UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
Commission File Number 0-9314
ACCESS PHARMACEUTICALS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 83-0221517
------------------------ --------------------------
(State of Incorporation) (I.R.S. Employer I.D. No.)
2600 Stemmons Frwy, Suite 176, Dallas, TX 75207
-----------------------------------------------
(Address of principal executive offices)
Telephone Number (214) 905-5100
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirement for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of each of the issuer's classes of common
stock, as of November 14, 2000, was 12,783,225 shares of Common Stock, $0.01
par value per share.
Total No. of Pages 14
PART I -- FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
The response to this Item is submitted as a separate section of this report.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Access Pharmaceuticals, Inc. is a Delaware corporation in the development
stage. We are an emerging pharmaceutical company focused on developing both
novel low development risk product candidates and technologies with longer-
term major product opportunities. Together with our subsidiaries, we have
proprietary patents or rights to five technology platforms: synthetic
polymers, bioerodible hydrogels, ResiDerm TM, carbohydrate targeting
technology and agents for the prevention and treatment of viral disease,
including HIV. In addition, Access' partner Block Drug Company, or Block, is
marketing in the United States Aphthasol TM, the first FDA approved product
for the treatment of canker sores. We are developing new formulations and
delivery forms to evaluate this product in additional clinical indications.
We have licensed the rights to amlexanox for the treatment of canker sores,
oral diseases and topical applications from Block for certain countries
excluding the U. S. and the worldwide rights for certain additional
indications including mucositis.
Except for the historical information contained herein, the following
discussions and certain statements in this Form 10-Q are forward-looking
statements that involve risks and uncertainties. In addition to the risks and
uncertainties set forth in this Form 10-Q, other factors could cause actual
results to differ materially, including but not limited to our research and
development focus, uncertainties associated with research and development
activities, uncertainty associated with, and the results of, preclinical and
clinical testing, future capital requirements, anticipated option and
licensing revenues, dependence on others, ability to raise capital, and other
risks detailed in our reports filed under the Securities Exchange Act,
including but not limited to our Annual Report on Form 10-K for the year
ended December 31, 1999.
Since our inception, we have devoted our resources primarily to fund our
research and development programs. We have been unprofitable since inception
and to date have received limited revenues from the sale of products. No
assurance can be given that we will be able to generate sufficient product
revenues to attain profitability on a sustained basis or at all. We expect
to incur losses for the next several years as we continue to invest in product
research and development, preclinical studies, clinical trials and regulatory
compliance. As of September 30, 2000, our accumulated deficit was $30,289,000
of which $8,894,000 was the result of the write-off of excess purchase price.
RECENT DEVELOPMENTS
On September 20, 2000, we completed a $13.5 million convertible note offering.
The offering was placed with three investors. The note has a fixed conversion
price of $5.50 per share of common stock and is not convertible for at least
twelve months. The note pays 7.0% per annum for the first twelve months and
if not converted at that time the note will be adjusted to 7.7% per annum.
The note is due September 13, 2005.
2
In addition, on September 13, 2000 we completed a transaction offering 250,000
shares of treasury stock to an individual at $5.50 share. We received gross
proceeds of $1.4 million from this sale.
On August 25, 2000 we issued 142,857 shares of our common stock to Mipharm SpA
in connection with an investment agreement between us and Mipharm that granted
Mipharm the right to acquire shares at $3.50 per share.
OTHER DEVELOPMENTS
On July 21, 2000, we initiated a voluntary odd-lot stock buy-back program
through which stockholders who own 25 or fewer shares of our common stock,
or Small-lot Stockholders, may elect to tender their shares for sale to
Access. Under this program, we will repurchase the shares held by Small-lot
Stockholders who validly tender their shares pursuant to the terms of the
odd-lot stock buy-back program. The per share purchase price to be paid by
Access to each participating Small-lot Stockholder for each share validly
tendered by such Small-lot Stockholder pursuant to the terms of the odd-lot
stock buy-back program will be the closing price of our common stock, as
quoted on the American Stock Exchange, on the date that a completed package,
addressed to Access and containing the Small-lot Stockholder's original stock
certificate(s) and a signed and properly completed Letter of Transmittal,
is post dated. This odd-lot stock buy-back program will remain available to
Small-lot Stockholders until November 30, 2000 unless extended.
On June 26, 2000 the Food and Drug Administration (FDA) cleared our
Investigational New Drug Application (IND) to commence Phase III clinical
development in the United States for OraDisc TM for the treatment of canker
sores. OraDisc TM, a polymer disc formulation which adheres to the disease
site and slowly erodes, locally releasing the drug, is potentially an improved
delivery vehicle for the oral delivery of amlexanox. Utilizing this
technology, it is anticipated that higher drug concentrations will be
achieved at the disease site, increasing the effectiveness of the product.
Previously, in April 2000, the FDA cleared our IND to commence a clinical
trial program for OraDisc TM and the initial irritation study conducted
under the IND has been successfully completed. The Phase III trial is being
conducted at 15 centers in the United States and one site in Europe. The
clinical trial will be a double-blind placebo controlled study with a no
treatment arm which will evaluate the ability of OraDisc TM to accelerate
healing and reduce pain once a canker sore has developed. This study has a
similar design to the studies conducted with the 5% amlexanox oral paste where
the product was proven effective accelerating healing and reducing pain.
Currently, a Phase III clinical study is being conducted in Northern Ireland
to evaluate OraDisc TM for the prevention of canker sores by applying the
product at the first sign or symptom of the disease.
Two European clinical studies of Zindaclin TM, which incorporates clindamycin
in the ResiDerm TM delivery system for the treatment of acne, have been
completed. These studies are a pharmacokinetics study to determine the
systemic absorption of Zindaclin TM and a pivotal Phase III study evaluating
the efficacy of the product. The results of these studies are expected to be
available soon. The ResiDerm TM delivery system uses zinc ions to enhance the
penetration of topically applied drugs into the skin and the accumulation of
drug in the skin, offering the prospect of improved clinical effectiveness
and reduced systemic side effects.
OraRinse TM is an adhesive oral liquid formulation of amlexanox for the
treatment of mucositis, a severe side effect of chemotherapy and radiation
treatment of cancer patients. The Phase II study to evaluate the potential of
OraRinse TM to prevent or reduce the severity of mucositis in head and neck
cancer patients undergoing radiation with or without chemotherapy is
approximately 50% enrolled. The study is expected to be completed in the 1st
quarter 2001.
3
Polymer Platinate, AP5280, is a chemotherapeutic agent incorporating platinum
bound to a polymer designed to improve the clinical benefit of platinum
therapy in cancer patients by concentrating the drug in the tumor and
reducing the side effects. A Phase I study to determine the dosing levels of
the product, was recently initiated and three patients have already received
treatment. The study is expected to take approximately 9-12 months depending
on the number of patients required to determine maximum dosing levels.
During the second quarter we completed two self-managed private placement
sales of our common stock, pursuant to which we sold 250,000 and 507,750
shares of our common stock at per share prices of $3.00 and $5.00,
respectively. We received gross proceeds of $3.3 million from these sales.
In addition, on March 1, 2000, with the assistance of an investment bank, we
completed the closing of a separate private placement offering of 4.8 million
shares of common stock, at a per share price of $2.50, for which we received
gross proceeds of $12.0 million. In accordance with the offering terms of this
$12.0 million private placement, the placement agent for the offering received
warrants to purchase 382,315 shares of our common stock at $2.50 per share,
and elected to receive 520,905 shares of common stock in lieu of certain sales
commissions. The funds from the private placements will be used principally for
general corporate purposes to support our operations and to fund clinical
development of our portfolio of product candidates. Exclusive of any payments
received from strategic partners, we have funds to support operations for
approximately 48 months. We registered the shares issued in each of the
private placements on a Form S-3 registration statement that we initially
filed with the Securities and Exchange Commission on May 25, 2000.
On March 28, 2000, our application for listing on the American Stock Exchange,
or AMEX, was approved and we began trading on AMEX on March 30, 2000 under the
symbol AKC.
On February 25, 2000 we signed licensing agreements with Mipharm S.p.A.
Pursuant to these agreements, we granted to Mipharm marketing and
manufacturing rights for amlexanox for numerous indications including the
prevention and treatment of canker sores and mucositis, oral lichen planus
and atopic dermatitis. We also granted manufacturing rights for Europe to
Mipharm for the products covered by the agreements. These licensing
agreements cover Italy, Switzerland, Turkey and Lebanon and relate to:
* the 5% paste formulation, approved in the United States for the treatment
of canker sores, which is in the regulatory process in Europe;
* the OraDisc TM formulation which is in Phase III clinical development for
the prevention and treatment of canker sores;
* OraRinse TM which has commenced Phase II clinical evaluation for the
prevention and treatment of mucositis;
* the 5% amlexanox cream formulation for the treatment for atopic
dermatitis; and
* a 5% amlexanox gel for the treatment of oral lichen planus.
Mipharm also has the option to license other Access product developments in
the fields of Dermatology and Gynecology in the territory covered by the
license agreements. In addition, under the terms of the agreements, Mipharm
paid up-front licensing fees and will make milestone payments and Access will
receive a percentage of the product sales made in the territory. Moreover,
pursuant to an investment agreement with Mipharm, Mipharm made an equity
investment in Access in 2000 and has the right to make an additional equity
investments in Access up to the first quarter in 2002.
4
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, our principal source of liquidity was $26,845,000
of cash and cash equivalents, short term investments and certificates of
deposits. Working capital as of September 30, 2000 was $25,718,000,
representing an increase in working capital of $25,630,000 as compared to
the working capital as of December 31, 1999 of $88,000. The increase in
working capital was due to the funds received from our March, May and
September 2000 private placements, our September 2000 issuance of
convertible notes and licensing revenues.
Since inception, our expenses have significantly exceeded revenues, resulting
in an accumulated deficit as of September 30, 2000 of $30,289,000. We have
funded our operations primarily through private sales of common stock and
convertible notes. Contract research payments, licensing fees and milestone
payments from corporate alliances and mergers have also provided funding for
operations.
We have incurred negative cash flows from operations since inception, and
have expended, and expect to continue to expend in the future, substantial
funds to complete our planned product development efforts. We expect that our
existing capital resources will be adequate to fund our current level of
operations through the year 2004.
We will expend substantial funds to conduct research and development programs,
preclinical studies and clinical trials of potential products, including
research and development with respect to our newly acquired and developed
technology. Our future capital requirements and adequacy of available funds
will depend on many factors, including:
* the successful commercialization of amlexanox;
* the ability to establish and maintain collaborative arrangements with
corporate partners for the research, development and commercialization of
products;
* continued scientific progress in our research and development programs;
* the magnitude, scope and results of preclinical testing and clinical trials;
* the costs involved in filing, prosecuting and enforcing patent claims;
* competing technological developments;
* the cost of manufacturing and scale-up;
* the ability to establish and maintain effective commercialization
arrangements and activities; and
* successful regulatory filings.
Third Quarter 2000 Compared to Third Quarter 1999.
Total research spending for the third quarter of 2000 was $1,051,000, as
compared to $349,000 for the same period in 1999, an increase of $702,000.
The increase in expenses was the result of:
* higher clinical development and product development costs for the
amlexanox projects: OraDisc TM ($286,000), OraRinse TM ($191,000) and
amlexanox cream ($14,000);
* higher external development costs for our polymer platinate project
($147,000); and
* higher employee expenses due to additional scientific staff ($64,000).
5
We expect that research spending will increase and remain higher than prior
years' quarters as we intend to hire additional scientific and clinical
staff, commence additional clinical trials and accelerate preclinical
development activities as we continue to develop our product candidates.
Total general and administrative expenses were $332,000 for the third quarter
of 2000 as compared to $293,000 for the same period in 1999, an increase of
$39,000. The change in spending for the periods was due primarily to
the following:
* higher legal and accounting expenses ($34,000);
* higher insurance costs due to clinical trial insurance ($23,000); and
* other net increases ($25,000).
Those increases were partially offset by lower patent costs ($43,000).
Depreciation and amortization was $110,000 for the third quarter 2000 as
compared to $84,000 for the same period in 1999, reflecting an increase of
$26,000. The increase in amortization is due to:
* amortization of goodwill of $21,000 recorded as a result of the purchase
of Virologix Corporation;
* amortization of licenses totaling $13,000; offset by,
* lower depreciation ($8,000) reflecting that some of our major assets have
been fully depreciated.
Interest and miscellaneous income was $236,000 for the third quarter of 2000
as compared to $18,000 for the same period in 1999, an increase of $218,000.
The increase in interest income was due to higher cash and short-term
investment balances in 2000 resulting from our private placements of common
stock and our convertible note offering in 2000.
Interest expense was $53,000 for the third quarter of 2000 as compared to
$3,000 for the same period in 1999, an increase of $50,000. The increase in
interest expense is due to interest accrued on the $13.5 million convertible
notes issued in September 2000 and amortization of debt issuance costs.
Net loss in the third quarter of 2000 was $1,310,000, or a $0.11 basic and
diluted loss per common share, compared with a loss of $711,000, or a $0.13
basic and diluted loss per common share, for the same period in
1999.
Nine Months ended September 30, 2000 Compared to Nine Months ended
September 30, 1999.
Total research spending for the nine months ended September 30, 2000 was
$2,723,000, as compared to $1,042,000 for the same period in 1999, an
increase of $1,681,000. The increase in expenses was the result of:
* higher clinical development and product development costs for the amlexanox
projects: OraDisc TM ($591,000), OraRinse TM ($529,000) and amlexanox
cream ($63,000);
* higher external development costs for our polymer platinate project
($304,000);
* higher employee expenses due to additional scientific staff ($117,000);
* moving expenses for scientific personal ($50,000); and
* recruitment expenses ($27,000).
6
We expect research spending to increase and remain higher than prior years'
quarters as we intend to hire additional scientific and clinical staff,
commence additional clinical trials and accelerate preclinical development
activities as we continue to develop our product candidates.
Total general and administrative expenses were $1,205,000 for the nine months
ended September 30, 2000 and 1999. Expenses increased in 2000 due to:
* higher salary and bonus expenses ($138,000);
* higher listing fees due to our listing on the American Stock Exchange
($30,000); and
* higher legal and accounting expenses ($92,000).
These increases were offset by a reduction in warrant costs ($260,000) due to
warrants granted to consultants.
Depreciation and amortization was $333,000 for the nine months ended
September 30, 2000 as compared to $177,000 for the same period in 1999, an
increase of $156,000. The increase in amortization is due to:
* amortization of goodwill of $144,000 recorded as a result of the purchase
of Virologix Corporation; and
* amortization of licenses totaling $40,000.
These increases were offset by lower depreciation ($28,000) reflecting that
some of our major assets have been fully depreciated.
Interest and miscellaneous income was $524,000 for the nine months ended
September 30, 2000 as compared to $37,000 for the same period in 1999, an
increase of $487,000. The increase in interest income was due to higher
cash balances in 2000 resulting from our private placements of common stock
and our convertible note offering in 2000.
Interest expense was $56,000 for the nine months ended September 30, 2000 as
compared to $11,000 for the same period in 1999, an increase of $45,000. The
increase in interest expense is due to interest accrued on the $13.5 million
convertible notes issued in September 2000 and amortization of debt issuance
costs.
Net loss for the nine months ended September 30, 2000 was $3,836,000, or a
$0.37 basic and diluted loss per common share compared with a loss of
$2,398,000, or a $0.58 basic and diluted loss per common share, for the
same period in 1999.
PART II -- OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
ITEM 2 CHANGES IN SECURITIES
On September 20, 2000, we completed a $13.5 million convertible note offering.
The offering
7
was placed with three investors each of whom, represented to us that they
are accredited investors within the meaning of Rule 501 under the Securities
Act of 1933, as amended. The note has a fixed conversion price of $5.50
per share of common stock and is not convertible for at least twelve months.
The note pays 7.0% per annum for the first twelve months and if not converted
the note will be adjusted to 7.7% per annum. The note is due September
13, 2005. Total expenses of issuance were $915,000. The shares associated
with the convertible note offering have not been registered. The Company
relied on Rule 506 and Section 4(2) of the 1933 Securities Act and the
provisions of Regulation D as exemptions from the registration thereunder.
On September 13, 2000 we completed a transaction offering 250,000 shares of
treasury stock at $5.50 per share to an individual who represented to us that
he is an accredited investor within the meaning of Rule 501 under the
Securities Act of 1933, as amended. We received gross proceeds of $1.4
million from this sale. The shares associated with this offering have not been
registered. The Company relied on Rule 506 and Section 4(2) of the 1933
Securities Act and the provisions of Regulation D as exemptions from the
registration thereunder.
On August 25, 2000 we issued 142,857 shares of our common stock to Mipharm SpA
in connection with an investment agreement between us and Mipharm that granted
Mipharm the right to acquire shares at $3.50 per share. The Company relied on
Regulation S and Section 4(2) of the Securities Act of 1933 as exemption from
the registration thereunder.
The proceeds from the convertible note offering, the treasury stock sale and
the Mipharm common stock sale will be used to fund the research and
development, clinical development and general operations of the company.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 OTHER INFORMATION
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
Exhibits: 10.24 2000 Special Stock Option Plan and Agreement
10.25 Form of Convertible Note
27.1 Financial Data Schedule
Reports on Form 8-K:
None
8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
ACCESS PHARMACEUTICALS, INC.
Date: November 14, 2000 By: /s/ Kerry P. Gray
--------------------------
Kerry P. Gray
President and Chief Executive Officer
Date: November 14, 2000 By: /s/ Stephen B. Thompson
--------------------------
Stephen B. Thompson
Vice President and Chief Financial Officer
9
Access Pharmaceuticals, Inc. and Subsidiaries
(a development stage company)
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
----------------- -----------------
ASSETS (unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 7,166,000 $ 869,000
Short term investments 7,864,000 -
Certificates of deposit 11,815,000 -
Accounts receivable 286,000 88,000
Accrued interest receivable 154,000 -
Prepaid expenses and other current assets 83,000 117,000
----------------- -----------------
Total current assets 27,368,000 1,074,000
Property and equipment, at cost 1,084,000 1,016,000
Less accumulated depreciation
and amortization (977,000) (908,000)
----------------- -----------------
107,000 108,000
Debt issuance costs 908,000 -
Licenses, net 921,000 899,000
Investments 150,000 150,000
Goodwill, net 2,176,000 2,361,000
Other assets 8,000 8,000
----------------- -----------------
Total assets $ 31,638,000 $ 4,600,000
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 956,000 $ 728,000
Accrued insurance premiums 36,000 77,000
Deferred revenues 658,000 155,000
Current portion of obligations
under capital leases - 26,000
----------------- -----------------
Total current liabilities 1,650,000 986,000
Convertible notes 13,500,000 -
----------------- -----------------
Total liabilities 15,180,000 986,000
----------------- -----------------
Commitments and contingencies - -
Stockholders' equity
Preferred stock - $.01 par value;
authorized 2,000,000 shares;
none issued or outstanding - -
Common stock - $.01 par value;
authorized 50,000,000 shares;
issued, 12,603,481 at September 30,
2000 and 6,089,763 at December 31,1999 126,000 61,000
Additional paid-in capital 46,619,000 30,006,000
Treasury stock, 256 shares at
September 30, 2000 2,000 -
Deficit accumulated during
the development stage (30,289,000) (26,453,000)
----------------- -----------------
Total stockholders' equity 16,458,000 3,614,000
----------------- -----------------
Total liabilities and stockholders' equity $ 31,638,000 $ 4,600,000
================= =================
</TABLE>
The accompanying notes are an integral part of these statements.
10
Access Pharmaceuticals, Inc. and Subsidiaries
(a development stage company)
Condensed Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three Months ended Nine Months ended February 24,
September 30, September 30, 1988
-------------------------- -------------------------- (inception) to
2000 1999 2000 1999 September 30, 2000
------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Revenues
Research and development $ - $ - $ - $ - $ 2,711,000
Option income - - - - 2,164,000
Licensing revenues - - - - 325,000
------------ ------------ ------------ ------------ --------------
Total revenues - - - - 5,200,000
Expenses
Research and development 1,051,000 349,000 2,723,000 1,042,000 14,696,000
General and administrative 332,000 293,000 1,205,000 1,205,000 11,003,000
Depreciation and amortization 110,000 84,000 333,000 177,000 1,887,000
Write-off of excess purchase price - - - - 8,894,000
------------ ------------ ------------ ------------ --------------
Total expenses 1,493,000 726,000 4,261,000 2,424,000 36,480,000
------------ ------------ ------------ ------------ --------------
Loss from operations (1,493,000) (726,000) (4,261,000) (2,424,000) (31,280,000)
------------ ------------ ------------ ------------ --------------
Other income (expense)
Interest and miscellaneous income 236,000 18,000 524,000 37,000 1,409,000
Interest and debt expense (53,000) (3,000) (56,000) (11,000) (248,000)
------------ ------------ ------------ ------------ --------------
183,000 15,000 468,000 26,000 1,161,000
------------ ------------ ------------ ------------ --------------
Loss before income taxes (1,310,000) (711,000) (3,793,000) (2,398,000) (30,119,000)
Provision for income taxes - - 43,000 - 170,000
------------ ------------ ------------ ------------ --------------
Net loss $(1,310,000) $ (711,000) $(3,836,000) $(2,398,000) $(30,289,000)
============ ============ ============ ============ ==============
Basic and diluted loss per
common share $(0.11) $(0.13) $(0.37) $(0.58)
Weighted average basic and diluted
common shares outstanding 12,133,463 5,469,021 10,436,095 4,116,746
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
11
Access Pharmaceuticals, Inc. and Subsidiaries
(a development stage company)
Condensed Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
February 24,
Nine Months ended September 30, 1988
------------------------------- (inception) to
2000 1999 September 30, 2000
------------ ------------ --------------
<S> <C> <C> <C>
Cash flows form operating activities:
Net loss $(3,836,000) $(2,398,000) $(30,289,000)
Adjustments to reconcile net loss to
cash used in operating activities:
Write-off of excess purchase price - - 8,894,000
Warrants issued in payment of
consulting expenses - 296,000 865,000
Research expenses related to
common stock granted - - 100,000
Depreciation and amortization 333,000 177,000 1,887,000
Deferred revenue 503,000 155,000 548,000
Licenses (100,000) (100,000) (525,000)
Change in operating assets
and liabilities:
Accounts receivable (198,000) (3,000) (287,000)
Accrued interest receivable (154,000) - (154,000)
Prepaid expenses and other
current assets 34,000 23,000 (84,000)
Other assets - - (6,000)
Accounts payable and accrued expenses 187,000 (142,000) 230,000
------------ ------------ --------------
Net cash used in operating activities (3,231,000) (1,992,000) (18,821,000)
------------ ------------ --------------
Cash flows from investing activities:
Capital expenditures (68,000) (3,000) (1,241,000)
Sales of capital equipment - - 15,000
Purchases of short term investments
and certificates of deposit (27,349,000) - (27,349,000)
Maturities of investments 7,673,000 - 7,673,000
Purchase of Virologix - (102,000) (102,000)
Purchase of Tacora, net of
cash acquired - - (124,000)
Other investing activities - - (150,000)
------------ ------------ --------------
Net cash used in investing activities (19,744,000) (105,000) (21,278,000)
------------ ------------ --------------
Cash flows from financing activities:
Proceeds from notes payable - - 721,000
Payments of principal on obligations
under capital leases (26,000) (153,000) (750,000)
Purchase of treasury stock (752,000) - (752,000)
Cash acquired in merger with Chemex - - 1,587,000
Proceeds from convertible note, net 12,622,000 - 12,622,000
Proceeds from stock issuances, net 17,428,000 2,789,000 33,837,000
------------ ------------ --------------
Net cash provided by financing
activities 29,272,000 2,636,000 47,265,000
------------ ------------ --------------
Net increase in cash and
cash equivalents 6,297,000 539,000 7,166,000
Cash and cash equivalents at
beginning of period 869,000 1,487,000 -
------------ ------------ --------------
Cash and cash equivalents at
end of period $ 7,166,000 $ 2,026,000 $ 7,166,000
============ ============ ==============
</TABLE>
The accompanying notes are an integral part of these statements.
12
Access Pharmaceuticals, Inc. and Subsidiaries
(a development stage company)
Notes to Condensed Consolidated Financial Statements
Nine Months Ended September 30, 2000 and 1999
(unaudited)
(1) Interim Financial Statements
The consolidated balance sheet as of September 30, 2000 and the consolidated
statements of operations and cash flows for the three and nine months ended
September 30, 2000 and 1999 were prepared by management without audit. In the
opinion of management, all adjustments, including only normal recurring
adjustments necessary for the fair presentation of the financial position,
results of operations, and changes in financial position for such periods,
have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these financial
statements be read in conjunction with the financial statements and notes
thereto included in our Annual Report on Form 10-K for the year ended
December 31, 1999. The results of operations for the periods ended September 30,
2000 are not necessarily indicative of the operating results which may be
expected for a full year. The consolidated balance sheet as of December 31,
1999 contains financial information taken from the audited financial
statements as of that date.
(2) Convertible Notes and Sales of Common Stock
On September 20, 2000, we completed a $13.5 million convertible note offering.
The offering was placed with three investors. The note has a fixed conversion
price of $5.50 per share of common stock and is not convertible for at
least twelve months. The note pays 7.0% per annum for the first twelve
months and if not converted at that time the note will be adjusted to 7.7%
per annum. The note is due September 13, 2005. Total expenses of issuance
were $915,000.
On September 13, 2000 we completed a transaction offering 250,000 shares of
treasury stock to an individual at $5.50 share. We received gross proceeds
of $1.4 million from this sale.
On August 25, 2000 we issued 142,857 shares of our common stock to Mipharm SpA
in connection with an investment agreement between us and Mipharm that granted
Mipharm the right to acquire shares at $3.50 per share.
(3) Short-term Investments
Short-term investments which consist of commercial paper and US government
securities, are carried at cost.
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