State the number of shares outstanding of each the issuer's classes of common equity as of the latest practicable date. As of November 13, 2007 there were 3,575,114 shares of common stock issued and outstanding.
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, our ability to close the Somanta merger and, if it closes, our ability to integrate Somanta’s business with ours, 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, the terms of future licensing arrangements, our ability to secure additional financing for our operations and our expected cash burn rate. 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, including the risks outlined under “Risk 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 Form 10-QSB 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 OR PLAN OF OPERATION
OVERVIEW
Access Pharmaceuticals, Inc. (“Access” or the “Company”) is a Delaware corporation. We are an emerging biopharmaceutical company developing products for use in the treatment of cancer, the supportive care of cancer, and other disease states. Our product for the management of oral mucositis, MuGard™, has received marketing clearance by the FDA as a device. Our lead clinical development program for the drug candidate ProLindac™ (formerly known as AP5346) is in Phase II clinical testing. Access also has advanced drug delivery technologies including Cobalamin™-mediated oral drug delivery and targeted delivery.
Together with our subsidiaries, we have proprietary patents or rights to one technology approved for marketing and three drug delivery technology platforms:
• MuGard (mucoadhesive liquid technology),
• synthetic polymer targeted delivery,
• Cobalamin-mediated oral delivery,
• Cobalamin-mediated targeted delivery.
Products
We have used our drug delivery technologies to develop the following products and product candidates:
ACCESS PRODUCT PORTFOLIO
Compound | | Originator | | Technology | | Indication | | FDA Filing | | Clinical Stage (1) |
| | | | | | | | | | | |
| MuGard™ | | Access | | Mucoadhesive Liquid | | Mucositis | | 510(k) | | Marketing clearance |
ProLindacTM (Polymer Platinate, AP5346) (2) | | Access - U London | | Synthetic polymer | | Cancer | | Clinical Development(3) | | Phase II |
| Oral Insulin | | Access | | Cobalamin | | Diabetes | | Research | | Pre-Clinical |
| Oral Delivery System | | Access | | Cobalamin | | Various | | Research | | Pre-Clinical |
Cobalamin-Targeted Therapeutics | | Access | | Cobalamin | | Anti-tumor | | Research | | Pre-Clinical |
(1) For more information, see “Form 10-KSB, Government Regulation” for description of clinical stages.
(2) Licensed from the School of Pharmacy, The University of London. Subject to a 1% royalty and milestone payments on sales.
(3) Clinical study being conducted in Europe.
Approved Products
MuGard™ - Mucoadhesive Liquid Technology (MLT)
Access’ MuGard is a viscous polymer solution which provides a coating for the oral cavity. MuGard is dispensed in a ready to use form. A multi-site, randomized clinical study was performed in the United States testing MuGard and MuGard containing an anti-inflammatory drug to determine the effect of these products on the prevention and treatment of mucositis. The data from this trial indicated that the patients using MuGard displayed a lower incidence of mucositis than is typically seen in the studied population with no additional benefit from the drug.
Access is currently seeking marketing partners to market MuGard™ in the United States and in other territories worldwide.
In August 2007, we signed a definitive licensing agreement with SpePharm Holding, B.V. under which SpePharm will market Access’ product MuGard in Europe.
Products in Development Status
ProLindac™ (Polymer Platinate, AP5346) DACH Platinum
We have commenced a European Phase 2 ProLindac trial in ovarian cancer patients who have relapsed after first line platinum therapy. The primary aim of the study is to determine the response rate of ProLindac monotherapy in this patient population. The response rates for other platinum compounds in this indication are well known, and will be used for comparison.
We have submitted an IND application to the US Food and Drug Administration, and have received clearance from the agency to proceed with a Phase 2 clinical study of ProLindac in combination with fluorouracil and leucovorin. The study is designed to evaluate the safety of ProLindac in combination with two standard drugs used to treat colorectal cancer and to establish a safe dose for further clinical studies of this combination in colorectal cancer. We are currently evaluating whether clinical development of ProLindac in this indication might proceed more rapidly by utilizing an alternative clinical strategy and/or conducting studies in the US and/or elsewhere in the world.
RECENT EVENTS
On November 7, 2007, we entered into securities purchase agreements (the “Purchase Agreements”) with accredited investors whereby we agreed to sell 954.0001 shares of a newly created series of our preferred stock, designated “Series A Cumulative Convertible Preferred Stock”, par value $0.01 per share, for an issue price of $10,000 per share, (the “Series A Preferred Stock”) and agreed to issue warrants to purchase 1,589,999 shares of our common stock at an exercise price of $3.50 per share, for an aggregate purchase price of $9,540,001.
As a condition to closing, SCO Capital Partners, LLC and affiliates, along with the other holders of an aggregate of $6,000,000 Secured Convertible Notes, also exchanged their notes and accrued interest for an additional 1,836.0512 shares of Series A Preferred Stock and were issued warrants to purchase 1,122,031 shares of our common stock at an exercise price of $3.50 per share, and Oracle Partners LP and affiliates, along with the other holders of an aggregate of $4,015,000 Convertible Notes also exchanged their notes and accrued interest for 437.3104 shares of the Series A Preferred Stock and were issued warrants to purchase 728,850 shares of our common stock at an exercise price of $3.50 per share. SCO Capital Partner, LLC currently has a designee serving on our Board of Directors. In connection with the exchange of the notes, all security interests and liens relating thereto were terminated.
On October 24, 2007, Access and SCO Capital Partners LLC and affiliates (“SCO”) agreed to extend the maturity date of an aggregate principal amount of $6,000,000 of 7.5% convertible notes to November 15, 2007 from October 25, 2007.
On October 24, 2007, Access and Oracle Partners LP and affiliates (“Oracle”) agreed to extend the maturity date of an aggregate principal amount of $4,015,000 of 7.7% convertible notes to November 16, 2007 from October 26, 2007.
On August 27, 2007, we signed a definitive licensing agreement with SpePharm Holding, B.V. under which SpePharm will market Access’ product MuGard in Europe.
On August 1, 2007, we announced that Esteban Cvitkovic, a member of our board of directors as Vice Chairman Europe, agreed to an expanded role as Senior Director, Oncology Clinical R&D.
On April 19, 2007, we announced we had entered into an agreement to acquire Somanta Pharmaceuticals, Inc. Pursuant to the terms of the merger agreement, upon consummation of the acquisition, Somanta’s preferred and common shareholders would receive an aggregate of 1.5 million shares of Access’ common stock which would represent approximately 9.5% of the combined company assuming the conversion of Access’ existing convertible debt and preferred stock under existing terms of conversion. The Somanta stockholders approved the proposed transaction at the stockholders’ meeting on August 17, 2007. The closing of the transaction is subject to numerous conditions including receipt of necessary approvals. There can be no assurance that the transaction will be consummated or if consummated that it will be on the terms described herein.
On April 26, 2007, we entered into a Note Purchase Agreement with Somanta Pharmaceuticals, Inc. in order for Access to loan Somanta amounts to keep certain of their licenses and vendors current. As of September 30, 2007 we have loaned Somanta $859,000.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations primarily through private sales of common stock and convertible notes and our principal source of liquidity is cash and cash equivalents. Licensing fees provided minimal funding for operations during the quarter ended September 30, 2007. As of November 13, 2007, our cash and cash equivalents and short-term investments were $9,761,000 and our net cash burn rate for the nine months ending September 30, 2007 was approximately $430,000 per month. As of September 30, 2007 our working capital deficit was $12,624,000. Our working capital at September 30, 2007 represented a decrease of $6,842,000 as compared to our working capital deficit as of December 31, 2006 of $5,782,000. Our working capital is negative reflecting approximately $11.4 million of debt that is a current liability at September 30, 2007 and $1.0 million of accrued interest payments accrued at September 30, 2007. As of November 13, 2007 we have convertible notes outstanding due of $6.89 million, in the principle amount of $5.5 million.
As of September 30, 2007, the Company did not have enough capital to achieve its long-term goals. If we raise additional funds by selling equity securities, the relative equity ownership of our existing investors would be diluted and the new investors could obtain terms more favorable than previous investors. A failure to restructure our convertible notes or obtain additional funding to repay the convertible notes and support our working capital and operating requirements, could cause us to be in default of our convertible notes and prevent us from making expenditures that are needed to allow us to maintain our operations. A failure to restructure our existing convertible notes or obtain necessary additional capital in the future could jeopardize our operations.
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 September 30, 2007 of $85,865,000. We expect that our capital resources will be adequate to fund our current level of operations through December 2008. 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 may be 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. We plan to satisfy our obligations under the notes either through conversion of the notes into equity or through the sale of equity.
All shares and per share information reflect a one for five reverse stock split effected June 5, 2006.
Currently, one noteholder holding $5.5 million worth of 7.7% convertible notes has amended their note to a new maturity date, September 13, 2011, and the 2005, 2006 and 2007 capitalized interest of $1,348,000 is currently payable.
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.
THIRD QUARTER 2007 COMPARED TO THIRD QUARTER 2006
Our licensing revenue in the third quarter of 2007 was $6,000. We recognize licensing revenue over the period of the performance obligation under our licensing agreement. We received a $1.0 million upfront licensing payment in August 2007 from SpePharm Holding, B.V. for marketing MuGard in Europe. We will recognize the upfront licensing fee over 14 ¾ years, the license term.
Total research spending for the third quarter of 2007 was $596,000, as compared to $379,000 for the same period in 2006, an increase of $217,000. The increase in expenses was primarily due to:
| · | costs for product manufacturing for a new ProLindac clinical trial expected to start in 2008 ($214,000); |
| · | higher salary and related cost due to the hiring of additional scientific staff ($30,000); and |
| · | other net increases ($25,000). |
The increase in research spending is partially offset by lower clinical development costs ($52,000). We incurred start-up costs for the clinical trial in early 2006.
Total general and administrative expenses were $1,000,000 for the third quarter of 2007, an increase of $200,000 as compared to the same period in 2006. The increase in spending was due primarily to the following:
| · | higher investor relations expenses ($149,000) due to our increased investor relations efforts; |
| · | higher salary related expenses due to stock option expenses ($156,000); and |
| · | higher salary expenses ($65,000). |
The increase in general and administrative spending is partially offset by:
| · | lower patent expenses ($90,000); |
| · | lower professional fees ($59,000); and |
| · | other net decreases ($21,000). |
Depreciation and amortization was $61,000 for the third quarter of 2007 as compared to $77,000 for the same period in 2006 reflecting a decrease of $16,000. The decrease in depreciation and amortization was due to assets becoming fully depreciated.
Total operating expenses in the third quarter of 2007 were $1,657,000 as compared to total operating expenses of $1,256,000 for the same period in 2006, an increase of $401,000.
Interest and miscellaneous income was $12,000 for the third quarter of 2007 as compared to $86,000 for the same period in 2006, a decrease of $74,000. The decrease in interest income was due to accretion of the receivable due from Uluru that was recorded in 2006.
Interest and other expense was $318,000 for the third quarter of 2007 as compared to $1,976,000 the same period in 2006, a decrease of $1,658,000. The decrease in interest and other expense was due to amortization of the discount on the Oracle convertible notes and the amortization of the SCO notes recognized in 2006.
In 2006, there was an unrealized loss on fair value of warrants of $1,131,000 due to the warrants issued to SCO and affiliates. We changed our accounting for the warrants in the fourth quarter of 2006 and there are no unrealized losses or gains in 2007.
Net loss in the third quarter of 2007 was $1,957,000, or a $0.55 basic and diluted loss per common share, compared with a loss of $2,015,000, or a $0.57 basic and diluted loss per common share for the same period in 2006, a decreased loss of $58,000.
NINE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2006
Our licensing revenue in the first nine months of 2007 was $6,000. We recognize licensing revenue over the period of the performance obligation under our licensing agreement. We received a $1.0 million upfront licensing payment in August 2007 from SpePharm Holding, B.V. for marketing MuGard in Europe. We will recognize the upfront licensing fee over 14 ¾ years, the license term.
Total research spending for the first nine months of 2007, was $1,532,000, as compared to $1,769,000 for the same period in 2006, a decrease of $237,000. The decrease in expenses was primarily due to
| · | lower costs for product manufacturing for ProLindac ($198,000). Product manufacturing was completed early in 2006 which we believe is adequate to supply drug product for our current ovarian cancer trial; |
| · | lower costs of clinical trials for ProLindac ($170,000). We incurred start-up costs for the clinical trial in early 2006; and |
| · | other net decreases ($53,000). |
The decrease in research spending is partially offset by
| · | higher salary and related cost due to the hiring of additional scientific staff ($121,000); and |
| · | higher scientific consulting costs ($63,000). |
Total general and administrative expenses were $3,252,000 for the first nine months of 2007, an increase of $1,123,000 as compared to the same period in 2006. The increase in general and administrative expenses was due primarily to the following:
| · | higher salary related expenses due mainly to stock option expenses ($580,000); |
| · | higher investor relations expenses ($368,000) due to our increased investor relations efforts; |
| · | higher salary and related costs ($178,000); and |
| · | higher travel costs ($58,000). |
The increase in general and administrative expenses is partially offset by:
| · | lower patent expenses ($45,000); and |
| · | other net decreases ($16,000). |
Depreciation and amortization was $210,000 for the first nine months of 2007 as compared to $231,000 for the same period in 2006 reflecting a decrease of $21,000. The decrease in depreciation and amortization was due to assets becoming fully depreciated.
Interest and miscellaneous income was $72,000 for the first nine months of 2007 as compared to $278,000 for the same period in 2006, a decrease of $206,000. The decrease in interest income was due to accretion of the receivable due from Uluru that was recorded in 2006.
Interest and other expense was $3,277,000 for the first nine months of 2007 as compared to $5,244,000 for the same period in 2006, a decrease of $1,967,000. The decrease in interest and other expense was due to amortization of the discount on the Oracle convertible notes and the amortization of the SCO notes recognized in 2006.
In 2006 there was an unrealized loss on fair value of warrants of $1,107,000 due to the warrants issued to SCO and affiliates. We changed our accounting for the warrants in the fourth quarter of 2006 and there is no unrealized losses or gains in 2007.
Net loss in the first nine months of 2007 was $8,193,000, or a $2.31 basic and diluted loss per common share, compared with a loss of $10,202,000, or a $2.89 basic and diluted loss per common share for the same period in 2006, a decreased loss of $2,009,000.
Recent Accounting Pronouncements
We adopted FIN 48 as of the beginning of our 2007 fiscal year. See Notes to Condensed Consolidated Financial Statements.
In September 2006, the FASB issued SFAS 157, Fair Value Measurements (SFAS 157), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of SFAS 157 are effective as of the beginning of our 2008 fiscal year. We are currently evaluating the impact of adopting SFAS 157 on our financial statements.
In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115 (SFAS 159), which permits entities to choose to measure many financial instruments and certain other items at fair value. The provisions of SFAS 159 are effective as of the beginning of our 2008 fiscal year. We are currently evaluating the impact of adopting SFAS 159 on our financial statements.
ITEM 3 CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures.
Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a — 15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report. Based on this evaluation, our management, including our Chief Executive Officer and our Chief Financial Officer, concluded that, as of September 30, 2007 our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
Changes in Internal Control over Financial Reporting
For the quarter ended September 30, 2007, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
RISK FACTORS
Other than the risk factors set forth below, there have not been any material changes from the risk factors previously disclosed in our Form 10-KSB. These risk factors are not the only ones facing the Company. Additional risks and uncertainties not currently deemed to be material may also materially or adversely affect our financial condition and/or operating results. Please consult the Risk Factors set forth in our Form 10-KSB.
We have limited liquid assets.
We expect that our capital resources will be adequate to fund our current level of operations through December 2008. 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 may be 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. If we are unable to secure financing prior to the exhaustion of our liquid assets we may be required to cease or curtail our operations.
The proposed merger between Access and Somanta may not result in benefits to the combined company because of integration and other challenges.
Access’ ability to realize the anticipated benefits of the merger will depend, in part, on the ability of Access to integrate the business of Somanta with the business of Access. The combination of two independent companies is a complex, costly and time-consuming process. This process may disrupt the business of either or both of the companies, and may not result in the full benefits expected by Access and Somanta. The difficulties of combining the operations of the companies include, among others:
| | • | | unanticipated issues in integrating information, communications and other systems; |
| | • | | retaining key employees; |
| | • | | consolidating corporate and administrative infrastructures; |
| | • | | the diversion of management’s attention from ongoing business concerns; and |
| | • | | coordinating geographically separate organizations. |
We cannot assure you that the combination of Somanta with Access will result in the realization of the full benefits anticipated from the merger. The closing of the Somanta acquisition is subject to numerous closing conditions. At this time, either we or Somanta may terminate the Merger Agreement or the Merger Agreement may be terminated if various closing conditions are not met.
PART II -- OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
None
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 OTHER INFORMATION
None
Exhibits:
| 2.2 | Agreement and Plan of Merger, by and among Access Pharmaceuticals, Inc., Somanta Acquisition Corporation, Somanta Pharmaceuticals, Inc., Somanta Incorporated and Somanta Limited, dated April 18, 2007. (Incorporated by reference to Exhibit 2.1 to our Form 8-K dated April 18, 2007) |
| 3.0 | Articles of incorporation and bylaws: |
| 3.1 | Certificate of Incorporation (Incorporated by Reference to Exhibit 3(a) of our Form 8-B dated July 12, 1989, Commission File Number 9-9134) |
| 3.2 | Certificate of Amendment of Certificate of Incorporation filed August 21, 1992 |
| 3.3 | Certificate of Merger filed January 25, 1996. (Incorporated by reference to Exhibit E of our Registration Statement on Form S-4 dated December 21, 1995, Commission File No. 33-64031) |
| 3.4 | Certificate of Amendment of Certificate of Incorporation filed January 25, 1996. (Incorporated by reference to Exhibit E of our Registration Statement on Form S-4 dated December 21, 1995, Commission File No. 33-64031) |
| 3.5 | Certificate of Amendment of Certificate of Incorporation filed July 18, 1996. (Incorporated by reference to Exhibit 3.8 of our Form 10-K for the year ended December 31, 1996) |
| 3.6 | Certificate of Amendment of Certificate of Incorporation filed June 18, 1998. (Incorporated by reference to Exhibit 3.8 of our Form 10-Q for the quarter ended June 30, 1998) |
In accordance with the requirements of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
The accompanying notes are an integral part of these statements.
The accompanying notes are an integral part of these statements.
The consolidated balance sheet as of September 30, 2007 and the consolidated statements of operations and cash flows for the three and nine months ended September 30, 2007 and 2006 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. All share and per share information reflect a one for five reverse stock split effected on June 5, 2006.
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-KSB for the year ended December 31, 2006. The results of operations for the period ended September 30, 2007 are not necessarily indicative of the operating results which may be expected for a full year. The consolidated balance sheet as of December 31, 2006 contains financial information taken from the audited financial statements as of that date.
The report of our independent registered public accounting firm for the fiscal year ended December 31, 2006 contained a fourth explanatory paragraph to reflect its significant doubt about our ability to continue a going concern as a result of our history of losses and our liquidity position, as discussed herein and in this Form 10-QSB. If we are unable to obtain adequate capital funding in the future, 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.
Amortization expense related to intangible assets totaled $42,000 and $54,000 for each of the three months ended September 30, 2007 and 2006, respectively and totaled $151,000 and $163,000 for each of the nine months ended September 30, 2007 and 2006. The aggregate estimated amortization expense for intangible assets remaining as of September 30, 2007 is as follows (in thousands):
The Company incurred significant losses from continuing operations of $2.0 million for the quarter ended September 30, 2007, $8.2 million for the nine months ended September 30, 2007, $13.3 million for the year ended December 31, 2006 and $7.6 million for the year ended December 31, 2005. Additionally, at September 30, 2007, our working capital deficit is $12.6 million. As of September 30, 2007, we did not have sufficient funds to repay our convertible notes at their maturity and support our working capital and operating requirements. See Note (7) Subsequent Events for the changes in our cash position and convertible notes. Our funds at November 14, 2007 will allow us to support our working capital and operating requirements through December 2008.
For the third quarter, we recognized stock-based compensation expense of $207,000 in 2007 and $49,000 in 2006. For the nine months we recognized stock-based compensation expense of $810,000 in 2007 and $171,000 in 2006. For the third quarter of 2007, we granted 25,000 stock options under our 2005 Equity Incentive Plan at a weighted average exercise price of $3.03.
As of the beginning of our 2007 fiscal year, due to our cumulative net losses we do not have any reserves for income taxes because no taxes are due.
We file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. A number of years may elapse before an uncertain tax position is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believe that our reserves for income taxes reflect the most probable outcome. We adjust these reserves, as well as the related interest, in light of changing facts and circumstances. Settlement of any particular position would usually require the use of cash. The resolution of a matter would be recognized as an adjustment to our provision for income taxes and our effective tax rate in the period of resolution.
On October 24, 2007, Access and SCO Capital Partners LLC and affiliates (“SCO”) agreed to extend the maturity date of an aggregate principal amount of $6,000,000 of 7.5% convertible notes to November 15, 2007 from October 25, 2007.
On October 24, 2007, Access and Oracle Partners LP and affiliates (“Oracle”) agreed to extend the maturity date of an aggregate principal amount of $4,015,000 of 7.7% convertible notes to November 16, 2007 from October 26, 2007.
