þ
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934.
|
¨
|
TRANSACTION
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
New
York
|
11-0853640
|
|
(State
or other Jurisdiction
of
|
(I.R.S.
Employer Identification
No.)
|
|
incorporation
or
organization)
|
||
616
N. North Court, Suite
120
|
||
Palatine,
Illinois
|
60067
|
|
(Address
of Principal Executive
Offices)
|
(Zip
Code)
|
ACURA
PHARMACEUTICALS, INC. AND SUBSIDIARY
|
||
INDEX
|
||
PART
1. FINANCIAL INFORMATION
|
||
Page
|
||
Item
1.
|
Financial
Statements (Unaudited)
|
2
|
Consolidated
Balance Sheets
|
||
March
31, 2007 and December 31, 2006
|
2
|
|
Consolidated
Statements of Operations
|
||
Three
months ended March 31, 2007 and March 31, 2006
|
3
|
|
Consolidated
Statement of Stockholders’ Deficit
|
||
Three
months ended March 31, 2007
|
4
|
|
Consolidated
Statements of Cash Flows
|
||
Three
months ended March 31, 2007 and March 31, 2006
|
5
|
|
Notes
to Consolidated Financial Statements
|
7
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
14
|
Item
4.
|
Controls
and Procedures
|
27
|
PART
II. OTHER INFORMATION
|
||
Item
1A.
|
Risk
Factors Relating to the Company
|
27
|
Item
2.
|
Unregistered
Sale of Equity Securities and Use of Proceeds
|
27
|
Item
6.
|
Exhibits
|
28
|
Signatures
|
28
|
Item
1. Financial
Statements
|
|||||||
ACURA
PHARMACEUTICALS, INC. AND SUBSIDIARY
|
|||||||
CONSOLIDATED
BALANCE SHEETS
|
|||||||
UNAUDITED
|
|||||||
(in
thousands, except par values)
|
|||||||
March
31,
|
|
December
31,
|
|
||||
|
|
2007
|
|
2006
|
|||
ASSETS
|
|||||||
CURRENT
ASSETS
|
|||||||
Cash
and cash equivalents
|
$
|
521
|
$
|
228
|
|||
Prepaid
insurance
|
101
|
179
|
|||||
Prepaid
expenses and other current assets
|
58
|
60
|
|||||
Total
current assets
|
680
|
467
|
|||||
PROPERTY,
PLANT & EQUIPMENT, NET
|
1,143
|
1,145
|
|||||
DEPOSITS
|
7
|
7
|
|||||
TOTAL
ASSETS
|
$
|
1,830
|
$
|
1,619
|
|||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|||||||
CURRENT
LIABILITIES
|
|||||||
Senior
secured convertible bridge term notes, net
|
$
|
8,805
|
$
|
7,005
|
|||
Conversion
features on bridge term notes
|
-
|
16,750
|
|||||
Secured
term note
|
5,000
|
5,000
|
|||||
Current
maturities of capital lease obligations
|
26
|
25
|
|||||
Accrued
expenses
|
757
|
328
|
|||||
Total
current liabilities
|
14,588
|
29,108
|
|||||
COMMON
STOCK WARRANTS
|
-
|
10,784
|
|||||
CAPITAL
LEASE OBLIGATIONS, less current maturities
|
-
|
7
|
|||||
TOTAL
LIABILITIES
|
14,588
|
39,899
|
|||||
COMMITMENTS
AND CONTINGENCIES
|
|||||||
STOCKHOLDERS'
DEFICIT
|
|||||||
Common
stock - $.01 par value;
|
|||||||
650,000
shares authorized;
|
|||||||
331,597
and 330,998 shares issued and outstanding
|
|||||||
at
March 31, 2007 and December 31, 2006, respectively
|
3,316
|
3,310
|
|||||
Convertible
preferred stock - $.01 par value;
|
|||||||
72,027
shares authorized and available for issuance
|
-
|
-
|
|||||
Additional
paid-in capital
|
310,631
|
275,953
|
|||||
Accumulated
deficit
|
(326,705
|
)
|
(317,543
|
)
|
|||
STOCKHOLDERS’
DEFICIT
|
(12,758
|
)
|
(38,280
|
)
|
|||
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
$
|
1,830
|
$
|
1,619
|
|||
See
accompanying notes to the consolidated financial
statements.
|
For
the three months ended March 31,
|
|||||||
2007
|
2006
|
||||||
Research
and development
|
$
|
1,196
|
$
|
1,506
|
|||
Marketing,
general and administrative
|
778
|
2,421
|
|||||
LOSS
FROM OPERATIONS
|
(1,974
|
)
|
(3,927
|
)
|
|||
OTHER
INCOME (EXPENSE)
|
|||||||
Interest
expense
|
(367
|
)
|
(225
|
)
|
|||
Interest
income
|
5
|
4
|
|||||
Amortization
of debt discount
|
(1,692
|
)
|
-
|
||||
Loss
on fair value change of conversion features
|
(3,483
|
)
|
-
|
||||
Loss
on fair value change of common stock warrants
|
(1,668
|
)
|
-
|
||||
Gain
(loss) on asset disposals
|
20
|
(7
|
)
|
||||
TOTAL
OTHER EXPENSE
|
(7,185
|
)
|
(228
|
)
|
|||
NET
LOSS
|
$
|
(9,159
|
)
|
$
|
(4,155
|
)
|
|
Basic
and diluted loss per share
allocable
to common stockholders (Note 7)
|
$
|
(0.03
|
)
|
$
|
(0.01
|
)
|
|
Weighted
average shares used in computing basic and diluted loss
per
share allocable to common stockholders (Note 7)
|
352,293
|
340,314
|
Common
Stock
$0.01
Par Value -
Shares
|
Common
Stock
$0.01
Par Value -
Amount
|
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Total
|
||||||||||||
Balance
at December 31, 2006
|
330,998
|
$
|
3,310
|
$
|
275,953
|
$
|
(317,543
|
)
|
$
|
(38,280
|
)
|
|||||
Net
loss for three months ended March 31, 2007
|
-
|
-
|
-
|
(9,159
|
)
|
(9,159
|
)
|
|||||||||
Deemed
dividend related to debt modification
|
-
|
-
|
-
|
(3
|
)
|
(3
|
)
|
|||||||||
Reclassification
of conversion feature value
|
-
|
-
|
21,086
|
-
|
21,086
|
|||||||||||
Reclassification
of common stock warrant value
|
-
|
-
|
12,307
|
-
|
12,307
|
|||||||||||
Conversion
feature value of issued debt
|
-
|
-
|
339
|
-
|
339
|
|||||||||||
Stock
based compensation
|
-
|
-
|
442
|
-
|
442
|
|||||||||||
Issuance
of common stock for interest
|
433
|
4
|
360
|
-
|
364
|
|||||||||||
Issuance
of common stock for cashless exercise of common stock
warrants
|
166
|
2
|
144
|
-
|
146
|
|||||||||||
Balance
at March 31, 2007
|
331,597
|
$
|
3,316
|
$
|
310,631
|
$
|
(326,705
|
)
|
$
|
(12,758
|
)
|
|
2007
|
2006
|
|||||
Cash
flows from Operating Activities:
|
|||||||
Net
loss
|
$
|
(9,159
|
)
|
$
|
(4,155
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities
|
|||||||
Depreciation
and amortization
|
29
|
31
|
|||||
Amortization
of debt discount
|
1,692
|
-
|
|||||
Loss
on fair value change of conversion features
|
3,483
|
-
|
|||||
Loss
on fair value change of common stock warrants
|
1,668
|
-
|
|||||
Common
stock issued for interest
|
364
|
-
|
|||||
Non-cash
stock compensation expense
|
442
|
2,822
|
|||||
(Gain)
loss on asset disposals
|
(20
|
)
|
7
|
||||
Changes
in assets and liabilities
|
|||||||
Prepaid
expenses and other current assets
|
81
|
92
|
|||||
Accrued
expenses
|
430
|
92
|
|||||
Total
adjustments
|
8,169
|
3,044
|
|||||
Net
cash used in operating activities
|
(990
|
)
|
(1,111
|
)
|
|||
Cash
flows from Investing Activities:
|
|||||||
Capital
expenditures
|
(27
|
)
|
(3
|
)
|
|||
Proceeds
from asset disposals
|
20
|
-
|
|||||
Net
cash used in investing activities
|
(7
|
)
|
(3
|
)
|
|||
Cash
flows from Financing Activities:
|
|||||||
Proceeds
from issuance of senior secured term notes payable
|
1,296
|
1,500
|
|||||
Proceeds
from the exercise of stock options
|
-
|
11
|
|||||
Payments
on capital lease obligations
|
(6
|
)
|
(7
|
)
|
|||
Net
cash provide by financing activities
|
1,290
|
1,504
|
|||||
Increase
in cash and cash equivalents
|
293
|
390
|
|||||
Cash
and cash equivalents at beginning of period
|
228
|
260
|
|||||
Cash
and cash equivalents at end of period
|
$
|
521
|
$
|
650
|
|||
Cash
paid for interest
|
$
|
2
|
$
|
76
|
|||
1. |
The
Company issued 247,232 shares of common stock as payment of $207,000
of
Senior Secured Convertible Bridge Term Notes Payable accrued
interest.
|
2. |
The
Company issued 185,692 shares of common stock as payment of $157,000
of
Secured Term Note Payable accrued
interest.
|
3. |
Warrants
to purchase aggregate 410,092 shares of common stock were exercised
at
exercise prices between $0.12 and $0.66 per share in a series of
cashless
exercise transactions resulting in the issuance of aggregate 165,335
shares of common stock.
|
4. |
The
issuance of $1,296,000 Senior Secured Convertible Bridge Term Notes
included conversion features measured at $1,188,000, which resulted
in an
equal amount of debt discount. The change in all separated conversion
feature’s fair value through March 30, 2007 resulted in a loss of
$3,483,000. Due to a debt agreement modification on March 30, 2007,
the
then current conversion feature fair value of $21,086,000 was reclassified
from liabilities to equity.
|
5. |
The
change in the common stock warrants’ fair value through March 30, 2007
resulted in a loss of 1,668,000. Due to a debt agreement modification
on
March 30, 2007, the then current fair value of all 15,921,000 outstanding
common stock warrants of $12,307,000 was reclassified from liabilities
to
equity.
|
1. |
The
Company issued 207,856 shares of common stock as payment of $147,000
of
Secured Term Note Payable accrued
interest.
|
2. |
Warrants
to purchase 165,934 shares of common stock were exercised in March
2006 at
an exercise price of $0.48 per share in a cashless exercise transaction
resulting in the issuance of 19,065 shares of common
stock.
|
Three
months ended
March
31,
|
|||||||
(in
thousands, except per share data)
|
2007
|
2006
|
|||||
Numerator:
|
|||||||
Net
loss
|
$
|
(9,159
|
)
|
$
|
(4,155
|
)
|
|
Deemed
dividend from modification of debt
|
(3
|
)
|
-
|
||||
Net
loss allocable to common stockholders
|
$
|
(9,162
|
)
|
$
|
(4,155
|
)
|
|
Denominator:
|
|||||||
Common
shares (weighted)
|
331,079
|
329,304
|
|||||
Vested
restricted stock units (weighted)
|
21,214
|
11,010
|
|||||
Weighted
average shares used in computing
basic
and diluted loss per share allocable to common
stockholders
|
352,293
|
340,314
|
|||||
Basic
and diluted loss per share allocable
to common stockholders
|
$
|
(0.03
|
)
|
$
|
(0.01
|
)
|
|
Potentially
dilutive securities:
|
|||||||
Common
stock issuable (see #1 below)
|
|||||||
Vested
and nonvested employee and director stock options
|
18,995
|
19,755
|
|||||
Nonvested
restricted stock units
|
7,375
|
17,208
|
|||||
Common
stock warrants
|
15,921
|
16,076
|
|||||
Convertible
term bridge notes
|
35,963
|
-
|
|||||
Total
excluded dilutive common stock equivalents
|
78,254
|
53,039
|
|||||
(1)
Number of common shares issuable is based on maximum number of common
shares issuable on exercise or conversion of the related securities
as of
year end. Such amounts have not been adjusted for the treasury stock
method or weighted average outstanding calculations required if the
securities were dilutive.
|
Mar
31,
|
Dec
31,
|
||||||
2007
|
2006
|
||||||
Bonus,
payroll, payroll taxes and benefits
|
$
|
79
|
$
|
62
|
|||
Legal
fees
|
25
|
19
|
|||||
Audit
examination and tax preparation fees
|
51
|
70
|
|||||
Franchise
taxes
|
19
|
15
|
|||||
Property
taxes
|
59
|
52
|
|||||
Clinical,
regulatory and patent consulting fees
|
249
|
60
|
|||||
Clinical
trials
|
162
|
-
|
|||||
Market
research
|
34
|
-
|
|||||
Other
fees and services
|
79
|
50
|
|||||
$
|
757
|
$
|
328
|
|
Mar
31,
|
Dec
31,
|
|||||
2007
|
2006
|
||||||
Senior
secured convertible bridge term notes (a):
|
|||||||
Face
value
|
$
|
9,144
|
$
|
7,848
|
|||
Debt
discount
|
(339
|
)
|
(843
|
)
|
|||
|
8,805
|
7,005
|
|||||
Conversion
feature value
|
-
|
16,750
|
|||||
$
|
8,805
|
$
|
23,755
|
||||
Secured
term note (b)
|
$
|
5,000
|
$
|
5,000
|
|||
Capital
lease obligations
|
$
|
26
|
$
|
32
|
|
March
30,
2007
|
December
31,
2006
|
|
Company
stock price
|
$
0.85
|
$
0.74
|
|
Exercise
price
|
(see
note below)
|
(see
note below)
|
|
Expected
dividend
|
0.0%
|
0.0%
|
|
Risk
-free interest rate
|
5.07%
|
5.0%
|
|
Expected
volatility
|
none
|
88.8%
|
|
Contracted
term
|
1
day
|
3
months
|
March
30,
2007
|
December
31,
2006
|
||
Company
stock price
|
$
0.85
|
$
0.74
|
|
Exercise
price
|
$
0.12 - $ 0.34
|
$
0.12 - $ 0.66
|
|
Expected
dividend
|
0.0%
|
0.0%
|
|
Risk-free
interest rate
|
4.54%
- 4.70%
|
4.7%
- 5.0%
|
|
Expected
volatility
|
114.3%
- 135.8%
|
48.4%
- 143.5%
|
|
Weighted
-average volatility
|
127.7%
|
127.7%
|
|
Contractual
term
|
1.4
years -
6.8
years
|
38
days -
6.8
years
|
Technical
and Pre-Clinical Development
|
Status
|
Formulation
development
|
Complete
|
Pilot
bioequivalence study
|
Complete
|
Pivotal
oxycodone extraction study #1
|
Complete
(results summarized below)
|
Pivotal
oxycodone extraction study #2
|
Protocol
drafted. Results intended for use in product labeling
|
Tablet
stability for NDA submission
|
Testing
in process. 18 month real time data demonstrates stability acceptable
for
NDA submission
|
Toxicology
studies
|
Not
required per FDA written guidance to the
Company
|
Regulatory
Affairs
|
Status
|
Investigational
New Drug Application (IND)
|
Active
|
End
of Phase II meeting with FDA
|
Completed
Q1-06
|
Factorial
design clinical studies
|
Not
required per FDA written guidance to Company
|
Product
labeling
|
Strategy
and concepts discussed with FDA. Written guidance provided by FDA
to the
Company
|
Regulatory
submission for commercial distribution in the U.S.
|
OxyADF
Tablets are eligible for submission as a 505(b)(2) NDA per FDA written
guidance to Company
|
Phase
III pivotal clinical trial
|
A
single phase III efficacy and safety trial is required per FDA written
guidance to Company
|
Product
Tested,
Oxycodone
HCl Strength
and
Product Supplier
|
Approximate
laboratory time required
to
produce a form suitable
for
intravenous injection
|
Extraction
Scheme
and
Yield
|
Difficulty
Rating
1
= Easy
to
10
= Difficult
|
OxyContin®
Tablets
1x
40mg tablet
Purdue
Pharma
|
3
minutes
|
3
steps
~92%
Yield
|
1
|
Oxycodone
HCl Tablets
8
x
5mg tablets,
Mallinckrodt
|
6
minutes
|
3
Steps
~71%
Yield
|
2
|
Percocet®
Tablets
8
x
5/325mg tablets
Endo
Labs
|
<10
minutes
with
vacuum assisted filtration
|
3
Steps
~75%
Yield
|
3-4
|
OxyADF
Tablets
8
x
5/30mg tablets
Acura
Pharmaceuticals
|
355
minutes
with
no success
|
23
Steps
~0%
Yield
|
10
|
Clinical
Study Number
|
Clinical
Study Description
|
Status
|
|
||
Phase
I
|
||
AP-ADF-101
|
Niacin
dose-response in normal subjects
|
Final
study report complete
|
AP-ADF-104
|
Phase
I:
Bioequivalence to non
Aversion® Technology Reference Listed Drug
|
Final
study report complete. OxyADF tablets are bioequivalent to reference
listed drug
|
AP-ADF-106
|
Evaluate
effects of nasal snorting
|
Received
FDA written guidance for protocol design
|
AP-ADF-108
|
Single
dose pharmacokinetics
(dose
linearity
and food effect)
|
Received
FDA written guidance for protocol design
|
AP-ADF-109
|
Multi-dose
pharmacokinetics (dose linearity)
|
Received
FDA written guidance for protocol design
|
AP-ADF-110
|
Single
dose pharmacokinetics and bioavailability. Required if there is not
dose
linearity
|
Received
initial FDA written guidance for protocol design
|
|
||
Phase
II
|
||
AP-ADF-102
|
Relative
dislike of oxycodone HCl/niacin versus oxycodone alone in subjects
with a
history of opioid abuse
|
Subject
enrollment complete. Principal Investigator's report and data analysis
complete
Final
study report in progress
|
AP-ADF-103
|
Repeat
dose safety and tolerability in normal subjects
|
Final
study report complete
|
AP-ADF-107
|
Niacin
dose-response in normal subjects
|
Final
study report complete
|
|
||
Phase
III
|
||
AP-ADF-105
|
Pivotal
efficacy and safety
|
Received
FDA written guidance for protocol design. Special Protocol Assessment
requested
|
(1) |
In
the fasting state, all three doses of niacin [240mg, 480mg and 600mg]
in
combination with oxycodone 40mg produced significant (p ≤ .05) disliking
scores compared to oxycodone 40mg alone. The linear regression across
niacin dose was not significant. No other subjective measure was
significantly affected by the niacin addition to
oxycodone.
|
(2) |
The
high fat meal eliminated the niacin effect on oxycodone 40 mg. The
high
fat meal also delayed the time to oxycodone peak blood
levels.
|
(3) |
The
addition of niacin to oxycodone alters the subjective response to
oxycodone as indicated by the significant responses on the disliking
scale. This observation in conjunction with the results from the
Treatment
Enjoyment Questionnaire indicates that the addition of niacin reduces
the
attractiveness of oxycodone to opiate
abusers.
|
(4) |
There
were no serious adverse events. Niacin produced a dose related attenuation
of pupillary constriction, diastolic blood pressure increase and
probably
systolic blood pressure increase produced by oxycodone. The alterations
by
niacin on the vital sign responses to oxycodone 40 mg were minimal,
were
seen primarily with the 600 mg niacin dose and were not clinically
significant.
|
3
MONTHS ENDED 3/31/07
R&D
EXPENSES
|
3
MONTHS ENDED 3/31/06
R&D
EXPENSES
|
3
MONTHS ENDED
3/31/07
and 3/31/06
R&D
EXPENSES
CHANGE
($)
|
3
MONTHS ENDED
3/31/07
and 3/31/06
R&D
EXPENSES
CHANGE
(%)
|
$1,196
|
$1,506
|
($310)
|
(21%)
|
3
MONTHS ENDED 3/31/07
MARKETING,
G&A EXPENSES
|
3
MONTHS ENDED 3/31/06
MARKETING,
G&A EXPENSES
|
3
MONTHS ENDED
3/31/07
and 3/31/06
MARKETING,
G&A EXPENSES
CHANGE
($)
|
3
MONTHS ENDED
3/31/07
and 3/31/06
MARKETING,
G&A EXPENSES
CHANGE
(%)
|
$778
|
$2,421
|
($1,643)
|
(68%)
|
3
MONTHS ENDED 3/31/07
INTEREST
EXPENSE, NET OF INTEREST INCOME
|
3
MONTHS ENDED 3/31/06
INTEREST
EXPENSE, NET OF INTEREST INCOME
|
3
MONTHS ENDED
3/31/07
and 3/31/06
INTEREST
EXPENSE, NET
OF
INTEREST INCOME
CHANGE
($)
|
3
MONTHS ENDED
3/31/07
and 3/31/06
INTEREST
EXPENSE, NET
OF
INTEREST INCOME
CHANGE
(%)
|
$362
|
$221
|
$141
|
64%
|
3
MONTHS ENDED 3/31/07
NET
LOSS
|
3
MONTHS ENDED 3/31/06
N
ET LOSS
|
3
MONTHS ENDED
3/31/07
and 3/31/06
NET
LOSS
CHANGE
($)
|
3
MONTHS ENDED
3/31/07
and 3/31/06
NET
LOSS
CHANGE
(%)
|
$9,159
|
$4,155
|
$5,004
|
120%
|
Expected
cash payments on
contractual
obligations outstanding
at
March 31, 2007
|
Total
|
Due
in 2007
|
Due
in 2008
|
Due
Thereafter
|
|||||||||
Bridge
term notes, gross (2)
|
$
|
9,144
|
$
|
9,144
|
$
|
-
|
$
|
-
|
|||||
Interest
on fixed rate debt (1)
|
457
|
457
|
-
|
-
|
|||||||||
Term
note (2)
|
5,000
|
5,000
|
-
|
-
|
|||||||||
Capital
leases
|
26
|
19
|
7
|
-
|
|||||||||
Operating
leases
|
12
|
12
|
-
|
-
|
|||||||||
Employment
agreements
|
555
|
555
|
-
|
-
|
|||||||||
Total
contractual cash obligations
|
$
|
15,194
|
$
|
15,187
|
$
|
7
|
$
|
-
|
|||||
Expected
cash payments on
contractual
obligations entered into
subsequent
to March 31, 2007
|
Total
|
Due
in 2007
|
Due
in 2008
|
Due
Thereafter
|
|||||||||
Bridge
term notes, gross (2)
|
$
|
200
|
$
|
200
|
$
|
-
|
$
|
-
|
|||||
Interest
on fixed rate debt (1)
|
10
|
10
|
-
|
-
|
|||||||||
Total
contractual cash obligations
|
$
|
210
|
$
|
210
|
$
|
-
|
$
|
-
|
|||||
(1) |
At
the Company’s option, interest on the Company’s fixed rate Bridge Term
Notes is payable in either cash or Company common stock. Interest
on the
Company’s variable rate debt is payable in Company common stock (Note 9).
|
(2) |
To
the extent cash is not available to the Company to pay this near-term
debt
obligation upon maturity, the Company expects to negotiate with its
lenders to arrange for alternative means to settle the obligation,
including, without limitation, the possible extension of maturity
or
conversion into equity.
|
31.1 |
Certification
of Periodic Report by Chief Executive Officer pursuant to Rule
13a-14 and
15d-14 of the Securities Exchange Act of
1934.
|
31.2 |
Certification
of Periodic Report by Chief Financial Officer pursuant to Rule
13a-14 and
15d-14 of the Securities Exchange Act of
1934.
|
32.1 |
Certification
of Periodic Report by the Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section
906 of the Sarbanes-Oxley Act of
2002.
|
May 4, 2007 | ACURA PHARMACEUTICALS, INC. | |
|
|
|
By: | /s/ Andrew D. Reddick | |
Andrew D. Reddick | ||
President & Chief Executive Officer |
|
|
|
By: | /s/ Peter A. Clemens | |
Peter A. Clemens | ||
Senior VP & Chief Financial Officer |