UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 2004.
Commission file number 0-22245
NEXMED, INC.
-----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Nevada 87-0449967
- ---------------------------------------- -----------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
350 Corporate Boulevard, Robbinsville, NJ 08691
-----------------------------------------------------------------
(Address of Principal Executive Offices)
(609) 208-9688
-----------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Check whether the registrant: (1) filed all reports required to be
filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check whether the registrantant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act):
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: as of May 4, 2004,
40,340,113 shares of Common Stock, par value $0.001 per share, were outstanding.
Table of Contents
Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets at March 31, 2004 and
December 31, 2003............................................. 1
Unaudited Consolidated Statements of Operations for the Three
Months Ended March 31, 2004 and March 31, 2003 ............... 2
Unaudited Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2004 and March 31, 2003 ............... 3
Notes to Unaudited Consolidated Financial Statements.......... 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................... 7
Item 3. Quantitative and Qualitative Disclosures about Market Risk....17
Item 4. Controls and Procedures.......................................17
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................17
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of
Equity Securities.............................................18
Item 6. Exhibits and Reports on Form 8-K..............................18
Signatures....................................................................19
Exhibit Index.................................................................20
NEXMED, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MARCH 31, DECEMBER 31,
2004 2003
Assets
Current assets:
Cash and cash equivalents $ 5,295,220 $ 9,479,214
Marketable securities 1,504,622 1,501,204
Note receivable, current 5,916 48,341
Prepaid expenses and other assets, net 2,015,468 1,482,426
----------------------------
Total current assets 8,821,226 12,511,185
Fixed assets, net 10,346,017 10,583,733
Debt issuance cost, net of accumulated amortization 35,924 38,761
----------------------------
Total assets $ 19,203,167 $ 23,133,679
============================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 873,857 $ 773,522
Payroll related liabilities 1,287,584 1,273,303
Deferred revenue 97,958 128,708
Capital lease obligations - current portion 870,504 898,861
----------------------------
Total current liabilities 3,129,903 3,074,394
----------------------------
Long Term liabilities:
Convertible notes payable 6,000,000 6,000,000
Other long term liabilities 458,000 458,000
Capital lease obligations 689,013 877,877
----------------------------
Total Liabilities 10,276,916 10,410,271
----------------------------
Commitments and contingencies (Note 9)
Stockholders' equity:
Preferred stock, $.001 par value, 10,000,000
shares authorized, none issued and outstanding - -
Common stock, $.001 par value, 80,000,000
shares authorized, 40,278,000 and 40,123,127 issued
and outstanding, respectively 40,279 40,124
Additional paid-in capital 98,099,779 97,924,314
Deferred compensation (9,973) (19,332)
Accumulated other comprehensive loss (733) (163)
Accumulated deficit (89,203,101) (85,221,535)
----------------------------
Total stockholders' equity 8,926,251 12,723,408
----------------------------
Total liabilities and stockholders' equity $ 19,203,167 $ 23,133,679
============================
1
See notes to unaudited consolidated financial statements
NEXMED, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------
2004 2003
---- ----
Revenue
Product sales and royalties $ 2,204 $ 1,713
Research and development fees 101,995 -
------------ ------------
Total revenue 104,199 1,713
------------ ------------
Operating expenses
General and administrative 1,360,038 1,235,046
Research and development 2,634,348 1,855,334
------------ ------------
Total operating expenses 3,994,386 3,090,380
------------ ------------
Loss from operations (3,890,187) (3,088,667)
Other income (expense)
Interest expense, net (91,379) (253,125)
Other expense - (109,535)
------------ ------------
Total other income (expense) (91,379) (362,660)
------------ ------------
Net loss (3,981,566) (3,451,327)
------------ ------------
Other comprehensive income (loss)
Foreign currency translation adjustments 512 3,509
Unrealized loss on available-for-sale securities (4,728) -
------------ ------------
Total other comprehensive (loss) income (4,216) 3,509
------------ ------------
Comprehensive Loss (3,985,782) (3,447,818)
============ ============
Basic and diluted loss per share $ (0.10) $ (0.12)
------------ ------------
Weighted average common shares outstanding
used for basic and diluted loss per share 40,212,607 28,593,839
------------ ------------
See notes to unaudited consolidated financial statements
2
NEXMED, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------
2004 2003
---- ----
Cash flows from operating activities
Net loss $(3,981,566) $(3,451,327)
Adjustments to reconcile net loss to net cash used in operating
activities
Depreciation and amortization 266,730 300,786
Non-cash interest, amortization of debt discount and
deferred financing costs 2,837 204,467
Non-cash insurance expense - 3,501
Non-cash compensation expense 33,390 124,597
Net loss on sale of marketable securities - 94,824
Loss on disposal of property and equipment - 14,711
(Increase)/decrease in prepaid expenses and other assets (533,042) 81,546
Decrease in deferred revenue (30,750) -
Increase/(decrease) in payroll related liabilities 14,281 (143,905)
Increase/(decrease) in accounts payable
and accrued expenses 100,335 (426,741)
--------------------------
Net cash used in operating activities (4,127,785) (3,197,541)
--------------------------
Cash flow from investing activities
Proceeds from collection of note receivable 42,425 38,491
Capital expenditures (29,013) (21,017)
Purchase of marketable securities (4,500) -
Proceeds from sale of marketable securities - 545,200
--------------------------
Net cash provided by investing activities 8,912 562,674
--------------------------
Cash flow from financing activities
Issuance of common stock, net of offering
costs 151,588 848,469
Issuance of notes payable, net of debt issue costs - 1,100,000
Repayment of capital lease obligations (217,221) (147,171)
--------------------------
Net cash (used in) provided by financing activities (65,633) 1,801,298
--------------------------
Net decrease in cash and cash equivalents (4,184,506) (833,569)
Effect of foreign exchange on cash and cash equivalents 512 3,509
--------------------------
Cash and cash equivalents, beginning of period 9,479,214 1,035,149
--------------------------
Cash and cash equivalents, end of period $ 5,295,220 $ 205,089
==========================
See notes to unaudited consolidated financial statements
3
NEXMED, INC.
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America for interim financial information and with the instructions to Form
10-Q and Article 10-01 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by accounting principles generally
accepted in the United States of America for annual financial statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three months ended March 31, 2004 are not necessarily indicative
of the results that may be expected for the year ended December 31, 2004. These
financial statements should be read in conjunction with the financial statements
and notes thereto contained in the Company's Annual Report on Form 10-K for the
year ended December 31, 2003.
The Company has an accumulated deficit of $89,203,101 at March 31, 2004 and
the Company expects to incur additional losses throughout 2004. The Company's
current cash reserves raise substantial doubt about the Company's ability to
continue as a going concern. Management anticipates that it will require
additional financing, which it is actively pursuing, to fund operations,
including continued research, development and clinical trials of the Company's
product candidates. Management plans to obtain the additional financing through
partnering agreements for Alprox-TD(R) and some of its other products under
development using the NexACT(R) technology as well as through the issuance of
debt and/or equity securities. If the Company is successful in entering into
partnering agreements for some of its products under development using the
NexACT(R) technology, it anticipates that it will receive milestone payments,
which may offset some of its research and development expenses. Although
management continues to pursue these plans, there is no assurance that the
Company will be successful in obtaining financing on terms acceptable to it. If
additional financing cannot be obtained on reasonable terms, future operations
will need to be scaled back or discontinued. These financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
2. ACCOUNTING FOR STOCK BASED COMPENSATION
As provided by SFAS 123, Accounting for Stock-Based Compensation ("SFAS 123"),
the Company has elected to continue to account for its stock-based compensation
programs according to the provisions of Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees." Accordingly, compensation
expense has been recognized to the extent of employee or director services
rendered based on the intrinsic value of compensatory options or shares granted
under the plans. The Company has adopted the disclosure provisions required by
SFAS 123.
Had the Company's stock-based compensation been determined by the fair-value
based method of SFAS 123, "Accounting for Stock-Based Compensation," the
Company's net loss and loss per share would have been as follows:
4
FOR THE THREE MONTHS ENDED
MARCH 31,
2004 2003
Net loss, as reported $(3,981,566) $(3,451,327)
Add: Stock-based compensation expense included
in reported net loss 33,390 124,597
Deduct: Total stock-based compensation expense determined
under fair-value based method for all awards (491,519) (548,664)
----------- -----------
Proforma net loss $(4,439,695) $(3,875,394)
=========== ===========
Basic and diluted loss per share:
As reported $ (0.10) $ (0.12)
Proforma $ (0.11) $ (0.14)
3. LOSS PER SHARE
At March 31, 2004 and 2003, respectively, options to acquire 5,619,141 and
4,950,755 shares of common stock with exercise prices ranging from $.55 to
$16.25 per share, promissory notes convertible into 923,077 and 1,845,018 shares
of common stock and warrants to acquire 7,164,761 and 2,170,032 shares of common
stock with exercise prices ranging from $1.00 to $5.04 were excluded from the
calculation of diluted loss per share, as their effect would be antidilutive.
4. NOTE RECEIVABLE
The Company has advanced its Asian licensee funds to finance the purchase of
certain equipment. In February 2002, the Company received a note, in the
original principal amount of $309,575, to evidence these advances. The note
bears interest at 6% per annum and as of March 31, 2004, the final payment of
$5,916 remained outstanding.
5. NOTES PAYABLE
On December 12, 2003, the Company issued convertible notes (the "2003 Notes")
with a face value of $6 million. The 2003 Notes are payable on May 31, 2007 and
are collateralized by the Company's manufacturing facility in East Windsor, New
Jersey. The Notes are initially convertible into shares of the Company's common
stock at a conversion price equal to $6.50 per share (923,077 shares). The
conversion price will be adjusted on June 14, 2004 to the volume weighted
average price of the Company's stock over the six month period beginning
December 15, 2003 and ending on June 14, 2004, but will be no greater than $6.50
and no less than $5.00. Interest accretes on the 2003 Notes on a semi-annual
basis at a rate of 5% per annum, and the Company may pay such amounts in cash or
by effecting the automatic conversion of such amount into the Company's common
stock at a 10% discount to the then average market prices.
5
6. CAPITAL LEASE OBLIGATIONS
In February 2001, the Company entered into a financial arrangement with GE
Capital Corporation for a line of credit, which provided for the financing of up
to $5 million of equipment and expired in March 2002. As of December 31, 2002,
we had financed $1,113,459 of equipment purchases under the GE credit line, and
as of March 31, 2004, there was an outstanding balance due GE of $323,258 under
this facility, payable in monthly installments through various dates in 2004.
In January 2002, GE approved a new credit line, which provided for the financing
of up to $3 million of equipment and expired on December 31, 2002. The Company
accessed $1,111,427 of the credit line, and as of March 31, 2004, there was an
outstanding balance due GE of $617,511 under the January 2002 facility, payable
in 42 monthly installments from the date of take-down.
In July 2003, GE approved a new credit line, which expires in July 2004 and
provides for the financing of up to $1.85 million of equipment. We accessed
$738,731 of the credit line during 2003, and as of March 31, 2004, there was an
outstanding balance due GE of $618,748 under the July 2003 facility, payable in
36 monthly installments from the date of take-down.
7. RESEARCH & DEVELOPMENT AGREEMENT
In March 2004, the Company entered into the second phase of a research and
development contract, pursuant to which the Company provides contract
development services for an innovative topical product to treat a form of
herpes. The Company has received upfront funding and is eligible to receive
additional payments upon the achievement of certain development milestones,
including the successful filing of an Investigational New Drug application and
the completion of a single U.S.-based Phase 2a clinical study.
Revenue earned under this research and development contract is recognized in
accordance with the cost-to-cost method outlined in Staff Accounting Bulletin
No. 104 whereby the extent of progress toward completion is measured on the
cost-to-cost basis; however, revenue recognized at any point will not exceed the
cash received. If the current estimates of total contract revenue and contract
cost indicate a loss, a provision for the entire loss on the contract would be
made. All costs related to this agreement are expensed as incurred and
classified within "Research and development" expenses in the Consolidated
Statements of Operations and Comprehensive Income.
8. INCOME TAXES
In consideration of the Company's accumulated losses and lack of historical
ability to generate taxable income, the Company has estimated that it will not
be able to realize any benefit from its temporary differences and the Company
has recorded a valuation allowance of an equal amount to fully offset the
deferred tax benefit amount.
9. COMMITMENTS AND CONTINGENCIES
The Company is a party to clinical research agreements totaling approximately
$12.8 million. These agreements provide that if the Company cancels them prior
to completion, the Company will owe 10% of the outstanding contract amount at
the time of cancellation. At March 31, 2004, this amounts to
6
approximately $1.2 million. The Company anticipates that the clinical research
in connection with the agreements will be completed during 2005.
The Company is a party to several short-term consulting and research agreements
that, generally, can be cancelled at will by either party.
We have been the subject of a number of lawsuits. On March 22, 2003 five former
employees filed a lawsuit in the Superior Court of New Jersey against the
Company, Y. Joseph Mo, and Administaff (the co-employer who until December 31,
2003, provided the Company's benefits), claiming their termination was due to
age discrimination and seeking unspecified damages. This complaint is covered by
a labor insurance policy the Company maintains through Administaff, and the
insurance company has appointed counsel.
Another lawsuit was filed with the Superior court of New Jersey on April 1, 2003
by one of the above five employees against the Company for an $800,000 bonus
amount that he believes he should have received for completing the construction
of the Company's East Windsor facility. The Company has engaged counsel to
defend its position.
On December 29, 2003, a consultant previously engaged by the Company filed a
suit in the Superior Court of New Jersey, Chancery Division: Mercer County,
which subsequently was removed to the United States District Court for the
District of New Jersey, alleging a breach by the Company of a consulting
agreement entered into with that consultant in January 2003. The plaintiff
alleged that the Company failed to issue certain warrants provided for under
that agreement, which the Company terminated in April 2003. The complaint did
not specify any particular amount of monetary risk and expense damages. The
Company has engaged counsel to defend its position.
The Company intends to defend itself vigorously against the above mentioned
claims and believes it has valid defenses; however, each of the cases are still
in the preliminary stages and the likely outcomes can not be predicted, nor can
a reasonable estimate of the amount of loss, if any, be made.
On February 27, 2002, the Company entered in to an employment agreement with Y.
Joseph Mo, Ph.D., that has a constant term of five years, and pursuant to which
Dr. Mo serves as the Company's Chief Executive Officer and President. During his
employment with the Company, Dr. Mo will receive an annual base salary of at
least $250,000 (to be raised to $350,000 after the Company sustains gross
revenues of $10 million for two consecutive fiscal quarters), subject to annual
cost of living increases. Under the employment agreement, Dr. Mo is also
entitled to deferred compensation in an annual amount equal to one sixth of the
sum of his base salary and bonus for the 36 calendar months preceding the date
on which the deferred compensation payments commence subject to certain
limitations, including annual vesting through January 1, 2007, as set forth in
the employment agreement. The deferred compensation will be payable monthly for
180 months commencing on termination of employment. The Company has accrued
approximately $458,000 which is included in other long-term liabilities, based
upon the estimated present value of the vested portion of the obligation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
DISCLOSURES REGARDING FORWARD-LOOKING STATEMENTS.
7
The following should be read in conjunction with the consolidated
financial statements and the related notes that appear elsewhere in this
document. This report includes forward-looking statements made based on current
management expectations pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These statements are not guarantees of
future performance and actual outcomes may differ materially from what is
expressed or forecast. There are many factors that affect the Company's
business, consolidated financial position, results of operations and cash flows,
including but not limited to, our ability to enter into partnering agreements or
raise financing on acceptable terms, successful completion of clinical
development programs, regulatory review and approval, product development and
acceptance, manufacturing, competition, and/or other factors, many of which are
outside the control of the Company.
GENERAL.
We have been in existence since 1987. Since 1994, we have positioned
ourselves as a pharmaceutical and medical technology company with a focus on
developing and commercializing therapeutic products based on proprietary
delivery systems. We, together with our subsidiaries, are focusing our efforts
on new and patented pharmaceutical products based on a penetration enhancement
drug delivery technology known as NexACT(R), which may enable an active drug to
be better absorbed through the skin. The NexACT(R) transdermal drug delivery
technology is designed to enhance the absorption of an active drug through the
skin, overcoming the skin's natural barrier properties and enabling high
concentrations of the active drug to rapidly penetrate the desired site of the
skin or extremity. Successful application of the NexACT(R) technology could
improve therapeutic outcomes and reduce dose requirement, dosing frequency, and
systemic side effects that often accompany oral and injectable medications.
We intend to continue our efforts developing transdermal treatments
including cream, gel, patch and tape, based on the application of NexACT(R)
technology to drugs: (1) previously approved by the FDA, (2) with proven
efficacy and safety profiles, (3) with patents expiring or expired and (4) with
proven market track records and potential.
We are focusing our application of the NexACT(R) technology to
Alprox-TD(R) cream for the treatment of male erectile dysfunction. We have
explored the application of the NexACT(R) technology to other drug compounds and
delivery systems, and are in various stages of developing new treatments for
female sexual arousal disorder, nail fungus, premature ejaculation, urinary
incontinence, wound healing, pain and the prevention of nausea and vomiting
associated with post-operative surgical procedures and cancer chemotherapy.
Alprox-TD(R) is an alprostadil-based cream treatment intended for
patients with mild, moderate or severe erectile dysfunction. Our clinical
studies have demonstrated that NexACT(R) enhancers promote the rapid absorption
of alprostadil and improve clinical responses. In December 2002, we completed
our two pivotal Phase 3 studies for Alprox-TD(R), which tested over 1,700
patients at 85 sites throughout the U.S. The two pivotal studies were
randomized, double-blind, placebo-controlled, and designed to confirm the
efficacy and safety of Alprox-TD(R) in patients with varying degrees of erectile
dysfunction.
We are currently engaged in discussions and contract negotiations with
several pharmaceutical companies regarding possible strategic marketing
partnership(s) for Alprox-TD(R). If partnership arrangements are successfully
completed, the partner(s) will obtain marketing rights for Alprox-TD(R) for
certain markets, in exchange for milestone payments and other future payments to
us. However, in each
8
case consummation of the transaction is subject to the negotiation of complex
contractual relationships, and we may not be able to negotiate such agreements
on a timely basis, if at all, or on terms acceptable to us.
Prior to filing a New Drug Application for Alprox-TD(R), we will be
required to initiate a new long-term open-label safety study. We had previously
initiated an open-label study, which was halted in November 2002 due to FDA
concerns about results of our transgenic mice study. The duration of this study
is 12 months. However, we have determined with the FDA that completion of the
open-label study is not a prerequisite for our New Drug Application submission
provided that the 12-month safety update on 100 patients is filed within four
months after new drug application submission. We are required to have three
hundred patients complete six months of testing in the study at the time of New
Drug Application submission, and 100 patients must complete the 12-month study
prior to New Drug Application approval.
In late 2003, we met with the FDA to evaluate our Alprox-TD(R) New Drug
Application package and to discuss possible product improvements. At that time,
the FDA requested that we include a tolerance study of Alprox-TD(R) in female
subjects as part of our New Drug Application submission. We have submitted the
protocols for the female study to the FDA for their review and comment. Assuming
that the FDA agrees with our plan, we intend to implement this plan concurrently
with the open label study and complete it prior to the New Drug Application
submission.
During the same meeting, we proposed to the FDA a new and improved
formulation of Alprox-TD(R), to include in our New Drug Application filing. The
FDA has permitted us to switch to the new formulation if we conduct two bridging
studies to confirm the efficacy of the new formulation. We intend to conduct
these two studies concurrently with the open-label study and complete them prior
to the New Drug Application filing. We also proposed to the FDA to conduct a
study of Alprox-TD(R) in men who have failed with oral erectile dysfunction
medication. Industry estimates indicate that a large number of patients who have
tried oral erectile dysfunction medications have discontinued their use due
either to failure to get a satisfactory response or for other reasons. This type
of study is typically considered a Phase 4 or a post approval study. However,
based on the positive response of FDA to this proposal, we are considering early
initiation of the study so that its results can be incorporated into the New
Drug Application.
The timeframe for us to complete these studies largely depends on our
ability to obtain financing through a partnering agreement for Alprox-TD(R) or
from other sources, and on FDA review. Assuming we begin patient enrollment for
the long-term open-label study in the third quarter of 2004, we anticipate that
we will file the New Drug Application in the first half of 2005. However, this
timeframe may change if we encounter any delay in financing, clinical testing or
FDA review. If we are not able to successfully arrange financing through a
partnering agreement or from other sources, we may be required to discontinue
the development of Alprox-TD(R). In addition, it is possible that we may not
have successful clinical results or receive FDA approval on a timely basis, if
at all.
In April 2002, Alprox-TD(R) was launched in Hong Kong under the
Befar(R) trademark. The product, which has been selling in China since October
2001, is manufactured and marketed by a local affiliate of Vergemont
International Limited, our Asian licensee. We receive from our Asian licensee
royalty payments and payments for manufacturing supplies in connection with the
distribution of Befar(R) in China and will receive such payments in other Asian
markets once Befar(R) is approved for marketing in such other markets. The sale
of Befar(R) has been slower than anticipated for several reasons. First, the
switching of distributors by our Asian licensee in China and in Hong Kong during
2003 significantly disrupted the sale of the product in the two markets.
Secondly, Befar(R), along with the currently approved oral erectile
9
dysfunction product, are currently classified in China as controlled substances,
and their distribution is limited to prescription by certain urologists and
dispensing through hospitals. In addition, China has a limited number of
patients who can afford erectile dysfunction treatments. In December 2002 and
February 2003, our Asian licensee entered into licensing agreements for two of
our NexACT(R)-based products, with CJ Pharmaceuticals, one of the five largest
pharmaceutical companies in South Korea. Its parent company, CJ Corporation, is
a $7 billion conglomerate in South Korea. Pursuant to the terms of the
agreement, CJ Pharmaceuticals will develop, file for regulatory approval, market
and distribute Befar(R) and Femprox(R) in South Korea.
We have explored the application of the NexACT(R) technology to other
drug compounds and delivery systems. The furthest advanced of these products is
Femprox(R), which is an alprostadil-based cream product intended for the
treatment of female sexual arousal disorder. We have completed one Phase 2 study
for Femprox(R) and intend to continue with its U.S. clinical development pending
the availability of a partnering agreement. We recently announced our plans to
initiate a 400-patient study for Femprox(R) in China, where the cost for
conducting clinical studies is significantly lower than in the U.S. The clinical
data and experience to be gained from this study will guide us in designing
future U.S. studies.
We recently completed a three-month interim analysis of a multi-center,
randomized, placebo-controlled, parallel, blinded efficacy and safety study. The
overseas study, which enrolled 120 patients with various severities of big
toenail fungal infection, is designed to evaluate the dose-response relationship
of the efficacy and safety of NM100060, our proprietary nail lacquer treatment
for onychomycosis. The interim data suggest that all three tested doses of
NM100060 were well tolerated by the patients, and the primary efficacy rate,
defined as simultaneous negative mycological test and healthy new nail growth
greater than 3 millimeter (>3 mm) after three months, was up to 55%. The
NM100060 nail lacquer is topically applied, and incorporates a currently
marketed oral anti-fungal drug with the NexACT(R) technology, which facilitates
the permeation of the drug through the nail and into the nail bed. We anticipate
that during 2004 we will file an Investigational New Drug application with the
FDA for NM100060 and begin clinical testing of the product in the U.S.
During the last 18 months, we have entered into a series of R&D
agreements with Japanese pharmaceutical companies, to develop new topical
treatments for different indications. These agreements provided for modest
signing payments, followed by additional payments based on the achievement of
certain milestones. Currently, two of these agreements are still in effect. We
anticipate that we will enter into additional R&D agreements during the next
twelve months but we cannot assure you that we will be able to conclude any
arrangement on a timely basis, if at all, or on terms acceptable to us.
PATENTS.
Proprietary protection for our pharmaceutical products is of material
importance to our business in the U.S. and most other countries. We have sought
and will continue to seek proprietary protection for our products to attempt to
prevent others from commercializing equivalent products in substantially less
time and at substantially lower expense. Our success may depend on our ability
to (1) obtain effective patent protection within the U.S. and internationally
for our proprietary technologies and products, (2) defend patents we own, (3)
preserve our trade secrets, and (4) operate without infringing upon the
proprietary rights of others.
We have ten U.S. patents either acquired or received out of a series of
patent applications that we have filed in connection with our NexACT(R)
technology and our NexACT(R) -based products under
10
development, such as Alprox-TD(R), Femprox(R), and our non-steroidal
anti-inflammatory cream. To further strengthen our global patent position with
respect to our proprietary products under development, and to expand the patent
protection to other markets, we have filed under the Patent Cooperation Treaty,
corresponding international applications for our issued U.S. patents and pending
U.S. patent applications.
The following table identifies our ten U.S. patents issued for
NexACT(R) technology and/or our NexACT-based products under development, and the
year of expiration for each patent:
PATENT NAME EXPIRATION
- ----------- ----------
DATE
----
Biodegradable Absorption Enhancers 2008
Biodegradable Absorption Enhancers 2009
Compositions and Methods for Amelioration of Human Female Sexual Dysfunction 2017
Topical Compositions for PGE1 Delivery 2017
Topical Compositions for Non-Steroidal Anti-Inflammatory Drug Delivery 2017
Medicament Dispenser 2019
Crystalline Salts of dodecyl 2-(N, N-Dimethylamino) 2019
Topical Compositions Containing Prostaglandin E1 2019
Prostaglandin Composition and Methods of Treatment of Male Erectile Dysfunction 2020
CIP: Prostaglandin Composition and Methods of Treatment of Male Erectile Dysfunction 2020
While we have obtained patents and have several patent applications
pending, the extent of effective patent protection in the U.S. and other
countries is highly uncertain and involves complex legal and factual questions.
No consistent policy addresses the breadth of claims allowed in or the degree of
protection afforded under patents of medical and pharmaceutical companies.
Patents we currently own or may obtain might not be sufficiently broad to
protect us against competitors with similar technology. Any of our patents could
be invalidated or circumvented.
There have been patents issued to other companies on the use of
alprostadil for the treatment of male or female sexual dysfunction. While we
believe that our patents would prevail in any potential litigation, we can
provide no assurance that the holders of these competing patents will not
commence a lawsuit against us or that we would prevail in any such lawsuit.
Litigation could result in substantial cost to and diversion of effort by us,
which may harm our business. In addition, our efforts to protect or defend our
proprietary rights may not be successful or, even if successful, may result in
substantial cost to us.
RESEARCH AND DEVELOPMENT.
Governmental authorities in the U.S. and other countries heavily
regulate the testing, manufacture, labeling, advertising, marketing and
distribution of our proposed products. None of our proprietary products under
development, including the Alprox-TD(R) cream utilizing the NexACT(R)
technology, has been approved for marketing in the U.S. Before we market any
products we develop, we must obtain FDA and comparable foreign agency approval
through an extensive clinical study and approval process.
The studies involved in the approval process are conducted in three
phases. In Phase 1 studies, researchers assess safety or the most common acute
adverse effects of a drug and examine the size of doses that patients can take
safely without a high incidence of side effects. Generally, 20 to 100 healthy
volunteers or patients are studied in the Phase 1 study for a period of several
months. In Phase 2 studies, researchers determine the drug's efficacy with
short-term safety by administering the drug to subjects who
11
have the condition the drug is intended to treat, assess whether the drug
favorably affects the condition, and begin to identify the correct dosage level.
Up to several hundred subjects may be studied in the Phase 2 study for
approximately 6 to 12 months, depending on the type of product tested. In Phase
3 studies, researchers further assess efficacy and safety of the drug. Several
hundred to thousands of patients may be studied during the Phase 3 studies for a
period of from 12 months to several years. Upon completion of Phase 3 studies, a
New Drug Application is submitted to the FDA or foreign governmental regulatory
authority for review and approval.
Our failure to obtain requisite governmental approvals timely or at all
will delay or preclude us from licensing or marketing our products or limit the
commercial use of our products, which could adversely affect our business,
financial condition and results of operations.
Because we intend to sell and market our products outside the U.S., we
will be subject to foreign regulatory requirements governing the conduct of
clinical trials, product licensing, pricing and reimbursements. These
requirements vary widely from country to country. Our failure to meet a foreign
country's requirements could delay the introduction of our proposed products in
such foreign country and limit our revenues from sales of our proposed products
in foreign markets.
Successful commercialization of our products may depend on the
availability of reimbursement to the consumer from third-party healthcare
payers, such as government and private insurance plans. Even if we succeed in
bringing one or more products to market, reimbursement to consumers may not be
available or sufficient to allow us to realize an appropriate return on our
investment in product development or to sell our products on a competitive
basis. In addition, in certain foreign markets, pricing or profitability of
prescription pharmaceuticals is subject to governmental controls. In the U.S.,
federal and state agencies have proposed similar governmental control and the
U.S. Congress has recently considered legislative and regulatory reforms that
may affect companies engaged in the healthcare industry. Pricing constraints on
our products in foreign markets and possibly in the U.S. could adversely effect
our business and limit our revenue.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION.
We have experienced net losses and negative cash flow from operations
each year since our inception. Through March 31, 2004, we had an accumulated
deficit of $89,203,101. Our operations have principally been financed through
private placements of equity securities and debt financing. Funds raised in past
periods should not be considered an indication of our ability to raise
additional funds in any future periods.
As a result of our losses to date, working capital deficiency and
accumulated deficit, there is substantial doubt as to our ability to continue as
a going concern, and, accordingly, our independent auditors have modified their
report on our December 31, 2003 consolidated financial statements included in
our Annual Report on Form 10-K in the form of an explanatory paragraph
describing the events that have given rise to this uncertainty. These factors
may make it more difficult for us to obtain additional funding to meet our
obligations. Our ability to continue as a going concern is based on our ability
to generate or obtain sufficient cash to meet our obligations on a timely basis
and ultimately become profitable.
We are currently engaged in discussions and contract negotiations with
several pharmaceutical companies regarding possible strategic marketing
partnership(s) for Alprox-TD(R). If partnership arrangements are successfully
completed, the partner(s) will obtain marketing rights for Alprox-TD(R) for
12
certain markets, in exchange for milestone payments and other future payments to
us. However, in each case consummation of the transaction is subject to the
negotiation of complex contractual relationships, and we may not be able to
negotiate such agreements on a timely basis, if at all, or on terms acceptable
to us.
At March 31, 2004, we recorded significantly less non-cash interest
expense charges from convertible notes. The convertible notes which were
outstanding in the first quarter of 2003 were issued with significant debt
discounts that were being amortized to interest expense over the life of the
notes whereas our convertible notes issued in December 2003 and outstanding in
the first quarter 2004 were issued at no discount and therefore have no non-cash
interest expense related to the amortization of debt discounts.
At March 31, 2004, we had $2,015,468 in prepaid expenses and other
assets as compared to $1,482,426 at December 31, 2003. The increase is primarily
due to a second deposit made in the first quarter of 2004, net of amounts
expended, to an independent clinical research organization for the planned
clinical studies for Alprox-TD(R). The initial deposit was made in December
2003.
At March 31, 2004, we had cash and cash equivalents, certificates of
deposit and investments in marketable securities of approximately $6.8 million
as compared to $10.98 million at December 31, 2003. We are currently operating
at a burn-rate of approximately $850,000 per month. In addition, during the
first three months of 2004, we made a $1.3 million payment to the contract
research organization that is working with us to prepare for the initiation of
the long term open-label study for Alprox-TD(R).
At March 31, 2004, we had $97,958 in deferred revenue as compared to
$128,708 at December 31, 2003. The decrease in deferred revenue is the result of
our recognition of a portion of the revenue deferred at December 31, 2003
related to our ongoing research and development projects for our Japanese
partners. In the first quarter of 2004, we made more progress toward completion
of these projects and consequently recognized a portion of the deferred revenue
under the percentage of completion method.
To date, we have spent approximately $64.5 million on the Alprox-TD(R)
development program, and anticipate that we will spend approximately an
additional $20 million to complete the proposed clinical studies which includes
an estimated $5 million for the Phase 4 study if we elect to conduct it prior to
marketing approval, and file the New Drug Application for Alprox-TD(R). Since we
cannot predict the actions of the FDA, the level of other research and
development activities we may be engaged in, and our ability to enter into
partnering agreements, we cannot accurately predict the expenditure required for
the period between NDA submission of Alprox-TD(R) and its commercialization.
We have spent approximately $9.4 million in total for the land,
building, manufacturing and lab equipment, and GMP development as related to our
East Windsor manufacturing facility and estimate that an additional $2 million,
approximately, will be spent prior to the FDA pre-approval inspection for the
facility. We intend to initiate additional clinical studies for Femprox(R) and
other NexACT(R)-based products, pending the availability financing or through
partnering arrangements.
The timeframe for us to complete the planned clinical studies for
Alprox-TD(R) largely depends on our ability to obtain financing through a
partnering agreement for Alprox-TD(R) or from other sources, and on the FDA
review process. Assuming we begin patient enrollment for the long-term
open-label safety study in the third quarter of 2004, we anticipate that we will
file the New Drug Application in first half of 2005. If we are not able to enter
into a licensing agreement for Alprox-TD(R) on a timely basis, the timeframe for
our New Drug Application filing will be delayed. This timeframe may also change
if we
13
encounter any delay in financing, clinical testing or FDA review. In addition,
it is possible that we may not have successful clinical results or receive FDA
approval on a timely basis, if at all.
In February 2001, we entered into a financial arrangement with GE
Capital Corporation for a line of credit, which provided for the financing of up
to $5 million of equipment and expired in March 2002. As of December 31, 2002,
we had financed $1,113,459 of equipment purchases under the GE credit line, and
as of March 31, 2004, there was an outstanding balance due GE of $323,258 under
this facility, payable in monthly installments through various dates in 2004.
In January 2002, GE approved a new credit line, which provided for the
financing of up to $3 million of equipment and expired on December 31, 2002. We
accessed $1,111,427 of the credit line, and as of March 31, 2004, there was an
outstanding balance due GE of $617,511 under the January 2002 facility, payable
in 42 monthly installments from the date of take-down..
In July 2003, GE approved a new credit line, which expires in July 2004
and provides for the financing of up to $1.85 million of equipment. We accessed
$738,731 of the credit line in 2003, and as of March 31, 2004, there was an
outstanding balance due GE of $618,748 under the July 2003 facility, payable in
36 monthly installments from the date of take-down.
CRITICAL ACCOUNTING POLICIES.
Our discussion and analysis of our financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
our management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenue and expenses, and related disclosure of
contingent assets and liabilities. Our accounting policies affect our more
significant judgments and estimates used in the preparation of our financial
statements. Actual results could differ from these estimates. The following is a
brief description of the more significant accounting policies and related
estimate methods that we follow:
Income Taxes - In preparing our financial statements, we make estimates
of our current tax exposure and temporary differences resulting from timing
differences for reporting items for book and tax purposes. We recognize deferred
taxes by the asset and liability method of accounting for income taxes. Under
the asset and liability method, deferred income taxes are recognized for
differences between the financial statement and tax bases of assets and
liabilities at enacted statutory tax rates in effect for the years in which the
differences are expected to reverse. The effect on deferred taxes of a change in
tax rates is recognized in income in the period that includes the enactment
date. In addition, valuation allowances are established when necessary to reduce
deferred tax assets to the amounts expected to be realized.
Critical Estimate: In consideration of our accumulated losses and lack
of historical ability to generate taxable income to utilize our deferred tax
assets, we have estimated that we will not be able to realize any benefit from
our temporary differences and have recorded a full valuation allowance. If we
become profitable in the future at levels which cause management to conclude
that it is more likely than not that we will realize all or a portion of the net
operating loss carry-forward, we would immediately record the estimated net
realized value of the deferred tax asset at that time and would then provide for
income taxes at a rate equal to our combined federal and state effective rates,
which would be approximately 40% under current tax laws in the United States of
America. Subsequent revisions to the estimated net realizable value
14
of the deferred tax asset could cause our provision for income taxes to vary
significantly from period to period.
Long-lived assets -- We review for the impairment of long-lived assets
whenever events or circumstances indicate that the carrying amount of an asset
may not be recoverable. An impairment loss would be recognized when estimated
undiscounted future cash flows expected to result from the use of the asset and
its eventual disposition are less than its carrying amount. If such assets are
considered impaired, the amount of the impairment loss recognized is measured as
the amount by which the carrying value of the asset exceeds the fair value of
the asset, fair value being determined based upon discounted cash flows or
appraised values, depending on the nature of the asset. We have not identified
any such impairment losses.
Critical Estimate: Estimated undiscounted future cash flows are based
on sales projections for our products under development for which the long-lived
assets are used. In 2003, we performed a review for impairment of our
manufacturing facility based on projections of sales of our product candidates,
for which the facility is anticipated to be ultimately utilized. Overestimating
the future cash flows resulting from the commercialization of Alprox TD(R) may
lead to overstating the carrying value of the manufacturing facility by not
identifying an impairment loss.
Revenue recognition -- Revenue from product sales are recognized upon
delivery of products to customers, less allowances for returns and discounts.
Royalty revenue is recognized upon the sale of the related products, provided
the royalty amounts are fixed or determinable and the amounts are considered
collectible. Revenue earned under research and development contracts are
recognized in accordance with the cost-to-cost method outlined in Staff
Accounting Bulletin No. 104 whereby the extent of progress toward completion is
measured on the cost-to-cost basis; however, revenue recognized at any point
will not exceed the cash received. If the current estimates of total contract
revenue and contract cost indicate a loss, a provision for the entire loss on
the contract would be made. All costs related to these agreements are expensed
as incurred and classified within "Research and development" expenses in the
Consolidated Statement of Operations and Comprehensive Income.
Critical Estimate: In calculating the progress made toward completion
of a research contract, we must compare costs incurred to date to the total
estimated cost of the project. We estimate the cost of any given project based
on our past experience in product development as well as the past experience of
our research staff in their areas of expertise. Underestimating the total cost
of a research contract may cause us to accelerate the revenue recognized under
such contract. Conversely, overestimating the cost may cause us to delay revenue
recognized.
Research and development -- Research and development expenses include
costs directly attributable to the conduct of our research and development,
including salaries, payroll taxes, employee benefits, materials, supplies,
depreciation on and maintenance of research equipment, costs related to research
and development fee agreements, the cost of services provided by outside
contractors, including services related to our clinical trials, clinical trial
expenses, the full cost of manufacturing drugs for use in research, pre-clinical
and clinical development, and the allocable portion of facility costs.
COMPARISON OF RESULTS OF OPERATIONS BETWEEN THE THREE MONTHS ENDED MARCH 31 OF
2004 AND OF 2003.
Revenue. We recorded $104,199 in revenue during the first quarter of
2004 as compared to $1,713 during the same period in 2003. The revenue consisted
of $2,204 and $1,713, respectively, in
15
royalties on sales received from our Asian licensee. First quarter 2004 revenue
also included $101,995 of revenue recognized on our research and development
agreements with Japanese pharmaceutical companies. We have received an
additional $97,958 from research and development agreements with Japanese
pharmaceutical companies, which we expect to recognize as revenue in subsequent
quarters during 2004 when we have reached the development milestone. During
2004, we anticipate that revenue will increase as we enter into additional
agreements.
Research and Development Expenses. Our research and development
expenses for the first quarter of 2004 and 2003 were $2,634,348 and $1,855,334,
respectively. Research and development expenses attributable to Alprox-TD(R) in
the first quarter of 2004 were $1,153,707, with the balance attributable to
NexACT(R) technology based products and indirect overhead related to research
and development, as compared to $741,957 during the same period in 2003. We
anticipate that total research and development spending in 2004 will increase
with the planned clinical activities for Alprox-TD(R) and the filing of
Investigational New Drug applications for some of the NexACT(R)-based products
under development which would include the initiation of Phase 1 and 2 clinical
studies in the U.S.
General and Administrative Expenses. Our general and administrative
expenses were $1,360,038 during the first quarter of 2004 as compared to
$1,235,046 during the same period in 2003. The modest increase is largely
attributable to increased legal fees related to ongoing lawsuits. Additionally,
we have steadily been increasing expenses since the second half of 2003 in order
to return to the general and administrative support levels that are necessary to
operate the Company under the scaled up Alprox-TD(R) and other NexACT(R)-based
products development programs. Our cash conservation program implemented in
November 2002 resulted in lower general and administrative spending for 2003.
Under this program, we implemented a significant reduction in expenses and
non-essential personnel and allocated our remaining cash reserves for our
operational requirements at the reduced level. Therefore, during 2004, we
anticipate that general and administrative expenses will increase as compared to
2003 with the anticipated increase in development activities and with the
additional compliance activities mandated by the Sarbanes-Oxley Act of 2002 and
by Nasdaq.
Interest Expense. We had interest expense of $91,379 during the first
quarter of 2004, as compared to interest expense of $253,125 during the same
period in 2003. The significant decrease is the result of a decrease in the
amortization of note discounts related to our convertible notes. In 2003, our
convertible notes had significant discounts that were being amortized to
interest expense over the life of the notes. As a result of the full conversion
of these notes in December 2003 and the issuance of new convertible notes with
no discounts in December 2003, there are no longer any note discounts to
amortize to interest expense.
Other income (expense). Other expense was nil during the first quarter
of 2004 as compared to expense of $109,535 during the same period in 2003. The
first quarter 2003 expense was attributable to the sale of marketable securities
for a loss of $94,824 and the disposition of equipment for a loss of $14,711 in
order to generate additional cash.
Net Loss. The net loss was $3,981,566 or a loss of $0.10 per share for
the first quarter of 2004, as compared to $3,451,327 or $0.12 per share for the
first quarter of 2003. The increase in net loss is primarily attributable to the
increase in research and development expenses related to the scaled up
Alprox-TD(R) and other NexACT(R)-based products development programs. We
anticipate that net loss in 2004 will increase with the planned clinical
activities and New Drug Application preparation for Alprox-TD(R), and planned
development activities for other NexACT(R)-based products under development.
16
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to our exposures to market risk
since December 31, 2003.
ITEM 4. CONTROLS AND PROCEDURES
In accordance with Exchange Act Rules 13a-15 and 15d-15, the Company's
management carried out an evaluation with participation of the Company's Chief
Executive Officer and Chief Financial Officer, its principal executive officer
and principal financial officer, respectively, of the effectiveness of the
Company's disclosure controls and procedures as of the end of the period covered
by this report. Based upon that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded as of the end of the period covered by this
Form 10-Q that the Company's disclosure controls and procedures are effective in
timely alerting them to material information relating to the Company (including
the Company's consolidated subsidiaries) required to be included in periodic
reports filed under the Securities Exchange Act of 1934, as amended. There were
no changes in the Company's internal controls over financial reporting
identified in connection with the evaluation by the Chief Executive Officer and
Chief Financial Officer that occurred during the Company's first quarter that
have materially affected or are reasonably likely to materially affect the
Company's internal controls over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 22, 2003, five former employees filed a lawsuit in the
Superior Court of New Jersey against the Company, Y. Joseph Mo, and Administaff
(the co-employer who until December 31, 2003, provided the Company's benefits),
claiming their termination at the time of their November 2002 lay-off was due to
age discrimination, and seeking unspecified damages. This complaint is covered
by a labor insurance policy that we maintained through Administaff and the
insurance company has appointed counsel.
Another lawsuit was filed with the Superior Court of New Jersey on
April 1, 2003 by one of the above five employees against us for an $800,000
bonus amount that he believes he should have received upon completion of the
construction of the Company's East Windsor facility. We have engaged counsel to
defend our position.
On December 29, 2003, a consultant previously engaged by the Company
filed a suit in the Superior Court of New Jersey, Chancery Division: Mercer
County, which subsequently was removed to the United States District Court for
the District of New Jersey, alleging a breach by us of a consulting agreement
entered into with that consultant in January 2003. The plaintiff alleged that we
failed to issue certain warrants provided for under that agreement, which we
terminated in April 2003. The complaint did not specify any particular amount of
monetary risk and expense damages. We have engaged counsel to defend our
position.
We intend to defend ourselves vigorously against the above-mentioned
claims and believe we have valid defenses; however, each of the cases is still
in the preliminary stages and the likely outcomes cannot be predicted, nor can a
reasonable estimate of the amount of loss, if any, be made.
17
ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
SECURITIES
(c) On February 11, 2004, the Company issued 7,500 shares of its common
stock upon the exercise of warrants. The common stock was issued pursuant to an
exemption provided by Section 4(2) of the Securities Act of 1933. The Company
received $14,550 in gross proceeds, which have been and are being used to fund
general corporate overhead expenses and ongoing U.S. clinical studies.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
31.1 Chief Executive Officer's Certificate, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Chief Financial Officer's Certificate, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Chief Executive Officer's Certificate, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 - furnished only
32.2 Chief Financial Officer's Certificate, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 - furnished only.
(B) REPORTS ON FORM 8-K
We filed a form 8-K on March 4, 2004 in connection with a press release
announcing our financial results for the fiscal year ended December 31, 2003.
18
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NEXMED, INC.
Date: May 5, 2004 /s/ Vivian H. Liu
---------------------- -----------------
Vivian H. Liu
Vice President, Chief Financial
Officer and Secretary
19
EXHIBIT INDEX
31.1 Chief Executive Officer's Certificate, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Chief Financial Officer's Certificate, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Chief Executive Officer's Certificate, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 - furnished only.
32.2 Chief Financial Officer's Certificate, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 - furnished only.
20