UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549

                                  FORM 10-Q
                                                                  
       
          /X/   QUARTERLY REPORT UNDERPURSUANT TO SECTION 13 OR 15(d)  
                OF THE SECURITIES EXCHANGE ACT OF 1934

                  For Quarter EndedFOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996


                       Commission File
March 31, 1996 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 N Stemmons Frwy, Suite 210, 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___Yes    X                 No             
                              ------                  -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Common stock outstanding as 
of  May 10,August 12, 1996                     31,377,61031,391,324 shares, $0.04 par value
   -----------------------------------                     ----------    
                      
                         Total No. of Pages   1312   











                         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

In connection with the merger of ACCESSAccess Pharmaceuticals, Inc., a Texas  
corporation ("API") with and into the Chemex Pharmaceuticals, Inc. ("Chemex")
on January 25, 1996, the name of Chemex was changed to ACCESSAccess Pharmaceuticals,
Inc. ("ACCESS"Access" or the "Company").

Until the sale of its results to the drug Amlexanox in September 1995 to Block
Drug Company ("Block"), Chemex focused on the development of novel drugs for the
treatment of various skin diseases and had a diversified portfolio of drugs
under development.

As consideration for the sale of the Company's share of Amlexanox, Block (a)
made an initial non-refundable upfront royalty payment of $2.5 million; (b) is
obligated to pay the Company $1.5 million as a prepaid royalty at the end of the
calendar month during which Block together with any sublicensee has achieved
cumulative worldwide sales of Amlexanox oral products of $25 million; and (c)
after the payment of such $1.5 million royalty, is obligated to pay the Company
a royalty for all sales in excess of cumulative worldwide sales of Amlexanox
oral products of $45 million, as defined in the agreement.

ACCESS' obligations following such sale are limited to performing reasonable
activities in support of obtaining FDA approval of Amlexanox until the earlier
of (i) three years after FDA approval of Amlexanox, or (ii) the liquidation or
dissolution of ACCESS. An NDA for Amlexanox was filed in April 1995 and the
Company is awaiting approval of this product. As a result, there have been no
sales of Amlexanox to date.

Subsequent to the Mergermerger of API into ACCESS,Access (the "Merger"), the Company has  
been managed by the former management of API and the focus of the Company has
changed to the development of enhanced delivery of parentalparenteral therapeutic and diagnostic
imaging agents through the utilization of its patented and proprietary  
endothelial binding technology which selectively targets sites of disease. The 
Company has a broad platform technology for enhancing the site targeting of 
intravenous therapeutic drugs, MRI contrast agents and radiopharmaceutical  
diagnostic and therapeutic agents.  The ACCESSAccess technology is based on natural
carbohydrate carriers.

The technology development of the Company is currently focused on increasing
the therapeutic benefit of oncology agents and improving the efficiency of  
oncology diagnosis by selectively targeting sites of disease and accelerating
drug clearance.

The Company has developed four possible product candidates, two of which are
anticipated to be ready to be advanced into human testing in the first half of
1997.next twelve
months.  These product candidates are new formulations of existing compounds
which increase therapeutic efficacy and reduce toxicity, designed to address
the clinical shortfalls of available treatments.

2

As a result of the mergerMerger and immediately after the merger,Merger, the former API
Stockholdersstockholders owned approximately 60% of the issued and outstanding shares of
the Company.  Generally accepted accounting principles require that a company
whose stockholders retain the controlling interest in a combined business be
treated as the acquiror for accounting purposes.  As a consequence, the mergerMerger
is being accounted for as a "reverse acquisition" for financial reporting
purposes and API has been deemed to have acquired an approximate 60% interest
in Chemex.  Despite the financial reporting requirement to account for the
acquisition as a "reverse acquisition," Chemex (now called Access) remains 
the continuing legal entity and registrant for Securities and Exchange 
Commission reporting purposes.  

The unaudited balance sheet, statementsheets, statements of operations and statementstatements of cash
flowflows have been prepared using "purchase" accounting for the Merger, with API 
as the acquirer.  The values used in the preparation of the financial 
statements were determined based on negotiations between Chemex and API and
comparable values for companies at API's stage of development.  As a result,
common stock and paid in capital of API was recorded at a $10.0 million 
valuation.  The excess purchase price over the fair value of Chemex's assets
was written off in the first quarter of 1996.  The accompanying balance sheet
at December 31, 1995 and the related statements of operations and cash flowflows
for the threesix months ended March 31,June 30, 1995 are the financial statements of API. 

                                  2

RECENT DEVELOPMENTS

On April 26, 1996, ACCESSAccess executed a letter of intent to acquire Tacora Corp.,
a privately-held pharmaceutical company based in Seattle.  The transaction is 
expectedcurrently scheduled to close in the next 60-9030-60 days. Under the terms of the
letter of intent, the purchase price is contingent upon the achievement of 
certain milestones.  Stock valued at up to a maximum value of $14,000,000 could be 
payable to Tacora's shareholders over a 30 month period on an escalating value
over the milestone period.  The consummation of the transaction is subject to
customary conditions to closing including completion of due diligence,
negotiation of definitive documents and approval of the stockholders of
Tacora Corp.

                       Liquidity and Capital Resources

Working capital as of March 31,June 30, 1996 was $6,309,000,$5,796,000, an increase of $6,824,000$6,311,000
as compared to the working capital as of December 31, 1995 of $(515,000).  The
increasencrease in working capital was principally due to the $6 million in proceeds from
the private placement of 8.57 million shares of common stock in March 1996 and
the addition of $1.84$1.69 million in working capital of Chemex resulting from the
Merger between Chemex and API, net. Based onoffset by payments for 1996 operating expenses,
$56,000 for 1996 capital lease payments and $480,000 for payment to a 
consultant as a result of the completion of the private placement,
$480,000 was paid to a consultant.placement. The net
cash infusion from the private placement will be used to continue the 
development of the ACCESS technology
which focuses on increasing the therapeutic development benefit and improving
the efficiency of oncology therapeutics and diagnostic agents by selectively
targeting sites of disease and accelerating drug clearance.Access technology.  The shares issued in the private
placement have not been registered; however,registered and the Company has agreed
to file a registration statement within 90 days of the date of issuance. The investors have agreed not to sell any of
the shares purchased in the private
placementoffering until 180 days after the closing.September 5, 1996.

Management believes its working capital will cover planned operations through
December 1997.

Currently royalty revenues are not expected during 1996.  Research and
development expenditures to advance product capabilities toproducts into human testing will remain
high for several years and there can be no assurance that the Company will be
successful in attaining a partner or future equity financing to complete the
testing of its products.

                            3



                               FirstSecond Quarter 1996
                                Compared to
                            FirstSecond Quarter 1995

FirstThe Company had no revenue in the second quarter 1996 revenues were $165,000 as compared to $135,000 in 1995, an
increase of $30,000. The increase in revenues for the first quarter of 1996 as compared to the comparable 1995 period was principally due to $165,000 of option
payments received as income$395,000
in the first quarter related to a third-party
evaluation of certain of the Company's technology. The company performing the
evaluation elected not to extend the option period beyond March 29, 1996. An
additional $110,000 option payments was converted to a non-interest bearing loan
due the pharmaceutical company. First1995.  Second quarter 1995 revenues were comprised of sponsored research and
development revenues.revenues from an agreement that was terminated in June 1995.

Total research spending for the firstsecond quarter of 1996 was $181,000$243,000 as compared
to $215,000$204,000 for the same period in 1995, a decreasean increase of $34,000.$39,000.  The decreaseincrease
in expenses was the result of a decrease in external research expenditures.the increase staffing for the projects.  Research
spending will increase in the future quarters as the Company has initiated the hiring ofhired additional
scientific management and staff and is accelerating activities to develop the
Company's product candidates. 

Total general and administrative expenses were $336,000$388,000 for the firstsecond quarter
of 1996, an increase of $182,000$255,000 as compared to the same period in 1995.  The
increase in spending was due primarily to the following:  legalincreased  
professional expenses due to the Merger, Private Placement offering costs and legal costspublic 
company reporting and compliance requirements $79,000; salaries and moving  
expenses of being a public company-
$100,000;recently hired employees $53,000; patent expenses of $37,000; 
director fees and director and officer insurance- $39,000;$31,000; general business  
consulting fees and expenses- $15,000;$20,000;  and other increases totalling
$28,000.of $35,000.

                                   3


Accordingly, total expenses were $681,000, with interest income of $50,000  
resulting in a loss for the quarter of $631,000, or $.02 per share.

                        Six Months ended June 30, 1996
                                  Compared to
                        Six Months ended June 30, 1995

Net revenues for the six months ended June 30, 1996 were $165,000 as compared
to the same period in 1995 of $530,000 a decrease of $365,000. 1996 revenues  
related entirely to an option agreement for rights to certain of the Company's
technology that terminated in April 1996.  1995 revenues were entirely  
comprised of sponsored research and development revenues from an agreement that
was terminated in June 1995.

Research spending for the six months ended June 30, 1996 was $424,000 as  
compared to $419,000 for the same period in 1995, an increase of $5,000.   
Research spending will increase in future quarters as the Company has hired  
additional scientific management and staff and is accelerating activities to
develop the Company's product  candidates.

General and administrative expenses were $724,000 for the six months ended June
30, 1996, an increase of $437,000 as compared to the same period in 1995.  The 
increase was due to the following: increased professional expenses due to the 
Merger, Private Placement offering and public company reporting and compliance 
requirements - $188,000; director fees and director and officer insurance-
$72,000; salaries and moving expenses of newly hired employees $71,000; general
business consulting fees and expenses -$35,000; patent expenses of $27,000;  
and other increases of $44,000.

Excess purchase price over the fair value of Chemex's assets of $8,314,000 was 
recorded and correspondingly written off in the first quarter due to the merger between API and Chemex.

Accordingly, total expenses were $8,880,000,$9,561,000, including $8,314,000 of excess  
purchase price written off in the first quarter, which resulted in a loss for
the quartersix months ended June 30, 1996 of $8,685,000,$9,316,000, or $.34$.33 per share.

Certain statements in this Form 10-Q including Management's Discussion and  
Analysis of Financial Condition and Results of Operations, 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 the Company's 
research and development focus, uncertainties associated with research and  
development activities, future capital requirements and dependence on others,
and other risks detailed in the Company's reports filed under the Securities 
Exchange Act, but not limited to including the Company's Annual Reportreport on Form
10-K for the year ended December 31, 1995.


                                        4



                      PART II -- OTHER INFORMATION


ITEM 1    LEGAL PROCEEDINGS
          None


ITEM 2    CHANGES IN SECURITIES
          In connection with the merger of ACCESS Pharmaceuticals, Inc. a Texas
         corporation ("API") with and into the Chemex Pharmaceuticals, Inc.
         ("Chemex") on January 25, 1996, API stock was exchanged for 13.92
         million shares of Chemex common stock. In addition, Chemex changed
         its name to "ACCESS Pharmaceuticals, Inc."

         In connection with a $6 million private placement, 8.57 million shares 
         of common stock were issued in March 1996. The shares issued in the 
         private placement have not been registered; however, the Company has 
         agreed to file a registration statement within 90 days of the date of 
         issuance. The investors have agreed not to sell any of the shares
         purchased in the offering until 180 days after the closing.None


ITEM 3    DEFAULTS UPON SENIOR SECURITIES
          None

                                   4


ITEM 4    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          A Special MeetingThe annual meeting of stockholders was held on June 21,1996 in lieuNew 
          York, NY.  At that meeting the following matters were submitted to a
          vote of the 1995 Annual Meetingstockholders of Stockholders ofrecord.  All such proposals were approved
          by the Companystockholders, as follows:

          *  Dr. Max Link was held at 10:00 a.m., January 25, 1996elected as a Director for a three year term.  The
             votes were 24,761,046 for and 69,310 against.

          *  A proposal to consider and
         vote upon proposals to (i) approve and adopt that certain Agreement of
         Merger and Plan of Reorganization, dated as of October 3, 1995, as
         amended and restated as of October 31, 1995 (the "Merger Agreement") by
         and between the Company and API, pursuant to which, among other
         matters, API would be merged with and into the Company with the Company
         the surviving corporation (the "Merger") and each share of API's common
         stock, $.01 par value per share, would be converted into approximately
         3.7744 shares ofamend the Company's common stock, $.04 par value per share
         ("the Company Common Stock") (subjectcertificate of incorporation to
             adjustment as provided in the
         Merger Agreement); (ii) approve an amendment to the Certificate of
         Incorporation of the Company increasingincrease the number of authorized shares of the Company Common Stock to 40,000,000 shares and the number of
         authorized shares of the preferred stock, $.01 par value per share, of
         the Company to 10,000,000 shares; (iii) approve an amendment to the
         Certificate of Incorporation of the Company to effect a change of the
         name of the
             Company from Chemex Pharmaceuticals, Inc.40,000,0000 to "ACCESS
         Pharmaceuticals, Inc."; (iv) approve60,000,000 shares was approved with
             24,528,599 for, 245,155 against, 29,452 abstained and 27,150 did  
             not vote.

          *  An amendment to the establishment of the ACCESSCompany's 1995 Stock Option Plan (the "1995 Stock Option Plan"), under which an
         aggregatethat provides
             that for each year that a non-employee director serves as a
             director of 2,000,000the Company, the director would receive a non-
             statutory option to purchase 6,667 shares of ACCESS Common Stock, will be issuable
         pursuantbut
             would no longer receive a non-statutory option to the termspurchase 20,000
             shares of such plan; (v) ratify the selection byCommon Stock upon any re-election to the Board of    
             Directors of ACCESSthe Company was approved with 23,454,779 for, 316,287
             against, 59,440 abstained and 999,850 did not vote.

          *  A proposal to ratify the appointment of ACCESS'KPMG Peat Marwick LLP as
             independent auditors; (vi)
         elect three directors;certified public accountants for the Company for 
             fiscal year December 31, 1996 was approved with 24,705,988 for, 
             104,613 against and (vii) approve an adjournment of the Special
         Meeting, if necessary, to permit further solicitation of proxies in the
         event that there are not sufficient votes at the Special Meeting to
         consider and approve any or all of the above proposals. All proposals
         were approved by the stockholders.


                                        5






         The voting with respect to each of such matters was as follows:

                             For                  Withhold
                            ----                  --------
         Item 1

         Greetham          7,587,633               232,047
         Taylor            7,586,547               233,133
         Woolard           7,587,633               232,047

                              For                  Against
                             ----                  -------
         Item 2            5,146,576                49,075
         Item 3            5,097,671                84,407
         Item 4            7,708,188                62,635
         Item 5            4,849,452               537,159
         Item 6            7,717,348                65,15619,755 abstained.


ITEM 5    OTHER INFORMATION

          On April 26, 1996, ACCESSAccess executed a letter of intent to acquire
          Tacora Corp., a privately-held pharmaceutical company based in
          Seattle.  The transaction is expectedcurrently scheduled to close in the next
          60-9030-60 days. Under the terms of the letter of intent, the purchase
          price is contingent upon the achievement of certain milestones.
          Stock valued at up to a maximum value of $14,000,000 could be payable to 
          Tacora's shareholders over a 30 month period on an escalating value
          over the milestone period.  The consummation of the transaction is
          subject to customary conditions to closing including completion of
          due diligence, negotiation of definitive documents and approval of
          the stockholders of Tacora Corp.
                  

ITEM 6    EXHIBITS AND REPORTS ON FORM 8-K                        
           

          Exhibits:     (27) Financial Data Schedule.2.1     -       Amended and Resulted Bylaws 
                       10.18    -       Amended Stock Option Plan

          Reports on Form 8-K: 8-K filed on January 25, 1996 reporting information under Item 2 and
4.

            8-K filed on MarchNone

                                   5 1996 reporting information under Item 2.




                                        6 


                                 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:    May 15,August 12, 1996              By: /s/ Kerry P. Gray 
         --------------------------              --------------------------------                  ----------------------------- 
                                          Kerry P. Gray      
                                          (PresidentPresident and Chief Executive Officer


Date:    August 12, 1996              By: /s/ Stephen B. Thompson   
         ---------------                  -----------------------------
                                          Stephen B. Thompson      
                                          Chief Financial Officer     
                                          (Principal Financial and 
                                          Accounting Officer)
























                                   76


                        ACCESS PHARMACEUTICALS, INC.
                        a development stage company

                               Balance Sheets
                                                                  
    
Assets March 31,June 30, 1996 December 31, 1995 - ------ --------------------------- ----------------- Current Assets Cash and cash equivalents $6,813,000$5,980,000 $ 30,000 Accounts receivable - 3,000 Prepaid expenses and other current assets 65,000146,000 4,000 ---------- ---------- Total current assets 6,878,0006,126,000 37,000 ---------- ---------- Property and Equipment, at cost 559,000 558,000 Less accumulated depreciation (209,000)(245,000) (173,000) ----------- ---------- 350,000---------- 314,000 385,000 --------------------- ---------- Other Assets 2,000 2,000 --------------------- ---------- Total Assets $7,230,000 $ 424,000 ===========$6,442,000 $424,000 ========== ========== Liabilities and Stockholders' Equity (Deficit) - ---------------------------------------------- Current Liabilities Accounts payable and accrued expenses $317,000$184,000 $169,000 Unearned revenue - 150,000 Note payable due to Chemex Pharmaceuticals, Inc. - 100,000 Current portion of obligations under capital leases 142,000146,000 133,000 ------------- -------------------- --------- Total current liabilities 569,000330,000 552,000 ------------- -------------------- --------- Obligations under capital leases, 190,000 220,000 net of current portion ------------- -----------151,000 220,000 Note payable 110,000 - --------- --------- Total liabilities 759,000591,000 772,000 ------------- ----------- Commitments and Contingencies--------- --------- Stockholders' Equity (Deficit) Preferred stock, at March 31,June 30, 1996 $.01 par value, authorized 10,000,000 shares, none issued or outstanding; at December 31, 1995, $.10 par value, authorized - - 1,000,000 shares, none issued or outstanding - - Common stock, at March 31,June 30, 1996 $.04 par value, authorized 40,000,00060,000,000 shares, issued and outstanding 31,290,18231,377,610 shares; at December 31, 1995 $.01 par value, authorized 10,000,000 shares, issued and outstanding 3,639,928 shares 1,252,0001,255,000 36,000 Additional paid-in capital 17,748,00017,756,000 3,460,000 Deficit accumulated during the development stage (12,529,000)(13,160,000) (3,844,000) ------------ --------------------- --------- Total Stockholders' Equity (Deficit) 6,471,0005,851,000 (348,000) ------------ --------------------- --------- Total Liabilities and Stockholders'Stockholder's Equity (Deficit) $7,230,000$6,442,000 $424,000 ========= =========
- ---------------------------------------------- See accompanying notes to financial statements and Management's Discussion and Analysis of Financial Conditions and Results of Operations. 7 ACCESS PHARMACEUTICALS, INC. a development stage company Statements of Operations
Three Months ended June 30, Six Months ended June 30, February 24, 1988 --------------------------- ------------------------- (inception) to 1996 1995 1996 1995 June 30, 1996 ----------- ----------- ----------- ----------- ----------------- Revenues Research and development $ - $ 395,000 $ - $ 530,000 $ 2,711,000 Option income - - 165,000 - 2,037,000 ----------- ----------- ----------- ----------- ------------ Total Revenues - 395,000 165,000 530,000 4,748,000 ----------- ----------- ----------- ----------- ------------ Research and development 243,000 204,000 424,000 ============419,000 4,950,000 General and administrative 388,000 133,000 724,000 287,000 4,111,000 Interest 14,000 15,000 27,000 36,000 103,000 Depreciation and amortization 36,000 31,000 72,000 62,000 843,000 Writeoff of excess purchase price - - 8,314,000 - 8,314,000 ----------- ----------- ----------- ----------- ---------- Total Expenses 681,000 383,000 9,561,000 804,000 18,321,000 ----------- ----------- ----------- ----------- ---------- Net income (loss) from operations (681,000) 12,000 (9,396,000) (274,000) (13,573,000) ----------- ----------- ----------- ----------- ---------- Other Income Interest and miscellaneous income 50,000 1,000 80,000 4,000 539,000 ----------- ----------- ----------- ----------- ---------- Net income (loss) before income taxes (631,000) 13,000 (9,316,000) (270,000) (13,034,000) Provision for income taxes - - - - 127,000 ----------- ----------- ----------- ----------- ---------- Net income (loss) after income taxes $(631,000) $13,000 $(9,316,000) $(270,000) $(13,161,000) =========== =========== =========== =========== ========== Net income (loss) per common share $(0.02) $0.00 $(0.33) $(0.09) =========== =========== =========== =========== Average number of common and equivalent common shares outstanding 31,346,866 2,918,328 28,285,296 2,918,328 =========== =========== =========== ===========
- ---------------------------------------------- See accompanying notes to financial statements and Management's Discussion and Analysis of Financial ConditionConditions and Results of Operations.Operations 8 ACCESS PHARMACEUTICALS, INC. a development stage company Statements of Operations
Three months ended March 31, February 24, 1988 ----------------------------- (Inception) to 1996 1995 March 31, 1996 ----------------------------- ------------------ Revenues Sponsored research and development $ - $ 135,000 $2,711,000 Option income 165,000 - 2,037,000 ------------ ---------- ---------- Total Revenues 165,000 135,000 4,748,000 ------------ ---------- ---------- Expenses Sponsored research and development - 187,000 2,172,000 Proprietary research and development 181,000 28,000 2,535,000 General and administrative 336,000 154,000 3,772,000 Interest 13,000 21,000 89,000 Depreciation and amortization 36,000 31,000 807,000 ------------ ---------- ---------- Write-off of Total Expenses 8,880,000 421,000 17,640,000 ------------ ---------- ---------- Net loss from operations 8,765,000 (286,000) (12,892,000) ------------ ---------- ---------- Other Income Interest and miscellaneous income 30,000 3,000 489,000 Excess purchase price 8,314,000 - 8,314,000 ------------ ----------- ---------- Net loss (8,685,000) (283,000) (12,403,000) Provision for income taxes - - 127,000 ----------- ----------- ---------- Net loss after income taxes ($8,685,000) ($283,000) ($12,530,000) =========== =========== ========== Net loss per common share ($0.34) ($0.10) ============ =========== Average number of common and equivalent common shares outstanding 25,535,239 2,918,328 ============ ===========
See accompanying notes to financial statements 9 ACCESS PHARMACEUTICALS, INC. a development stage company Statements of Cash Flows
Three monthsSix Months ended March 31,June 30, February 24, 1988 --------------------------- (Inception)---------- ---------- (inception) to 1996 1995 March 31,June 30, 1996 --------------------------- --------------------------- ---------- --------------- Cash Flows fromform Operating Activities Net loss $(8,685,000)$(9,316,000) $ (283,000) ($12,530,000)(270,000) $(13,161,000) Adjustments to reconcile net loss to cash used in operating activities: Write-offWrite off of Excessexcess purchase price 8,314,000 - 8,314,000 Depreciation and amortization 36,000 31,000 817,00072,000 62,000 843,000 Change in assets and liabilities: Accounts receivable 3,000 - - Prepaid expenses and other current assets (61,000)(142,000) 15,000 (67,000)(147,000) Accounts payable and accrued expenses (4,000) 11,000 118,00015,000 (17,000) 137,000 Unearned revenue (150,000) (135,000) - -------- ---------- ---------------------- ---------- Net Cash Used in Operating Activities (547,000) (361,000) (3,348,000) --------(1,204,000) (345,000) (4,014,000) ---------- ------------- Cash Flows From Investing Activities Capital---------- ---------- Capitalized expenditures (1,000) - (1,120,000) --------(1,111,000) ---------- ----------------------- ---------- Net Cash Used Inin Investing Activities (1,000) - (1,120,000) --------(1,111,000) ---------- ----------------------- ---------- Cash Flows From Financing Activities Repayment of notes payable (21,000) (38,000) (170,000)Payments on obligations under capital leases (56,000) (67,000) (205,000) Proceeds from notes payable 10,000 612,000 Cash acquired in110,000 - 712,000 Proceeds from Merger 1,839,000with Chemex Pharmaceuticals 1,587,000 - 1,839,0001,587,000 Proceeds from stock issuances, net 5,503,0005,514,000 - 9,000,000 --------- ----------- -----------9,011,000 ---------- ---------- ---------- Net Cash Provided By (Used In)in) Financing Activities 7,533,000 (38,000) 11,281,000 --------- ------------ -----------7,155,000 (67,000) 11,105,000 ---------- ---------- ---------- Net Increase (Decrease) in Cash and Cash Equivalents 6,783,000 (399,000) 6,813,0005,950,000 (412,000) 5,980,000 Cash and Cash Equivalents at Beginning of PeriodYear 30,000 533,000 - ---------- ----------- --------------------- ---------- Cash and Cash Equivalents at End of Period $6,813,000 $134,000 #6,813,000$5,980,000 $121,000 $5,980,000 ========== =========== ===================== ========== Supplemental disclosure of non cash transaction: Eliminationtransactions: eliminations of note payable to Chemex PharmaceuticalsPharmaceutical due to Merger $100,000100,000
- ---------------------------------------------- See accompanying notes to financial statements 10and Managements Discussion and Analysis of Financial Conditions and Results of Operations 9 ACCESS PHARMACEUTICALS, INC. a development stage company Notes to Financial Statements ThreeSix Months Ended March 31,June 30, 1996 and 1995 (1) Interim Financial Statements The balance sheet as of March 31,June 30, 1996 and the statements of operations and cash flows for the threesix months ended March 31,June 30, 1996 and 1995 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, except for the merger accounting discussed below. 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 the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the year ended December 31, 1995. The results of operations for the period ended March 31,June 30, 1996 are not necessarily indicative of the operating results which may be expected for a full year. The balance sheet as of December 31, 1995 contains financial information taken from the audited financial statements as of that date. ACCESSAccess Pharmaceuticals, Inc., a Texas corporation, ("API") as of that date. API merged with and into Chemex Pharmaceuticals, Inc. ("Chemex") on January 25, 1996. Under the terms of the agreement, API was merged into Chemex with Chemex as the surviving legal entity. The name of Chemex was changed to ACCESSAccess Pharmaceuticals, Inc. ("ACCESS"Access" or the "Company"). ChemexThe Company acquired all of the outstanding shares of API in exchange for 13,919,979 shares of its registered common stock of Chemex.stock. The Company is engaged in research and development activities with a broad platform technology for enhancing the site targeting of intravenous therapeutic drugs, MRI contrast agents and radiopharmaceutical diagnostic and therapeutic agents. The ACCESSAccess technology is based on natural carbohydrate carriers. As a result of the merger and immediately after the merger, the former API stockholders owned approximately 60% of the issued and outstanding shares of the Company. Generally accepted accounting principles require that a company whose stockholders retain the controlling interest in a combined business be treated as the acquiror for accounting purposes. As a consequence, the merger was accounted for as a "reverse acquisition" for financial reporting purposes and API has been deemed to have acquired an approximate 60% interest in Chemex. Despite the financial reporting requirement to account for the acquisition as a "reverse acquisition," Chemex remains the continuing legal entity and registrant for Securities and Exchange Commission reporting purposes. However, the name of Chemex was changed to ACCESSAccess Pharmaceuticals, Inc. ("ACCESS"Access" or the "Company"). 10 ACCESS PHARMACEUTICALS, INC. a development stage company Notes to Financial Statements Six Months Ended June 30, 1996 and 1995 The unaudited balance sheet, statement of operations and statement of cash flowfinancial statements at June 30, 1996 have been prepared using "purchase" accounting for the merger with API as the acquirer. The values used in the preparation of the financial statements were determined based on negotiations between companiesChemex and API and comparable values for companies at API's stage of development. As a result, common stock and paid in capital of API was recorded at a $10.0 million valuation. The excess purchase price over the fair value of Chemex's assets of $8,314,000 was written off in the first quarter of 1996. The balance sheet at December 31, 1995 and the related statements of operations and cash flows at March 31,for the six months ended June 30, 1995 are the statements of API. Proforma condensed results of operations "as of"if" the acquisition had been made on January 1, 1996 and 1995, respectively, are as follows: ThreeSix months ended March 31 ---------------------------June 30 ------------------------ 1996 1995 ---- ------------- --------- Revenues $ 195,000 $ 388,000$245,000 $876,000 Expenses 566,000 1,268,0001,228,000 2,280,000 --------- ------------------- Net income (loss) (371,000) (880,000)(983,000) (1,404,000) ========= ========== Earnings per========= Lossper share ($0.01) ($0.04)$(0.03) $(0.06) ========= ========== 11 ACCESS PHARMACEUTICALS, INC. Notes to Financial Statements Three Months Ended March 31, 1996 and 1995========= (2) The Company On January 25, 1996, the Company's Shareholders, at a Special Shareholders Meeting, approved the merger with API. Under the terms of the agreement, API was merged into Chemex with Chemex as the surviving legal entity. Chemex acquired all of the outstanding shares of API in exchange for 13,919,979 shares of registered common stock of Chemex. Chemex also changed its name to ACCESS Pharmaceuticals, Inc. and the operations of the consolidated company are now based in Dallas, Texas. ACCESS is engaged in research and development activities with a broad platform technology for enhancing the site targeting of intravenous therapeutic drugs, MRI contrast agents and radiopharmaceutical diagnostic and therapeutic agents. The ACCESS technology is based on natural carbohydrate carriers. In March 1996 the Company concluded a $6 million Private Placement of 8.57 million shares of common stock. The cash infusion will be used to continue the advancement of the ACCESSAccess technology which focuses on increasing the therapeutic benefit and improving the efficiencyefficacy of oncology therapeutics and diagnostic agents by selectively targeting sites of disease and accelerating drug clearance. The shares issued in the private placement have not been registered, however the Company has agreed to file a registration statement within 90 days of the issuance covering such shares. The investors have agreed not to sell any of the shares purchased in the offering until 180 days after the closing. (3) SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,of," effective for fiscal years beginning after December 15, 1995, requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In addition, this statement requires that long-lived assets and certain identifiable intangibles to be disposed of be reported at the lower of carrying amount or fair value less cost to sell. The Company adopted this statement January 1, 1996, and the adoption of SFAS No. 121 did not have material impact on the financial conditionstatements of the Company for the quarter ended March 31, 1996.Company. 11 ACCESS PHARMACEUTICALS, INC. a development stage company Notes to Financial Statements Six Months Ended June 30, 1996 and 1995 (4) SFAS No. 123, "Accounting for Stock Based Compensation,"Compensation", effective for fiscal years beginning after December 15, 1995 established financial, accounting and reporting standards for stock-based employee compensation plans. These plans include all arrangements by which employees receive shares of stock or other equity investments of the employer or the employer incurs liabilities to employees in amounts based on the price of the employer's stock. This statement also applies to transactions in which an entity issues its equity instruments to acquire goods or services from non-employees. The Company has elected to account for employee stock compensation plans under APB 25 will disclose the required pro forma effect on net income and accordingly only selectedearnings per share in the disclosure requirements of FASB 123. Such additional disclosure requirements will be presented by the Company in itsCompany's year ending December 31, 1996 Form 10-K.financial statements. (5) On April 26, 1996, ACCESSAccess executed a letter of intent to acquire Tacora Corp., a privately-held pharmaceutical company based in Seattle. The transaction is expectedcurrently scheduled to close in the next 60-9030-60 days. Under the terms of the letter of intent, the purchase price is contingent upon the achievement of certain milestones. Stock up to a maximum value of $14,000,000 could be payable to Tacora's shareholders over a 30 month period on an escalating value over the milestone period. The consummation of the transaction is subject to customary conditions to closing including completion of due diligence, negotiation of definitiveofdefinitive documents and approval of the stockholders of Tacora Corp. 12