Unassociated Document
Via
Federal Express
October
22, 2008
Securities
& Exchange Commission
Office of
the Chief Counsel
Division
of Corporation Finance
100 F
Street, NE
Washington,
DC 20549
Attn: Mr.
Mark Brunhofer
|
Re:
|
Access
Pharmaceuticals, Inc.
|
Form 10-K
for the Fiscal Year Ended December 31, 2007
and Forms
10-Q for the Quarterly Periods Ended March 31, 2008 and June 30,
2008
File No.
1-15771
Dear Mr.
Brunhofer:
On behalf of our client, Access
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), set forth
below is the Company's response to the comments of the staff (the "Staff") of the
Securities and Exchange Commission (the "Commission") that you
conveyed to us via telephone on October 2, 2008. For ease of
reference, the comments (as paraphrased by us) are printed below in bold print,
followed by the Company's responses.
1. Please
revise your disclosure in your Form 10-K as it relates to Controls and
Procedures. Your disclosure should state separately the Company’s
obligations and conclusions with respect to (i) Controls and Procedures and (ii)
Internal Control over Financial Reporting.
We note
your comment and in response the Company has filed a Second Amendment to its
Form 10-K to amend the disclosure regarding controls and procedures to
separately discuss obligations and conclusions regarding (i) Controls and
Procedures and (ii) Internal Controls over Financial
Reporting. Specifically, the Company has amended Item 9A of its Form
10-K to read as follows:
|
Item 9A(T). Control
and Procedures
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Under the
supervision and with the participation of our management, including the Chief
Executive Officer and Chief Financial Officer, we have evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures, as such term is defined in Exchange Act Rules 13a-15(e)
and 15d-15(e), as of the end of the period covered by this
report.
Evaluation
of Disclosure Controls and Procedures
We conducted an evaluation of the
effectiveness of the design and operation of our “disclosure controls and
procedures” (Disclosure Controls) as of the end of the period covered by this
Form 10-K. The controls evaluation was conducted under the supervision and with
the participation of management, including our Chief Executive Officer and Chief
Financial Officer. Disclosure Controls are controls and procedures designed to
reasonably assure that information required to be disclosed in our reports filed
under the Exchange Act, such as this Form 10-K, is recorded, processed,
summarized and reported within the time periods specified in the U.S. Securities
and Exchange Commission’s (SEC’s) rules and forms. Disclosure Controls are also
designed to reasonably assure that such information is accumulated and
communicated to our management, including the Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.
The evaluation of our Disclosure
Controls included a review of the controls’ objectives and design, our
implementation of the controls and the effect of the controls on the information
generated for use in this Form 10-K. During the course of our evaluation of our
internal control over financial reporting, we advised the Audit Committee of our
Board of Directors that we had identified a material weakness as defined under
standards established by the Public Company Accounting Oversight Board (United
States). A material weakness is a deficiency, or combination of deficiencies, in
internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the Company’s annual or interim
financial statements will not be prevented or detected on a timely basis. The
material weakness we identified is discussed in “Management’s Report on Internal
Control Over Financial Reporting” below. Our Chief Executive Officer and Chief
Financial Officer have concluded that as a result of the material weakness, as
of the end of the period covered by this Annual Report on Form 10-K, our
disclosure controls and procedures were not effective.
Management’s
Report on Internal Control Over Financial Reporting
“Our management is responsible for
establishing and maintaining adequate internal control over financial reporting,
as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange
Act. Our internal control system was designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes, in accordance with generally
accepted accounting principles. Because of inherent limitations, a system of
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate due to
change in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Our management, including our principal
executive officer and principal accounting officer, conducted an evaluation of
the effectiveness of our internal control over financial reporting using the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control—Integrated Framework.
Based on its evaluation, our management
concluded that there is a material weakness in our internal control over
financial reporting. The material weakness identified did not result in the
restatement of any previously reported financial statements or any related
financial disclosure, nor does management believe that it had any effect on the
accuracy of the Company’s financial statements for the current reporting period.
A material weakness is a deficiency, or a combination of control deficiencies,
in internal control over financial reporting such that there is a reasonable
possibility that a material misstatement of the Company’s annual or interim
financial statements will not be prevented or detected on a timely
basis.
The material weakness relates to the
monitoring and review of work performed by our Chief Financial Officer in the
preparation of audit and financial statements, footnotes and financial data
provided to the Company’s registered public accounting firm in connection with
the annual audit. All of our financial reporting is carried out by our Chief
Financial Officer. This lack of accounting staff results in a lack of
segregation of duties and accounting technical expertise necessary for an
effective system of internal control.
In order to mitigate this material
weakness to the fullest extent possible, all financial reports are reviewed by
the Chief Executive Officer as well as the Chairman of the Audit Committee for
reasonableness. All unexpected results are investigated. At any time, if it
appears that any control can be implemented to continue to mitigate such
weaknesses, it is immediately implemented. As soon as our finances allow, we
will hire sufficient accounting staff and implement appropriate procedures for
monitoring and review of work performed by our Chief Financial
Officer.
Because of the material weakness
described above, management concluded that, as of December 31, 2007, our
internal control over financial reporting was not effective based on the
criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
This annual report does not include an
attestation report of the Company’s registered public accounting firm regarding
internal control over financial reporting. Management’s report was not subject
to attestation by the Company’s registered public accounting firm pursuant to
temporary rules of the SEC that permit the Company to provide only management’s
report in this annual report.
This report shall not be deemed to be
filed for purposes of Section 18 of the Securities Exchange Act of 1934, or
otherwise subject to the liabilities of that section, and is not incorporated by
reference into any filing of the Company, whether made before or after the date
hereof, regardless of any general incorporation language in such
filing.”
Additionally,
please include a statement setting forth your anticipated disclosure in your
future Form 10-Qs regarding the obligations and conclusions regarding controls
and procedures.
We note that the Company’s future Form
10-Qs will include a statement which briefly defines disclosure controls and
procedures and the Company’s obligation and conclusions regarding such
disclosure controls and procedures. Specifically, such statements
will be similar to the statement below with such changes as may be required by
the Company’s actual findings or changes to its disclosure
requirements.
“Under
the supervision and with the participation of our Chief Executive Officer (CEO)
and Chief Financial Officer (CFO), we evaluated the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934 (the “Act”)) as of __________. Based
on this evaluation, our CEO and CFO concluded that, as of ____________, our
disclosure controls and procedures were/were not effective. [This conclusion was
based on the existence of the material weaknesses in our internal control over
financial reporting previously disclosed and discussed below (as applicable).]
No
changes in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal
quarter ended __________ that have materially affected, or are reasonably likely
to materially affect, our internal control over financial
reporting.
A
material weakness is a deficiency, or a combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable possibility
that a material misstatement of the company’s annual or interim financial
statements will not be prevented or detected on a timely basis.
As
previously disclosed in our Annual Report on Form 10-K for the fiscal year ended
December 31, 20XX, we identified and continue to have the following material
weakness in our internal controls over financial reporting:
Inadequate resources and technical
accounting expertise The material weakness relates to the monitoring and
review of work performed by our Chief Financial Officer in the preparation of
audit and financial statements, footnotes and financial data provided to the
Company’s registered public accounting firm in connection with the annual audit.
All of our financial reporting is carried out by our Chief Financial Officer.
This lack of accounting staff results in a lack of segregation of duties and
accounting technical expertise necessary for an effective system of internal
control.
In order to mitigate this
material weakness to the fullest extent possible, all financial statements
are reviewed by the Chief Executive Officer as well as the Chairman of the Audit
Committee for reasonableness. All unexpected results are investigated. At any
time, if it appears that any control can be implemented to continue to mitigate
such weaknesses, it is immediately implemented. As soon as our finances allow,
we will hire sufficient accounting staff and implement appropriate procedures
for monitoring and review of work performed by our Chief Financial
Officer.”
2. Please
confirm that your certifications to be included with future filings of your Form
10-Qs:
·
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Remove
the adjective “Quarterly” used to describe the report in certifications
number 3, 4a, 4c and 4d and continue in your 2008 certifications;
and
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·
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Include
in your certifications the required statement that the certifying officer
is responsible for establishing internal controls over financial
reporting.
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We note your comment and will remove
the adjective “Quarterly” from all future certifications filed with the
Company’s Form 10-Q and will include in paragraph 4 of the certifications a
statement that each certifying officer is responsible for establishing internal
controls over financial reporting.
Company
Acknowledgements
In addition to the responses provided
in Comments 1 and 2 above, we noted that attached as Exhibit A hereto is the
Company’s acknowledgement of certain representations as requested by the Staff
in the comment letter dated September 9, 2008, and reiterated in your telephone
comments to us on October 2, 2008.
If you
have any questions regarding this matter or require any additional information,
please contact me at (617) 951-8874. If the Staff disagrees with any
of the conclusions set forth above, please contact the undersigned prior to the
issuance of a written response.
Very truly yours,
/s/ John J.
Concannon
John J. Concannon III,
Esq.
cc: Jeffrey
B. Davis
Mr. Stephen B. Thompson