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ABEONA THERAPEUTICS INC. - Quarter Report: 2010 June (Form 10-Q)

a10q-063010.htm



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q
(Mark One)
     
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended June 30, 2010

OR
     
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Transition Period from                      to                     

Commission file number 0-9314

ACCESS PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
 
 
     Delaware    83-0221517
 (State or other jurisdiction of     (I.R.S. Employer I.D. No.)
 incorporation or organization)    
 

        
   2600 Stemmons Frwy, Suite 176, Dallas, TX 75207
(Address of principal executive offices)

 (214) 905-5100
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

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 requirements for the past 90 days.
Yes  þ   No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  o   No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
             
Large accelerated filer o
 
Accelerated filer o
 
Non-accelerated filer o
 
Smaller reporting company þ
   
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ

As of August 16, 2010, there were 15,686,450 shares of Access Pharmaceuticals, Inc. common stock outstanding. Also, as of August 16, 2010, there were 2,985.3617 shares of Series A Convertible Preferred Stock outstanding, and such shares were convertible into 9,951,198 shares of common stock.

 
 

 


ACCESS PHARMACEUTICALS, INC.

INDEX
 
PART I - FINANCIAL INFORMATION
 
        Page No.
 
Item 1.
Financial Statements:
 
       
   
Condensed Consolidated Balance Sheets at June 30, 2010
 
   
(unaudited) and December 31, 2009
13
       
   
Condensed Consolidated Statements of Operations (unaudited) for the
 
   
three and six months ended June 30, 2010 and June 30, 2009
14
       
   
Condensed Consolidated Statement of Stockholders’ Deficit (unaudited)
 
   
for the three and six months ended June 30, 2010
15
       
   
Condensed Consolidated Statements of Cash Flows (unaudited) for the
   
six months ended June 30, 2010 and June 30, 2009
16
       
   
Notes to Unaudited Condensed Consolidated Financial Statements
17
       
 
Item 2.
Management's Discussion and Analysis of Financial Condition and
   
Results of Operations
2
       
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
9
       
 
Item 4T.
Controls and Procedures
9
       
       
       
PART II - OTHER INFORMATION
 
       
 
Item 1.
Legal Proceedings
10
       
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
10
       
 
Item 3.
Defaults Under Senior Securities
10
       
 
Item 4.
Removed and Reserved
11
       
 
Item 5.
Other Information
11
       
 
Item 6.
Exhibits
11
       
SIGNATURES
 
12
       
CERTIFICATIONS
   
 

 
1

 

PART I –FINANCIAL INFORMATION

This Quarterly Report (including the information incorporated by reference) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties including, but not limited to the uncertainties associated with research and development activities, clinical trials, our ability to raise capital, the timing of and our ability to achieve regulatory approvals, dependence on others to market our licensed products, collaborations, future cash flow, the timing and receipt of licensing and milestone revenues, the future success of our marketed products and products in development, our sales projections, and the sales projections of our licensing partners, our ability to achieve licensing milestones and other risks described below as well as those discussed elsewhere in this Quarterly Report, documents incorporated by reference and other documents and reports that we file periodically with the Securities and Exchange Commission. These statements include, without limitation, statements relating to our ability to continue as a going concern, anticipated product approvals and timing thereof, product opportunities, clinical trials and U.S. Food and Drug Administration (“FDA”) applications, as well as our drug development strategy, our clinical development organization, expectations regarding our rate of technological developments and competition, our expectations regarding minimizing development risk and developing and introducing technology, the size of our targeted markets, the terms of future licensing arrangements, our plans to hire additional accounting staff and implement appropriate procedures, the adequacy of our capital resources, and our ability to secure additional financing for our operations. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “could,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by such forward-looking statements.
 
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of filing this Quarterly Report to conform such statements to actual results.

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. (together with our subsidiaries, “we”, “Access” or the “Company”) is a Delaware corporation. We are an emerging biopharmaceutical company focused on developing a range of pharmaceutical products primarily based upon our nanopolymer chemistry technologies and other drug delivery technologies. We currently have one approved product, two products at Phase 2 of clinical development and several products in pre-clinical development. Low priority clinical and pre-clinical programs will be dependent on our ability to enter into collaborative arrangements. Certain of our development programs are dependent upon our ability to secure approved funding for such projects. Our description of our business, including our list of products and patents, takes into consideration our acquisition of MacroChem Corporation which closed February 25, 2009.

 
2

 
 
·  
MuGard™ is our approved product for the management of oral mucositis, a frequent side-effect of cancer therapy for which there is no established treatment. The market for mucositis treatment is estimated to be in excess of $1 billion world-wide. MuGard, a proprietary nanopolymer formulation, has received marketing allowance in the U.S. from the Food & Drug Administration (FDA). MuGard has been launched in Germany, Italy, UK, Greece and the Nordic countries by our European commercial partner, SpePharm. Our manufacturing of MuGard is underway as we expect to launch MuGard in the United States during the third quarter of 2010. We are also working with our partners in Korea and China for marketing.

·  
Our lead development candidate for the treatment of cancer is ProLindac™, a nanopolymer DACH-platinum prodrug. We recently completed a Phase 2 clinical trial on ProLindac in the European Union (EU), in patients with recurrent ovarian cancer. The clinical study had positive safety and efficacy results. On January 7, 2010, we announced that we are initiating a study of ProLindac combined with Paclitaxel in second line treatment of platinum pretreated advanced ovarian cancer patients. This multi-center study of up to 25 evaluable patients will be conducted in Europe. We are also currently planning a number of combination trials, looking at combining ProLindac with other cancer agents in solid tumor indications including colorectal and ovarian cancer. The DACH-platinum incorporated in ProLindac is the same active moiety as that in oxaliplatin (Eloxatin; Sanofi-Aventis), which has sales in excess of $2.0 billion.

·  
Thiarabine, or 4-thio Ara-C, is a next generation nucleoside analog licensed from Southern Research Institute. Previously named SR9025 and OSI-7836, the compound has been in two Phase 1/2 solid tumor human clinical trials and was shown to have anti-tumor activity. We are working with leukemia and lymphoma specialists at MD Anderson Cancer Center in Houston and intend to initiate additional Phase 2 clinical trials in adult AML, ALL and other indications.

·  
Cobalamin™ is our proprietary preclinical nanopolymer oral drug delivery technology based on the natural vitamin B12 oral uptake mechanism. We are currently developing a product for the oral delivery of insulin, and have conducted sponsored development of a product for oral delivery of human growth hormone. We are in discussion with several companies regarding the sponsored development of Cobalamin oral drug delivery formulations of proprietary and non-proprietary actives.

·  
Cobalamin-mediated cancer targeted delivery is a preclinical technology which makes use of the fact that cell surface receptors for vitamins such as B12 are often overexpressed by cancer cells. This technology uses nanopolymer constructs to deliver more anti-cancer drug to tumors while protecting normal tissues.

Products

We use our drug delivery technologies to develop the following products and product candidates:

 
3

 
 
Access Drug Portfolio
Compound
 
Originator
 
 
Technology
 
Indication
 
Clinical
Stage (1)
                 
MuGard™
 
Access
 
Mucoadhesive
liquid
 
Mucositis
 
(510k) Marketing clearance received
 
ProLindacTM (Polymer
   Platinate, AP5346)  (2)
 
 
Access /
Univ of
London
 
 
Synthetic
polymer
 
Cancer
 
Phase 2
Thiarabine (4-thio Ara-C) (3)
 
Southern
Research
Institute
 
 
Small
molecule
 
Cancer
 
Phase 1/2
Oral Insulin
 
 
Access
 
Cobalamin
 
Diabetes
 
Pre-clinical
Oral Delivery System
 
 
Access
 
Cobalamin
 
Various
 
Pre-clinical
Cobalamin™-Targeted Therapeutics
 
Access
 
Cobalamin
 
Anti-tumor
 
Pre-clinical
 

(1)  
For more information, see “Government Regulation” in our Annual Report on Form 10-K for description of clinical stages.
(2)  
Licensed from the School of Pharmacy, The University of London.
(3)  
Licensed from Southern Research Institute of Birmingham, Alabama.

RECENT EVENTS

On July 20, 2010, we announced we had signed an exclusive specialty distribution agreement with BioScrip, Inc. for MuGard. The agreement aligns us with comprehensive access to BioScrip’s nationwide distribution platform and the ability to leverage their extensive physician relationships, 110 BioScrip specialty pharmacies, mail distribution capability and diversified payor network.

On July 15, 2010, we announced that we had entered into a pre-licensing feasibility agreement with a leading biotechnology company to develop an oral formulation of its currently-marketed, proprietary injectable drugs. We will utilize our proprietary Cobalamin Oral Drug Delivery Technology to develop oral formulation of the drug for pre-clinical testing.

On April 13, 2010, we announced that we had completed our first commercial scale production run of MuGard in North America at Accupac, Inc. manufacturing facilities.

On March 30, 2010, we announced that we signed a collaborative development agreement with bioRASI, LLC to facilitate clinical development for our Cobalamin based oral insulin and Cobalamin based products.

On March 25, 2010, we announced that our Korean partner JCOM co., Ltd. received approval from the Korean Food and Drug Administration of its Registration Dossier for MuGard.

On March 11, 2010, we announced that we had received reports of significant bioavailability of orally delivered insulin in two independently-conducted animal studies with our Cobalamin™ Oral Drug Delivery Technology.

On January 22, 2010, we announced the sale of approximately 2.10 million shares of our common stock and warrants to purchase approximately 1.05 million shares of our common stock for gross proceeds of approximately $6.3 million. We sold these shares and warrants as a combined unit for $3.00 per unit (each unit consisting of one share and a warrant to purchase 0.5 shares of common stock). The exercise price of the warrants is $3.00 per share.

 
4

 
 
On January 7, 2010, we announced that we completed enrollment and evaluation of the last additional cohort of patients in the ongoing clinical study of ProLindac as a monotherapy in ovarian cancer patients who received at least two prior platinum based treatment regimens. The additional cohort of 8 patients received the ProLindac batch made by an improved scalable process, which will be used on a larger scale for future clinical and commercial supplies. None of the 8 patients experienced any acute significant adverse events, while treatment had the same beneficial pharmacodynamic effect seen in the first 26 patients treated with the former ProLindac production batch; clinically relevant sustained biomarker decrease (responses by Rustin's criteria) and disease stabilization were seen in several patients. The overall results of our Phase 1/2 exploratory single agent ProLindac study have helped define multiple safe dosing regimens, while the level of patient cohort accrued in the study antitumor activity was as expected in this very heavily pretreated patient cohort.

LIQUIDITY AND CAPITAL RESOURCES

We have funded our operations primarily through private sales of common stock, preferred stock, convertible notes and through licensing agreements. Our principal source of liquidity is cash and cash equivalents. Royalty revenues provided limited funding for operations during the six months ended June 30, 2010. As of June 30, 2010, our cash and cash equivalents were $2,758,000 and our net cash burn rate for the six months ended June 30, 2010, was approximately $470,000 per month, which included non-recurring manufacturing expenses. As of June 30, 2010, our working capital deficit was $5,230,000. Our working capital deficit at June 30, 2010 represented a decrease of $2,719,000 as compared to our working capital deficit as of December 31, 2009 of $7,949,000. The decrease in the working capital deficit at June 30, 2010 reflects net receipts from our January 2010 offering of $5,848,000 offset by the first six months operating costs. As of June 30, 2010, we had one convertible note outstanding in the principal amount of $5.5 million which is due September 13, 2011.

As of August 16, 2010, we did not have enough capital to achieve our long-term goals. If we raise additional funds by selling equity securities, the relative equity ownership of our existing investors will be diluted and the new investors could obtain terms more favorable than previous investors. A failure to obtain necessary additional capital in the future could jeopardize our operations and our ability to continue as a going concern.

We have generally 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. Since inception, our expenses have significantly exceeded revenues, resulting in an accumulated deficit as of June 30, 2010 of $239,816,000. We expect that our capital resources will be adequate to fund our current level of operations into the first quarter of 2011. However, our ability to fund operations over this time could change significantly depending upon changes to future operational funding obligations or capital expenditures. As a result, we are required to seek additional financing sources within the next twelve months. We cannot assure you that we will ever be able to generate significant product revenue or achieve or sustain profitability.

 
5

 
 
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. We cannot assure you 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.

SECOND QUARTER 2010 COMPARED TO SECOND QUARTER 2009

Our licensing revenue for the second quarter of 2010 was $87,000 as compared to $63,000 for 2009, an increase of $24,000. We recognize licensing revenue over the period of the performance obligation under our licensing agreements.

We received royalties of $18,000 in the second quarter of 2010 as compared to no royalties for the same period in 2009. Royalties for MuGard were first recorded in the third quarter of 2009.

Total research and development spending for the second quarter of 2010 was $733,000, as compared to $582,000 for 2009, an increase of $151,000. The increase in expenses was primarily due to:

·  
increased stock compensation expense due to the calculated expense of options grants ($193,000);
·  
increased salary and related costs due to employees at full salary in the second quarter of 2010 while employees were paid at a reduced salary in June 2009 ($31,000);
·  
other net increases in research spending ($50,000);
·  
offset by lower costs for product manufacturing for ProLindac which were higher in 2009 ($51,000);
·  
offset also by lower costs for clinical development ($36,000); and
·  
offset by lower scientific consulting expenses ($36,000).

Total general and administrative expenses were $1,253,000 for the second quarter of 2010, a decrease of $254,000 compared to 2009 expenses of $1,507,000 for the same quarter. The decrease in expenses was due primarily to the following:

·  
lower general business consulting expenses due to reduction in use of outside consultants ($295,000);
·  
lower license fees due to the termination of a license that was previously accrued ($200,000);
·  
lower potential liquidated damages under an investor rights agreement with certain investors ($159,000);
·  
lower general and administrative expenses incurred by MacroChem in 2010  ($57,000);
·  
other net decreases in other general and administrative expenses ($51,000);
·  
offset by higher investor relations expenses ($374,000); and
·  
offset by higher salary and related costs due to the addition of two new employees and due to existing employees at full salary in the second quarter of 2010 while employees were paid at a reduced salary in June 2009 ($134,000).

Depreciation and amortization was $59,000 for the second quarter of 2010, as compared to $66,000 for 2009, a decrease of $7,000. The decrease in expenses was primarily due to assets becoming fully depreciated.

 
6

 
 
Total operating expenses for the second quarter of 2010, were $2,045,000 as compared to total operating expenses of $2,155,000 for same period in 2009, a decrease of $110,000 for the reasons listed above.

Interest and miscellaneous income was $512,000 for the second quarter of 2010, as compared to $2,000 for the same period in 2009, an increase of $510,000. Miscellaneous income is $509,000 higher in 2010 as compared to the same period in 2009 due to negotiated payables and write-off  of other accounts payable. Interest income is $1,000 higher in 2010 as compared to the same period in 2009.

Interest and other expense was $143,000 for the second quarter of 2010, as compared to $118,000 in 2009, an increase of $25,000. The increase in interest and other expense was due to the interest due on the unpaid portion of the long-term notes and dividends.

We recorded derivative gain of $3,361,000 for the second quarter of 2010. A derivative was recorded in the fourth quarter of 2009 when the fair value of the warrants, that were issued with our Series A Convertible Preferred Stock, were reclassified from equity to a liability per the requirements of new accounting guidance. Although we were required, per the guidance, to adopt this guidance effective January 1, 2009, there was no derivative liability recorded in the second quarter of 2009. If a derivative was recorded in the second quarter of 2009 there would have been a derivative loss of $2,036,000.

Preferred stock dividends of $446,000 were accrued for the second quarter of 2010 and $483,000 for 2009, a decrease of $37,000. The decrease is due to preferred shareholders converting their ownership to common stock. Dividends are paid semi-annually in either cash or common stock.

Net income allocable to common stockholders for the second quarter of 2010, was $1,344,000, or a $0.09 basic and $0.07 diluted income per common share, compared with a loss of $2,691,000, or a $0.24 basic and diluted loss per common share for the same period in 2009, a decreased loss of $4,035,000.

SIX MONTHS ENDED JUNE 30, 2010 COMPARED TO SIX MONTHS ENDED JUNE 30, 2009

Our licensing revenue for the first six months of 2010 was $174,000 as compared to $104,000 for the same period of 2009. We recognize licensing revenue over the period of the performance obligation under our licensing agreements.

We received royalties of $33,000 for the first six months of 2010 as compared to no royalties for the same period in 2009. Royalties for MuGard were first recorded in the third quarter of 2009.

Total research and development spending for the first six months of 2010 was $1,519,000, as compared to $1,269,000 for the same period in 2009, an increase of $250,000. The increase in expenses was primarily due to:

·  
increased stock compensation expense due to the calculated expense of options grants ($230,000);
·  
increased salary and related costs ($65,000);
·  
increased costs for our internal lab costs for various projects ($54,000);
·  
increased costs for our external lab costs for various projects ($41,000);
 
 
7

 
 
·  
increased costs for clinical development as we prepared to start our new ProLindac combination therapy clinical trial  ($44,000);
·  
other net increases in research spending ($32,000);
·  
offset by lower costs for product manufacturing for ProLindac which were higher in 2009 ($116,000); and
·  
offset by lower scientific consulting expenses ($100,000).

Total general and administrative expenses were $2,151,000 for the first six months of 2010, a decrease of $603,000 over 2009 expenses of $2,754,000. The decrease in spending was due primarily to the following:

·  
lower general business consulting expenses due to reduction in use of outside consultants ($405,000);
·  
lower potential liquidated damages under an investor rights agreement with certain investors ($317,000);
·  
lower license fees due to the termination of a license that was previously accrued ($200,000);
·  
lower general and administrative expenses incurred by MacroChem in 2010  ($196,000);
·  
net decreases in other general and administrative expenses ($26,000);
·  
offset by higher investor relations expenses ($395,000); and
·  
offset by higher salary and related costs due to the addition of two new employees ($146,000).

Depreciation and amortization was $120,000 for the first six months of 2010 as compared to $132,000 for the same period in 2009 reflecting a decrease of $12,000. The decrease in depreciation and amortization was due to assets becoming fully depreciated.

Total operating expenses for the first six months of 2010 were $3,790,000 as compared to total operating expenses of $4,155,000 for same period in 2009, a decrease of $365,000 for the reasons listed above.

Interest and miscellaneous income was $516,000 for the first six months of 2010 as compared to $16,000 for the same period of 2009, an increase of $500,000. Miscellaneous income is $509,000 higher in 2010 as compared to the same period in 2009 due to negotiated payables and write-off  of other accounts payable. Interest income is $7,000 lower in 2010 as compared to the same period in 2009.

Interest and other expense was $292,000 for the first six months of 2010 as compared to $262,000 in 2009, an increase of $30,000.

We recorded derivative gain of $6,238,000 for the first six months of 2010. A derivative was recorded in the fourth quarter of 2009 when the fair value of the warrants, that were issued with our Series A Convertible Preferred Stock, were reclassified from equity to a liability per the requirements of new accounting guidance. Although we were required, per the guidance, to adopt this guidance effective January 1, 2009, there was no derivative liability recorded in the first six months of 2009. If a derivative was recorded in the first six months of 2009 there would have been a derivative loss of $4,255,000.

Preferred stock dividends of $888,000 were accrued for the first six months of 2010 and $963,000 for 2009, a decrease of $75,000. The decrease is due to preferred shareholders converting their ownership to common stock. Dividends are paid semi-annually in either cash or common stock.

 
8

 
 
Net income allocable to common stockholders for the first six months of 2010 was $1,991,000, or a $0.13 basic and $0.11 diluted income per common share, compared with a loss of $5,260,000, or a $0.48 basic and diluted loss per common share for the same period in 2009, a decreased loss of $7,251,000.

ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4T.           CONTROLS AND PROCEDURES

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Act”)) as of March 31, 2010. Based on this evaluation, our CEO and CFO concluded that, as of June 30, 2010, our disclosure controls and procedures were not effective. This conclusion was based on the existence of the material weaknesses in our internal control over financial reporting previously disclosed and discussed below.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management, including our principal executive officer and principal accounting officer, conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on its evaluation, our management concluded in our Annual Report on Form 10-K for the year ended December 31, 2009 that there is a material weakness in our internal control over financial reporting. As of the date of this report on Form 10-Q, we have not remediated such material weakness and as a result, our Chief Executive Officer and Chief Financial Officer have concluded that a material weakness continues to exist as of the end of the period covered by this Quarterly Report on Form 10-Q and our disclosure controls and procedures were not effective. The material weakness identified did not result in the restatement of any previously reported financial statements or any related financial disclosure, nor does management believe that it had any effect on the accuracy of the Company’s financial statements for the current reporting period. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

 
9

 
 
The material weakness relates to the monitoring and review of work performed by our Chief Financial Officer in the preparation of financial statements, footnotes and financial data provided to the Company’s registered public accounting firm in connection with the annual audit. All of our financial reporting is carried out by our Chief Financial Officer. This lack of accounting staff results in a lack of segregation of duties and accounting technical expertise necessary for an effective system of internal control.

In order to mitigate this material weakness to the fullest extent possible, all financial statements are reviewed by the Chief Executive Officer as well as the Chairman of the Audit Committee for reasonableness. All unexpected results are investigated. At any time, if it appears that any control can be implemented to continue to mitigate such weaknesses, it is immediately implemented. As soon as our finances allow, we plan to hire sufficient accounting staff and implement appropriate procedures for monitoring and review of work performed by our Chief Financial Officer.

Changes In Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2010 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.


PART II -- OTHER INFORMATION


ITEM 1.             LEGAL PROCEEDINGS

None.


ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the second quarter of 2010 we issued 100,000 shares Access common stock to consultants for their consulting fees. The issuance of shares of our common stock in settlement of these accounts was made pursuant to Section 4(2) and for Rule 506 of the Securities Act of 1933, as amended.

During the second quarter of 2010 we also issued 6,249 shares Access common stock to an employee as required by his employment agreement. The issuance of shares of our common stock in settlement of these accounts was made pursuant to Section 4(2) and for Rule 506 of the Securities Act of 1933, as amended.


ITEM 3.             DEFAULTS UPON SENIOR SECURITIES

Pursuant to the terms of the Certificate of Designations, Rights and Preferences of our Series A Cumulative Convertible Preferred Stock, we are required to pay dividends in cash or shares of our common stock, semi-annually, at the rate of 6% per annum. If funds are not currently available to pay cash dividends or if a cash payment of dividends would be impermissible under Delaware law, we may in certain circumstances pay such dividends in shares of the Company’s common stock. In order to pay such dividends in shares of the Company’s common stock, there must either be an effective registration statement covering the resale of the dividend shares, the resale must be permissible subject to an exemption from registration, or the respective holders of Series A Preferred Stock must agree to accept restricted common stock as payment of such dividends. In the event none of these three circumstances are met, and the dividends have not been paid in cash or shares of the Company’s common stock, the dividends shall continue to accrue until they are paid in cash or shares of the Company’s common stock. The Company has accrued as of June 30, 2010, dividends payable in the aggregate amount of $3,548,000.

 
10

 
 
Pursuant to the terms of an Investor Rights Agreement with the purchasers of Series A Preferred Stock, the Company is required to maintain an effective registration statement with respect to certain shares issuable upon conversion of our outstanding preferred stock. As of June 30, 2010, the Securities and Exchange Commission had not yet declared a registration statement effective with respect to all of the shares covered by the Investor Rights Agreement, and as a result, we have accrued as of June 30, 2010, $857,000 in liquidated damages. A registration statement filed by us relating to a portion of such securities was declared effective on November 13, 2008.

ITEM 4.             REMOVED AND RESERVED


ITEM 5.             OTHER INFORMATION

None

ITEM 6.             EXHIBITS

Exhibits:

31.1
Certification of Chief Executive Officer of Access Pharmaceuticals, Inc. pursuant to Rule 13a-14(a)/15d-14(a)

31.2
Certification of Chief Financial Officer of Access Pharmaceuticals, Inc. pursuant to Rule 13a-14(a)/15d-14(a)

32.1*
Certification of Chief Executive Officer of Access Pharmaceuticals, Inc. pursuant to 18 U.S.C. Section 1350

32.2*
Certification of Chief Financial Officer of Access Pharmaceuticals, Inc. pursuant to 18 U.S.C. Section 1350
______________
* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filings under the Securities Act of 1933 or the Securities and Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

†Management contract or compensatory plan required to be filed as an Exhibit to this Form pursuant to Item 6 of the report.


 
11

 

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:
August 16, 2010
 
By:
/s/ Jeffrey B. Davis
 
   
Jeffrey B. Davis
   
Chief Executive Officer
   
(Principal Executive Officer)
     
Date:
August 16, 2009
 
By:
/s/ Stephen B. Thompson
 
   
Stephen B. Thompson
   
Vice President and Chief Financial Officer
   
(Principal Financial and Accounting Officer
     







 
12

 

Access Pharmaceuticals, Inc. and Subsidiaries

 
Condensed Consolidated Balance Sheets
 
 
                         
June 30, 2010
 
 
December 31, 2009 
                             ASSETS
(unaudited)
   
Current assets
Cash and cash equivalents
   Receivables
Prepaid expenses and other current assets
 
$          2,758,000
38,000
52,000
 
 
$             607,000
36,000
               42,000
                 Total current assets  2,848,000    685,000
Property and equipment, net
44,000
 
50,000
       
Patents, net
681,000
 
787,000
       
Other assets
52,000
 
61,000
            Total assets
 
$          3,625,000
 
$          1,583,000
        LIABILITIES AND STOCKHOLDERS' DEFICIT
     
Current liabilities
  Accounts payable
  Accrued expenses
  Dividends payable
  Accrued interest payable
  Current portion of deferred revenue
 
$          2,988,000
857,000
3,548,000
338,000
347,000
 
 
$          4,094,000
857,000
2,773,000
563,000
347,000
                Total current liabilities
8,078,000
 
8,634,000
Derivative liability
Long-term deferred revenue
Long-term debt
3,470,000
4,556,000
5,500,000
 
9,708,000
4,730,000
5,500,000
 Total liabilities
21,604,000
 
28,572,000
Commitments and contingencies
     
Stockholders' deficit
  Convertible Series A preferred stock - $.01 par value; authorized
      2,000,000 shares; 2,985.3617 shares issued at June 30, 2010
      and 2,992.3617 shares issued at December 31, 2009
  Common stock - $.01 par value; authorized 100,000,000 shares;
     issued, 15,672,284 at June 30, 2010 and 13,171,545 at
     December 31, 2009
  Additional paid-in capital
  Notes receivable from stockholders
  Treasury stock, at cost – 163 shares
  Accumulated deficit
 
 
 
-
 
 
157,000
222,729,000
(1,045,000)
(4,000)
(239,816,000)
 
 
 
 
-
 
 
132,000
215,735,000
(1,045,000)
(4,000)
(241,807,000)
                Total stockholders' deficit
(17,979,000)
 
(26,989,000)
    
            Total liabilities and stockholders' deficit
 
$          3,625,000
 
 
$          1,583,000
 
 

The accompanying notes are an integral part of these consolidated statements.

 
13

 

Access Pharmaceuticals, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations
(unaudited)


   
Three months ended
June 30,
   
Six months ended
June 30,
 
   
2010
   
2009
   
2010
   
2009
 
Revenues
                       
License revenues
  $ 87,000     $ 63,000     $ 174,000     $ 104,000  
Royalties
    18,000       -       33,000       -  
Total revenues
    105,000       63,000       207,000       104,000  
                                 
Expenses
                               
Research and development
    733,000       582,000       1,519,000       1,269,000  
General and administrative
    1,253,000       1,507,000       2,151,000       2,754,000  
Depreciation and amortization
    59,000       66,000       120,000       132,000  
Total expenses
    2,045,000       2,155,000       3,790,000       4,155,000  
                                 
Loss from operations
    (1,940,000 )     (2,092,000 )     (3,583,000 )     (4,051,000 )
                                 
Interest and miscellaneous income
    512,000       2,000       516,000       16,000  
Interest and other expense
    (143,000 )     (118,000 )     (292,000 )     (262,000 )
Gain on change in fair value of derivative
    3,361,000       -       6,238,000       -  
      3,730,000       (116,000 )     6,462,000       (246,000 )
Net income (loss)
    1,790,000       (2,208,000 )     2,879,000       (4,297,000 )
                                 
Less preferred stock dividends
    446,000       483,000       888,000       963,000  
Net income (loss) allocable to
common stockholders
  $ 1,344,000     $ (2,691,000 )   $ 1,991,000     $ (5,260,000 )
                                 
Net income (loss) per share
                               
Basic
  $ 0.09     $ (0.24 )   $ 0.13     $ (0.48 )
Diluted
  $ 0.07     $ (0.24 )   $ 0.11     $ (0.48 )
                                 
Weighted average basic and diluted
common shares outstanding
                               
   Basic
    15,460,072       11,406,700       15,115,424       10,954,472  
   Diluted
    27,937,880       11,406,700       27,824,943       10,954,472  
                                 
                                 



The accompanying notes are an integral part of these consolidated statements.




 
14

 

Access Pharmaceuticals, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Deficit
(unaudited)


   
Common Stock
   
Preferred Stock
                         
   
Shares
   
Amount
   
Shares
   
Amount
   
Additional
paid-in
capital
   
Notes receivable from stockholders
   
 
Treasury stock
   
 
Accumulated deficit
 
Balance
   December 31, 2009
    13,172,000     $ 132,000       2,992.3617     $ -     $ 215,735,000     $ (1,045,000 )   $ (4,000 )   $ (241,807,000 )
Restricted common
stock issued for services
    73,000       1,000       -       -       17,000       -       -       -  
Warrants issued for
  services
    -       -       -       -       19,000       -       -       -  
Preferred stock
converted into common
stock
      23,000         -       (7.0000 )       -         -         -         -         -  
Stock option
  compensation expense
    -       -       -       -       114,000       -       -       -  
Common stock issued
  for cash exercise of
  options
      10,000         -         -         -         14,000         -         -         -  
Common stock issued
  for cashless warrant
  exercise
      20,000         -         -         -         -         -         -         -  
Common stock issued
 $3.00 share, net of costs
    2,083,000       21,000       -       -       5,827,000       -       -       -  
Preferred dividends
    -       -       -       -       -       -       -       (442,000 )
Net income
    -       -       -       -       -       -       -       1,089,000  
Balance at March 31,
   2010
    15,381,000       154,000       2,985.3617       -        221,726,000       (1,045,000 )     (4,000 )     (241,160,000 )
                                                                 
Restricted common
stock issued for services
    106,000       1,000       -       -       248,000       -       -       -  
Stock option
  compensation expense
    -       -       -       -       440,000       -       -       -  
Common stock issued
  for cash exercise of
  options
      105,000         1,000         -         -         125,000         -         -         -  
Common stock issued
  for preferred dividends
    80,000       1,000       -       -       190,000       -       -       -  
Preferred dividends
    -       -       -       -       -       -       -       (446,000 )
Net income
    -       -       -       -       -       -       -       1,790,000  
Balance at June 30,
   2010
    15,672,000     $ 157,000       2,985.3617     $ -     $ 222,729,000     $ (1,045,000 )   $ (4,000 )   $ (239,816,000 )
                                                                 



The accompanying notes are an integral part of these consolidated statements.

 
15

 

Access Pharmaceuticals, Inc. and Subsidiaries
 
Condensed Consolidated Statements of Cash Flows
(unaudited)

   
Six Months ended June 30,
 
   
2010
   
2009
 
Cash flows from operating activities:
           
     Net income (loss)
  $ 2,879,000     $ (4,297,000 )
  Adjustments to reconcile net income (loss) to cash used
              in operating activities:
               
Gain on change in fair value of derivative
    (6,238,000 )     -  
     Gain on negotiated accounts payable     (509,000     -  
Depreciation and amortization
    120,000       132,000  
Stock option compensation expense
    554,000       308,000  
Stock and warrants issued for services
    286,000       564,000  
Change in operating assets and liabilities:
               
    Receivables
    (2,000 )     132,000  
      Prepaid expenses and other current assets
    (10,000 )     117,000  
Other assets
    9,000       53,000  
    Accounts payable and accrued expenses
    (597,000 )     60,000  
Dividends payable
    78,000       (137,000 )
Accrued interest payable
    (225,000 )     229,000  
Deferred revenue
    (174,000 )     1,380,000  
Net cash used in operating activities
    (3,829,000 )     (1,459,000 )
                 
Cash flows from investing activities:
               
    Capital expenditures
    (8,000 )     (2,000 )
 Proceeds from sale of asset
    -       1,000  
Net cash used in investing activities
    (8,000 )     (1,000 )
                 
Cash flows from financing activities:
               
 Proceeds from exercise of stock options
    140,000       14,000  
    Proceeds from common stock issuances, net of costs
    5,848,000       -  
Net cash provided by financing activities
    5,988,000       14,000  
                 
Net decrease in cash and cash equivalents
    (2,151,000 )     (1,446,000 )
Cash and cash equivalents at beginning of period
    607,000       2,677,000  
Cash and cash equivalents at end of period
  $ 2,758,000     $ 1,231,000  
                 
Supplemental cash flow information:
               
   Cash paid for interest
  $ 440,000     $ -  
                 
Supplemental disclosure of noncash transactions:
               
Shares issued for payables, notes payable and accrued interest
    -       859,000  
Shares issued for dividends on preferred stock
    191,000       856,000  
  Preferred stock dividends in dividends payable
    888,000       963,000  
                 

The accompanying notes are an integral part of these consolidated statements.


 
16

 

Access Pharmaceuticals, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements
Three and Six Months Ended June 30, 2010 and 2009
(unaudited)

(1)  Interim Financial Statements

The consolidated balance sheet as of June 30, 2010, the consolidated statements of operations for the three and six months ended June 30, 2010 and 2009, the consolidated statements of stockholders deficit for the three and six months ended June 30, 2010, and the consolidated statements of cash flows for the six months ended June 30, 2010 and 2009, were prepared by management without audit. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, except as otherwise disclosed, 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 accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these interim financial statements be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2009. The results of operations for the period ended June 30, 2010 are not necessarily indicative of the operating results which may be expected for a full year. The consolidated balance sheet as of December 31, 2009 contains financial information taken from the audited Access financial statements as of that date.

The report of our independent registered public accounting firm for the fiscal year ended December 31, 2009, contained a fourth explanatory paragraph to reflect its significant doubt about our ability to continue as a going concern as a result of our history of losses and our liquidity position, as discussed herein and in this Form 10-Q. We expect that our capital resources and expected receipts due under our license agreements will be adequate to fund our current level of operations into the first quarter of 2011. If we are unable to obtain adequate capital funding in the future or enter into future license agreements for our products, we may not be able to continue as a going concern, which would have an adverse effect on our business and operations, and investors’ investment in us may decline.

On February 25, 2009, we closed our acquisition of MacroChem Corporation through the issuance of an aggregate of approximately 2.5 million shares of our common stock. Prior to our acquisition of MacroChem, SCO, an investment company, held a majority of Access’ and MacroChem’s voting stock.  Specifically, SCO owned 53% of the voting stock of Access and 63% of the voting stock of MacroChem. A non-controlling interest of 37% existed at the merger date of MacroChem. In addition, certain members of SCO’s management serve on the board of directors of both Access and MacroChem. Based on these facts, Access and MacroChem were deemed under the common control of SCO. As the entities were deemed under common control, the acquisition was recorded similar to the pooling-of-interest method and the financial information for all periods presented reflects the financial statements of the combined companies in accordance with Financial Accounting Standards Board standards on business combinations for entities under common control.

 
17

 

(2)           Intangible Assets

Intangible assets consist of the following (in thousands):

   
June 30, 2010
   
December 31, 2009
 
   
Gross
carrying
value
   
Accumulated
amortization
   
Gross
carrying
value
   
Accumulated
Amortization
 
Amortizable intangible assets
 
Patents
  $  2,624     $  1,943     $  2,624     $  1,837  
                                 

Amortization expense related to intangible assets totaled $53,000 and $106,000 for each of the three and six months ended June 30, 2010 and totaled $53,000 and $106,000 for each of the three and six months ended June 30, 2009. The aggregate estimated amortization expense for intangible assets remaining as of June 30, 2010 is as follows (in thousands):

2010                               $         106
2011                                          212
2012                                            82
2013                                            44
2014                                            44
over 5 years                             193

Total                               $        681

(3)           Liquidity

The Company generated net income allocable to common stockholders of $1,991,000 for the six months ended June 30, 2010 and a loss of $19,226,000 for the year ended December 31, 2009. At June 30, 2010, our working capital deficit was $5,230,000. We expect that our capital resources and receipts due under our license agreements will be adequate to fund our current level of operations into the first quarter of 2011. However, our ability to fund operations over this time could change significantly depending upon changes to future operational funding obligations or capital expenditures. As a result we will be required to seek additional financing sources and enter into future licensing agreements for our products. If we are unable to obtain adequate capital funding in the future or enter into future license agreements for our products, we may not be able to continue as a going concern, which would have an adverse effect on our business and operations, and investors’ investment in us may decline.

(4)           Fair Value of Financial Instruments

The carrying value of cash, cash equivalents, receivables, accounts payable and accruals approximate fair value due to the short maturity of these items. The carrying value of the convertible long-term debt is at book value which approximates the fair value as the interest rate is at market value.

 
18

 
 
Effective January 1, 2008, we adopted fair value measurement guidance issued by the FASB related to financial assets and liabilities which define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. This guidance establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

·  
Level 1 – Quoted prices in active markets for identical assets or liabilities.
·  
Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
·  
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar valuation techniques that use significant unobservable inputs.

We have no Level 3 financial assets or liabilities. The guidance requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

We have segregated all financial assets and liabilities that are measured at fair value on a recurring basis (at least annually) into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the table below.

Financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2010 and December 31, 2009 are summarized below:

(in thousands)
 
June 30, 2010
   
December 31, 2009
 
   
Level 1
   
Level 2
   
Total
   
Level 1
   
Level 2
   
Total
 
Assets:
                                   
 Cash
  $ 2,758     $ -     $ 2,758     $ 607     $ -     $ 607  
                                                 
Liabilities:
                                               
 Derivative
    liability
  $ -     $ 3,470     $ 3,470     $ -     $ 9,708     $ 9,708  

The adoption of this guidance related to financial assets and liabilities on January 1, 2008 and non-financial assets and liabilities on January 1, 2009 did not have a material impact on our consolidated financial statements.


 (5)           Stock Based Compensation

For the three and six months ended June 30, 2010 we recognized stock-based compensation expense of $440,000 and $554,000. For the three and six months ended June 30, 2009 we recognized stock-based compensation expense of $252,000 and $308,000.

 
19

 
 
The following table summarizes stock-based compensation for the three and six months ended June 30, 2010:

   
Three months ended
June 30,
   
Six months ended
June 30,
 
   
2010
   
2009
   
2010
   
2009
 
                         
Research and development
  $ 291,000     $ 99,000     $ 365,000     $ 135,000  
General and administrative
    149,000       153,000       189,000       173,000  
Stock-based compensation expense
   included in operating expense
  $ 440,000     $ 252,000     $ 554,000     $ 308,000  
 
For the three and six months ended June 30, 2010 we granted 410,000 and 640,000 stock options, respectively. For the three and six months ended June 30, 2009 we granted 475,000 and 475,000 stock options, respectively. MacroChem options were cancelled upon acquisition by Access and are no longer outstanding.

Our weighted average Black-Scholes fair value assumptions used to value the 2010 and 2009 first six months grants are as follows:

         
 
6/30/10
 
6/30/09
 
Expected life (b)
   5.7 yrs
 
  5.5 yrs
 
Risk free interest rate
  2.4
%
  2.4
%
Expected volatility(a)
  123
  114
%
Expected dividend yield
  0.0
%
  0.0
%
         
 

(a)
   Reflects movements in our stock price over the most recent historical period equivalent to the expected life.
  (b)
   Based on the simplified method.

(6)           Stockholders’ Equity

On January 26, 2010, we completed the sale of approximately 2.10 million shares of our common stock and warrants to purchase approximately 1.05 million shares of our common stock at an exercise price of $3.00 per share for an aggregate purchase price of $6.3 million. Proceeds, net of cash issuance costs from the sale, were $5.8 million.

In connection with the sale we issued warrants for placement agent fees to purchase a total of 125,109 shares of our common stock at an exercise price of $3.75 per share. All of the warrants are exercisable immediately and expire five years from the date of issue. The fair value of the warrants was $2.19 per share on the date of grant using the Black-Scholes pricing model with the following assumptions: expected yield 0.0%, risk-free interest rate 2.38%, expected volatility 119% and an expected term of 5 years.

 
20

 

 (7)           Basic and Diluted Net Income (Loss) Per Common Share

Basic net income or loss per share is based upon the weighted average number of common shares outstanding during the period. Diluted net income or loss per share is based upon the weighted average number of common shares outstanding during the period, plus the effect of additional weighted average common equivalent shares outstanding during the period when the effect of adding such shares is dilutive. Common equivalent shares result from the assumed exercise of outstanding stock options and warrants (the proceeds of which are then assumed to have been used to repurchase outstanding stock using the treasury stock method). In addition, the assumed proceeds under the treasury stock method include the average unrecognized compensation expense of stock options that are in-the-money. This results in the “assumed” buyback of additional shares, thereby reducing the dilutive impact of stock options and warrants. Common equivalent shares have not been included in the net loss per share calculations for the three and six months ended June 30, 2009, because the effect of including them would have been anti-dilutive.

Basic and diluted net income (loss) per share were determined as follows:

(in thousands, except per share amounts)
 
Three months ended June 30,
   
Six months ended June 30,
 
   
2010
   
2009
   
2010
   
2009
 
                         
Basic net income (loss) allocable to common shareholders
  $ 1,344     $ (2,691 )   $ 1,991     $ (5,260 )
Weighted average shares outstanding
    15,460       11,407       15,115       10,954  
Basic net income (loss) per common share
  $ 0.09     $ (0.24 )   $ 0.13     $ (0.48 )
                                 
Basic net income (loss) allocable to common shareholders
  $ 1,344     $ (2,691 )   $ 1,991     $ (5,260 )
       Effect of dilutive securities                                
       Preferred stock dividends     446       -       888        -  
       Interest related to dividends     37        -        77        -  
       Diluted net income   $ 1,827     $  (2,691    2,956     (5,260
Weighted average shares outstanding
    15,460       11,407       15,115       10,954  
Effect of dilutive options, warrants and preferred stock
    12,478       -       12,710       -  
Weighted average shares outstanding assuming dilution
    27,938       11,407       27,825       10,954  
Diluted net income (loss) per common share
  $ 0.07     $ (0.24 )   $ 0.11     $ (0.48 )
                                 


We did not include the following securities in the table below in the computation of diluted net income (loss) per common share because the securities were anti-dilutive during the periods presented:

(in thousands, except per share amounts)
 
Three months ended June 30,
   
Six months ended June 30,
 
   
2010
   
2009
   
2010
   
2009
 
                         
Warrants
    6,175       9,564       6,150       9,564  
Stock options
    1,168       1,805       1,027       1,805  
Convertible note
    200       200       200       200  
Preferred stock
    -       10,693       -       10,693  
Total
    7,543       22,262       7,377       22,262  
                                 


 
21