effects of therapeutics and diagnostic agents by
selectively targeting them to the sites of disease and accelerating drug
clearance. The principal form of the technology utilizes natural
carbohydrates, glycosaminoglycans ("GLYCOS"), as the carrier system which
selectively targets sites of disease. GLYCOS work by recognizing and adhering
to cytokine-induced adhesive receptors on the walls of local blood vessels.
The therapeutic focus of ACCESS is the development of proprietary
pharmaceuticals for the treatment of cancer and life-threatening infections and
the diagnosis and staging of cancer. ACCESS believes that the unique
pharmacologic profiles and selective targeting properties of GLYCOS could allow
its product candidates to become useful treatments for cancer and
life-threatening infections, and important diagnostic tools in the early
detection, prognosis and monitoring of cancer. The focus on acute care in
large expanding high-value hospital markets, particularly in the areas of
oncology and infectious disease, is designed to more rapidly accelerate
development and regulatory review and lower development cost in these life
saving therapeutic areas.
ACCESS has developed four possible product candidates, two of which are
believed ready to be advanced into human testing. These product candidates are
new formulations of existing compounds which increase therapeutic efficacy and
reduce toxicity, designed to address the clinical shortfalls of available
treatments.
OVERVIEW OF CURRENT OPERATIONS
The ACCESS strategy is to initially focus on utilizing its GLYCOS technology in
combination with approved drug substances to develop novel patentable physical
formulations of potential therapeutic and diagnostic
16
<PAGE> 19
products. It is anticipated that this will expedite product development, both
preclinical and clinical, and ultimately product approval. To reduce financial
risk and equity financing requirements, ACCESS is directing its resources to
the preclinical phase of development and plans to outlicense to, or co-develop
with, marketing partners its current product candidates during the clinical
development phases.
ACCESS has initiated and will continue to expand its internal core capabilities
of physical formulation, analytical methods development, initial process scale
up, carbohydrate analysis, drug/diagnostic targeting screens and project
management capability to maximize product opportunities in a timely manner. The
manufacturing scale-up, pre-clinical testing and product production will be
contracted to research organizations, contract manufacturers and strategic
partners. Given the current cost containment and managed care environment both
in the United States and overseas and the difficulty for a small company to
effectively market its products, ACCESS does not currently plan to become a
fully integrated pharmaceutical company.
Consequently, ACCESS expects to form strategic alliances for product
development and to outlicense the commercial rights to development partners.
By forming strategic alliances with major pharmaceutical and diagnostic
companies, it is believed that the ACCESS technology can be more rapidly
developed and successfully introduced into the marketplace. Potential
strategic partners are and will continue to be screened based on the technology
synergy, development capabilities, expertise in the therapeutic/diagnostic area
and ability to globally maximize the potential product opportunity. Strategic
alliance agreements are expected to be structured around milestone and
diligence payments commensurate with the opportunity, the level of development
partner funding of clinical development and regulatory costs and ACCESS'
receiving a royalty based on worldwide product revenues.
SCIENTIFIC BACKGROUND
Preclinical work to date has demonstrated that ACCESS' technology enhances the
performance of therapeutic and diagnostic/prognostic imaging agents by binding
them to GLYCOS carriers which rapidly target to sites of tissue disease and
cause them to remain there for longer intervals while rapidly clearing the
non-targeted fraction. The GLYCOS technology is patterned after an immune
targeting system present in the body. GLYCOS mimic the body's defense systems
and appear capable of recognizing neovascular receptors selectively at sites of
disease, crossing vascular barriers and targeting drug payloads to tumor sites,
infections, inflammatory lesions, cardiovascular disease and potentially other
disease entities.
ACCESS' GLYCOS carriers are derived from natural sources and comprise the
carbohydrate portions of natural proteoglycans. GLYCOS have favorable toxicity
profiles compared to synthetic molecules. Also, currently they are the only
cost effective carrier substances available in the class of complex
carbohydrates. Examples of ACCESS carriers include heparin and dermatan
sulfate, the former an approved substance worldwide, and the latter a product
in advanced clinical development in Europe.
ACCESS has researched various GLYCOS for their targeting, biodistribution, and
clearance properties. ACCESS is now able to select the combination of GLYCOS
and active substances to provide optimal formulation characteristics, minimize
the dose-related side effects in preclinical testing, optimize clearance rates
and routes of different drugs and potentially obtain site selectivity for
different major classes of disease, beginning with cancer and infection.
Importantly, the binding of drugs and imaging agents to GLYCOS carriers is
typically by noncovalent physical processes. This results in simple
formulations which utilize existing, approved/approvable substances as carriers
and are expected to be compatible with a range of drugs and imaging agents.
ACCESS' proprietary GLYCOS carriers bind first to the body's endothelial
receptors that are induced on the microvascular barrier between the bloodstream
and the tissue sites of disease. Consequently, in a fashion similar to the
body's own cellular immune mechanisms, ACCESS' GLYCOS formulations
progressively accumulate and cross into sites of disease from their initial
binding/targeting sites on induced endothelium and are able to continue such
accumulation with repeated dosing, depending on the nature, severity and
persistence of the disease and the tissue mediators. Being sulphated
polysaccharides, these GLYCOS appear to avoid inducing anticarrier antibodies
to themselves except in the extremely low incidence established for therapeutic
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<PAGE> 20
heparinoids.
Attaching a GLYCOS carrier to a drug or imaging agent causes the drug or
imaging agent to accumulate at the site of tissue damage more rapidly and to a
significantly greater extent than without the GLYCOS. Moreover, by
piggybacking on the physiological pathway that allows cells and molecules to
penetrate the endothelial barrier and permeate deep into the underlying tissue
lesion, GLYCOS help bring the drug closer to all sub-regions and cells of the
pathologic lesion.
ACCESS believes that both the polymeric and multivalent binding properties of
GLYCOS are important for optimal disease site-localization of the attached drug
or diagnostic/prognostic. These aspects are important in optimizing
biodistribution, targeting and clearance and may also promote displacement of
the endogenous interfering substances which can be bound to diseased
endothelium, further enhancing the active endothelial translocation of the
GLYCOS drug or diagnostic into underlying sites of disease.
Drug and diagnostic enhancement by ACCESS' GLYCOS occurs by a number of
mechanisms, the principal ones being rapid selective targeting to tissue sites
of disease, stabilization of the active substance during both storage and
plasma transmit, longer retention at the site of disease and rapid clearance of
the non-targeted fraction giving reduced imaging backgrounds and reduced drug
toxicity.
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<PAGE> 21
PRODUCT DEVELOPMENTS
ACCESS DRUG PORTFOLIO
<TABLE>
<CAPTION>
===========================================================================================================
Clinical
--------
Compound Originator Indication FDA Filing Stage (1)
-------- ---------- ---------- ---------- ------
- ----------------------------------------------------------------------------------------------------------
Cancer
------
<S> <C> <C> <C> <C>
AP 4010 ACCESS Anti-tumor (Cancer) Development Pre-Clinical
AP 2011 ACCESS MRI Contrast Agent Development Pre-Clinical
Radiopharmaceutical ACCESS Cancer Diagnosis Development Research
Masoprocol(3)(5) ACCESS Anti-tumor (Cancer) Development Pre-Clinical
Anti-Fungal
-----------
AP 1110 ACCESS Anti-fungal Development Pre-Clinical
Dermatology
-----------
ActinexTM(2) ACCESS Actinic keratosis FDA approved Completed
Amlexanox(2) Takeda Oral ulcers NDA filed April Completed
(CHX-3673) 1995
CHX-100 (3)(5) ACCESS Prevention of IND filed 1993 Phase II
photoaging of skin
Hypericin(4)(5) VimRx Psoriasis VimRx IND Phase I
===========================================================================================================
</TABLE>
(1) See "Government Regulations" for description of clinical stages.
(2) Sold to Block. Subject to a Royalty Agreement.
(3) Involves the use of NDGA and may be developed by ACCESS pursuant to
the royalty-free, worldwide, exclusive license from Block to ACCESS.
(4) Option to license compound for dermatological use from VimRx
Pharmaceuticals.
(5) Development currently suspended. Furthered development is under
review.
ACCESS currently has rights to three drugs in various stages of human clinical
development covering medical indications for the following disease states:
contact dermatitis, mild to moderate psoriasis and photoaging of the skin
(anti-wrinkling). ACCESS also has an option to license hypericin from Vim Rx
Pharmaceuticals, Inc. for dermatological use. In addition, ACCESS' proprietary
drug, masoprocol, was in preclinical studies to determine the extent of its
potential in treating, in combination with other chemotherapeutic agents,
multiple-drug resistant cancers.
ACCESS begins the product development effort by screening and formulating
potential product candidates, selecting an optimal active and formulation
approach and developing the processes and analytical methods. Pilot stability,
toxicity and efficacy testing are conducted prior to advancing the product
candidate into formal pre-clinical development. Specialized skills are
required to produce these product candidates utilizing the ACCESS technology.
ACCESS has a core internal development capability with significant experience
in these formulations.
Once the product candidate has been successfully screened in pilot testing,
ACCESS' scientists together with external consultants, assist in designing and
performing the necessary preclinical efficacy, pharmacokinetic and
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<PAGE> 22
toxicology studies required for IND submission. External investigators and
scale-up manufacturing facilities are selected in conjunction with Company
consultants. ACCESS does not plan to have an extensive clinical development
organization as this would be conducted by a development partner.
DEVELOPMENT AND RESEARCH PROJECTS
With all of ACCESS' product development candidates, there can be no assurance
that the results of the in vitro or animal studies are or will be indicative of
the results that will be obtained when these product candidates are tested in
humans. There can be no assurance that any of these projects will be
successfully completed or that regulatory approval of any product will be
obtained.
CANCER
Chemotherapy, surgery and radiation are the major components in the clinical
management of cancer patients. Chemotherapy is usually the primary treatment of
hematologic malignancies, which cannot be excised by surgery, and is
increasingly used as an adjunct to radiation and surgery, to improve efficacy,
and is used as the primary therapy for some solid tumors and metastases. The
current optimal strategy for chemotherapy involves exposing patients to the
most intensive cytotoxic regimens they can tolerate. Clinicians attempt to
design a combination of drugs, dosing schedule and method of administration to
increase the probability that cancerous cells will be destroyed while
minimizing the harm to healthy cells.
Most current drugs have significant limitations. Certain cancers are
inherently unresponsive to chemotherapeutic agents, other cancers initially
respond but subgroups of cancer cells acquire resistance to the drug during the
course of therapy, with the resistant cells surviving and resulting in relapse.
As the cells acquire resistance to a specific agent, they often simultaneously
become resistant to a wide variety of agents through a phenomenon known as
multi-drug resistance. Another limitation of current anti-cancer drugs is that
serious toxicity, including bone marrow suppression or irreversible
cardiotoxicity, can prevent their administration in curative doses.
ACCESS' cancer program is aimed at formulating generic chemotherapy agents and
proprietary products to enhance efficacy and reduce the toxicity compared with
the currently available chemotherapeutics.
Product in Development
AP-4010 - ACCESS currently has one product in development, a GLYCOS-based
doxorubicin formulation for intravenous administration.
The most widely used cancer agents are anthracyclines, such as doxorubicin,
which are broadly effective against proliferating cancer cells. Anthracyclines
have a number of limitations, certain cancer types are unresponsive and can
cause severe toxic effects, including myelosuppression, mucositis and
cumulative irreversible cardiotoxicity.
ACCESS' animal studies have shown that higher doses of the product can be
tolerated with less acute toxicity and hence greater efficacy than standard
doxorubicin. It is possible that AP-4010 may have a better pharmacokinetic
profile than existing formulations of doxorubicin.
ACCESS is currently conducting pilot scale up of production of AP-4010 for
animal toxicity testing prior to submission of an IND which ACCESS anticipates
filling in approximately 12 months. The clinical indications are currently
under evaluation by external company consultants.
INFECTIOUS DISEASES
Systemic fungal infections are a major problem for patients with impaired
immune defense mechanisms, particularly cancer patients, diabetics and AIDS
patients. Available agents for the treatment of systemic fungal infections
include amphotericin B and fluconazole. Despite the availability of these
agents, serious fungal infections remain difficult to treat. Because
fluconazole is not effective in treating many strains of fungi and
20
<PAGE> 23
amphotericin B toxicities remain difficult to manage at effective doses,
mortality rates among such patients remain high.
Product in Development
AP-1110 - ACCESS' product development is focused on a GLYCOS-based formulation
of Amphotericin B, an effective cytocidal compound whose effectiveness and
regimens are limited by severe nephrotoxicity and prolonged blood and body
clearance. Amphotericin B remains the standard in the treatment of fungal
infections, however, because of nephroxicity, limitations on intensive higher
dosing regimens, it is difficult to cure many deep fungal infections.
The GLYCOS formulation significantly reduces kidney toxicity by redirecting the
clearance of the drug through the liver, where no new hepatotoxicity has been
observed (in subacute mouse toxicity tests). The clearance in animals of
amphotericin B appears accelerated from 120 hours to 24 hours with the GLYCOS
formulation. Based on its improved tolerance and clearance, in animal testing
it was possible to sufficiently increase the dosing and regimen intensity of
the GLYCOS formulation to achieve cures in animals, whereas none could be
achieved with the standard formulation.
An additional animal study to confirm the findings with a second fungal model
is required prior to formulation scale-up and proceeding toward an IND. This
project had been scheduled as a subsequent development, pending further
definition of the market potential and the interest of a strategic partner. The
Company now anticipates that this product candidate will be moved into clinical
development.
MRI DIAGNOSTIC AGENTS
Preoperative diagnostic imaging technologies are used to determine the
existence and the extent of disease. The principal diagnostic imaging
technologies are CT Scanning and Magnetic Resonance Imaging ("MRI"). Both
methods produce images that show anatomic boundaries between the tissue
suspected of being malignant and the surrounding tissue, to reveal potential
disease. Neither method gives information allowing a clear distinction of
malignant from nonmalignant tissue. A more recently developed technology,
immunoscintigraphy, uses a gamma-ray detection camera externally to identify
internally localized radiolabeled antibodies potentially specific to certain
cancers. Although immunoscintigraphy with certain radiolabeled antibodies
appears capable of distinguishing malignant tumors from nonmalignant lesions
and surrounding tissues, none of the external imaging technologies, including
immunoscintigraphy, is effective in consistently identifying primary tumors
smaller than one centimeter, in precisely locating the site or margins of the
tumor, in consistently identifying all metastatic tumor nodules, or in
distinguishing pre-invasive from functionally invasive tumor behaviors.
The currently available contrast agents for MRI are nonselective gadolinium
based extracellular agents predominantly used in imaging the central nervous
system.
ACCESS is focused on expanding the utility of MRI imaging to include body
imaging by developing a site-selective intravenous contrast agent with improved
localization and performance outside as well as within the central nervous
system. ACCESS believes that improved site selectivity, longer site contrast
with rapid blood clearance, the ability to clearly delineate tumor boundaries
and metastases and the opportunity to obtain additional valuable information on
prognosis, function, therapeutic response monitoring and anatomy at high
resolution, could be major competitive advantages of the GLYCOS formulations.
Product in Development
AP-2011 - A pilot formulation utilizing the GLYCOS carrier, a chelating agent
and gadolinium has been prepared and an acceptable acute toxicity profile
obtained.
Prior to advancing this product candidate further, additional toxicity and
animal efficacy studies are required. Encouraging initial results, including
the successful, rapid contrast enhancement of tumors of the liver and nonliver
tumors have been obtained in four different animal models and in three
different species. Acute
21
<PAGE> 24
toxicity studies have been completed. Production of GMP materials and sub-acute
toxicity testing is required before submission of an IND.
RADIOPHARMACEUTICALS
Given currently available technologies, diagnostic techniques such as CT, MRI
and immunoscintigraphy are projected to be used by a large number of physicians
to detect, stage and monitor cancer. CT and MRI currently have not effectively
distinguished malignant from non-malignant tissue. Several biotechnology-based
companies are developing antibody products for immunoscintigraphy in
colorectal, ovarian, small cell lung, melanoma and breast cancer. Although
immunoscintigraphy with antibody agents and peptides has the capacity to
distinguish malignant from non-malignant tissue, none of the technologies is
effective in consistently identifying tumors smaller than one centimeter or in
precisely locating the site of a tumor. They only indicate that cancer may be
present within a general area. Because of these limitations, the physician may
frequently be making decisions concerning surgery and other therapy with
incomplete information.
To date, radiopharmaceuticals have been limited to diagnostic indications and
bone pain management in patients with metastatic prostate cancer. There has
been little use in therapy due to the toxicities associated with the
radionuclides necessary to achieve therapeutic benefits, and also due to the
heterogeneity of tumor-specific antigens on tumor cells and subregions, with
the prominent exception of B-cell lymphomas.
Diagnostic Applications
A pilot GLYCOS radiopharmaceutical diagnostic imaging agent has been prepared
and tested utilizing Gallium67. Animal studies have shown that the GLYCOS have
the ability to rapidly target and permeate AT-1 prostate tumors in grown rats.
These studies also showed fast clearance by the renal route and negligible
liver uptake. These characteristics support the development of radiolabeled
agents for tumor imaging. The pilot studies indicate selective tumor
localization of the radiolabeled agent within 5 minutes of injection allowing
optimal imaging between 15 minutes and 1 hour post injection.
GLYCOS may provide the key additional information of tumor function and
prognosis in a way which can improve clinical diagnosis and staging, and allow
rapid early decision-making on patient management and therapeutic approaches,
including intraoperative approaches.
Before advancing to preclinical development, product optimization, including
the selection of a radionuclide, chelator and GLYCOS carrier, must be finalized
in conjunction with an external advisory group.
PATENTS
ACCESS believes that the value of technology both to ACCESS and to potential
corporate partners is established and enhanced by its strong, broad and
specific intellectual property positions. Consequently, ACCESS already has
issued and seeks to obtain additional U.S. and foreign patent protection for
products under development and for new discoveries. Patent applications are
filed with the U.S. Patent and Trademark Office and, when appropriate, with the
Paris Convention's Patent Cooperation Treaty (PCT) Countries (most major
countries in Western Europe and the Far East) for its inventions and
prospective products.
ACCESS holds U.S. and European patents with broad composition of matter claims
encompassing glycosaminoglycan, acidic saccharide, carbohydrate and other
endothelial-binding and targeting carriers in combination with drugs and
diagnostic agents formulated by both physical and chemical covalent means.
Eight patents have issued commencing in 1990 (six U.S. and two European) and
an additional eight patent applications are pending (five U.S. and three PCT).
These patents and applications broadly cover the in vivo medical uses of drugs
and diagnostic carrier formulations which bind and cross endothelial and
epithelial barriers at sites of disease, including but not limited to treatment
and medical imaging of tumor, infarct, infection and inflammation. They
further disclose the body's induction of endothelial, epithelial, tissue and
blood adhesins, selections, integrins, chemotaxins and cytotaxins at sites of
disease as a mechanism for selective targeting, and they claim recognized
usable carrier
22
<PAGE> 25
substances which selectively bind to these induced target determinants.
ACCESS has a strategy of maintaining an ongoing line of continuation
applications for each major category of patentable carrier and delivery
technology. By this approach, ACCESS is extending the intellectual property
protection of its basic targeting technology and initial agents to cover
additional specific carriers and agents, some of which are anticipated to carry
the priority dates of the original applications.
The intellectual property around which API was founded was originally licensed
by way of a License Agreement from the inventor and principal shareholder Dr.
David Ranney. A Patent Purchase Agreement dated April 5, 1994, (the "Patent
Purchase Agreement") terminated the License Agreement and provided for
assignment of the rights to the original patents to ACCESS. The terms of the
Patent Purchase Agreement were amended effective January 25, 1996 reducing the
minimum royalty payments due to Dr. David Ranney. Additional patents covering
the technology were purchased from the University of Texas system on October
31, 1990 and applied for directly by ACCESS. The technology was developed by
Dr. David Ranney during his tenure at the University of Texas Southwestern
Medical School which retains a royalty free non-exclusive right to use the
patent rights for its own research, teaching and other educationally-related
purposes. See "Certain Relationships and Related Transactions."
Dr. David Ranney has signed an Assignment of Intellectual Property Agreement
whereby all rights, title and interest in and to all subsequent inventions and
confidential information will become the sole and exclusive property of ACCESS
at the earlier of the date of conception or development, while he remains an
employee of ACCESS and for a period of two years after he ceases employment for
inventions relating to the ACCESS technology.
Under the terms of the Patent Purchase Agreement as amended, Dr. David Ranney
has retained certain rights and interests in the intellectual property,
including a non-exclusive right to use the inventions and technology covered by
or relating to the patents for his own research, teaching or other academic
related purposes, and after he is no longer a full-time employee of ACCESS for
research and development of uses or implementations of the inventions and
technology improvements. ACCESS maintains the first right to negotiate the
acquisition of any new inventions or technology improvements developed by Dr.
David Ranney relating to the technology. Beginning in 1994, ACCESS has agreed
to pay Dr. David Ranney a royalty of three quarters of one percent (0.75%) of
ACCESS' gross revenues derived from products covered by the patents and pay
certain minimum payments.
In addition, the Patent Purchase Agreement, as amended, establishes certain
additional rights of Dr. David Ranney. The patent assignment will terminate in
the event ACCESS fails to pay the amounts due to Dr. David Ranney pursuant to
the Agreement, files a petition in bankruptcy, fails to commercially develop
the patents or creates a security interest in the patents without Dr. David
Ranney's approval. Also, in the event that parts of the ACCESS technology are
not being developed prior to January 2000, Dr. David Ranney has the right of
first refusal to license or acquire at fair market value development rights to
such parts of the ACCESS technology.
GOVERNMENT REGULATIONS
ACCESS is subject to extensive regulation by the Federal Government,
principally by the FDA, and, to a lesser extent, by other Federal and State
agencies as well as comparable agencies in foreign countries where registration
of products will be pursued. Although a number of ACCESS GLYCOS formulations
incorporate extensively tested drug substances, because the resulting GLYCOS
formulations make claims of enhanced efficacy and/or improved side effect
profiles they are expected to be classified as new drugs by the FDA.
The Federal Food, Drug and Cosmetic Act and other federal, state and foreign
statutes and regulations govern the testing, manufacturing, safety, labeling,
storage, shipping and record keeping of ACCESS' products. The FDA has the
authority to approve or not approve new drug applications and inspect research
and manufacturing records and facilities.
Among the requirements for drug approval and testing is that the prospective
manufacturer's facilities and
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methods conform to the FDA's Code of Good Manufacturing Practices regulations
which establish the minimum requirements for methods to be used in, and the
facilities or controls to be used during the production process and the
facilities are subject to ongoing FDA inspection to insure compliance.
The steps required before a pharmaceutical product may be produced and marketed
in the U.S. include preclinical tests, the filing of an IND with the FDA, which
must become effective pursuant to FDA regulations before human clinical trials
may commence, and the FDA approval of an NDA prior to commercial sale.
Preclinical tests are conducted in the laboratory, usually involving animals,
to evaluate the safety and efficacy of the potential product. The results of
preclinical tests are submitted as part of the IND application and are fully
reviewed by the FDA prior to granting the sponsor permission to commence
clinical trials in humans. Clinical trials typically involve a three-phase
process. Phase I, the initial clinical evaluations, consists of administering
the drug and testing for safety and tolerated dosages as well as preliminary
evidence of efficacy in humans. Phase II involves a study to evaluate the
effectiveness of the drug for a particular indication and to determine optimal
dosage and dose interval and to identify possible adverse side effects and
risks in a larger patient group. When a product is found effective in Phase
II, it is then evaluated in Phase III clinical trials. Phase III trials consist
of expanded multi-location testing for efficacy and safety to evaluate the
overall benefit-to-risk index of the investigational drug in relationship to
the disease treated. The results of preclinical and human clinical testing are
submitted to the FDA in the form of an NDA for approval to commence commercial
sales.
The process of doing the requisite testing, data collection, analysis and
compilation of an IND and an NDA is labor intensive and costly and may take a
protracted time period. In some cases tests may have to be re-done or new tests
instituted to comply with FDA requests. Review by the FDA may also take a
considerable time period and there is no guarantee an NDA will be approved.
Hence, ACCESS cannot with any certainty estimate how long the approval cycle
may take.
Current U.S. government revisions to the U.S. healthcare system are not yet
known in detail, but could have an impact on the pharmaceutical industry,
possibly in the form of pricing restrictions. Although ACCESS is developing
new novel drugs in the field of cancer and infectious disease that are
currently not treated effectively, there still can be no assurance that certain
pricing constraints would not pertain.
ACCESS is also governed by other federal, state and local laws of general
applicability, such as laws regulating working conditions, employment
practices, as well as environmental protection.
COMPETITION
The pharmaceutical and biotechnology industry is highly competitive. Most
pharmaceutical and biotechnology companies have considerably greater research
and development, financial, technical and marketing resources than ACCESS.
Although ACCESS' proposed products utilize a novel drug delivery system, they
will be competing with established pharmaceutical companies' existing and
planned new product introductions and alternate delivery forms of the active
substance being formulated by ACCESS.
A number of companies are developing or may, in the future, engage in the
development of products competitive with the ACCESS delivery system. Currently,
in the therapeutic area, liposomal formulations being developed by Nexstar,
Inc., The Liposome Company, Inc. and Sequus Pharmaceuticals, Inc. are the major
competitive intravenous drug delivery formulations which utilize similar drug
substances. A number of companies are developing or evaluating enhanced drug
delivery systems. ACCESS expects that technological developments will occur at
a rapid rate and that competition is likely to intensify as various alternative
delivery system technologies achieve certain if not identical advantages.
The principal current competitors to ACCESS' technology fall into three
categories: monoclonal antibodies, liposomes and peptides. ACCESS believes its
technology represents a significant advance over these older technologies
because it is the only system with a favorable pharmacokinetic profile which
has been shown to effectively bind and cross neovascular barriers and to deeply
penetrate the major classes of deep tissue and organ disease, which remain
partially inaccessible to older technologies.
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Even if ACCESS' products are fully developed and receive required regulatory
approval, regarding which there is no assurance, ACCESS believes that its
products can only compete successfully if marketed by a company having
expertise and a strong presence in the therapeutic area. Consequently, ACCESS
does not currently plan to establish an internal marketing organization. By
forming strategic alliances with major pharmaceutical and diagnostic medical
imaging companies, management believes that ACCESS' development risks should be
minimized and the technology will potentially be more rapidly developed and
successfully introduced into the marketplace.
EMPLOYEES
As of May 31, 1996 ACCESS has 12 full time employees, five of whom have
advanced scientific degrees. ACCESS believes that it maintains good relations
with its personnel. In addition, to complement its internal expertise, ACCESS
contracts with scientific consultants, contract research organizations and
university research laboratories that specialize in various aspects of drug
development including toxicology, sterility testing and preclinical testing to
complement its internal expertise.
PROPERTIES
ACCESS maintains one facility of administrative offices and laboratories in
Dallas, Texas. ACCESS has a lease agreement for the facility which has
approximately 5,500 square feet, which terminates in January 1998, however the
Company has an option for early termination. Adjacent space is available for
expansion which the Company believes would accommodate growth for the
foreseeable future.
LEGAL PROCEEDINGS
ACCESS is not a party to any legal proceedings.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position Held with ACCESS
- ---- --- -------------------------
<S> <C> <C>
Herbert H. McDade, Jr. 68 Chairman of the Board of Directors
Kerry P. Gray 43 President, Chief Executive Officer, Treasurer, Director
David F. Ranney, M.D. 53 Executive Vice President, Director
Stephen B. Thompson 42 Chief Financial Officer
J. Michael Flinn 61 Director
Elizabeth M. Greetham 46 Director
Max Link, Ph.D. 55 Director
</TABLE>
Business and Experience of Directors and Executive Officers
The Board of Directors of the Company is divided into three classes. Members
of each class serve a term of three years until the respective annual meeting
of stockholders and election and qualification of their successors. Max Link
is the sole member of Class 1 whose term expires upon the Annual Meeting of
Stockholders in 1996. The Board of Directors of the Company has nominated Max
Link for election as a Class 1 director at the Annual Meeting of Stockholders
to be held June 21, 1996. Dr. David F. Ranney and Elizabeth M. Greetham are
Class 2 directors to serve as such
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until their successors shall be elected and qualified. Messrs. Gray, McDade
and Flinn are Class 3 directors to serve as such until the 1998 Annual Meeting
of Stockholders and until their successors shall be elected and qualified.
Each officer of the Company is selected by the Board of Directors for a term of
one year. There is no family relationship among any of the Directors or
Executive Officers.
Mr. Herbert H. McDade, Jr. was elected a Director of the Company in January
1988. In February 1989, he was elected Vice-Chairman of the Board of Directors
and Chief Executive Officer of the Company. In June 1989, he was elected
Chairman of the Board of Directors and Treasurer in addition to his
responsibilities as Chief Executive Officer, and in May 1990 he assumed the
position of President of the Company. Mr. McDade served in such capacities
until January 25, 1996. He is also a member of the Audit & Finance and
Compensation Committees of the Board of Directors. He is currently President
and Chief Executive Officer of the Thoma Corporation, a closely-held health
care consulting company. In addition, he also serves on the Boards of CytRx
Corporation, Shaman Pharmaceutical Co., Vaxcel Inc. and Clarion
Pharmaceuticals, Inc. From 1986 to 1987 he served as Chairman of the Board of
Directors and President of Armour Pharmaceutical Co., a wholly-owned subsidiary
of Rorer Group, Inc. Prior to 1986 he served for approximately 13 years in
various executive positions at Revlon, Inc., including President of the
International Division of the Revlon Health Care Group from 1979 to 1986. He
was also previously associated for twenty years in various executive capacities
with The Upjohn Company. From January 1989 to July 1995 he served on the Board
of API.
Mr. Kerry P. Gray, has been President and a Chief Executive Officer and a
Director of the Company since January 25, 1996. Prior to such time he served
as President and Chief Executive Officer of API since June 1993. Previously,
Mr. Gray served as Vice President and Chief Financial Officer of
PharmaSciences, Inc., a company he co-founded to acquire technologies in the
drug delivery area. From May 1990 to August 1991, Mr. Gray was Senior Vice
President, Americas, Australia and New Zealand of Rhone-Poulenc Rorer, Inc.
Prior to the Rorer/Rhone Poulenc merger, he had been Area Vice President
Americas of Rorer International Pharmaceuticals. Previously, from January 1986
to May 1988, he was Vice President, Finance of Rorer International
Pharmaceuticals, having served in that same capacity for the Revlon Health Care
Group of companies before their acquisition by Rorer Group. Between 1975 and
1985, he held various senior financial positions in Revlon Health Care Group.
Mr. Gray's experience in the pharmaceutical industry totals 20 years.
David F. Ranney, M.D., has been Executive Vice President and a Director of the
Company since January 25, 1996. He was the founder and Chairman of the Board
of Directors of API since inception in 1988, and was Executive Vice President
commencing August 1995 and Vice President, Research and Development since June
1993. Previously, he was President and Chief Executive Officer of API since
founding API in March 1988. Until November 1989, Dr. Ranney directed the
Laboratory of Targeted Diagnosis and Therapy at the University of Texas
Southwestern Medical Center, where he held a joint faculty appointment in
Radiology and Pathology. Dr. Ranney received a B.A. degree in Chemistry from
Oberlin College and an M.D. from Case Western Reserve Medical School. He has
postdoctoral training in Biochemistry (Case Western Reserve), Cardiovascular
and Microvascular Surgery (Stanford University Medical Center), Immunology and
Cancer Biology (NIH), and Pathology (University Of Texas Southwestern Medical
Center). Dr. Ranney resigned his position of Executive Vice President
effective May 31, 1996.
Mr. Stephen B. Thompson, has been Chief Financial Officer of the Company since
January 25, 1996. Previously from November 1990 he was Controller and
Administration Manager of API. From 1989 to 1990, he was Controller of Robert
E. Woolley, Inc. a hotel real estate company where he was responsible for
accounting, finances and investor relations. Previously, from 1985 to 1989, he
was Controller of OKC Limited Partnership, an oil and gas company where he was
responsible for accounting, finances and SEC reporting. Between 1975 and 1985
he held various accounting and finance positions with Santa Fe International
Corporation.
Mr. J. Michael Flinn has served as a Director of the Company since 1983. He
also is a member of the Audit & Finance and Compensation Committees of the
Board of Directors. Since 1970 he has been an investment counselor. He is a
principal with the investment counseling firm of Sirach Capital Management,
Inc. He assists in the management of pension, profit sharing, individual,
corporate and foundation accounts totaling over $4.5 billion.
Mrs. Elizabeth M. Greetham has served as a Director of the Company since 1992
and is President of Libracorn
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Financial Consultants. One of her present clients is Weiss, Peck & Greer, a
New York-based money management firm. With over twenty years of worldwide
experience as a health care analyst and portfolio manager, she currently is
responsible for Weiss, Peck & Greer's health care investments for
institutional, mutual, and selected individual accounts. Prior to her
association with Weiss, Peck & Greer, Mrs. Greetham consulted for a number of
years for F. Eherstadt & Co., a New York institutional brokerage house. She is
a member of the Board of Directors of Repligen Corporation, a pharmaceutical
development company. She is a member of the Company's Audit & Finance and
Compensation Committees.
Max Link, Ph.D. has been a director of the Company since March 28, 1996. He
has held a number of executive positions with pharmaceutical and health care
companies. Most recently, he served as Chief Executive Officer of Corange
Limited, from May 1993 until June 1994. Prior to joining Corange, Dr. Link
served in a number of positions with Sandoz Pharma Ltd., including Chief
Executive Officer, from 1990 until April 1992, and Chairman, from April 1992
until May 1993. Dr. Link currently serves on the board of directors of three
other publicly-traded life science companies: Alexion Pharmaceuticals, Inc.,
Protein Design Labs, Inc. and Human Genome Sciences, Inc. Dr. Link received
this Ph.D. in Economics from the University of St. Gallen in 1970.
KEY EMPLOYEE
In addition to its executive officers, the Company relies on the following key
employee for advancing its research efforts, pursuing licensing and
collaborative research arrangements with pharmaceutical companies and obtaining
FDA approval of identified drug products.
Dr. Richard Van Inwegen rejoined the Company in May 1996 as Vice President
Pre-Clinical and Clinical Development, after consulting for a period of eight
months with the Company and others. Previously he was with Chemex from
September 1991 as Director of Clinical Research and from March 1993 as Vice
President of Clinical Research until August 1995. He is responsible for all of
the Company's clinical research and drug development. Prior to joining the
Company, Dr. Van Inwegen was with Roberts Pharmaceuticals for two years as
assistant director of clinical research the Rorer Company as department manager
specializing in hypersensitivity for three years, and the Revlon Health Care
Group where he was involved in various pharmaceutical development for ten
years. He holds a B.A. in biology and an M.A. in cell physiology from State
University of New York, Binghampton, and Ph.D. from the University of Illinois
in physiology. In addition, he is a member of the New York Academy of Sciences
and Sigma Xi.
Compliance with Section 16(a) of the Securities Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors, Executive officers and persons who own more than ten percent of a
registered class of the Company's equity securities ("10% holders"), to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of common stock and other equity securities of
the Company. Directors, officers and 10% holders are required by SEC
regulation to furnish the Company with copies of all of the Section 16(a)
reports they file.
Based solely on a review of reports furnished to the Company or written
representatives from the Company's Directors and executive officers during the
fiscal year ended December 31, 1995, all Section 16(a) filing requirements
applicable to its Directors, officers and 10% holders for such year were
complied with.
EXECUTIVE COMPENSATION
Each Director who is not an employee of the Company receives a quarterly fee of
$1,250, the sum of $1,000 for each board meeting which he attends and each
member of the Audit and Finance and Compensation Committee receives $500 for
each meeting he attends. Each Committee Chairman also received $250 for each
meeting.
27
<PAGE> 30
Summary Compensation Table
The following table sets forth the aggregate compensation paid by the Company
to each of the most highly compensated executive officers of the Company whose
aggregate salary and bonus exceeded $100,000 for services rendered in all
capacities to the Company for the year ended December 31, 1995.
<TABLE>
<CAPTION>
===============================================================================================================
Long-term
Annual Compensation Compensation
Awards
- ---------------------------------------------------------------------------------------------------------------
Securities
Name and Underlying All Other
Principal Position Year Salary(1) Bonus Options/SARs (#) Compens.
------------------ ------ ------ ----- ---------------- --------
<S> <C> <C> <C> <C> <C>
Herbert H. McDade, Jr. 1995 $ 110,571 $ 0 0 $ 57,165(2)
Chairman & Former CEO(5) 1994 131,714 0 226,829 46,122(2)
1993 174,000 62,500 50,000 60,371(2)
Atul S. Khandwala 1995 $ 103,751 $ 0 0 $ 57,173(6)
Former Executive Vice 1994 153,960 0 107,715 19,620(4)
President(5) 1993 160,626 30,519 28,662(3)
25,000
Kerry P. Gray 1995 $ 150,000 $ 0 $ 0
President and CEO(7) $ 0
David F. Ranney 1995 $ 145,000 $ 0 $ 0 $ 15,000(9)
Former Executive Vice
President(7,8)
===============================================================================================================
</TABLE>
(1) These amounts are prior to reduction for deferred employer
contributions under the Company's Employee Stock Ownership Plan
Pursuant to Section 401(k) of the Internal Revenue Code of 1986, as
amended (the "Code").
(2) Pursuant to Mr. McDade's employment agreement, Mr. McDade was
reimbursed for certain expenses. In 1995, he was reimbursed for
insurance payments ($49,682) and auto allowance ($6,000) and auto
insurance reimbursement ($440). In addition, the Company made ESOP
contributions in stock of $1,043. In 1994, he was reimbursed for life
insurance payments ($23,000) and auto allowance ($6,000) and auto
insurance reimbursement ($658). In addition, the Company made ESOP
contributions in stock of $16,464. In 1993, he was reimbursed for
life insurance payments ($31,220) and auto allowance ($6,000) and auto
insurance reimbursement ($1,254). In addition, the Company made ESOP
contributions in stock of $21,897.
(3) Represents Company ESOP contributions in stock of $20,560 and
relocation expenses of $8,102.
(4) Represents Company ESOP contributions made in stock.
(5) Effective January 25, 1996 and August 31, 1995, Mr. McDade, Mr.
Khandwala, respectively, resigned as officers of the Company. Mr.
McDade remains as Chairman of the Board of Directors.
(6) Pursuant to Mr. Khandwala's severance agreement payments of $53,542
were made to during 1995. Represents company ESOP contributions made
in stock of $3,631.
(7) Mr. Gray and Dr. Ranney, President and Executive Vice President,
respectively, became officers of the Company on January 25, 1996,
previously they were officers of API. Compensation reported for
28
<PAGE> 31
Mr. Gray and Dr. Ranney's compensation is paid by API.
(8) Effective May 31, 1996, Dr. Ranney resigned as an officer of ACCESS.
(9) Pursuant to Dr. Ranney's patent purchase agreement dated April 4, 1994
Dr. Ranney was paid $15,000.
Options/SARs Year-End Value Table
This table includes the number of shares covered by both exercisable and
non-exercisable stock options/SARs as of December 31, 1995. Also reported are
the values for "in-the-money" stock options/SARs which represent the positive
spread between the exercise price of any such existing stock options/SARs and
the year-end price of the Company's common stock. There were no SARs granted
or exercised by the officers during 1995.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
==============================================================================================================
Number of Value of
Securities Underlying Unexercised In-
Unexercised The-Money
Shares Acquired Value Options/SARs at Options/SARs at
Name on Exercise (#) Realized ($) Fiscal Year-End (#) Fiscal Year-End ($)
Exercisable/ Exercisable/
Unexercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
H. McDade, Jr. - - 490,004/0 $184,756/$0
- --------------------------------------------------------------------------------------------------------------
A. Khandwala - - 268,965/0 $73,572/$0
==============================================================================================================
</TABLE>
STOCK OPTION PLANS
1995 Stock Option Plan
The Company's 1995 Stock Option Plan (the "1995 Plan") was approved by the
stockholders on January 25, 1996. The 1995 Plan provides for the issuance of a
maximum of 2,000,000 shares of Common Stock, pursuant to the grant of incentive
stock options and non-qualified stock options to any executive, other key
employee, director, advisor or consultant to the Company. To date 406,000
options and no shares have been granted under the 1995 Plan.
The 1995 Plan is administered by the Compensation Committee of the Board of
Directors. The Company stockholders must approve all amendments to the 1995
Plan. Generally, an option is not transferable by the option holder except by
will or by the laws of descent and distribution.
Under the 1995 Plan, the exercise price of incentive stock options must be not
less than 100% (or 110% with respect to any optionee owning more than 10% of
the total combined voting power of all classes of stock of the Company) of the
fair market value of the Common Stock at the date of grant, and the aggregate
fair market value (determined at the time of grant) of shares issuable pursuant
to such options which first become exercisable in any calendar year by an
employee or officer, may not exceed $100,000. The term of such options may not
exceed ten years (except that with respect to any optionee who owns more than
10% of the total combined voting power of all classes of stock of the Company,
the terms may not exceed five years). The corresponding provisions of any
non-qualified stock options granted under the 1995 Plan are not similarly
limited.
Option grants to non-employee directors under the Plan will be made on a
formula basis only, whereby each director of the Company will receive, upon her
or his initial election or appointment to the Board, options exercisable for
30,000 shares of Common Stock and, under the current version of the Plan, will
receive, at each subsequent election of directors of the Company at which she
or he is re-elected to the Board, options exercisable for 20,000 shares of
Common Stock.
1987 Stock Option Plan and Non-Employee Director Stock Option Plan
The 1995 Plan replaced the 1987 Stock Option Plan and Non-Employee Director
Stock Option Plan (the "1987 Plans"). No further option grants are permitted
under the 1987 plans and as of May 31, 1996 there were options outstanding
under the 1987 Plans to purchase an aggregate of approximately 1,445,461 shares
of Common Stock.
COMPENSATION PURSUANT TO AGREEMENTS AND PLANS
EMPLOYMENT AGREEMENTS
MR. HERBERT H. MCDADE, JR. Effective February 1, 1989 the Company and Mr.
McDade entered into an
29
<PAGE> 32
employment agreement, as amended (the "McDade Agreement"), which provided that
he would serve as the Chief Executive Officer of the Company and Vice Chairman
or Chairman of the Board of Directors. The McDade Agreement was amended,
effective June 25, 1991, to provide for a term ending June 30, 1994, and was
extended to January 31, 1996. Mr. McDade left the company as President and
Chief Executive Officer on January 25, 1996 after the Merger was completed.
See Item 13 Certain Relationships and Related Transactions - Transactions with
Management and Others. Mr. McDade was eligible to participate in all company
employee benefit and welfare programs available to executives. The Company
also paid insurance premiums on $1 million of life insurance payable to his
estate, medical expenses coverage for Mr. McDade and his spouse and long-term
disability coverage for Mr. McDade. The McDade Agreement provided that, upon
termination, a cash severance payment equal to one year's salary would be paid
if Mr. McDade was terminated by the Company without cause and a cash severance
equal to two years' salary would be paid if he terminated his employment for
good reason. Mr. McDade waived the severance provisions when leaving the
company.
Pursuant to the McDade Agreement and in accordance with the Company's 1987
Stock Awards Plan, the Company granted to Mr. McDade (i) on February 1, 1989
options (the "February Options") for the purchase of 50,000 shares of common
stock, and (ii) on December 31, 1989 options ("the December Options") for the
purchase of 37,500 shares of common stock, upon vesting and payment of the
exercise price. The February Options and December Options are referred to
collectively herein as the "New Options." On July 31, 1991, Mr. McDade
exchanged 87,500 previously granted options for 80,625 New Options. The New
Options are identical to the exchanged options, except that the New Options
have a lower exercise price. All of the New Options have vested. On March 31,
1992, Mr. McDade was granted 65,000 options at market value, which have vested
as of December 31, 1994. On July 29, 1993, Mr. McDade was granted 50,000
options at market value, which vest based on certain performance criteria. On
April 29, 1994, Mr. McDade voluntarily accepted a salary reduction of
approximately $64,000 on an annualized basis. In exchange for this salary
reduction, Mr. McDade was granted 75,000 options at market value, to vest in
one year from the date of the grant. On July 29, 1994, Mr. McDade was granted
50,000 options, which vest based on certain performance criteria, all of which
have vested. On December 31, 1994, Mr. McDade was granted 101,829 SARs with
zero base value or exercise price, based on certain performance criteria. Upon
Mr. McDade's termination of employment (other than termination by the Company
for cause or by Mr. McDade without good reason), all options shall immediately
vest and become exercisable. All Options and SARS are vested. Mr. McDade also
holds 17,550 vested options for the purchase of common stock granted pursuant
to the Non-Employee Directors Stock Option Plan. Mr. McDade has the right to
request (subject to certain limitations by the underwriters) that all shares of
common stock which he owns or may acquire in the future be included in
registration statements of company securities filed with the Securities and
Exchange Commission.
The McDade Agreement also contained a provision for stock appreciation rights
("SARS") pertaining to 50,000 shares of common stock with a zero base value or
exercise price. All of the stock appreciation rights have vested.
Appreciation on SARs is to be paid in shares of common stock; as of December
31, 1991, Mr. McDade waived his right under the provision of the 1987 Stock
Awards Plan to request the Board to authorize a cash payment for any SARs he
elects to exercise.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Mr. David Blech. Mr. Blech became a financial consultant to ACCESS on October
1, 1990. His contract terminated in 1991 and under the terms of the agreement,
ACCESS paid Mr. Blech $75,000 in 1991 and $25,000 in 1990. In 1992, Mr. Blech
performed consulting services for ACCESS and ACCESS paid him $50,000. In
addition, ACCESS paid $25,000 to Mr. Blech in January 1995 for consulting
services rendered.
As of December 14, 1995, ACCESS, D. Blech & Co., and Sentinel Remainder Trust
(each affiliates of Mr. Blech), entered into a Letter Agreement which provided
that Sentinel Remainder Trust would forfeit its rights to representation on the
Board of Directors of ACCESS in consideration of the extension of the
expiration date of (i) 500,000 Units exercisable in the aggregate for 500,000
shares of Common Stock and warrants exercisable in the aggregate for 700,000
shares of Common stock pursuant to the terms of the Conversion
30
<PAGE> 33
Agreement from July 31, 1996 to January 1, 1999 and (ii) the warrants
underlying the Units from July 31, 1997 to January 1, 2000.
As of January 29, 1996, ACCESS has retained Mr. Blech as a consultant to the
Company for one year to advise on structuring transactions including equity
placements, licensing agreements and research and development collaborations.
Under the terms of the agreement Mr. Blech was paid $480,000 in connection with
the March 4, 1996 private placement offering and received warrants to purchase
600,000 shares of Common Stock at an exercise price of $1.00 per share
exercisable until the year 2000.
In March 1996, the Company concluded a $6 million Private Placement of 8.57
million shares of common stock. Mr. Blech may be deemed to be the beneficial
owner of up to 4.77 million shares of the Common Stock sold and issued in this
private placement. The investors have agreed not to sell any of the shares
purchased in the offering until 180 days after closing.
As of April 30, 1996, Mr. Blech may be deemed to be the beneficial owner of
7,198,027 Shares of Common Stock which represents 21.7% of the outstanding
shares Common Stock. Mr. Blech has warrants to purchase 600,000 shares of
Common Stock at the exercise price of $1.00 per share pursuant to his
consulting arrangement described above. Additionally Sentinel a related party
of Mr. Blech has an option to purchase until January 1, 1999, up to 500,000
units which consist of 500,000 shares of Common Stock and 700,000 warrants with
an expiration date of January 1, 2000. See "Security Ownership of Certain
Beneficial Owners and Management."
Dr. David Ranney. Dr. David Ranney, Director of ACCESS, beneficially owns,
approximately 9,147,608 shares of Common Stock which represents 29.2% of the
outstanding shares of Common Stock. See "Management and Security Ownership of
Certain Beneficial Owners and Management." Dr. David Ranney and ACCESS have
entered into a Stockholder's Agreement providing for, among other matters, (1)
certain rights of Dr. David Ranney to be nominated or to have his nominee
nominated for election to the Board of Directors of ACCESS at any election of
ACCESS Directors; (2) a right of first refusal of Dr. David Ranney to license
or purchase certain technology and intellectual property of ACCESS under
certain conditions; and, (3) a certain Patent Purchase Agreement, dated as of
April 5, 1994, as amended January 25, 1996 between Dr. David Ranney and ACCESS,
regarding certain royalties payable to Dr. David Ranney relating to certain
technology and intellectual property of ACCESS and an agreement, subject to
certain conditions, by Dr. David Ranney not to sell, transfer or otherwise
dispose of his shares of the capital stock of ACCESS through July 25, 1996.
ACCESS has agreed to pay Dr. David Ranney a royalty of three quarters of one
percent ((0.75%) of ACCESS' gross revenues derived from products covered by the
patents and pay certain minimum payments.
On April 5, 1994 a Patent Purchase Agreement, which terminated a previous
License Agreement, between ACCESS and Dr. David Ranney, was executed. This
provided for the assignment of the rights to the original patents to ACCESS.
Under the terms of the Patent Purchase Agreement Dr. David Ranney has retained
certain rights and interests in the intellectual property as provided in the
Stockholder's Agreement, including a non-exclusive right to use the inventions
and technology covered by or relating to the patents for his own research,
teaching or other academic related purposes, and after he is no longer a
full-time employee of ACCESS for research and development of uses or
implementations of the inventions or technology improvements. ACCESS maintains
the first right to negotiate the acquisition of any new inventions or
technology improvements developed by Dr. David Ranney relating to the
technology. ACCESS has agreed to pay Dr. David Ranney a royalty of three
quarters of one percent (0.75%) of ACCESS gross revenues derived from products
covered by the patents and to pay certain minimum payments which began in 1994,
and which are subject to further modifications.
In addition the Patent Purchase Agreement as amended, establishes certain
additional rights of Dr. David Ranney. The patent assignment will terminate in
the event ACCESS fails to pay the amounts due to Dr. David Ranney pursuant to
the Agreement, files a petition in bankruptcy, fails to commercially develop
the patents or creates a security interest in the patents without Dr. David
Ranney's approval. Also, in the event that parts of the ACCESS technology are
not being developed after January 25, 2000, Dr. David Ranney has the right of
first refusal to license or acquire at fair market value development rights to
such parts of the
31
<PAGE> 34
ACCESS technology.
Dr. David Ranney has signed an Assignment of Intellectual Property whereby all
rights, title and interest in and to all subsequent inventions and confidential
information will become the sole and exclusive property of ACCESS at the
earlier of the date of conception or development, while he remains an employee
of ACCESS and for a period of two years after he ceases employment for
inventions related to the ACCESS technology.
Herbert McDade. In consideration for the termination of his employment with
ACCESS, Mr. McDade and ACCESS entered into an agreement on October 4, 1995,
pursuant to which, among other things, (i) Mr. McDade became a consultant to
ACCESS, providing consulting services to ACCESS at least four days each month;
(ii) Mr. McDade is paid a base of $1,500 per day of consulting; (iii) ACCESS
will use its best efforts to retain Mr. McDade's enrollment under its
healthcare plan and (iv) the period for exercise of all options and SARs owned
by Mr. McDade was extended from three months after the termination of his
employment with ACCESS to the expiration of the option or SAR. See "Security
Ownership of Certain Beneficial Owners and Management."
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 40,000,000
shares of Common Stock, $.04 par value per share, and 10,000,000 shares of
Preferred Stock, $.01 par value per share ( the "Preferred Stock"), which may
be issued in one or more series.
COMMON STOCK
As of March 31, 1996, there were 31,290,182 shares of Common Stock
outstanding and held of record by approximately 3,000 stockholders.
Holders of Common Stock are entitled to one vote for each share held
on all matters submitted to a vote of stockholders and have the right to vote
cumulatively for the election of Directors. This means that in the voting at
the Annual Meeting each stockholder, or his proxy, may multiply the number of
his shares by the number of directors to be elected then cast the resulting
total number of votes for a single nominee, or distribute such votes on the
ballot among the nominees as desired. Holders of Common Stock are entitled to
receive ratably such dividends, if any, as may be declared by the Board of
Directors out of funds legally available therefor, subject to any preferential
dividend rights for outstanding Preferred Stock. Upon the liquidations,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to receive ratably the net assets of the Company available after the
payment of all debts and other liabilities and subject to the prior rights of
any outstanding Preferred Stock. Holders of the Common Stock have no
preemptive, subscription, redemption or conversion rights. The outstanding
shares of Common Stock are, and the shares offered by the Selling Stockholders
in this offering will be fully paid and nonassessable. The rights, preferences
and privileges of holders of Common Stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of Preferred
Stock which the Company may designate and issue in the future. Upon the
closing of this offering, there will be no shares of Preferred Stock
outstanding.
PREFERRED STOCK
The Board of Directors are authorized, subject to certain limitations
prescribed by law, without further stockholder approval, to issue from time to
time up to an aggregate of 10,000,000 shares of Preferred Stock in one of more
series and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions of the shares of each such series
thereof, including the dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption of shares constituting any series or
designations of such series. The issuance of Preferred Stock may have the
effect of delaying, deferring or preventing a change of control of the Company.
The Company has no present plans to issue any shares of Preferred Stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar of the Common Stock is American Stock
Transfer & Trust Company,
32
<PAGE> 35
New York, New York.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth beneficial ownership of Common Stock as of April
30, 1996 by all Directors and named Executive Officers of the Company and all
Directors and Executive Officers as a group, and all owners of 5% or more of
the Common Stock:
<TABLE>
<CAPTION>
Common Stock Beneficially Owned
-----------------------------------------------------------------------------------------------------------
Name Number of Shares (1) % of Class
-------------------------------------------- ------------------------ -------------------------------
<S> <C> <C>
Herbert H. McDade. Jr. 1,008,062 3.2%
Kerry P. Gray 1,079,790 3.4%
David F. Ranney 9,147,608 29.2%
Stephen B. Thompson 55,451 *
J. Michael Flinn 63,500 *
Elizabeth M. Greetham 32,667 *
David Blech and Certain Related Parties 7,198,027 21.7%
All Directors and Executive Officers as a
group (consisting of 7 persons) 1,378,078 35.7%
</TABLE>
- ------------------------------
* Less than 1%.
(1) Includes common stock held plus all options and warrants exercisable
within 30 days after April 30, 1996. Unless otherwise indicated, the
persons listed have sole voting and investment powers with respect to
all such shares.
(2) Including presently exercisable options for the purchase of 17,550
shares of Common Stock pursuant to the Non-Employee Director Plan, and
320,625 shares of Common Stock and 151,829 SARs exercisable pursuant
to the 1987 Stock Option Plan and 69,270 shares issued in connection
with the ESOP.
(3) Including presently exercisable options for the purchase of 54,000
shares of Common Stock pursuant to the Non-Employee Director Plan.
(4) Including presently exercisable options for the purchase of 26,667
shares of Common Stock pursuant to the Non-Employee Director Plan.
(5) Sentinel Charitable Remainder Trust ("Sentinel"), 30 Outwater Lane,
Garfield, New Jersey, is known to ACCESS to be the beneficial owner of
more than five percent of the Common Stock. Mr. David Blech is the
sole income beneficiary of the trust, and as such may be deemed to be
the beneficial owner of the securities held by it.
In addition to the 1,020,000 shares of Common Stock held by Sentinel, Sentinel
additionally has an option to purchase until January 1, 1999, up to 500,000
units at $2.50 per unit. The units consist of 500,000 shares of Common Stock,
500,000 warrants with an expiration date of January 1, 2000 and an exercise
price of $6.25 and 200,000 Warrants with an expiration date of January 1, 2000
and an exercise price of $2.50. Information is based on Form 4 as filed by Mr.
David Blech in October 1994.
The Century Charitable Remainder Trust, the Ocean Charitable Remainder Trust,
the Lake Charitable Remainder Trust, the Beacon Charitable Remainder Trust, the
Freedom Charitable Remainder Trust, the Oak Charitable Remainder Trust and the
Celestial Charitable Remainder Trust (together, the "Charitable Remainder
Trusts") are known by ACCESS to be the beneficial owners in the aggregate of
more than 5% (807,839 shares) of the issued and outstanding Common Stock. Mr.
Nicholas Madonia is the trustee of the Charitable Remainder Trusts and as such
may be deemed to be a beneficial owner of the securities held by them. In
addition, Mr. Blech may be deemed to be a beneficial owner of the securities
held by the Charitable Remainder Trusts. Mr. Nicholas Madonia is the trustee
of the Blech Family Trust and as such may be deemed to be a beneficial owner of
the securities held by it. In addition, Mr. Blech may be deemed to be a
beneficial owner of the securities held by the Blech Family Trust. Mr. Blech
may be deemed to be a beneficial owner
33
<PAGE> 36
of the securities held by the Edward Blech Trust.
In addition to the 5,000 shares of Common Stock held by Mr. Blech, Mr.
Blech additionally has 600,000 warrants to purchase up to 600,000 shares of
Common Stock with an expiration date of March 4, 2000, at an initial exercise
price, subject to adjustment in certain events, of $1.00 per share.
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of May 31, 1996 and as
adjusted to reflect the sale of the Common Stock offered hereby, by each of the
Selling Stockholders.
Except as indicated below, none of the Selling Stockholders has had
any position, office or other material relationship within the past three years
with the Company or its affiliates.
<TABLE>
<CAPTION>
Shares to be
Beneficially
Owned After
Shares Offering
Beneficially ------------------
Owned Prior Shares
Name of Selling Stockholder to Offering(1) Offered(2,3) Number
----------------------------------------- ---------------- --------------- ------------------
<S> <C> <C> <C>
Aries Domestic Fund LP 212,857 212,857 0
The Aries Trust 522,857 522,857 0
Arnold Barros 142,857 142,857 0
Beacon Charitable Remainder Trust(5) 5,130,529 2,846,329 2,284,200
David Blech(4,5) 7,198,027 4,908,827 2,289,200
The Edward Blech Trust(5) 1,462,498 1,462,498 0
Esther Blech 88,000 71,000 17,000
The Blech Family Trust(5) 5,130,529 2,846,329 2,284,200
Celestrial Charitable Remainder Trust(5) 5,130,529 2,846,329 2,284,200
Century Charitable Remainder Trust(5) 5,130,529 2,846,329 2,284,200
Freedom Charitable Remainder Trust(5) 5,130,529 2,846,329 2,284,200
Mark S. Germain 714,285 714,285 0
Michael G. Jesselson 1,428,510 1,428,510 714,285
Michael G. Jesselson 12/18/80 Trust 1,428,510 1,428,510 714,285
Rabbi M. Jofen(6) 1,462,498 1,462,498 0
Karfunkel Family Foundation 193,285 193,285 0
Pasquale Li Vecchi 291,174 107,142 184,032
Nicholas R. Madonia(5) 5,130,529 2,846,329 2,284,200
Oak Charitable Remainder Trust(5) 5,130,529 2,846,329 2,284,200
Ocean Charitable Remainder Trust(5) 5,130,529 2,846,329 2,284,200
David Mark Rozen 249,999 249,999 0
Sential Charitable Remainder Trust(5) 5,130,529 2,846,329 2,284,200
Stanley K. Shapiro 92,094 92,094 0
Patricia Higgins Swetnick 142,857 142,857 0
Elizabeth van Merkenstein 142,857 142,857 0
Paul and Ruth Woolard 177,000 157,000 20,000
Larry Zalk 71,428 71,428 0
</TABLE>
- -------------------------
(1) Except as provided herein, the Company believes, based on information
provided by the Selling Shareholders, that each Selling Stockholder has
sole voting and investment power with respect to the shares beneficially
owned.
34
<PAGE> 37
(2) The sale or distribution of the Shares may be effected directly to
purchasers by the Selling Stockholders as principals or through one or
more underwriters, brokers, dealers or agents from time in one or more
transactions (which may involve crosses or block transactions) (i) or on
any exchange or in the over-the-counter market, (ii) in transactions
otherwise than in the over-the-counter market or (iii) through the
writing of options (whether such options are listed on an options
exchange or otherwise) on, or settlement of short sales of, the Shares.
Any of such transactions may be effected at market prices prevailing at
the time of sale, at prices related to such prevailing market prices, at
varying prices determined at the time of sale or at negotiated or fixed
prices, in each case as determined by the Selling Stockholder or by
agreement between the Selling Stockholder and underwriters, brokers,
dealers or agents, or purchasers. If the Selling Stockholders effect
such transactions by selling Shares to or through underwriters, brokers,
dealers or agents, such underwriters, brokers, dealers or agents may
receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders or commissions from purchasers
of Shares for who they may act as agent (which discounts, concessions or
commissions as to particular underwriters, brokers, declares or agents
may be in excess of those customary in the types of transactions
involved). The Selling Stockholders and any brokers, dealers or agents
may be deemed to be underwriting discounts and commissions under the
Securities Act.
Under the securities laws of certain states, the Shares may be sold in
such states only through registered or licensed brokers or dealers. In
addition, in certain states the Shares may not be sold unless the Shares
have been registered or qualified for sale in such state or an exemption
from registration or qualification is available and is complied with.
The Company will pay all of the expenses incident to the registration,
offering and sale of the Shares to the public hereunder other than
commissions, fees and discounts of underwriters, brokers, dealers and
agents. The Company has agreed to indemnify the Selling Stockholders
and any underwriters against certain liabilities, including liabilities
under the Securities Act. The Company will not receive any of the
proceeds from the sale of any of the Shares by the Selling Shareholders.
(3) All of the shares offered by Selling Stockholders have a restriction on
selling shares until 180 days after closing the Private Placement
Offering from March 4, 1996.
(4) Includes 600,000 shares issuable upon exercise of certain warrants that
were received by Mr. Blech under the terms of the consulting agreement
on advice on structuring transactions, including equity placements,
licensing agreements and research and development collaborations. This
transaction was exempt from the registration requirements exempted from
the Securities Act.
(5) Sentinel Charitable Remainder Trust ("Sentinel"), 30 Outwater Lane,
Garfield, New Jersey, is known to ACCESS to be the beneficial owner of
more than five percent of the issued and outstanding Common Stock. Mr.
Blech is the sole income beneficiary of the trust, and as such may be
deemed to the beneficial owner of the securities held by it.
In addition to the 1,020,000 shares of Common Stock held by Sentinel,
Sentinel additionally has an option to purchase until January 1, 1999,
up to 500,000 units at $2.50 per unit. The units consists of 500,000
shares of Common Stock, 500,000 warrants with an expiration date of
January 1, 2000 and an exercise price of $2.50. Information is based on
Form 4 as filed by Mr. Blech in October 1994.
The Century Charitable Remainder Trust, the Ocean Charitable Remainder
Trust, the Lake Charitable Remainder Trust, the Beacon Charitable
Remainder Trust, the Freedom Charitable Remainder Trust, the Oak
Charitable Remainder Trust and the Celestrial Charitable Remainder Trust
(together, the "Charitable Remainder Trusts") are known by ACCESS to be
the beneficial owners in the aggregate of more than 5% (807,839 shares)
of the issued and outstanding Common Stock. Mr. Nicholas Madonia is the
trustee of the Charitable Remainder Trusts and as such may be deemed to
be a beneficial owner of the securities held by them. In addition, Mr.
David Blech
35
<PAGE> 38
may be deemed to be a beneficial owner of the securities held by the
Charitable Remainder Trusts. Mr. Nicholas Madonia is the trustee of the
Blech Family Trust and as such may be deemed to be a beneficial owner of
the securities held by it. In addition, David Blech may be deemed to be
a beneficial owner of the securities held by the Blech Family Trust.
David Blech may be deemed to be a beneficial owner of the securities
held by the Edward Blech Trust.
In addition to the 5,000 shares of Common Stock held by Mr. Blech, Mr
Blech additionally has 600,000 warrants to purchase up to 600,000 shares
of Common Stock with an expiration date of March 4, 2000, at an initial
exercise price, subject to adjustment in certain events, of $1.00 per
share.
(6) Rabbi M. Jofen is the trustee of The Edward Blech Trust and as such may
be deemed to be the beneficial owner of the Securities held by such
trusts.
PLAN OF DISTRIBUTION
The sale or distribution of the Shares may be effected directly to
purchasers by the Selling Stockholders as principals or through one or more
underwriters, brokers, dealers or agents from time in one or more transactions
(which may involve crosses or block transactions) or (i) on any exchange or in
the Over-the-counter market, or (ii) in transactions otherwise than in the
over-the-counter market or (iii) through the writing of options (whether such
options are listed on an options exchange or otherwise) on, or settlement of
short sales of, the Shares. Any of such transactions may be effected at market
prices prevailing at the time of sale, at prices related to such prevailing at
the time of sale, at prices related to such prevailing market prices, at
varying prices determined at the time of sale or at negotiated or fixed prices,
in each case as determined by the Selling Stockholder or by agreement between
the Selling stockholder and underwriters, brokers, dealers or agents, or
purchasers. If the Selling Stockholders effect such transactions by selling
Shares to or through the form of discounts, concessions or commissions from the
Selling stockholders or commissions from purchasers of securities for who they
may act as agent (which discounts, concessions or commissions as to particular
underwriters, brokers, dealers or agents may be in excess of those customary
in the types of transactions involved). The Selling Stockholders and any
brokers, dealers or agents that participate in the distribution of the Shares
may be deemed to be underwriters, and any profit on the sale of Shares by them
and any discounts, concessions or commissions received by any such
underwriters, brokers, dealers or agents may be deemed to be underwriting
discounts and commissions under the Securities Act.
Under the securities laws of certain states, the Shares may be sold in
such states only through registered or licensed brokers or dealers. In
addition, in certain states the Shares may not be sold unless the Shares have
been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
The Company will pay all of the expenses incident to the registration,
offering and sale of the shares to the public hereunder other than commissions,
fees and discounts of underwriters, brokers, dealers and agents. The Company
has agreed to indemnify the Selling Stockholders and any underwriters against
certain liabilities, including liabilities under the Securities Act. The
Company will not receive any of the proceeds from the sale of any of the Shares
by the Selling Stockholders.
Certain of the underwriters, dealers, brokers or agents may have other
business relationships with the Company and its affiliates in the ordinary
course.
LEGAL MATTERS
The validity of the Common Stock to be sold in this offering is being
passed upon for the Company by Bingham, Dana & Gould LLP 150 Federal Street,
Boston, Massachusetts 02110.
36
<PAGE> 39
EXPERTS
The financial statements of ACCESS Pharmaceuticals, Inc., formerly
Chemex Pharmaceuticals, Inc., as of December 31, 1995 and 1994 and for each of
the years in the three-year period ended December 31, 1995 appearing in this
Prospectus and Registration Statement have been audited by KPMG Peat Marwick
LLP, independent Certified Public Accountants, as set forth in their report
thereon appearing elsewhere herein and in the Registration Statement and are
included in reliance upon such report given the authority of said firm as
experts in accounting and auditing.
The financial statements of ACCESS Pharmaceuticals, Inc. ("API") ( a
development stage enterprise) as of December 31, 1995 and for the year then
ended appearing in the Prospectus and Registration Statement have been audited
by KPMG Peat Marwick LLP, independent Certified Public Accountants, as set
forth in the report thereon appearing elsewhere herein and in the Registration
Statement, and are included in reliance upon such report given the authority of
said firm as experts in accounting and auditing.
The financial statements of API as of December 31, 1994 and for
the years ended December 31, 1994 and 1993 and the cumulative statements of
operations, stockholders' equity and cash flows for the period February 24, 1988
(inception) to December 31, 1994 appearing in this Prospectus and Registration
Statement have been audited by Smith, Anglin & Co., independent Certified Public
Accountants, as set forth in their report thereon appearing elsewhere herein and
in the Registration Statement and are included in reliance upon such report
given the authority of said firm as experts in accounting and auditing.
37
<PAGE> 40
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
ACCESS PHARMACEUTICALS
a development stage company
- ---------------------------
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Balance Sheets at December 31, 1995 and 1994, and March 31, 1996 (unaudited) . . . . . . . . . . . F-4
Statement of Operations for the three years ended December 31, 1995 and for the three months
ended March 31, 1996 and 1995 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Statement of Stockholders' Equity (Deficit) for the three years ended
December 31, 1995 and for the three months ended March 31, 1996 (unaudited) . . . . . . . . . F-6
Statement of Cash Flows for the three years ended December 31, 1995 and for the three months
ended March 31, 1996 and 1995 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8
ACCESS PHARMACEUTICALS, INC.
(Formerly Chemex Pharmaceuticals, Inc.)
- ---------------------------------------
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-17
Balance Sheets at December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . F-18
Statement of Operations for the three years ended December 31, 1995 . . . . . . . . . . . . . . . F-19
Statement of Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-20
Statement of Cash Flows for the three years ended December 31, 1995 . . . . . . . . . . . . . . . . F-21
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-22
</TABLE>
F-1
<PAGE> 41
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
ACCESS Pharmaceuticals, Inc.:
We have audited the accompanying balance sheet of ACCESS Pharmaceuticals, Inc.
(a development stage enterprise) as of December 31, 1995, and the related
statements of operations, stockholders' equity (deficit), and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. The cumulative statements of
operations, stockholders' equity (deficit), and cash flows for the period
February 24, 1988 (inception) to December 31, 1995 include amounts for the
period from February 24, 1988 (inception) to December 31, 1988 and for each of
the years in the six-year period ending December 31, 1994, which were audited
by other auditors whose report has been furnished to us and is included herein,
and our opinion, insofar as it relates to the amounts included for the period
February 24, 1988 (inception) through December 31, 1994 is based solely on the
report of the other auditors included herein.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, based on our audit and the report of the other auditors included
herein, the 1995 financial statements referred to above present fairly, in all
material respects, the financial position of ACCESS Pharmaceuticals, Inc. (a
development stage enterprise) as of December 31, 1995, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
April 6, 1996,
except for the last paragraph of Note 9,
which is as of April 26, 1996
F-2
<PAGE> 42
INDEPENDENT AUDITORS REPORT
To the Board of Directors and Stockholders
Of ACCESS Pharmaceuticals, Inc.
We have audited the accompanying balance sheet of ACCESS Pharmaceuticals, Inc.
(a development stage company) as of December 31, 1994, and the related
statements of income, stockholders' equity, and cash flows for the years ended
December 31, 1994 and 1993 and the period February 24, 1988 (Inception) through
December 31, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ACCESS Pharmaceuticals, Inc.
as of December 31, 1994, and the results of operations and its cash flows for
the years ended December 31, 1994 and 1993 and the period February 24, 1988
(Inception) through December 31, 1994, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements. the Company's significant operating losses and lack of
new equity financing or funding raises substantial doubt about its ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Smith, Anglin & Co.
Dallas, Texas
September 21, 1995
F-3
<PAGE> 43
ACCESS PHARMACEUTICALS, INC.
a development stage company
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
March 31, ----------------------------------------------
1996 1995 1994
---------------- ----------------------- -------------------
(Unaudited)
<S> <C> <C> <C>
Assets
------
Current Assets
Cash and cash equivalents $ 6,813,000 $ 30,000 $ 533,000
Accounts receivable - 3,000 -
Prepaid expenses and other current assets 65,000 4,000 20,000
---------------- ------------------- -------------------
Total Current Assets 6,878,000 37,000 553,000
Property and Equipment, net (note 4) 350,000 385,000 453,000
Patents and Applications, net of
accumulated amortization of $10,000 in
1994 (note 1) - - 252,000
Other Assets, net 2,000 2,000 3,000
---------------- ------------------- -------------------
Total Assets $ 7,230,000 $ 424,000 $ 1,261,000
================ =================== ===================
Liabilities and Stockholders' Equity (Deficit)
----------------------------------------------
Current Liabilities
Accounts payable and accrued expenses $ 317,000 $ 169,000 $79,000
Unearned revenue (note 3) - 150,000 180,000
Note payable (note 2) - 100,000 -
Current portion of obligations under
capital leases (note 5) 142,000 134,000 118,000
---------------- ------------------- -------------------
Total Current Liabilities 459,000 553,000 377,000
---------------- ------------------- -------------------
Obligations under capital leases, net of
current portion (note 5) 191,000 220,000 353,000
Note payable (note 3) 110,000 - -
---------------- ------------------- -------------------
Total Liabilities 760,000 773,000 730,000
---------------- ------------------- -------------------
Commitments and Contingencies
(note 5 & 8)
Stockholders' Equity (note 6)
Common stock, $.04 par value; authorized
40,000,000 shares; issued and
outstanding 31,290,182 shares at March 31,
1996; $.01 par value; authorized
10,000,000 shares; issued and
outstanding 3,639,928 and 2,918,328 1,252,000 36,000 29,000
shares at December 31, 1995 and 1994,
respectively
Additional paid-in capital 17,748,000 3,460,000 3,248,000
Deficit accumulated during the
development stage (12,530,000) (3,845,000) (2,746,000)
---------------- ------------------- -------------------
Total Stockholders' Equity (Deficit) 6,470,000 (349,000) 531,000
---------------- ------------------- -------------------
Total Liabilities and Stockholders'
Equity (Deficit) $ 7,230,000 $ 424,000 $ 1,261,000
================ =================== ===================
</TABLE>
___________________________________________
See Accompanying Notes to Financial Statements
F-4
<PAGE> 44
ACCESS PHARMACEUTICALS, INC.
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
February February
Three Months Ended 24, 24,
March 31, Year Ended December 31, 1988 1988
---------------------- -------------------------------------- (Inception) (Inception)
to to
December March
1996 1995 1995 1994 1993 31, 1995 31, 1996
----------- --------- ----------- ---------- ---------- ----------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues (note 3)
Sponsored research and $ - $ 135,000 $ 690,000 $ 439,000 $ - $ 2,711,000 $ 2,711,000
development
Option income 165,000 - - 600,000 322,000 1,872,000 2,037,000
----------- --------- ----------- ---------- ---------- ----------- ------------
Total Revenues 165,000 135,000 690,000 1,039,000 322,000 4,583,000 4,748,000
----------- --------- ----------- ---------- ---------- ----------- ------------
Expenses
Sponsored research and
development - 187,000 341,000 248,000 - 2,172,000 2,172,000
Proprietary research and 181,000 28,000 334,000 466,000 842,000 2,354,000 2,535,000
development
General and Administrative 336,000 154,000 694,000 676,000 755,000 3,387,000 3,723,000
Interest 13,000 21,000 58,000 19,000 - 76,000 89,000
Depreciation and amortization 36,000 31,000 367,000 115,000 111,000 771,000 807,000
Write off of Excess purchase price 8,314,000 - - - - - 8,314,000
----------- --------- ----------- ---------- ---------- ----------- ------------
Total Expenses 8,880,000 421,000 1,794,000 1,524,000 1,708,000 8,760,000 17,640,000
----------- --------- ----------- ---------- ---------- ----------- ------------
Loss From Operations (8,715,000) (286,000) (1,104,000) (485,000) (1,386,000) (4,177,000) (12,892,000)
----------- --------- ----------- ---------- ---------- ----------- ------------
Other Income
Interest and miscellaneous income 30,000 3,000 5,000 9,000 34,000 459,000 489,000
----------- --------- ----------- ---------- ---------- ----------- ------------
Loss Before Income Taxes (8,685,000) (283,000) (1,099,000) (476,000) (1,352,000) (3,718,000) (12,403,000)
Provision for Income Taxes - - - - 32,000 127,000 127,000
----------- --------- ----------- ---------- ---------- ----------- ------------
Net Loss $(8,685,000) $(283,000) $(1,099,000) $ (476,000) $(1,384,000) $(3,845,000) $(12,530,000)
=========== ========= =========== ========== =========== =========== ============
Net Loss Per Share $(0.34) $ (0.10) $ (0.35) $ (0.16) $ (0.47)
=========== ========= =========== ========== ===========
Weighted Average Common Shares
Outstanding 25,535,239 2,918,328 3,097,686 2,918,328 2,918,328
=========== ========= =========== ========== ===========
</TABLE>
- -------------------------------------------------
See Accompanying Notes to Financial Statements
F-5
<PAGE> 45
ACCESS PHARMACEUTICALS, INC.
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock
------------------------------------------
Deficit Accumulated
Additional Paid-in During the
Shares Amount Capital Development Stage
---------------- -------------- ------------------ --------------------
<S> <C> <C> <C> <C>
Balance, February 24, 1988 - $ - $ - $ -
Common stock issued, $1.00 per share 98,000 1,000 97,000
Common stock issued, $0.25 per share 51,000 1,000 12,000
Net Loss for the period February 24,
1988 to December 31, 1988 (30,000)
---------------- -------------- ------------------ ------------------
Balance, December 31, 1988 149,000 2,000 109,000 (30,000)
Common stock issued, $1.00 per share 29,000 - 29,000
Common stock issued, $5.00 per share 25,000 - 124,000
Common stock issued, $0.01 per share 650,000 7,000
Stock split (Two shares issued for
each one share held) 1,706,000 17,000 (17,000)
Net loss for the year (191,000)
---------------- -------------- ------------------ ------------------
Balance, December 31, 1989 2,559,000 26,000 245,000 (221,000)
Common stock issued, $3.00 per share 71,000 - 212,000
Common stock issued, $7.82 per share 284,000 3,000 2,222,000
Common stock grants 2,000 - 6,000
Net loss for the year (219,000)
---------------- -------------- ------------------ ------------------
Balance, December 31, 1990 2,916,000 29,000 2,685,000 (440,000)
Common stock issued $3.00 per share 2,000 - 6,000
Additional paid-in-capital equipment 468,000
Net income for the year 413,000
---------------- -------------- ------------------ ------------------
Balance, December 31, 1991 2,918,000 29,000 3,159,000 (27,000)
Additional paid-in-capital equipment 89,000
Net loss for the year (859,000)
---------------- -------------- ------------------ ------------------
Balance, December 31, 1992 2,918,000 29,000 3,248,000 (886,000)
Net loss for the year (1,384,000)
---------------- -------------- ------------------ ------------------
Balance, December 31, 1993 2,918,000 29,000 3,248,000 (2,270,000)
Net loss for the year (476,000)
---------------- -------------- ------------------ ------------------
Balance, December 31, 1994 2,918,000 29,000 3,248,000 (2,746,000)
Common stock issued $2.00 per share 25,000 - 50,000
Exercise of stock options between
$0.25 and $1.25 per share 623,000 6,000 163,000
Common Stock grants 74,000 1,000 (1,000)
Net loss for the year (1,099,000)
---------------- -------------- ------------------ ------------------
Balance, December 31, 1995 3,640,000 $ 36,000 $ 3,460,000 $ (3,845,000)
Merger 19,018,000 871,000 9,130,000
Common stock issued $.70 per share 8,571,000 343,000 5,160,000
Exercise of stock options/SARs 61,000 2,000 (2,000)
Net loss for the period (8,685,000)
---------------- -------------- ------------------ ------------------
Balance, March 31, 1996 31,290,000 $ 1,252,000 $ 17,748,000 $ (12,530,000)
================ ============== ================== ==================
</TABLE>
- --------------------------------------------------
See Accompanying Notes to Financial Statements
F-6
<PAGE> 46
ACCESS PHARMACEUTICALS, INC.
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
-------------------------- -------------------------------------------
1996 1995 1995 1994 1993
----------- --------- ----------- --------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net Loss $(8,685,000) $(283,000) $(1,099,000) $(476,000) $(1,384,000)
Adjustments to reconcile net loss
to net cash used in operating activities:
Write off of Excess purchase price 8,314,000 - - - -
Depreciation and amortization 36,000 31,000 367,000 115,000 111,000
Change in assets and liabilities:
Accounts receivable 3,000 - (3,000) - 29,000
Accrued interest receivable - - - - 14,000
Prepaid expenses and other current (61,000) 15,000 16,000 (20,000) -
assets
Other assets - - 1,000 - -
Accounts payable and accrued expenses 148,000 11,000 43,000 7,000 19,000
Unearned revenue (150,000) (135,000) (30,000) 180,000
----------- --------- ----------- ---------
Net Cash Used In Operating Activities (395,000) (361,000) (705,000) (194,000) (1,211,000)
----------- --------- ----------- --------- -----------
Cash Flows From Investing Activities:
Capital expenditures (1,000) - - (81,000) (13,000)
Marketable securities - - - - 1,204,000
Capitalized patent costs - - - (31,000) (94,000)
----------- --------- ----------- --------- -----------
Net Cash Provided by (Used In) Investing
Activities (1,000) - - (112,000) 1,097,000
----------- --------- ----------- --------- -----------
Cash Flows From Financing Activities
Proceeds from note payable 110,000 - 100,000 502,000 -
Repayment of notes payable and
obligations under capital leases (21,000) (38,000) (117,000) (30,000) -
Proceeds from merger with Chemex
Pharmaceuticals 1,587,000 - - - -
Proceeds from stock issuances 5,503,000 - 219,000 - -
----------- --------- ----------- --------- -----------
Net Cash Provided by (Used in)
Financing Activities 7,179,000 (38,000) 202,000 472,000 -
----------- --------- ----------- --------- -----------
Net Increase (Decrease) in Cash and Cash
Equivalents 6,783,000 (399,000) (503,000) 166,000 (114,000)
Cash and Cash Equivalents At Beginning of
Period 30,000 533,000 533,000 367,000 481,000
----------- --------- ----------- --------- -----------
Cash and Cash Equivalents at End of Period $ 6,813,000 $ 134,000 $ 30,000 $ 533,000 $ 367,000
=========== ========= =========== ========= ===========
Cash Paid for Interest $ 13,000 $ 21,000 $ 58,000 $ 19,000 $ -
Cash Paid for Income Taxes - - $ 32,000
Supplemental disclosure of noncash
transaction: $ 47,000
Payable accrued for fixed asset
purchase
Eliminations of note payable to Chemex
Pharmaceuticals due to merger $ 100,000
<CAPTION>
February February
24, 24,
1988 1988
(Inception) (Inception)
------------ ------------
to to
December March
31, 1995 31, 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss $ (3,845,000) $ (12,530,000)
Adjustments to reconcile net loss
to net cash used in operating activities:
Write off of Excess purchase price - 8,314,000
Depreciation and amortization 771,000 807,000
Change in assets and liabilities:
Accounts receivable (3,000) -
Accrued interest receivable - -
Prepaid expenses and other current (5,000) (66,000)
assets
Other assets - -
Accounts payable and accrued expenses 122,000 270,000
Unearned revenue 150,000 -
------------ ---------------
Net Cash Used In Operating Activities (2,810,000) (3,205,000)
------------ ---------------
Cash Flows From Investing Activities:
Capital expenditures (848,000) (849,000)
Marketable securities - -
Capitalized patent costs (262,000) (262,000)
------------ ---------------
Net Cash Provided by (Used In) Investing
Activities (1,110,000) (1,111,000)
------------ ---------------
Cash Flows From Financing Activities
Proceeds from note payable 603,000 712,000
Repayment of notes payable and
obligations under capital leases (149,000) (170,000)
Proceeds from merger with Chemex
Pharmaceuticals - 1,587,000
Proceeds from stock issuances 3,496,000 9,000,000
------------ ---------------
Net Cash Provided by (Used in)
Financing Activities 3,950,000 11,129,000
------------ ---------------
Net Increase (Decrease) in Cash and Cash
Equivalents 30,000 6,813,000
Cash and Cash Equivalents At Beginning of
Period - -
- -
Cash and Cash Equivalents at End of Period $ 30,000 $ 6,813,000
============ ===============
Cash Paid for Interest $ 76,000 $ 89,000
Cash Paid for Income Taxes
Supplemental disclosure of noncash
transaction:
Payable accrued for fixed asset purchase
Eliminations of note payable to Chemex
Pharmaceuticals due to merger
</TABLE>
F-7
<PAGE> 47
ACCESS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
March 31, 1996 (unaudited), December 31, 1995, 1994 and 1993
1. Summary of Significant Accounting Policies:
(a) Business - ACCESS Pharmaceuticals, Inc. ("API" or the "Company") is
engaged in research and development activities with a broad platform
technology for enhancing the site targeting of intravenous therapeutic
drugs, MRI contrast agents and radiopharmaceutical diagnostic and
therapeutic agents. The ACCESS technology is based on natural
carbohydrate carriers.
The Company's products will require clinical trials, U.S. Food and Drug
Administration ("FDA") approval and acceptance in the marketplace prior to
commercialization. Although the Company believes its patents and patent
applications are valid, the invalidation of its major patents would have a
material adverse effect upon its business. The Company competes with
specialized biotechnology companies and major pharmaceutical companies.
Many of these competitors have substantially greater resources than
does the Company.
The Company is in the development stage and its efforts have been
principally devoted to research and development. The Company has incurred
significant losses since inception on February 24, 1988.
API merged with Chemex Pharmaceuticals, Inc. ("Chemex") on January 25,
1996 and in March 1996 concluded a $6 million private placement of 8.57
million shares of common stock. On January 25, 1996, Chemex changed its
name to ACCESS Pharmaceuticals, Inc. ("ACCESS") and API was dissolved
(see note 9).
(b) Cash and Cash Equivalents - The Company considers all highly liquid
instruments with an original maturity of three months or less to be cash
equivalents for purposes of the statements of cash flows.
(c) Property and Equipment - Property and equipment are recorded at cost.
Depreciation is provided using the straight- line method over estimated
useful lives ranging from three to seven years. Assets acquired pursuant
to capital lease arrangements are amortized over the shorter of the
estimated useful lives or the lease terms.
(d) Patents and Applications - In the fourth quarter of 1995, the Company
changed its accounting for patent and application costs from capitalizing
and amortizing initial patent and application costs (primarily legal and
filing fees related to patents) to expensing these costs as incurred. The
change was made to bring the Company's policy in line with prevailing
industry
F-8
<PAGE> 48
ACCESS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
March 31, 1996 (unaudited), December 31, 1995, 1994 and 1993
practices. As a result of the change, the Company wrote down capitalized
patent and application costs by approximately $246,000 which amounts were
included in depreciation and amortization expense in the accompanying 1995
Statement of Operations.
(e) Revenue Recognition - Sponsored research and development revenues are
recognized as research and development activities are performed under the
terms of research contracts. Advance payments received are recorded as
unearned revenue until the related research activities are performed.
Option revenues are recognized when the earnings process is completed
pursuant to the terms of the respective contract.
(f) Research and Development Expenses - Research and development expenses are
expensed as incurred.
(g) Income Taxes - Tax credits related to research and development and to
investments in equipment and improvements are reported as a reduction of
income tax expense in the year realized. Certain income and expense items
are recognized for financial reporting purposes in years different than
for income tax purposes.
(h) Net Loss Per Share - Net loss per common share is calculated based upon
the weighted average number of common shares and common equivalent shares
outstanding during the years ended December 31, 1995, 1994 and 1993 of
3,097,686, 2,918,328 and 2,918,328, respectively. In 1995, 1994 and 1993
any common equivalent shares were either not material or anti-dilutive.
(i) Use of Estimates - Management of the Company has made a number of
estimates and assumptions relative to the reporting of assets and
liabilities to prepare these financial statements in conformity with
generally accepted accounting principles. Actual results could differ
from those estimates.
(j) Interim Financial Data (Unaudited) - The interim financial data for the
three months ended March 31, 1996 and 1995, included in the accompanying
financial statements are unaudited; however, in the opinion of the
Company, the interim financial data include all adjustments, consisting
only of normal recurring adjustments, except for the merger accounting
discussed below, necessary for a fair statement of the results for the
interim periods. The interim financial data are not necessarily
indicative of the results of operations for a full fiscal year.
F-9
<PAGE> 49
ACCESS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
March 31, 1996 (unaudited), December 31, 1995, 1994 and 1993
The unaudited balance sheet at March 31, 1996 and unaudited statement of
operations and unaudited statement of cash flows have been prepared using
"purchase" accounting with API as the acquirer. The values used in the
preparation of the financial statements were determined based on negotiations
between Chemex and API companies and comparable values for companies at API's
stage of development. As a result, common stock and paid in capital of API
was recorded at a $10.0 million valuation. The excess purchase price over
the fair value of Chemex's assets of $8,314,000 was written off in the first
quarter of 1996.
2. Related Party Transactions:
Under consulting agreements between Thoma Corporation (Thoma) and the
Company, Thoma receives payments for consulting services and reimbursement
of direct expenses. Herbert H. McDade, Jr., a former director of the
Company and current director of ACCESS is an owner of Thoma Corp. During
1994 and 1993 Thoma received payments for consulting services of $1,688, and
$6,930 respectively. Thoma was also reimbursed for consulting expenses of
$2,536, $2,761, and $2,898 respectively, in 1995, 1994 and 1993.
Mr. McDade's son, Mark McDade, was also a pharmaceutical consultant for the
Company. Mr. Mark McDade received payments for consulting services of
$40,625 during 1993 and reimbursements for expenses of $22,329 during 1993.
See also, Note 8. Commitments, for transactions regarding David F. Ranney,
Executive Vice President and major shareholder of the Company.
Pursuant to the terms of the merger agreement, Chemex was obligated to loan,
at any time prior to the closing of the transaction, an aggregate amount of
up to $250,000 to API, upon request of API. On October 4, 1995, Chemex made
a loan to API of $100,000 which is evidenced by a 7% promissory note (see
note 9). In addition, Chemex sold the remainder of its fixed assets to API
at book value in the fourth quarter of 1995. A payable to Chemex for
approximately $47,000 was recorded at December 31, 1995 for these fixed
assets.
3. Research and Development Agreements:
A technology evaluation option agreement with a pharmaceutical company
accounted for $150,000 in option proceeds in 1995. These proceeds are
reflected as unearned revenue at December 31, 1995 pending completion of the
earnings process under the terms of the
F-10
<PAGE> 50
ACCESS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
March 31, 1996 (unaudited), December 31, 1995, 1994 and 1993
agreement. This agreement was terminated March 29, 1996 at which point 40%
of the $275,000 ($150,000 in 1995 and $125,000 in 1996) in proceeds received,
$110,000, converted to a non-interest bearing loan due the pharmaceutical
company and the remaining 60% was recognized as option income revenue in
accordance with the agreement.
On April 26, 1994, the Company entered into agreements, as amended, with
Corange International Ltd. (Corange) to develop drugs based on the Company's
endothelial binding technology for use in the oncology area. Under the
agreements, the Company granted Corange an option for a period up to two
years, as defined, to exclusively license worldwide, any oncology agent
developed pursuant to the terms of the common research agreement. In 1994,
Corange made initial option payments of $600,000 which amounts were
recognized as revenue in 1994. Corange also made $618,532 in payments for
sponsored research and development of which $438,532 were revenues
recognized in 1994 and $180,000 were advance payments recorded as unearned
revenue at December 31, 1994.
In 1995, Corange made $494,937 in payments to the Company for sponsored
research and development which amounts were recognized as revenue in 1995.
In addition, $180,000 of unearned revenue at December 31, 1994 was
recognized as revenue in 1995 pursuant to the Corange agreements. The
Corange agreements were terminated by Corange on June 30, 1995.
An option agreement with a pharmaceutical company accounted for 100% of the
option income for 1993. The agreement was limited to the license of one
product in a specified geographical area. The pharmaceutical company
declined to exercise its option.
4. Property and Equipment:
Property and equipment, of which a majority is held under capital leases,
consists of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------
1995 1994
-------- ---------
<S> <C> <C>
Laboratory equipment $442,000 $442,000
Laboratory and building improvements 14,000 14,000
Furniture and equipment 102,000 54,000
-------- --------
558,000 510,000
Less accumulated depreciation and amortization
173,000 57,000
-------- --------
Net property and equipment $385,000 $453,000
======== ========
</TABLE>
Depreciation and amortization on property and equipment was $115,000,
$110,000, and $107,000 for the years ended December
F-11
<PAGE> 51
ACCESS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
March 31, 1996 (unaudited), December 31, 1995, 1994 and 1993
31,1995, 1994 and 1993, respectively.
In September 1994, pursuant to a sales leaseback transaction, the Company
sold substantially all of its property and equipment for $426,000, which
amount equaled the net book value of the property and equipment sold. The
Company correspondingly entered into a master lease agreement with the
purchaser of the property and equipment (see note 5).
5. Obligations Under Capital and Operating Leases:
At December 31, 1995, future minimum lease payments under capital lease
obligations and commitments under noncancelable operating leases were as
follows:
<TABLE>
<CAPTION>
Capital Operating
leases leases
---------- ---------
<S> <C> <C>
1996 $ 173,000 $ 59,000
1997 170,000 18,000
1998 80,000
---------- ---------
Total future minimum lease payments 423,000 $ 77,000
=========
Less amount representing interest 71,000
----------
Present value of minimum capital lease payments
354,000
Less current portion 134,000
----------
Obligations under capital leases,
excluding current portion
$ 220,000
==========
</TABLE>
The Company leases office and research and development facilities under an
operating lease. Rent expense for the years ended December 31, 1995, 1994
and 1993 was $59,000, $50,000 and $46,000, respectively.
As previously noted, the Company entered into a master lease agreement to
lease back property and equipment sold in September 1994. The lease is
classified as a capital lease with an initial minimum obligation of
$426,432, payable in 42 monthly installments plus interest. The agreement
allows for the purchase of the equipment at the end of the lease term for
$42,643. The Company also issued a warrant to the lessor for the purchase
of 35,536 shares of the Company's common stock at an exercise price of $4.20
per share, subject to adjustment, as part of the transaction (see note 6).
No value was assigned to the warrant because its value was de minimis.
Also during 1994 the Company enter into two other capital lease agreements
with leasing companies for an aggregate obligation of $75,815. The terms of
these leases are 36 months and allow for
F-12
<PAGE> 52
ACCESS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
March 31, 1996 (unaudited), December 31, 1995, 1994 and 1993
the purchase of the equipment at the end of the lease term at a price not to
exceed 10 percent of the purchase price at inception for one lease and fair
market value for the other lease.
Substantially all of the Company's property and equipment is held under
capital leases.
6. Stockholders' Equity:
The Company has a Stock Awards Plan - Common Stock and a Stock Awards Plan -
Options, as amended, under which up to 1,000,000 shares of common stock and
options may be awarded to the Company's employees, directors and
consultants. At December 31, 1995, 696,600 shares of common stock had been
awarded under the Stock Awards Plan.
The Company's option plan for incentive and nonqualified stock options
expires on dates up to ten years after the date of the grant. As of
December 31, 1995, all options have been exercised at prices ranging from
$.25 to $1.25 per share and there were no options outstanding.
Summarized information for the Stock Awards Plan is as follows:
<TABLE>
<CAPTION>
Common
Options Stock
----------- ------------
<S> <C> <C>
Outstanding at December 31, 1994 455,500 0
Granted 190,000 73,600
Forfeited 22,500 0
Exercised 623,000 73,600
----------- -----------
Outstanding at December 31, 1995 0 0
=========== ===========
</TABLE>
No dividends have been paid or declared by the Company.
The Company is authorized to issue 1,000,000 shares of $.10 par value
preferred stock, none of which was issued or outstanding at December 31,
1995 or 1994.
Under the terms of the 1994 lease agreement (described in Note 5), the
leasing company received a warrant to purchase 35,536 shares of common
stock. The warrant remains exercisable for seven years from the date of
issuance and will expire on September 19, 2001. The warrant is exercisable
at $4.20 per share. The warrant may be adjusted under some conditions, as
defined, for dividends, changes in stock price, reorganization,
consolidation or merger and extraordinary events. No value was assigned to
the warrant because its value was de minimis.
F-13
<PAGE> 53
ACCESS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
March 31, 1996 (unaudited), December 31, 1995, 1994 and 1993
7. Income Taxes:
The Company follows Statement of Financial Accounting Standards Number 109 -
Accounting for Income Taxes ("FASB 109"). No provision for federal income
taxes has been made since inception due to the operating losses incurred for
income tax purposes. At December 31, 1995 and 1994, the Company had
deferred tax assets primarily comprised of the tax benefits of net operating
loss carry-forwards. Because the Company has a history of losses, a 100%
provision against the deferred tax assets was recorded. At December 31,
1995, the Company's regular and alternative minimum tax net operating loss
carry-forwards for federal income tax purposes approximated $3 million,
which if not utilized, will expire in varying amounts through the year 2010.
8. Commitments and Contingencies:
Under the terms of the "Patent Purchase Agreement" dated April 5, 1994, as
amended on January 23, 1996 between Dr. David F. Ranney and the Company,
Dr. Ranney, Executive Vice President, and majority stockholder is entitled
to yearly cash royalty payments as consideration for the assignment of
patents to the Company as follows:
<TABLE>
<CAPTION>
ROYALTY PAYMENTS
----------------------------------------
DATE AMOUNT
------------------------ -------------
<S> <C>
April 15, 1994 $ 7,500
January 31, 1995 $15,000
January 31, 1996 $25,000
January 31, 1996 $50,000
</TABLE>
Thereafter each January 31, payments equal to 105% of the payment made in the
immediately preceding calendar year will be paid to Dr. Ranney through the
life of the patents. ACCESS will also pay Dr. Ranney a royalty of three
quarters of one percent (0.75%) of gross revenues derived from products
covered by the patents. All payments due Dr. Ranney under this agreement
have been paid as of March 29, 1996.
Under the terms of the "Exclusive Technology License Agreement" between Dr.
David F. Ranney and the Company, which was terminated April 5, 1994, Dr.
Ranney, was entitled to royalties equal to the greater of: (i) four percent
(4%) of its Net Product Revenues (as defined), or (ii) one percent (1%) of
Gross Product Revenues (as defined). No payments were made under this
agreement in 1994 and 1993.
The Company is not currently a party to any material legal
F-14
<PAGE> 54
ACCESS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
March 31, 1996 (unaudited), December 31, 1995, 1994 and 1993
proceedings.
9. Subsequent Events:
On January 23, 1996, API's shareholders, at a Special Shareholders Meeting,
approved the merger into Chemex (an SEC registrant). Under the terms of the
agreement, API was merged into Chemex with Chemex as the surviving legal
entity. Chemex acquired all of the outstanding shares of API in exchange for
13,919,979 shares of registered common stock of Chemex. Chemex also changed
its name to ACCESS Pharmaceuticals, Inc. and the operations of the
merged company are now based in Dallas, Texas.
As a result of the merger, the former API Stockholders own approximately 60%
of the issued and outstanding shares of Chemex. Generally accepted
accounting principles require that a company whose stockholders retain the
controlling interest in a combined business be treated as the acquiror for
accounting purposes. As a consequence, the merger is being accounted for as
a "reverse acquisition" for financial reporting purposes and API has been
deemed to have acquired an approximate 60% interest in Chemex.
Despite the financial reporting requirement to account for the acquisition as
a "reverse acquisition," Chemex remains the continuing legal entity and
registrant for Securities and Exchange Commission reporting purposes.
Under the terms of merger on January 25, 1996, a maximum of 750,000 warrants
exercisable at $0.75 per share with a 5 year expiration from the date of
issue, may be issued to the former holders of record of API Common Stock upon
the occurrence of certain conditions.
As of January 29, 1996, ACCESS retained Mr. David Blech, the income
beneficiary of the Sentinel Charitable Remainder Trust, as a consultant to
ACCESS for one year to advise on structuring transactions including equity
placements, licensing agreements and research and development
collaborations. Under the terms of the agreement Mr. Blech was paid $480,000
in 1996 and received immediately exercisable warrants to purchase 600,000
shares of common stock at an exercise price of $1.00 per share, which
warrants expire in the year 2000.
In March 1996, ACCESS concluded a $6 million Private Placement of 8.57
million shares of common stock. The cash infusion will be used to continue
the advancement of the product portfolio which focuses on increasing the
therapeutic benefit and improving the
F-15
<PAGE> 55
ACCESS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
March 31, 1996 (unaudited), December 31, 1995, 1994 and 1993
efficiency of oncology therapeutics and diagnostic agents by selectively
targeting sites of disease and accelerating drug clearance. The shares
issued in the private placement have not been registered, however the company
has agreed to file a registration statement within 90 days of the issuance
covering such shares. The investors have agreed not to sell any of the
shares purchased in the offering until 180 days after the closing.
On April 26, 1996, ACCESS executed a letter of intent to acquire Tacora
Corp., a privately-held pharmaceutical company based in Seattle. The
transaction is expected to close in the next 60-90 days. Under the terms of
the letter of intent, the purchase price is contingent upon the achievement
of certain milestones. Stock up to a maximum of $14,000,000 could be payable
over a 30 month period on an escalating value over the milestone period.
F-16
<PAGE> 56
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
ACCESS Pharmaceuticals, Inc.:
We have audited the accompanying balance sheets of ACCESS Pharmaceuticals, Inc.
(formerly Chemex Pharmaceuticals, Inc.) as of December 31, 1995 and 1994, and
the related statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ACCESS Pharmaceuticals, Inc.,
as of December 31, 1995 and 1994, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1995, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
March 29, 1996
F-17
<PAGE> 57
ACCESS PHARMACEUTICALS, INC.
Formerly Chemex Pharmaceuticals, Inc.
Balance Sheets
<TABLE>
<CAPTION>
ASSETS December 31, 1995 December 31, 1994
------ ----------------- -----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents (Note 1) $ 1,888,000 $ 1,335,000
Accounts receivable (Note 1) 48,000 136,000
Loan to API (Note 6) 100,000 -
Prepaid expenses and other assets 93,000 151,000
----------- -----------
Total current assets 2,129,000 1,622,000
----------- -----------
Furniture and Equipment at cost - 123,000
Less accumulated depreciation - (61,000)
----------- -----------
- 62,000
----------- -----------
Other Assets - 20,000
----------- -----------
Total Assets $ 2,129,000 $ 1,704,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts payable $ 136,000 $ 190,000
Accrued lease settlement (Note 5) 30,000 -
Financed insurance premium 73,000 90,000
Accrued merger closing expenses (Note 9) 140,000 -
Other accrued liabilities 57,000 85,000
----------- -----------
Total current liabilities 436,000 365,000
----------- -----------
Long-term liabilities 7,000 12,000
----------- -----------
Total liabilities 443,000 377,000
----------- -----------
Commitments and contingencies (Note 5)
Stockholders' Equity (Notes 2 and 3)
Preferred stock, $.01 par value.
Authorized 5,000,000 shares;
none issued or outstanding - -
Common stock, $.04 par value.
Authorized 22,000,000 shares;
issued 8,737,788 and
8,678,660 shares 350,000 347,000
Additional paid-in capital 40,367,000 40,352,000
Treasury stock, 1,677 shares, at cost (5,000) (5,000)
Deficit (39,026,000) (39,367,000)
------------ -----------
Total Stockholders' Equity 1,686,000 1,327,000
----------- -----------
Total Liabilities and Stockholder's Equity $ 2,129,000 $1,704,000
=========== ===========
</TABLE>
- ---------------------------------------------------
See accompanying notes to financial statements.
F-18
<PAGE> 58
ACCESS PHARMACEUTICALS, INC
Formerly Chemex Pharmaceuticals, Inc.
Statements of Operations
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------
1995 1994 1993
---------------------------------------------
<S> <C> <C> <C>
Revenues:
Sale of proprietary rights (Note 8) $2,500,000 $1,700,000 -
Joint Venture project revenue (Note 8) 11,000 1,371,000 $1,468,000
Amlexanox project revenue 379,000 - -
Actinex royalty (Note 7) 1,000 26,000 49,000
Interest and dividend income 54,000 65,000 139,000
----------- ------------ -----------
2,945,000 3,162,000 1,656,000
----------- ------------ -----------
Expenses:
Research and Development (Notes 2, 3, 7 and 8):
Amlexanox/Joint Venture (Note 8) 587,000 2,438,000 2,582,000
ACCESS proprietary 666,000 153,000 324,000
General, Administrative and Other:
Operating expenses 1,341,000 1,381,000 1,895,000
Professional fees-related parties (Note 6) 13,000 27,000 108,000
Amortization of stock awards (Note 3) (3,000) 122,000 (161,000)
Settlement of litigation - - 475,000
------------ ----------- -----------
2,604,000 4,121,000 5,223,000
------------ ----------- -----------
Income (loss) before income taxes 341,000 (959,000) (3,567,000)
Provision for income taxes (Note 4) - - -
------------ ----------- -----------
Net income (loss) $341,000 ($959,000) ($3,567,000)
=========== =========== ===========
Net income (loss) per common share (Note 1) $0.04 ($0.11) ($0.43)
=========== ============ ===========
Average number of common and equivalent
common shares outstanding (Note 1) 8,717,402 8,543,003 8,384,904
=========== =========== ===========
</TABLE>
- ---------------------------------------------------
See accompanying notes to financial statements
F-19
<PAGE> 59
ACCESS PHARMACEUTICALS, INC.
FORMERLY CHEMEX PHARMACEUTICALS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1995, 1994, 1993
<TABLE>
<CAPTION>
Common Add'l.
Common Stock Paid-in
Shares Amount Capital
--------------------------------------------------
<S> <C> <C> <C>
Balances at December 31, 1992 8,314,563 $333,000 $40,038,000
- ---------------------------------------------------------- --------------------------------------------------
Issuance of common stock for ESOP [Note 3(c)] 117,763 5,000 156,000
Exercise of stock options/SARs [Note 3(a) and 3(b)] 66,750 2,000 20,000
Stock award amortization [Note 3(d)] (161,000)
Issuance of common stock for services [Note 2(a)] 25,000 1,000 49,000
Net loss - 1993
- ---------------------------------------------------------- --------------------------------------------------
Balances at December 31, 1993 8,524,076 $341,000 $40,102,000
- ---------------------------------------------------------- --------------------------------------------------
Issuance of common stock for ESOP [Note 3(c)] 154,580 6,000 95,000
Stock/SARs award expense [Note 3(d)] 155,000
Warrants exercised 4
Net loss - 1994
- ---------------------------------------------------------- --------------------------------------------------
Balances at December 31, 1994 8,678,660 $347,000 $40,352,000
- ---------------------------------------------------------- --------------------------------------------------
Issuance of common stock for ESOP [Note 3(c)] 44,325 2,000 19,000
Issuance of stock on exercise of SARs [Note 3(a) and 3(b)] 14,803 1,000 (4,000)
Net income - 1995
- ---------------------------------------------------------- --------------------------------------------------
Balances at December 31, 1995 8,737,788 $350,000 $40,367,000
- ---------------------------------------------------------- --------------------------------------------------
<CAPTION>
Total
Treasury Stockholders'
Deficit Stock Equity
- ---------------------------------------------------------- -------------------------------------------------
<S> <C> <C> <C>
Balances at December 31, 1992 $ (34,841,000) $ (5,000) $ 5,525,000
-------------------------------------------------
Issuance of common stock for ESOP [Note 3(c)] 161,000
Exercise of stock options/SARs [Note 3(a) and 3(b)] 22,000
Stock award amortization [Note 3(d)] (161,000)
Issuance of common stock for services [Note 2(a)] 50,000
Net loss - 1993 (3,567,000) (3,567,000)
- ---------------------------------------------------------- -------------------------------------------------
Balances at December 31, 1993 $ (38,408,000) $ (5,000) $ 2,030,000
- ---------------------------------------------------------- -------------------------------------------------
Issuance of common stock for ESOP [Note 3(c)] 101,000
Stock/SARs award expense [Note 3(d)] 155,000
Warrants exercised 0
Net loss - 1994 (959,000) (959,000)
- ---------------------------------------------------------- -------------------------------------------------
Balances at December 31, 1994 $ (39,367,000) $ (5,000) $ 1,327,000
- ---------------------------------------------------------- -------------------------------------------------
Issuance of common stock for ESOP [Note 3(c)] 21,000
Issuance of stock on exercise of SARs [Note 3(a) and 3(b)] (3,000)
Net income - 1995 341,000 341,000
- ---------------------------------------------------------- -------------------------------------------------
Balances at December 31, 1995 $ (39,026,000) $ (5,000) $ 1,686,000
- ---------------------------------------------------------- -------------------------------------------------
</TABLE>
- ------------------------------------------------------
See accompanying notes for financial statements
F-20
<PAGE> 60
ACCESS PHARMACEUTICALS, INC
Formerly Chemex Pharmaceuticals
Statements of Cash Flows
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1995 1994 1993
------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 341,000 $ (959,000) $(3,567,000)
Adjustments to reconcile net income (loss)
to cash provided by (used by) operating activities:
Depreciation 15,000 25,000 24,000
Common stock issued in payment for services 50,000
Common stock contributed to Employee Stock Ownership Plan 20,000 101,000 161,000
Stock award amortization (3,000) 155,000 (161,000)
Change in assets and liabilities:
Accounts receivable 136,000 217,000 (102,000)
Prepaid expenses and other assets 78,000 43,000 (78,000)
Accounts payable (54,000) (94,000) (35,000)
Accrued taxes - - (431,000)
Accrued lease settlement 30,000 - -
Accrued litigation settlement - (475,000) 475,000
Accrued merger closing expenses 140,000 - -
Other accrued liabilities (45,000) (36,000) (48,000)
------------ ------------ -----------
Net cash provided by (used by) operating activities 658,000 (1,023,000) (3,712,000)
------------ ------------ -----------
Cash Flows from Investing Activities:
Capital expenditures - - (3,000)
------------ ------------ -----------
Net cash used by investing activities - - (3,000)
------------ ------------ -----------
Cash Flows from Financing Activities:
Proceeds from exercising of stock options - - 22,000
Principal payments on capital leases (5,000) (4,000) (5,000)
Loan to API (100,000) - -
------------ ------------- -----------
Net cash provided by (used by) financing activities (105,000) (4,000) 17,000
------------ ------------- -----------
Net increase (decrease) in cash and cash equivalents $553,000 $ (1,027,000) $(3,698,000)
------------ ------------ -----------
Cash and cash equivalents at beginning of year 1,335,000 2,362,000 6,060,000
------------ ------------ -----------
Cash and cash equivalents at end of year $1,888,000 $ 1,335,000 $ 2,362,000
============ ============ ===========
Cash paid for interest $6,174 $5,233 $3,300
Cash paid for income taxes $ 431,000
</TABLE>
- -------------------------------------------------------
See accompanying notes to financial statements
F-21
<PAGE> 61
ACCESS PHARMACEUTICALS, INC.
FORMERLY CHEMEX PHARMACEUTICALS, INC.
Notes to Financial Statements
(1) The Company and Summary of Significant Accounting Policies
(a) The Company
ACCESS Pharmaceuticals, Inc. ("ACCESS" or the "Company"),
formerly known as Chemex Pharmaceuticals, Inc. ("Chemex"), is
engaged in research and development activities with a broad
platform technology for enhancing the site targeting of
intravenous therapeutic drugs, MRI contrast agents and
radiopharmaceutical diagnostic and therapeutic agents. The
ACCESS technology is based on natural carbohydrate carriers.
Chemex merged with ACCESS Pharmaceuticals, Inc. ("API") on
January 25, 1996 and in March 1996 concluded a $6 million
private placement of 8.57 million shares of common stock. On
January 25, 1996, Chemex changed its name to ACCESS (see note
9).
Prior to the merger, the Company was engaged in research and
development activities for certain dermatological products
relating to the determination of the potential use, if any, of
elements of certain natural product and synthetic compounds
for therapeutic purposes. To commercialize these activities,
a joint venture, (the "Joint Venture") was signed with Block
Drug Company, Inc. ("Block") in June 1991 and represented the
commencement of planned operations. The Joint Venture was
dissolved effective December 31, 1994, and pursuant to such
dissolution, the original compounds that had been contributed
to the Joint Venture by the Company were returned to the
Company, with the exception of Amlexanox. The Company
transferred its rights to Amlexanox to Block for a
non-refundable upfront royalty payment of $2.5 million plus
future royalties, with the consent of Takeda Chemicals (the
licensor) and approval of Chemex shareholders on September 14,
1995 (see Note 8).
The Company's products will require clinical trials, FDA
approval and acceptance in the marketplace prior to
commercialization. Although the Company believes its patents
and patent applications are valid, the invalidation of its
major patents would have a material adverse effect upon its
business. The Company competes with specialized biotechnology
companies and major pharmaceutical companies. Many of these
competitors have substantially greater resources than does the
Company.
(b) Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with
an original maturity of three months or less to be cash
equivalents for purposes of the statements of cash flows.
(c) Depreciation
Depreciation of furniture and equipment was provided using the
straight-line method based on estimated useful lives of 5
years. Depreciation expense for the years ended December 31,
1995, 1994 and 1993, amounted to $15,000, $25,000 and $24,000,
respectively. In connection with the merger, the Company sold
the remainder of its fixed assets to API at net book value in
the fourth quarter of 1995.
F-22
<PAGE> 62
ACCESS PHARMACEUTICALS, INC.
FORMERLY CHEMEX PHARMACEUTICALS, INC.
Notes to Financial Statements
(continued)
(d) Net Income (Loss) Per Common Share
Net income (loss) per common share is calculated based upon
the weighted average number of common shares and common
equivalent shares outstanding during the years ended December
31, 1995, 1994 and 1993 of 8,717,402, 8,543,003 and 8,384,904,
respectively. In 1995, 1994 and 1993 any common equivalent
shares were either not material or anti-dilutive.
(e) Revenues
The Company entered into three separate agreements with Block
under which it performed contract research and development.
The first agreement represented the sale of Actinex(R) to
Block, whereby the Company was reimbursed for any outside
costs it incurred in connection with the further development
of Actinex(R). The second agreement with Block was the Joint
Venture, under which the Company was responsible for
performing all research and development of the Joint Venture
products. Through December 31, 1994 (the effective date of
the dissolution of the Joint Venture), the Company shared
equally with Block all research and development expenses,
after the first $3 million of expenditures which was paid by
Block, however, this agreement was terminated by mutual
consent on December 31, 1994 (see note 8 for further
discussion). On June 7, 1995, the Company entered into the
third agreement with Block to sell its rights to Amlexanox for
a non-refundable upfront royalty payment of $2.5 million plus
future royalties, if any, which was approved by the Company's
shareholders on September 14, 1995. Until the completion of
the agreement, 50% of research conducted for Amlexanox was
paid for by Block.
(f) Research and Development Expenses
All costs of research and development are expensed in the
period incurred.
(g) Accounts Receivable
Accounts receivable as of December 31, 1995 and December 31,
1994 were $48,000 and $136,000, respectively, and in 1995 was
due from API in connection with the sale of the Company's
furniture and computer equipment and in 1994 were entirely due
from Block for the Joint Venture research and development
expenses and Actinex(R) royalty.
(h) Use of Estimates
Management of the Company has made a number of estimates and
assumptions relative to the reporting of assets and
liabilities to prepare these financial statements in
conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
F-23
<PAGE> 63
ACCESS PHARMACEUTICALS, INC.
FORMERLY CHEMEX PHARMACEUTICALS, INC.
Notes to Financial Statements
(continued)
(2) Stockholders' Equity
(a) Common Stock
From time to time, the Company has issued restricted shares of
its common stock as payment for various costs and services.
These shares were valued by the Company's Board of Directors
(the Board) based upon the quoted market price on the date of
issue, discounted as considered appropriate by the Board, for
the restricted nature of the stock. During the years ended
December 31, 1995 and 1994, the Company did not issue any
shares of common stock as payment for any obligations. During
the year ended December 31, 1993, the Company issued 25,000
shares at a value of $50,000 as payment of outside investment
banking services.
(b) Warrants
The Company has authorized the issuance of up to 500,000
Units, consisting in the aggregate of 500,000 shares of Common
Stock and warrants exercisable in the aggregate for 700,000
shares of Common Stock. The authorization of the Units was
made in connection with a Conversion Agreement, dated June 18,
1990, by and between ACCESS and Sentinel Charitable Remainder
Trust (the "Conversion Agreement"). Pursuant to the terms of
the Conversion Agreement, each Unit has an exercise price of
$2.50 and the rights of Sentinel Charitable Remainder Trust to
subscribe for the Units were to expire on July 31, 1996. This
Conversion Agreement was amended as of December 14, 1995 by
the Letter Agreement to provide that the right of Sentinel
Charitable Remainder Trust to subscribe for the Units now
expire on January 1, 1999.
Each warrant issuable in connection with the Units described
above is exercisable for one share of Common Stock (subject to
adjustment as provided in the warrant), with 500,000 of the
warrants exercisable at $6.25 and the remaining 200,000
warrants exercisable at $2.50, all upon the terms and
conditions set forth in the Conversion Agreement. The
warrants expire on January 1, 2000.
Under the terms of merger on January 25, 1996, a maximum of
750,000 warrants exercisable at $0.75 per share with a 5 year
expiration from the date of issue, may be issued to the former
holders of record of API Common Stock upon the occurrence of
certain conditions.
(3) Stock Option Plan and Employee Stock Ownership Plan
(a) Stock Option Plan
The Company adopted a stock option plan (the "1987 Stock
Awards Plan") and reserved 1,725,000 shares of the Company's
common stock for issuance to optionees including officers,
F-24
<PAGE> 64
ACCESS PHARMACEUTICALS, INC.
FORMERLY CHEMEX PHARMACEUTICALS, INC.
Notes to Financial Statements
(continued)
employees, and other individuals performing services for the
Company. The 1987 Stock Awards Plan replaced the previously
approved Restated Non-Qualified Stock Option Plan (the
"Restated Plan") and includes stock appreciation rights, which
vested based on the achievement of certain financial and
operational benchmarks. Options granted under the plans were
generally exercisable over a ten-year period from the date of
grant, however, as a result of certain events occurring in
1995, all issued options became vested and exercisable. The
shareholders replaced the 1987 Plan on January 25, 1996 with
the 1995 Stock Option Plan. No further grants have been or
can be made under the 1987 Plan.
Under the 1995 Stock Option Plan, 2,000,000 shares of ACCESS
Common Stock are reserved for issuance to employees, officers,
directors and consultants at the Company.
Summarized information for the 1987 Plan is as follows:
<TABLE>
<CAPTION>
1987 Plan
-------------------------------
Incentive
Stock Options SARs(1)
------------- ---------
<S> <C> <C>
Outstanding options
at December 31, 1994 1,092,602 360,161
Granted 0 0
Forfeited (116,505) (6,693)
Exercised 0 (14,803)
------------- ---------
Outstanding options
at December 31, 1995 976,097 338,665
============= =========
At December 31, 1995:
o Average exercise price of
outstanding options $2.42 $0.00
o Exercisable options 976,097 338,665
</TABLE>
(1) See Note [3(d)]
(b) Non-employee Director Stock Option Plan
The Company adopted the Non-Employee Director Stock Option
Plan during 1987 and reserved 467,500 shares of the Company's
common stock for options awarded under the plan. Directors
who had options in the Restated Plan relinquished those
options for equivalent options in the Non-Employee Director
Stock Option Plan. During 1995, there were no options granted
by the Company. Shares under option at December 31, 1995 are
as follows:
F-25
<PAGE> 65
ACCESS PHARMACEUTICALS, INC.
FORMERLY CHEMEX PHARMACEUTICALS, INC.
Notes to Financial Statements
(continued)
<TABLE>
<CAPTION>
1987 Non-Employee Director Plan
-------------------------------
<S> <C>
Outstanding options at December 31, 1994 299,054
Granted 0
Forfeited (19,937)
Exercised 0
--------
Outstanding options at December 31, 1995 279,117
========
At December 31, 1995
o Average exercise price of
outstanding options $2.90
o Exercisable options 279,117
</TABLE>
Both of the Plans described in (a) and (b) above provide for
shares to be purchased for cash or with shares of the
Company's common stock owned by the optionee with a market
value equal to the aggregate option price.
Stock options and stock appreciation rights vest to the
optionees immediately upon a change in control of the Company.
Change in control is generally defined as the acquisition of
25% or more of the common stock of the Company by an
individual or a group. Change in control did occur at the
date of the merger, January 25, 1996, and as a result, all
unvested options vested.
(c) Employee Stock Ownership Plan ("ESOP")
Effective January 1, 1986, the Company adopted a qualified
Employee Stock Ownership Plan (ESOP) in which all employees
are eligible to participate. The ESOP provides that the
Company may elect to match employee contributions at varying
percentage rates designated by the Company (50% in 1993, 1994,
and 1995) and may make an annual contribution to the ESOP as
determined by the Board, with a maximum contribution not to
exceed the amount deductible under the Internal Revenue Code.
Contributions to the ESOP can be made in cash, mutual funds or
in common stock of the Company. During the years ended
December 31, 1995, 1994 and 1993, the Company contributed
41,427, 151,608 and 116,202 shares of common stock to the ESOP
valued at $18,460, $98,006 and $158,064, respectively.
Employee contributions to the ESOP during the year ended
December 31, 1993 totalled $71,645, of which $2,744 was used
to purchase 1,561 shares and $68,901 was invested in mutual
funds; during the year ended December 31, 1994, contributions
totalled $73,222 of which $2,535 was used to purchase 2,972
shares, and $70,687 was invested in mutual funds; and during
the year ended December 31, 1995, contributions totalled
$36,921 of which $1,354 was used to purchase 2,898 shares and
$35,567 was invested in mutual funds. The Company intends to
terminate the Plan and no Company contributions are
anticipated in 1996.
F-26
<PAGE> 66
ACCESS PHARMACEUTICALS, INC.
FORMERLY CHEMEX PHARMACEUTICALS, INC.
Notes to Financial Statements
(continued)
(d) Stock Award Amortization/Cancellation
The Company amortizes stock award compensation expense for the
difference between the issuance or exercise price of stock
options granted and the fair market value of the common stock
on the date of the grant, over the period benefitted. SARs
are treated in the same manner, however, for SARs that were
payable in cash, a further amortization expense (or credit to
expense) was recorded for the difference between the fair
market value of the common stock at the current period end and
the fair market value on the grant date or the last fiscal
period, whichever is later. In addition, forfeited stock
options for employees that terminate from the Company prior to
full vesting of their stock options are recorded as a
reduction to stock awards expense, representing the original
difference between fair market value of the common stock and
the exercise price of the stock option on the grant date, for
any forfeited unvested options.
In 1992, the Board of Directors passed a resolution that no
SARs were to be paid in cash. During 1993, 50,000 SARs were
exercised. The difference between the fair market value of
the stock as originally recorded and the market value as of
the date the SARs were exercised was recorded as a reduction
of stock award amortization of $161,000. In 1994, bonuses
were paid to employees in the form of SARs totalling 35,210
options. In addition, 223,829 SARs were awarded to the three
former corporate officers contingent on operational
milestones. The difference between the fair market value of
the SARs as of the date of the grant and the zero exercise
price was recorded as stock award expense of $122,000 in 1994.
In 1995, no SARs were awarded. In 1995, the difference
between the fair market value of the stock as originally
recorded and the market value as of the date the SARs were
exercised was recorded as a reduction of stock award
amortization expense of $3,000.
(4) Income Taxes
The Company follows Statement of Financial Accounting Standards Number
109 - Accounting for Income Taxes ("FASB 109"). No provision for
federal income taxes has been made since inception due to the
operating losses incurred for income tax purposes. At December 31,
1995, 1994 and 1993, the Company had deferred tax assets primarily
comprised of the tax benefits of net operating loss carry-forwards and
temporary differences relating to compensation expense. Because the
Company has a history of losses, a 100% provision against the deferred
tax assets was recorded. At December 31, 1995, the Company's regular
and alternative minimum tax net operating loss carry-forwards for
federal income tax purposes approximate $34 million, which, if not
utilized, will expire in varying amounts through the year 2009.
However, as a result of the merger on January 25, 1996, (see note 9),
a change in control occurred for federal income tax purposes which
limited the utilization of net operating loss carry-forwards to
approximately $530,000 per year.
(5) Commitments and Contingencies
The Company is not currently a party to any material legal
proceedings.
Rent expense was $217,551, $201,552 and $202,028 for the years ended
December 31, 1995, 1994 and 1993 respectively. Effective as of
November 2, 1995 the Company terminated its lease agreement for
F-27
<PAGE> 67
ACCESS PHARMACEUTICALS, INC.
FORMERLY CHEMEX PHARMACEUTICALS, INC.
Notes to Financial Statements
(continued)
its former principal office space in Fort Lee, New Jersey. Pursuant
to the settlement agreement, approximately $79,000 in consideration of
the termination of the lease has been expensed of which $30,000
remains as an accrual at December 31, 1995. Limited temporary office
space was leased in Tarrytown, New York, until the merger.
Effective January 25, 1996 the Company relocated to API's corporate
offices in Dallas, Texas. API's office lease annual minimum rental
for 1996 is $58,767 and for 1997 is $17,046.
(6) Related Party Transactions
The following is a table of related party transactions for the years
ended December 31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
Year ended December 31,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Legal fees-Company's former law firm
of which a Partner was also a
Director $44,228
Consulting fees-Director $13,000 $26,950 54,132
Consulting fees-Director 10,000
</TABLE>
An attorney for the Company's former law firm was, and two consultants
were members of the Company's Board of Directors. As of July 29,
1993, the attorney did not stand for reelection to the Board and his
law firm is no longer retained by the Company.
Pursuant to the terms of the merger agreement, the Company was
obligated to loan, at any time prior to the closing of the
transaction, an aggregate amount of up to $250,000 to API, upon
request of API. On October 4, 1995, the Company made an unsecured
loan to API of $100,000 which is evidenced by a 7% promissory note
(see note 9).
(7) Sale of Actinex(R) Technology
On June 29, 1990, the Company signed a definitive agreement to sell
Actinex(R), a product developed by the Company for the treatment and
prevention of actinic keratoses to Block. As of December 31, 1990,
the Company received a total of $2 million in non-refundable payments
from Block for the sale of Actinex(R). The Company received from
Block during fiscal 1992 the following additional milestone payments:
$1 million upon receipt of the "approvable" letter from the FDA, $3
million upon receipt of the "approval" letter from the FDA, $2 million
upon first sale of the product by Block. An additional milestone of
$2 million to be paid on the first two anniversaries of the first sale
was waived
F-28
<PAGE> 68
ACCESS PHARMACEUTICALS, INC.
FORMERLY CHEMEX PHARMACEUTICALS, INC.
Notes to Financial Statements
(continued)
since the FDA did not grant the approval of the drug by June 29, 1992.
In its place, Block has agreed to pay a 2.5% royalty on the fist $40
million of cumulative sales of Actinex(R) (equivalent to $1 million).
The Company is also entitled to receive royalties on the sale of the
product worldwide (5% on sales in countries where the patent is
protected and 2.5% on sales in countries where the patent is not
protected) after the first $40 million of cumulative sales are
achieved. The Company recorded royalties of $1,000 in 1995, $26,000
in 1994 and $49,000 in 1993.
(8) Block Joint Venture and Subsequent Dissolution
On June 20, 1991 the Company and Block entered into a Joint Venture
and for such purpose established an equally-owned New Jersey general
partnership. The objective of the Joint Venture was to develop,
manufacture and market products developed by the Joint Venture. Both
Companies were to share equally in the profits of the Joint Venture.
The Company contributed all of its dermatological products to the
Joint Venture and agreed to dedicate its current research staff to the
performance of the Joint Venture research and development of up to $17
million during the five years of the research and development
agreement. The initial $3 million of research and development funding
was paid for by Block after which each partner was obligated to
contribute 50% of research and development cost up to an aggregate of
$14 million. Each party was obligated to offer all of their
respective new dermatological products to the Joint Venture during the
five year period. In addition, under the terms of the agreement,
Block paid the Company $2 million for certain of its proprietary
assets and Block contributed such assets to the Joint Venture.
As a result of entering into the Joint Venture, the Company's research
and development staff activities were then directed almost exclusively
to the Joint Venture effort. The Joint Venture was developing
Amlexanox (aphthous ulcers), EPC-K (inflammation of the skin), CHX-100
(anti-wrinkling), and CHX-108 (mild/moderate psoriasis).
In June 1994, Block purchased an additional 10% of the Joint Venture
from the Company (20% of the Company's share) for $1,700,000, thereby
changing the Joint Venture ownership to a 60/40 split in favor of
Block. The Company retained the right to re-purchase the 10% interest
for up to eighteen months after the purchase by Block.
As of December 31, 1994, by mutual consent, Block and the Company
agreed to terminate the Joint Venture. As part of the dissolution,
the Company returned to Block for $1,700,000, the 10% Joint Venture
ownership purchased by Block in June 1994 in return for the sale of
certain proprietary rights for Amlexanox to Block for a like amount;
Block returned its 50% share of all of the Joint Venture dermatology
drug portfolio (except Amlexanox); the Company returned its ownership
share of Penderm's Acticin to Block; and Block and the Company entered
into separate joint ownership agreements for Amlexanox.
Block and the Company have concluded several agreements as part of the
Joint Venture dissolution: (1) Asset Distribution Agreement ("ADA")
which effectively dissolves the Joint Venture and specifies the
distribution of assets of the Joint Venture; (2) Product Development
Agreement ("PDA") and Manufacturing, Marketing and Distribution
Agreement ("MMS") which established the joint ownership
F-29
<PAGE> 69
ACCESS PHARMACEUTICALS, INC.
FORMERLY CHEMEX PHARMACEUTICALS, INC.
Notes to Financial Statements
(continued)
of Amlexanox and the responsibilities of each party; and (3) a
separate agreement giving the Company an option to transfer its share
of the ownership rights to Amlexanox to Block for a non-refundable
upfront royalty payment plus future royalties, subject to consent by
Takeda Chemicals (the licensor of Amlexanox) and the Company
shareholder approval.
The ADA distributes the following rights to products: the Company
received Block's share of the rights to EPC- K1 a drug under license
from Senju Pharmaceuticals for atopic dermatitis; CEDE- 108-
potentially for psoriasis; and CHX-100 for the treatment of photoaging
of the skin; and Block received the Company's share to the rights for
Penederm's retinoic acid product.
The PDA and MMS Agreements outline the responsibilities of the parties
in terms of the development and commercialization of any Amlexanox
product for all oral use. The Company was responsible for all
development and regulatory activities and Block was responsible for
manufacturing, marketing and distribution of any Amlexanox products.
The MMS Agreement also defines the sharing of any profits or losses of
any Amlexanox product and further allows the Company the option, on a
country by country basis, to agree to a profit and loss arrangement or
a royalty.
On June 7, 1995, the Company entered into an agreement with Block to
sell its rights to Amlexanox for a non- refundable upfront royalty
payment of $2.5 million plus future royalties, if any, which was
approved by the Company shareholders on September 14, 1995.
(9) Subsequent Events
On January 25, 1996, the Company's Shareholders, at a Special
Shareholders Meeting, approved the merger with API. Under the terms
of the agreement, API was merged into Chemex with Chemex as the
surviving legal entity. Chemex acquired all of the outstanding shares
of API in exchange for 13,919,979 shares of registered common stock of
Chemex. Chemex also changed its name to ACCESS Pharmaceuticals, Inc.
and the operations of the merged company are now based in
Dallas, Texas. Shareholders of both companies approved the merger.
As of December 31, 1995, the Company had incurred $140,000 in
connection with the merger.
As a result of the merger, the former API Stockholders own
approximately 60% of the issued and outstanding shares of Chemex.
Generally accepted accounting principles require that a company whose
stockholders retain the controlling interest in a combined business be
treated as the acquiror for accounting purposes. As a consequence,
the merger is being accounted for as a "reverse acquisition" for
financial reporting purposes and API has been deemed to have acquired
an approximate 60% interest in Chemex. Despite the financial
reporting requirement to account for the acquisition as a "reverse
acquisition," Chemex remains the continuing legal entity and
registrant for Securities and Exchange Commission reporting purposes.
F-30
<PAGE> 70
ACCESS PHARMACEUTICALS, INC.
FORMERLY CHEMEX PHARMACEUTICALS, INC.
Notes to Financial Statements
(continued)
The following summarizes API's results of operations for the years indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1995 1994
------------------ -------------------
<S> <C> <C>
Revenues $ 690,000 $ 1,039,000
Other income 5,000 9,000
------------------ -------------------
695,000 1,048,000
Expenses
Research and development 675,000 714,000
Other expenses 752,000 695,000
Depreciation 367,000 115,000
------------------ -------------------
1,794,000 1,524,000
------------------ -------------------
Net loss $ (1,099,000) $ (476,000)
================== ===================
</TABLE>
- -----------
x Estimates
In March 1996 the Company concluded a $6 million Private Placement of 8.57
million shares of common stock. The cash infusion will be used to continue the
advancement of the product portfolio which focuses on increasing the
therapeutic benefit and improving the efficiency of oncology therapeutics and
diagnostic agents by selectively targeting sites of disease and accelerating
drug clearance. The shares issued in the private placement have not been
registered, however the company has agreed to file a registration statement
within 90 days of the issuance covering such shares. The investors have agreed
not to sell any of the shares purchased in the offering until 180 days after
the closing.
As of January 29, 1996, ACCESS retained Mr. David Blech, the income beneficiary
of the Sentinel Charitable Remainder Trust (see Note 2(b)), as a consultant to
the Company for one year to advise on structuring transactions including equity
placements, licensing agreements and research and development collaborations.
Under the terms of the agreement Mr. Blech was paid $480,000 in 1996 and
received immediately exercisable warrants to purchase 600,000 shares of Common
Stock at an exercise price of $1.00 per share, which warrants expire in the
year 2000.
F-31
<PAGE> 71
===============================================================================
No person has been authorized in connection with the offering made
hereby to give any information or to make any representation not contained in
this Prospectus and, if given or made, such information or representation must
not be relied upon as having been authorized by the Company. This Prospectus
does not constitute an offer to sell or a solicitation of any offer to buy any
of the securities offered hereby to any person or by anyone in any jurisdiction
in which it is unlawful to make such offer or solicitation. Neither the delivery
of this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that the information contained herein is correct as of
any date subsequent to the date hereof.
------------
TABLE OF CONTENTS
Available Information ..................................................... 3
Risk Factors .............................................................. 4
The Company ............................................................... 7
Use of Proceeds ........................................................... 7
Price Range of Common Stock and Dividend Policy ........................... 7
Capitalization ............................................................ 8
Selected Financial Data ................................................... 9
Pro Forma Financial Statements ............................................ 10
Management's Discussion and Analysis of Financial Condition and Results
of Operations ........................................................... 12
Business .................................................................. 15
Management ................................................................ 25
Executive Compensation .................................................... 27
Certain Relationships and Related Transactions ............................ 30
Description of Capital Stock .............................................. 32
Security Ownership of Certain Beneficial Owners and Management ............ 33
Selling Stockholders ...................................................... 34
Plan of Distribution ...................................................... 36
Legal Matters ............................................................. 36
Experts ................................................................... 37
Index to Financial Statements ............................................. F-1
------------
================================================================================
================================================================================
9,171,415 Shares
[LOGO]
ACCESS PHARMACEUTICALS, INC.
COMMON STOCK
------------
PROSPECTUS
------------
June 12, 1996
================================================================================
<PAGE> 72
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses (other than underwriting discounts and commissions)
payable in connection with the sale of the Common Stock offer hereby are as
follows:
<TABLE>
<S> <C>
SEC registration fee . . . . . . . . . . . . . . . . . . $ 6,325
Printing and engraving expenses . . . . . . . . . . . . . 2,500
Legal fees and expenses . . . . . . . . . . . . . . . . . 20,000
Accounting fees and expenses . . . . . . . . . . . . . . 8,400
Blue Sky fees and expenses (including legal fees) . . . . 15,000
Transfer agent and registrar fees and expenses . . . . . 11,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 0
-------
Total . . . . . . . . . . . . . . . . . . . . . . . $63,225
-------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") empowers
a Delaware corporation to indemnify any person who was or is, or is threatened
to be made, a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of such corporation) by reason of the fact
that such person is or was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, provided that such person acted in good
faith and in a manner that such person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, such person had no reasonable cause to believe
his conduct was unlawful. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding. A Delaware corporation may also indemnify such persons against
expenses (including attorneys' fees) in actions brought by or in the right of
the corporation to procure a judgement in its favor, subject to the same
conditions set forth in the immediately preceding sentences, except that no
indemnification is permitted in respect of any claim issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and to the extent the Court of Chancery of the State of Delaware or the
court in which such action or suit was brought shall determine upon application
that, in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses as the Court of Chancery or
other such court shall deem proper. To the extent such person has been
successful on the merits or otherwise in defense of any action to above, or in
defense of any claim, issue or matter therein, the corporation must indemnify
such person against expenses (including attorneys' fees) actually and
reasonably incurred by such person connection therewith. The indemnification
and advancement of expenses provided for in, or granted pursuant to, Section
145 is not exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 145 of the DGCL also provides that a corporation may maintain
insurance against liabilities for which indemnification is not expressly
provided by the statute. The Registrant is insured against liabilities which
it may incur by reason of its indemnification obligations under its Certificate
of Incorporation, Bylaws and indemnification agreements.
Article X of the Registrant's Certificate of Incorporation provides that
the Registrant will indemnify, defend and hold harmless directors, officers,
employees and agents or the Registrant to the fullest extent currently
permitted under the DGCL.
In addition, Article X of the Registrant's Certificate of Incorporation,
provides that neither the Registrant
II-1
<PAGE> 73
nor its stockholders may recover monetary damages from the Registrant's
directors for a breach of their fiduciary duty in the performance of their
duties as directors of the Registrant, unless such breach relates to (i) the
director's duty of loyalty, (ii) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the DGCL of (iv) any transactions for which the director
derived an improper personal benefit. The By-Laws of the Registrant provide
for indemnification of the Registrant's directors, officers, employees and
agents on the terms permitted under Section 145 of the DGCL described above.
The Registrant has entered into indemnification agreements with certain
of its directors and executive officers. These agreements provide rights of
indemnification to the full extent allowed and provided for by Section 145 of
the DGCL and the Certificate of Incorporation and Bylaws of Chemex.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In the three years preceding the filing of this registration statement,
the Company has issued the following securities that were not registered under
the Securities Act:
In connection with the Private Placement Offering in March 1996, the
Company issued 8,571,415 shares of Common Stock and warrants to purchase
600,000 shares of Common Stock.
No underwriters were involved in the foregoing sales of securities. Such
sales were made in reliance upon an exemption from the registration provisions
of the Securities Act set forth in Section 4(2) thereof relative to sales by an
issuer not involving any public offering or the rules and regulations
thereunder. All of the purchasers of securities in the transactions described
above represented to the Company that they were accredited investors as defined
in Rule 501(a) of Regulation D promulgated under the Securities Act and that
their intentions were to acquire the securities for investment only and under
the Securities Act and that their intentions were to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof, and appropriate legends were affixed to the securities
issued in such transactions. All recipients had adequate access to information
about the Company. All of the foregoing securities are deemed restricted
securities for the purpose of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE.
(a) Exhibits:
4. Exhibit Number
2.1 Amended and Restated Agreement of Merger and Plan of
Reorganization between ACCESS Pharmaceuticals, Inc
and Chemex Pharmaceuticals, Inc., dated as of October
31, 1995 (Incorporated by reference to Exhibit A of
the Company's Registration Statement on Form S-4
dated December 21, 1995, Commission File No.
33-64031)
3.0 Articles of incorporation and bylaws:
3.1 Certificate of Incorporation (Incorporated by
Reference to Exhibit 3(a) of the Chemex Form 8-B
dated July 12, 1989, Commission File Number 9-9134)
3.2 Bylaws (Incorporated by referenced to Exhibit 3(b) of
the Chemex Form 8-B dated July 12, 1989, Commission
File Number 0-9314)
3.3 Certificate of Amendment of Certificate of
Incorporation filed August 21, 1992
II-2
<PAGE> 74
3.4 Certificate of Merger filed January 25, 1996.
(Incorporated by reference to Exhibit E of the
Company's Registration Statement on Form S-4 dated
December 21, 1995, Commission File No. 33-64031)
3.5 Certificate of Amendment of Certificate of
Incorporation filed January 25, 1996. (Incorporated
by reference to Exhibit E of the Company's
Registration Statement on Form S-4 dated December 21,
1995, Commission File No. 33-64031)
5.1 Opinion of Bingham, Dana & Gould LLP
10.0 Material contracts:
* 10.1 Employee Stock Ownership Plan (Incorporated by the
reference to Exhibit 10 of the Company's Form 10-K
for the year ended December 31, 1986, commission File
Number 0-9314)
* 10.2 Employee Stock Ownership Trust (Incorporated by
reference to Exhibit 10 of the Company's form 10-K
for the year ended December 31, 1986, commission File
Number 0-9314)
* 10.3(a) Employment Agreement of Mr. Herbert H. McDade, Jr.
(Incorporated by reference to Exhibit 10 of the
Company's Form 10-K for the year ended December 31,
1988, Commission File Number 0-9314)
* 10.3(b) First Amendment to Employment Agreement of Mr.
Herbert H. McDade, Jr. Dated July 31, 1989
(Incorporated by reference to Exhibit 10.5(b) of the
Company's Form S-1 dated November 7, 1989, Commission
File Number 33-30685)
* 10.3 (c)Second Amendment to Employment Agreement of Mr.
Herbert H. McDade, Jr. dated December 13, 1989
(Incorporated by reference to Exhibit 10.3(a) of the
Company's form 10-K for the year ended December 31,
1990)
* 10.3(d) Third Amendment to Employment Agreement of Mr.
Herbert H. McDade, Jr. dated July 11, 1990
(Incorporated by reference to Exhibit 10.3(a) of the
Company's Form 10-K for the year ended December 31,
1990)
* 10.3(e) Fourth Amendment to Employment Agreement of Mr.
Herbert H. McDade, Jr. dated June 25, 1991
(Incorporated by reference to Exhibit 10 of the
Company's Form 10-K for the year ended December 31,
1991)
* 10.3(f) Fifth Amendment to Employment Agreement of Mr.
Herbert H. McDade, Jr. Dated December 31, 1991
(Incorporated by reference to Exhibit 6 of the
Company's Form 10-Q for the quarter ended June 30,
1994)
* 10.3(g) Sixth Amendment to Employment Agreement of Mr.
Herbert H. McDade, Jr. dated April 29, 1994
(Incorporated by reference to Exhibit 6 of the
Company's Form 10-Q for the quarter ended June 30,
1994)
10.4 Joint Venture and General Partnership Agreement
between Block Drug Company and Chemex
Pharmaceuticals, Inc., dated June 20, 1990,
(Incorporated by reference to Exhibit 28.1 of the
Company's Form S-3 dated August 5, 1991, Commission
File Number 33-42052)
10.5 Products Development Agreement between Block/Chemex,
II-3
<PAGE> 75
G.P. and Chemex Pharmaceuticals, Inc. dated June 20,
1991, Incorporated by reference to Exhibit 28.2 of
the Company's Form S-3 dated August 5, 1991,
Commission File Number 33-42052)
10.6 Patent Purchase Agreement between Block Drug Company,
Inc. and ACCESS Pharmaceuticals, Inc. dated June 20,
1992, (Incorporated by reference to Exhibit 28.2 of
the Company's Form S-3 dated August 5, 1991,
Commission File Number 33-42052)
10.7 Irrevocable Assignment of Proprietary Information
with Dr. Charles G. Smith (Incorporated by reference
to Exhibit 10.6 of the ACCESS Form 10-K for the year
ended December 31, 1991)
* 10.8 Option Agreement with Mr. Vernon Taylor III dated
September 25, 1990 (Incorporated by reference to
Exhibit 10 of the Company's Form 10-K for the year
ended December 31, 1990)
10.9 Conversion Agreement with Sentinel Charitable
Remainder Trust dated June 18, 1990 (Incorporated by
reference to Exhibit 10 of the Company's Form 10-K
for the year ended December 31, 1990)
10.10 Advisory Agreement with D. Blech & Company, Inc.
dated November 8, 1990 (Incorporated by reference to
Exhibit 10 of the Company's Form 10-K for the year
ended December 31, 1990)
10.11 Asset Purchase Agreement with Block Drug Company
dated June 29, 1990 (Incorporated by reference to
Exhibit 10 of the Company's Form 10-K for the year
ended December 31, 1990)
10.12 Assignment by Block Drug to Joint Venture of
Block/Penederm, Inc. Agreement dated March 24, 1993
(Incorporated by reference to Exhibit 10 of the
Company's Form 10-K for the year ended December 31,
1993)
10.13 Sale of 10% interest in the Block/Chemex Joint
Venture by Chemex Pharmaceuticals, Inc. to the Block
Drug Company, Inc. (Incorporated by reference to
Exhibit 6 of the Chemex Form 10-Q for the quarter
ended June 30, 1994)
10.14 1995 Stock Option Plan (Incorporated by reference
to Exhibit F of the Company's Registration Statement
on Form S-4 dated December 21, 1995, Commission File
No. 33-64031)
10.15 Stockholder's Agreement dated October 1995 between
ACCESS Pharmaceuticals, Inc. and Dr. David F. Ranney
(Incorporated by reference to Exhibit A of the
Company's Registration Statement on Form S-4 dated
December 21, 1995, Commission File No. 33-64031).
10.16 Patent Purchase Agreement dated April 5, 1994 between
David F. Ranney and ACCESS Pharmaceuticals, Inc.
(Incorporated by reference to Exhibit 10.16 of the
Company's Form 10-K for the year ended December 31,
1995)
10.17 First Amendment to Patent Purchase Agreement dated
January 23, 1996 between David F. Ranney and ACCESS
Pharmaceuticals, Inc. (Incorporated by reference to
Exhibit 10.17 of the Company's Form 10-K for the year
ended December 31, 1995)
23(a) Consent of Bingham, Dana & Gould LLP (included in
Exhibit 5.1)
23(b) Consent of KPMG Peat Marwick LLP
23(c) Consent of KPMG Peat Marwick LLP
23(d) Consent of Smith, Anglin & Co.
II-4
<PAGE> 76
26 Power of Attorney (See page II-5)
* Management contract or compensatory plan required to be filed
as an Exhibit to this Form pursuant to Item 14(c) of the
report
(b) Financial Statement Schedules:
All schedules are omitted because they are not applicable or
the required information is shown in the financial statements
or the notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions described in Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that claim of indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a from of
prospectus filed by the registrant pursuant to Rule 424(b) (1)
or (4) or 497(h) under the Securities Act shall be deemed to
be part of this registration statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement to
(i) Include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a
fundamental change in the information in the
registration statement. Notwithstanding the foregoing,
any increase or decrease in the volume of securities
offered (if the total dollar value of Securities
offered would not exceed that which was registered)
and any deviation from the low or high and of the
estimated maximum offering range may be reflected in
the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a
20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
II-5
<PAGE> 77
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas, Texas, on this
10th day of June, 1996.
ACCESS PHARMACEUTICALS, INC.
By /s/ Kerry P. Gray
--------------------------
Kerry P. Gray
President and Chief Executive
Officer, Treasurer
POWER OF ATTORNEY AND SIGNATURES
Each person whose signature appears below hereby constitutes and appoints
Kerry P. Gray, as his or her attorney- in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, (i) to sign any and all amendments
(including post-effective amendments) to this Registration Statement, (ii) to
sign any registration statement to be filed pursuant to Rule 462(b) under the
Securities Act of 1933 for the purpose of registering additional shares of
Common Stock for the same offering covered by this Registration Statement, and
(iii) to file any of the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as her or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following person in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ KERRY P. GRAY President and Chief Executive June 10, 1996
- ----------------------------------- Officer, Treasurer
Kerry P. Gray
/s/ HERBERT H. MCDADE, JR. Director June 10, 1996
- -----------------------------------
Herbert H. McDade, Jr.
Director June 10, 1996
- -----------------------------------
David F. Ranney
/s/ MICHAEL J. FLINN Director June 10, 1996
- -----------------------------------
Michael J. Flinn
/s/ ELIZABETH M. GREETHAM Director June 10, 1996
- -----------------------------------
Elizabeth M. Greetham
</TABLE>
II-6
<PAGE> 78
Exhibit Index
Exhibit No. Description
----------- -----------
2.1 Amended and Restated Agreement of Merger and Plan of
Reorganization between ACCESS Pharmaceuticals, Inc
and Chemex Pharmaceuticals, Inc., dated as of October
31, 1995 (Incorporated by reference to Exhibit A of
the Company's Registration Statement on Form S-4
dated December 21, 1995, Commission File No.
33-64031)
3.0 Articles of incorporation and bylaws:
3.1 Certificate of Incorporation (Incorporated by
Reference to Exhibit 3(a) of the Chemex Form 8-B
dated July 12, 1989, Commission File Number 9-9134)
3.2 Bylaws (Incorporated by referenced to Exhibit 3(b) of
the Chemex Form 8-B dated July 12, 1989, Commission
File Number 0-9314)
3.3 Certificate of Amendment of Certificate of
Incorporation filed August 21, 1992
3.4 Certificate of Merger filed January 25, 1996.
(Incorporated by reference to Exhibit E of the
Company's Registration Statement on Form S-4 dated
December 21, 1995, Commission File No. 33-64031)
3.5 Certificate of Amendment of Certificate of
Incorporation filed January 25, 1996. (Incorporated
by reference to Exhibit E of the Company's
Registration Statement on Form S-4 dated December 21,
1995, Commission File No. 33-64031)
5.1 Opinion of Bingham, Dana & Gould LLP
10.0 Material contracts:
* 10.1 Employee Stock Ownership Plan (Incorporated by the
reference to Exhibit 10 of the Company's Form 10-K
for the year ended December 31, 1986, commission File
Number 0-9314)
* 10.2 Employee Stock Ownership Trust (Incorporated by
reference to Exhibit 10 of the Company's form 10-K
for the year ended December 31, 1986, commission File
Number 0-9314)
* 10.3(a) Employment Agreement of Mr. Herbert H. McDade, Jr.
(Incorporated by reference to Exhibit 10 of the
Company's Form 10-K for the year ended December 31,
1988, Commission File Number 0-9314)
* 10.3(b) First Amendment to Employment Agreement of Mr.
Herbert H. McDade, Jr. Dated July 31, 1989
(Incorporated by reference to Exhibit 10.5(b) of the
Company's Form S-1 dated November 7, 1989, Commission
File Number 33-30685)
* 10.3 (c)Second Amendment to Employment Agreement of Mr.
Herbert H. McDade, Jr. dated December 13, 1989
(Incorporated by reference to Exhibit 10.3(a) of the
Company's form 10-K for the year ended December 31,
1990)
* 10.3(d) Third Amendment to Employment Agreement of Mr.
Herbert H. McDade, Jr. dated July 11, 1990
(Incorporated by reference to Exhibit 10.3(a) of the
Company's Form 10-K for the year ended December 31,
1990)
* 10.3(e) Fourth Amendment to Employment Agreement of Mr.
Herbert H. McDade, Jr. dated June 25, 1991
(Incorporated by reference to Exhibit 10 of the
Company's Form 10-K for the year ended December 31,
1991)
* 10.3(f) Fifth Amendment to Employment Agreement of Mr.
Herbert H. McDade, Jr. Dated December 31, 1991
(Incorporated by reference to Exhibit 6 of the
Company's Form 10-Q for the quarter ended June 30,
1994)
* 10.3(g) Sixth Amendment to Employment Agreement of Mr.
Herbert H. McDade, Jr. dated April 29, 1994
(Incorporated by reference to Exhibit 6 of the
Company's Form 10-Q for the quarter ended June 30,
1994)
<PAGE> 79
Exhibit No. Description
----------- -----------
10.4 Joint Venture and General Partnership Agreement
between Block Drug Company and Chemex
Pharmaceuticals, Inc., dated June 20, 1990,
(Incorporated by reference to Exhibit 28.1 of the
Company's Form S-3 dated August 5, 1991, Commission
File Number 33-42052)
10.5 Products Development Agreement between Block/Chemex,
G.P. and Chemex Pharmaceuticals, Inc. dated June 20,
1991, Incorporated by reference to Exhibit 28.2 of
the Company's Form S-3 dated August 5, 1991,
Commission File Number 33-42052)
10.6 Patent Purchase Agreement between Block Drug Company,
Inc. and ACCESS Pharmaceuticals, Inc. dated June 20,
1992, (Incorporated by reference to Exhibit 28.2 of
the Company's Form S-3 dated August 5, 1991,
Commission File Number 33-42052)
10.7 Irrevocable Assignment of Proprietary Information
with Dr. Charles G. Smith (Incorporated by reference
to Exhibit 10.6 of the ACCESS Form 10-K for the year
ended December 31, 1991)
* 10.8 Option Agreement with Mr. Vernon Taylor III dated
September 25, 1990 (Incorporated by reference to
Exhibit 10 of the Company's Form 10-K for the year
ended December 31, 1990)
10.9 Conversion Agreement with Sentinel Charitable
Remainder Trust dated June 18, 1990 (Incorporated by
reference to Exhibit 10 of the Company's Form 10-K
for the year ended December 31, 1990)
10.10 Advisory Agreement with D. Blech & Company, Inc.
dated November 8, 1990 (Incorporated by reference to
Exhibit 10 of the Company's Form 10-K for the year
ended December 31, 1990)
10.11 Asset Purchase Agreement with Block Drug Company
dated June 29, 1990 (Incorporated by reference to
Exhibit 10 of the Company's Form 10-K for the year
ended December 31, 1990)
10.12 Assignment by Block Drug to Joint Venture of
Block/Penederm, Inc. Agreement dated March 24, 1993
(Incorporated by reference to Exhibit 10 of the
Company's Form 10-K for the year ended December 31,
1993)
10.13 Sale of 10% interest in the Block/Chemex Joint
Venture by Chemex Pharmaceuticals, Inc. to the Block
Drug Company, Inc. (Incorporated by reference to
Exhibit 6 of the Chemex Form 10-Q for the quarter
ended June 30, 1994)
10.14 1995 Stock Option Plan (Incorporated by reference
to Exhibit F of the Company's Registration Statement
on Form S-4 dated December 21, 1995, Commission File
No. 33-64031)
10.15 Stockholder's Agreement dated October 1995 between
ACCESS Pharmaceuticals, Inc. and Dr. David F. Ranney
(Incorporated by reference to Exhibit A of the
Company's Registration Statement on Form S-4 dated
December 21, 1995, Commission File No. 33-64031).
10.16 Patent Purchase Agreement dated April 5, 1994 between
David F. Ranney and ACCESS Pharmaceuticals, Inc.
(Incorporated by reference to Exhibit 10.16 of the
Company's Form 10-K for the year ended December 31,
1995)
10.17 First Amendment to Patent Purchase Agreement dated
January 23, 1996 between David F. Ranney and ACCESS
Pharmaceuticals, Inc. (Incorporated by reference to
Exhibit 10.17 of the Company's Form 10-K for the year
ended December 31, 1995)
23(a) Consent of Bingham, Dana & Gould LLP (included in
Exhibit 5.1)
23(b) Consent of KPMG Peat Marwick LLP
23(c) Consent of KPMG Peat Marwick LLP
23(d) Consent of Smith, Anglin & Co.
<PAGE> 1
EXHIBIT 5.1
BINGHAM, DANA & GOULD LLP
150 Federal Street
Boston, Massachusetts 02110
June 12, 1996
ACCESS Pharmaceuticals, Inc.
2600 Stemmons Freeway, Suite 210
Dallas, TX 75207
Re: Registration Statement on Form SB-2
Under the Securities Act of 1933, as Amended
Ladies and Gentlemen:
We have acted as counsel to ACCESS Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), of 8,571,415 shares (the
"Shares") of the common stock, $.04 par value per shares (the "Common Stock"),
of the Company, and 600,000 shares of Common Stock (the "Warrant Shares"),
issuable upon the exercise of Warrants to purchase shares of Common Stock (the
"Warrants"), to be offered by certain stockholders of the Company pursuant to a
Registration Statement on Form SB-2, filed by the Company with the Securities
and Exchange Commission (the "Commission") on June 12, 1996.
As such counsel, we have reviewed the corporate proceedings taken by the
Company with respect to the authorization of the Warrant and the issuance of
the Shares and the Warrant Shares upon exercise of the Warrant. We have also
examined and relied upon originals or copies, certified or otherwise
authenticated to our satisfaction, of the Warrants and such corporate records,
documents, agreements and other instruments, and certificates of officers of the
Company as to certain factual matters, and have made such investigation of law,
and have discussed with officers and representatives of the Company such
questions of fact, as we have deemed necessary or appropriate to enable us to
express the opinion rendered hereby.
We have assumed without any investigation the genuineness of all
signatures, the conformity to the originals of all documents reviewed by us as
copies, the authenticity and completeness of all original documents reviewed by
us in original or copy form, and the legal competence of each individual
executing a document.
In rendering our opinion below regarding the shares, we have assumed,
without investigation, that the Company has received the consideration called
for by the resolutions of the Board of Directors of the Company authorizing the
issuance of the Shares.
We have also assumed that the registration requirements of the Act and
all applicable requirements of state laws regulating the sale of securities
will have been duly satisfied.
This opinion is limited solely to the General Corporation Law of the
State of Delaware as applied by courts located in Delaware.
Based upon the foregoing, we are of the opinion that the Shares are
validly issued, fully paid, and non-assessable and that the Warrant Shares,
when issued upon exercise of the warrants in accordance with the terms of the
warrants will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Bingham, Dana & Gould LLP
-----------------------------
BINGHAM, DANA & GOULD LLP
<PAGE> 1
EXHIBIT 23(b)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of
ACCESS Pharmaceuticals, Inc.
We consent to the use of our report on the 1995 financial statements of ACCESS
Pharmaceuticals, Inc. (a development stage enterprise) included herein and to
the reference to our Firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
--------------------------
KPMG Peat Marwick LLP
Dallas, Texas
June 11, 1996
<PAGE> 1
EXHIBIT 23(c)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of
ACCESS Pharmaceuticals, Inc.
We consent to the use of our report on the financial statements of ACCESS
Pharmaceuticals, Inc. (formerly Chemex Pharmaceuticals, Inc.) included herein
and to the reference to our Firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
--------------------------
KPMG Peat Marwick LLP
Dallas, Texas
June 11, 1996
<PAGE> 1
EXHIBIT 23(d)
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
ACCESS Pharmaceuticals, Inc.
We consent to the use of our report included herein and to the reference to our
Firm under the heading "Experts" in the prospectus.
/s/ Smith Anglin & Co.
--------------------------
Smith Anglin & Co.
Dallas, Texas
June 11, 1996
