UNITED STATES
                 SECURITIES AND EXCHANGE COMMISSION
                       Washington, D.C. 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 SEPTEMBER 30, 2006

                    Commission File Number 0-9314

                      ACCESS PHARMACEUTICALS, INC.
        ------------------------------------------------------
        (Exact name of registrant as specified in its charter)

      Delaware                                           83-0221517
------------------------                          --------------------------
(State of Incorporation)                          (I.R.S. Employer I.D. No.)

            2600 Stemmons Frwy, Suite 176, Dallas, TX 75207
            -----------------------------------------------
                  (Address of principal executive offices)

Telephone Number  (214) 905-5100

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirement for the past 90 days.

Yes   X   No
    -----   -----

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See Definition of "accelerated filer and large accelerated
filer" in Rule 12b-2 of the Exchange Act.

Large accelerated filer      Accelerated filer      Non-accelerated filer  X
                       -----                  -----                      -----

Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).

Yes       No  X
   -----    -----

The number of shares outstanding of the issuer's common stock, as of
November 20, 2006, was 3,535,108 shares, $0.01 par value per share.

                         Total No. of Pages  34
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<PAGE>
                      ACCESS PHARMACEUTICALS, INC.

                                INDEX
                                -----
                                                                    Page No.
PART I - FINANCIAL INFORMATION                                      --------

Item 1. Condensed Consolidated Financial Statements:

Condensed Consolidated Balance Sheets at September 30, 2006
(unaudited) and December 31, 2005 (audited)                            22

Condensed Consolidated Statements of Operations (unaudited) for
the three and nine months ended September 30, 2006 and
September 30, 2005                                                     23

Condensed Consolidated Statements of Cash Flows (unaudited) for
the nine months ended September 30, 2006 and September 30, 2005        24

Notes to Unaudited Condensed Consolidated Financial Statements         25

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations                                     2

Item 3. Quantitative and Qualitative Disclosures About Market Risk      8

Item 4. Controls and Procedures                                         9


PART II - OTHER INFORMATION

Item 1 Legal Proceedings                                                9
Item 1A Risk Factors                                                    9

Item 2 Sales of Unregistered Equity Securities and Use of Proceeds     19

Item 3 Defaults Upon Senior Securities                                 20

Item 4 Submission of Matters to a Vote of Security Holders             20

Item 5 Other Information                                               20

Item 6. Exhibits                                                       20

SIGNATURES                                                             21

                                  1
<PAGE>
                    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. These
statements include, without limitation, statements relating to
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, and the sales projections of our licensing
partners, our ability to achieve licensing milestones, our
ability to continue as a going concern, payments due from
Uluru, Inc., 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, our plan not to establish an internal
marketing organization, our expectations regarding minimizing
development risk and developing and introducing technology, 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 In Item 1A "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-Q 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 OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Access Pharmaceuticals, Inc. ("Access" or the "Company") is an
emerging pharmaceutical company focused on developing novel
product candidates based upon our technologies in oncology and
vitamin targeted drug delivery.

All shares and per share information reflect a one for five
reserve stock split effected June 5, 2006.

Together with our subsidiaries, we have proprietary patents or
rights to four drug delivery technology platforms:

* synthetic polymer targeted delivery,

                                   2
<PAGE>
* vitamin mediated targeted delivery,
* vitamin mediated oral delivery, and
* mucoadhesive liquid technology.

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. As of
September 30, 2006, our accumulated deficit was $76,367,000.

On October 24, 2006, we entered into a note and warrant
purchase agreement pursuant to which we sold and issued an
aggregate of $500,000 of 7.5% convertible notes due March 31,
2007 and warrants to purchase 386,364 shares of common stock of
Access. Net proceeds to Access were $450,000. The notes and
warrants were sold in a private placement to a group of
accredited investors led by SCO Capital Partners LLC ("SCO")
and affiliates.

On February 16, 2006, we entered into a note and warrant
purchase agreement pursuant to which we sold and issued an
aggregate of $5,000,000 of 7.5% convertible notes due March 31,
2007 and warrants to purchase an aggregate of 3,863,634 shares
of common stock of Access. Net proceeds to Access were $4.5
million. The notes and warrants were sold in a private
placement to a group of accredited investors led by SCO Capital
Partners LLC (see further discussion under "Liquidity and
Capital Resources").

On October 12, 2005, we sold our oral care and dermatology
business unit to Uluru, Inc., a private Delaware corporation,
for up to $20.6 million to allow us to focus on our
technologies in oncology and vitamin targeted drug delivery.
The products and technologies sold to Uluru include amlexanox
5% paste (marketed under the trade names Aphthasol(R) and
Aptheal(R)), OraDisc(TM), Zindaclin(R) and Residerm(R) and all
of our assets related to these products. In addition, we have
licensed to Uluru our nanoparticle hydrogel aggregate
technology which could be used for applications such as local
drug delivery and tissue filler in dental and soft tissue
applications. The CEO of Uluru is Kerry P. Gray, the former CEO
of the Company. In conjunction with the sale transaction, we
received a fairness opinion from a nationally recognized
investment banking firm (see further discussion under
"Liquidity and Capital Resources").

In March 2005 we finalized an agreement with Cornell Capital
Partners and Highgate House Funds providing funding in the form
of a Secured Convertible Debenture for net proceeds of
approximately $2,360,000 (which was repaid in October 2005),
and a Standby Equity Distribution Agreement ("SEDA") under
which Access could draw, under certain circumstances, up to
$15,000,000 in working capital over a 2-year period (see
further discussion under "Liquidity and Capital Resources").

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. Contract research
payments, licensing fees and milestone payments from corporate
alliances and mergers have also provided funding for
operations. As of September 30, 2006 our cash and cash
equivalents and short-term investments were $705,000 and our
working capital was ($10,304,000). Our working capital at
September 30, 2006 represented a decrease of $11,649,000 as
compared to our working capital as of December 31, 2005 of
$1,345,000. Our working capital is negative reflecting $9.0
million of debt that becomes due prior to September 30, 2007
and $1.5 million of interest payments due at September 30,
2006. The payment date for $880,000 of interest payments have
been extended until September 13, 2007 or earlier under certain
conditions.

                                  3
<PAGE>
SCO Capital Partners LLC - Notes and Warrants
---------------------------------------------

On October 24, 2006, we entered into a note and warrant
purchase agreement pursuant to which we sold and issued an
aggregate of $500,000 of 7.5% convertible notes due March 31,
2007 and warrants to purchase 386,364 shares of common stock of
Access. Net proceeds to Access were $450,000. The notes and
warrants were sold in a private placement to a group of
accredited investors led by SCO Capital Partners LLC ("SCO")
and affiliates.

On February 16, 2006, we entered into a note and warrant
purchase agreement pursuant to which we sold and issued an
aggregate of $5,000,000 of 7.5% convertible notes due March 31,
2007 and warrants to purchase an aggregate of 3,863,634 shares
of common stock of Access. Net proceeds to Access were $4.5
million after offering costs of approximately $500,000, which
are being amortized to interest expense over the term of the
debt. The notes and warrants were sold in a private placement
to a group of accredited investors led by SCO and its
affiliates.

The notes mature on March 31, 2007, are convertible into Access
common stock at a fixed conversion rate of $1.10 per share,
bear interest of 7.5% per annum and are secured by the assets
of Access. Each note may be converted at the option of the
noteholder or Access under certain circumstances as set forth
in the notes.

Each noteholder received a warrant to purchase a number of
shares of common stock of Access equal to 75% of the total
number shares of Access common stock into which such holder's
note is convertible. Each warrant has an exercise price of
$1.32 per share and is exercisable at any time prior to
February 16, 2012. In the event SCO and its affiliates were to
convert all of their notes and exercise all of their warrants,
it would own approximately 72.4% of the voting securities of
Access.

In connection with the sale and issuance of notes and warrants,
Access entered into an investors rights agreement whereby it
granted SCO the right to designate two individuals to serve on
the Board of Directors of Access while the notes are
outstanding, and also granted registration rights with respect
to the shares of common stock of Access underlying the notes
and warrants. SCO designated Jeffrey B. Davis and Mark J.
Alvino to the Board of Directors, and on March 13, 2006 Messrs,
Davis and Alvino were appointed to the Board of Directors.

Uluru, Inc. - Sale of Oral/Topical Care Assets
----------------------------------------------
On October 12, 2005, we sold our oral care and dermatology
business unit to Uluru, Inc., a private Delaware corporation,
for up to $20.6 million to focus on our technologies in
oncology and vitamin targeted drug delivery. The products and
technologies sold to Uluru include amlexanox 5% paste (marketed
under the trade names Aphthasol(R) and Aptheal(R)),
OraDisc(TM), Zindaclin(R) and Residerm(R) and all of our assets
related to these products. In addition, we have licensed to
Uluru our nanoparticle hydrogel aggregate technology which
could be used for applications such as local drug delivery and
tissue filler in dental and soft tissue applications. The CEO
of Uluru is Kerry P. Gray, the former CEO of the Company. In
conjunction with the sale transaction, we received a fairness
opinion from a nationally recognized investment banking firm.

Uluru assumed eight employees from the Company, and five
employees remained with Access after the sale transaction.
Throughout the transition period agreed to by the parties,
Uluru leased space from the Company at its Dallas, TX
headquarters. Uluru relocated in April 2006.

At the closing of this agreement we received $8.7 million in
cash proceeds. In addition, at the one year anniversary of the
agreement, October 12, 2006, we were due up to $3.7 million
(the anniversary payment due from Uluru on October 12, 2006 was
not paid, Uluru has assured us that payment is forthcoming

                                  4
<PAGE>
upon the closing of a financing, and the parties will continue
to negotiate the terms of such deferral) and within 24 months
after closing or earlier upon the achievement of a milestone
we are scheduled to receive an additional $1 million. Any
contingent liabilities which arise in the future relating to
our former business could reduce the $3.7 million amount.
Additional payments of up to $7.2 million may be made upon
the achievement of certain additional milestones.

The upfront payment of $8.7 million of this transaction allowed
Access to immediately retire our $2.6 million of Secured
Convertible Notes held by Cornell Capital Partners and its
affiliate and the various agreements relating to these notes.
Such notes were secured by all of our assets. In addition, the
elimination of the manufacturing and regulatory costs
associated with the oral care business, as well as required
employees for these marketed products and product candidates
reduced our burn rate substantially.

Restructuring Convertible Notes
-------------------------------
We restructured and made partial repayment of our 7.0%
convertible promissory notes in 2005 and 2006.

One holder of $4 million worth of convertible notes (Oracle
Partners LP and related funds) agreed to amend their notes to
a new maturity date, April  28, 2007, with the conversion price
being reduced from $27.50 per share to $5.00 per share. In
addition, the Company may cause a mandatory conversion of the
notes into common stock if the common stock trades at a price
of at least 1.5 times the conversion price for a minimum number
of trading days. There is also a provision to allow for a
minimum price for conversion  in the event of a change of
control of the Company. This modification resulted in us
recording additional debt discount of $2.1 million, which will
be accreted to interest expense to the revised maturity date.
Pursuant to an agreement to extend the payment date for such
interest, the interest payment due September 13, 2006 was paid
on October 16, 2006.

Access was unable to reach a conversion agreement with the
second holder of $4 million worth of notes (Philip D.
Kaltenbacher), so we settled his claim by paying him this
amount plus expenses and interest as outlined in the terms of
the note.

The third noteholder, holding $5.5 million worth of convertible
notes agreed to amend its notes to a new maturity date,
September 13, 2010 and elected to have the 2005 and 2006
interest of $880,000 to be paid on September 13, 2007 or
earlier if the Company receives $5.0 million of new investment.
The delayed interest will earn interest at a rate of 10.0%.

We do not have sufficient funds to repay our convertible notes
at their maturity. We may not be able to restructure the
convertible notes or obtain additional financing to repay them
on terms acceptable to us, if at all. 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.

Cornell Capital Partners Standby Equity Distribution Agreement
and Securities Purchase Agreement
----------------------------------------------------
On March 30, 2005 the Company executed a Standby Equity
Distribution Agreement (SEDA) with Cornell Capital Patners.
Under the SEDA, under certain conditions, the Company may issue
and sell to Cornell Capital Partners common stock for a total
purchase price of up to $15,000,000. The purchase price for the
shares is equal to their market price, which is defined in the
SEDA as 98% of the lowest

                                   5
<PAGE>
volume weighted average price of the common stock during a specified
period of trading days following the date notice is given by the
Company that it desires to access the SEDA. Further, we agreed to
pay Cornell Capital Partners 3.5% of the proceeds that we receive under
the Equity Line of Credit. The amount of each draw down is subject
to a maximum amount of $1,000,000. The terms of the SEDA do not
allow us to make draw downs should they cause Cornell Capital
to own in excess of 9.9% of our outstanding shares of common
stock. Upon closing of the transaction, Cornell Capital
Partners received a one-time commitment fee of 29,300 shares of
our common stock. On the same date, the Company entered into a
Placement Agency Agreement with Newbridge Securities
Corporation, a registered broker-dealer. Pursuant to the
Placement Agent Agreement, upon closing of the transaction the
Company paid a one-time placement agent fee of 700 shares of
common stock. The shares issued were valued at $500,000 and
recorded as issuance costs and such costs are amortized as the
SEDA is accessed. As of September 30, 2006 we have accessed
$600,000 of the SEDA and $20,000 of the issuance costs have
been charged to additional paid-in capital and $288,000 of the
issuance costs have been charged to interest expense. The
Company currently cannot access the SEDA until a post-effective
amendment to our registration statement is filed with, and
declared effective by, the SEC. The SEDA expires March 30, 2007.

In addition, on March 30, 2005, the Company executed a
Securities Purchase Agreement with Cornell Capital Partners and
Highgate House Funds. Under the Securities Purchase Agreement,
Cornell Capital Partners and Highgate House Funds purchased an
aggregate of $2,633,000 principal amount of Secured Convertible
Debentures from the Company (net proceeds to the Company of
$2,360,000). The Secured Convertible Debentures accrued
interest at a rate of 7% per year and were to mature 12 months
from the issuance date with scheduled monthly repayment
commencing on November 1, 2005 to the extent that the Secured
Convertible Debenture had not been converted to common stock.
The Secured Convertible Debenture was convertible into the
Company's common stock at the holder's option any time up to
maturity at a conversion price equal to $20.00. The Secured
Convertible Debentures were secured by all of the assets of the
Company. The Company had the right to redeem the Secured
Convertible Debentures upon 3 business days notice for 110% of
the amount redeemed. Pursuant to the Securities Purchase
Agreement, the Company issued to the holders an aggregate of
10,000 shares of common stock of the Company.  The Secured
Convertible Notes were paid in full on October 12, 2005 in
conjunction with the sale of our oral care assets.

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, 2006 of $76,367,000. We expect that
(including the full amount of the receivables due from Uluru,
Inc.) we will have funds adequate to fund our current level of
operations for seven months excluding any obligation to repay
the convertible notes and the debt service on the convertible
notes. We cannot assure you that we will ever be able to
generate significant product revenue or achieve or sustain
profitability. We currently do not have the cash resources to
repay the debt service which is due in March, April and
September 2007. Our financing plan including the sales of
equity or use of the SEDA are expected to provide the resources
to repay such notes. At this time the Company will not be able
to access the SEDA until a post-effective amendment to our
registration statement is filed with, and declared effective
by, the SEC.

THIRD QUARTER 2006 COMPARED TO THIRD QUARTER 2005

Total research spending for the third quarter of 2006 was
$379,000, as compared to $410,000 for the same period in 2005,
a decrease of $31,000. The decrease in expenses was primarily
the result of lower Phase II clinical costs for ProLindac(TM) for
the third quarter of 2006. The spending in the third quarter
2005 was for manufacturing the product for the clinical trial
which injected its first patient in June 2006.

                                   6
<PAGE>
Total general and administrative expenses were $800,000 for the
third quarter of 2006, an increase of $107,000 as compared to
the same period in 2005. The increase in spending was due
primarily to the following:

* higher patent costs ($95,000);
* additional shareholder expenses ($67,000); and
* expensing options ($34,000).

The increase in expenses was partially offset by:

* lower professional fees ($45,000);
* lower rent expenses ($31,000); and
* other net decreases ($13,000).

Depreciation and amortization was $77,000 for the third quarter
of 2006 as compared to $82,000 for the same period in 2005
reflecting a decrease of $5,000. The decrease in depreciation
and amortization was due to lower depreciation resulting from
some fully depreciated capital assets.

Interest and miscellaneous income was $86,000 for the third
quarter of 2006 as compared to $4,000 for the same period in
2005, an increase of $82,000. Most of the increase is due the
recognition of interest on the Uluru receivable ($78,000). The
remainder of the increase in interest income was due to higher
cash balances in 2006 as compared with 2005.

Interest expense and other expense was $1,976,000 for the third
quarter of 2006 as compared to $431,000 for the same period in
2005, an increase of $1,545,000. The increase in expense is due
to the amortization of the discount of the Secured Convertible
Notes.

The Secured Convertible Notes include warrants and a conversion
feature. Due to the liquidated damages provisions associated
with the registration rights agreement, the warrants and
conversion feature are classified as liabilities and recorded
at fair value.  From the date of issuance to September 30,
2006, the fair value of these instruments has increased
resulting in a net unrealized loss of $1.1 million of which a
gain of $1.1 million is attributable to the third quarter ended
September 30, 2006. Unrealized gain on fair value of warrants
and conversion feature was $1.1 million for the third quarter
of 2006 as compared to no gain or loss for the same period in
2005, an increased gain of $1.1 million.

Discontinued operations in 2005 is the result of the sale of
our oral/topical business to Uluru, Inc. and the closure of our
Australian laboratory. The loss from our discontinued
operations was $452,000 or $0.14 per common share for the third
quarter of 2005.

Net loss in the third quarter of 2006 was $2,015,000, or a
$0.57 basic and diluted loss per common share, compared with a
loss of $2,064,000, or a $0.65 basic and diluted loss per
common share for the same period in 2005, a decreased loss of
$49,000 in 2006

NINE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO NINE MONTHS
ENDED SEPTEMBER 30, 2005

Total research spending for the first nine months of 2006, was
$1,769,000, as compared to $1,604,000 for the same period in
2005, an increase of $165,000. The increase in expenses was the
result of initial Phase II clinical costs including
manufacturing costs of the final product used in clinical
studies in 2006 for ProLindac(TM) versus 2005 costs which were
primarily manufacturing of the initial product for the Phase II
trial and Phase I clinical costs.

                                   7
<PAGE>
Total general and administrative expenses were $2,129,000 for
the first nine months of 2006, a decrease of $1,069,000 as
compared to the same period in 2005. The decrease in general
and administrative expenses was due primarily to the following:

* expenses due to the separation agreement with our former CEO
  ($839,000);
* lower professional fees ($291,000);
* lower royalty license expenses ($150,000);
* lower rent expenses ($88,000);
* lower fees resulting from not being listed on the American
  Stock Exchange ($66,000); and
* other net decreases ($21,000).

The decrease in general and administrative expenses is
partially offset by:

* higher costs due to expensing options ($121,000);
* higher shareholder costs ($132,000);
* higher patent costs ($68,000); and
* higher salary costs due to the hiring of a business
  development officer ($65,000).

Depreciation and amortization was $231,000 for the first nine
months of 2006 as compared to $249,000 for the same period in
2005 reflecting a decrease of $18,000. The decrease in
depreciation and amortization was due to increased depreciation
resulting from the acquisition of additional capital assets.

Interest and miscellaneous income was $278,000 for the first
nine months of 2006 as compared to $26,000 for the same period
in 2005, an increase of $252,000. Most of the increase is due
the recognition of interest on the Uluru receivable ($235,000).
The remainder of the increase in interest income was due to
higher cash balances in 2006 as compared with 2005.

Interest and other expense was $5,244,000 for the first nine
months of 2006 as compared to $1,191,000 for the same period in
2005, an increase of $4,053,000. The increase in expense is due
to the amortization of the discount of the Secured Convertible
Notes.

The Secured Convertible Notes include warrants and a conversion
feature. Due to the liquidated damages provisions associated
with the registration rights agreement, the warrants and
conversion feature are classified as liabilities and recorded
at fair value.  From the date of issuance to September 30,
2006, the fair value of these instruments has increased
resulting in a net unrealized loss of $1.1 million of which a
gain of $1.1 million is attributable to the third quarter ended
September 30, 2006. Unrealized loss on fair value of warrants
and conversion feature was $1.1 million for the nine months of
2006 as compared to no gain or loss for the same period in 2005

Discontinued operations in 2005 is the result of the sale of
our oral/topical business to Uluru, Inc. and the closure of our
Australian laboratory. The loss from our discontinued
operations was $2,072,000 or $0.66 per common share for the
first nine months of 2005.

Net loss in the first nine months of 2006 was $10,202,000, or
a $2.89 basic and diluted loss per common share, compared with
a loss of $8,288,000, or a $2.64 basic and diluted loss per
common share for the same period in 2005, an increase of
$1,914,000.

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

                                   8
<PAGE>
We invest our excess cash and short-term investments in
certificates of deposit, corporate securities with high quality
ratings, and U.S. government securities. These investments are
not held for trading or other speculative purposes. These
financial investment securities all mature in 2006 and their
estimated fair value approximates cost. Changes in interest
rates affect the investment income we earn on our investments
and, therefore, impact our cash flows and results of
operations. A hypothetical 50 basis point decrease in interest
rates would result in a decrease in annual interest income and
a corresponding increase in net loss of approximately $4,000.
This estimated effect assumes no changes in our short-term
investments at September 30, 2006. We do not believe that we
are exposed to any other market risks, as defined under
applicable SEC regulations. We are not exposed to risks for
changes in commodity prices, or any other market risks.

ITEM 4 CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures. Our chief
executive officer and our chief financial officer, after
evaluating the effectiveness of our "disclosure controls and
procedures" (as defined in Rules 13a-15(e) and 15d-(e) of the
Securities and Exchange Act of 1934, as amended (the "Exchange
Act") as of the end of the period covered by this quarterly
report, concluded that the Company's disclosure controls and
procedures were (1) designed to ensure that material
information relating to the Company, including its consolidated
subsidiaries, is made known to the Company's chief executive
officer and chief financial officer by others within those
entities, particularly during the period in which this report
was being prepared, and (2) were not effective for the reasons
discussed below, in Item 4(c), to ensure that information
required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in
the SEC's rules and forms.

(b) Changes in internal controls. Except as set forth below,
there were no changes in our internal controls over financial
reporting during the quarter ended September 30, 2006 that have
materially affected, or are reasonably likely to materially
affect, our internal controls over financial reporting.

(c) As previously reported in our Annual Report on Form 10-K
for the fiscal year ended December 31, 2005 (the "Form 10-K"),
two material weaknesses were reported, a material weakness with
respect to the inadequacy of staffing and a material weakness
relating to the lack of segregation of duties.

(d) Management is taking the necessary steps to correct the two
material weaknesses discussed above. Management is hiring a
staff accountant to assist in the preparation of financial
statements and provide sufficient personnel to accomplish
segregation of duties. We believe that these actions will make
our disclosure controls and procedures effective.

                      PART II - OTHER INFORMATION

ITEM 1 LEGAL PROCEEDINGS

None

ITEM 1-A RISK FACTORS

The risk factors set forth below were previously discussed in
our Form 10-K for the fiscal year ended

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December 31, 2005. There have not been any material changes from
the risk factors previously disclosed in our Form 10-K. 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.

Without obtaining adequate capital funding, we may not be able
to continue as a going concern.
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The report of our independent registered public accounting firm
for the fiscal year ended December 31, 2005 contained a fourth
explanatory paragraph to reflect its significant doubt about
our ability to continue as a going concern as a result of our
history of losses and our liquidity position, as discussed
herein and in our Form 10-K. 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 the value of the investors'
investment in us may decline.

We have experienced a history of losses, we expect to incur
future losses and we may be unable to obtain necessary
additional capital to fund operations in the future.
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We have recorded minimal revenue to date and we have incurred
a cumulative operating loss of approximately $76.4 million
through September 30, 2006. Net losses for the years ended
2005, 2004 and 2003 were $1,700,000, $10,238,000 and
$6,935,000, respectively. Our losses have resulted principally
from costs incurred in research and development activities
related to our efforts to develop clinical drug candidates and
from the associated administrative costs. We expect to incur
additional operating losses over the next several years. We
also expect cumulative losses to increase if we expand research
and development efforts and preclinical and clinical trials.
Our net cash burn rate for the twelve months prior to September
30, 2006 was approximately $550,000 per month. We project our
net cash burn rate for the next seven months (October 1, 2006
to May 31, 2007) to be approximately $625,000 per month.
Capital expenditures are forecasted to be minor for the next
seven months.

We require substantial capital for our development programs and
operating expenses, to pursue regulatory clearances and to
prosecute and defend our intellectual property rights. We
believe that our existing capital resources, interest income,
and revenue from possible licensing agreements and
collaborative agreements and amounts expected from Uluru, Inc.
will be sufficient to fund our currently expected operating
expenses for seven months (other than debt and interest
obligations including the approximately $5.0 million of Senior
Convertible notes due March 31, 2007, and approximately $4.0
million of convertible notes which are required to be repaid in
April 2007 and interest of $419,000 due March 2007). We will
need to raise substantial additional capital to support our
ongoing operations and debt obligations. The anniversary
payment due from Uluru on October 12, 2006 was not paid, Uluru
has assured us that payment is forthcoming upon the closing
of a financing, and the parties will continue to negotiate
the terms of such deferral.

If we do raise additional funds by issuing equity securities,
further dilution to existing stockholders would result and
future investors may be granted rights superior to those of
existing stockholders. If adequate funds are not available to
us through additional equity offerings, we may be required to
delay, reduce the scope of or eliminate one or more of our
research and development programs or to obtain funds by
entering into arrangements with collaborative partners or
others that require us to issue additional equity securities or
to relinquish rights to certain technologies or drug candidates
that we would not otherwise issue or relinquish in order to
continue independent operations. As a result of our history of
losses and our liquidity position, our auditors have issued an
audit report expressing significant doubt about our ability to
remain a going concern.

We do not have operating revenue and we may never attain profitability.
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To date, we have funded our operations primarily through
private sales of common stock and convertible

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notes. Contract research payments and licensing fees from corporate
alliances and mergers have also provided funding for our operations.
Our ability to achieve significant revenue or profitability depends
upon our ability to successfully complete the development of
drug candidates, to develop and obtain patent protection and
regulatory approvals for our drug candidates and to manufacture
and commercialize the resulting drugs. We sold our only revenue
producing assets to Uluru, Inc. in October 2005. We are not
expecting any revenues in the short-term from our remaining
assets. Furthermore, we may not be able to ever successfully
identify, develop, patent, manufacture, commercialize, obtain
required regulatory approvals and market any additional
products. Moreover, even if we do identify, develop, patent,
manufacture, commercialize, and obtain required regulatory
approvals to market additional products, we may not generate
revenues or royalties from commercial sales of these products
for a significant number of years, if at all. Therefore, our
proposed operations are subject to all the risks inherent in
the establishment of a new business enterprise.  In the next
few years, our revenues may be limited to minimal product sales
and royalties, any amounts that we receive under strategic
partnerships and research or drug development collaborations
that we may establish and, as a result, we may be unable to
achieve or maintain profitability in the future or to achieve
significant revenues in order to fund our operations.

Our Standby Equity Distribution Agreement may have a dilutive
impact on our stockholders.
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We are dependent on external financing to fund our operations.
Our financial needs may be partially provided from the SEDA.
The issuance of shares of our common stock under the SEDA would
have a dilutive impact on our other stockholders and the
issuance, or even potential issuance of such shares could have
a negative effect on the market price of our common stock. In
addition, if we access the SEDA, we will issue shares of our
common stock to Cornell Capital Partners at a discount to the
lowest daily volume weighted average of our common stock during
a specified period of trading days after we access the SEDA.
Issuing shares at a discount will further dilute the interests
of other stockholders and may negatively affect the market
price of our Common Stock.

To the extent that Cornell Capital Partners sells shares of our
common stock issued under the SEDA to third parties, our stock
price may decrease due to the additional selling pressure in
the market. The perceived risk of dilution from sales of stock
to or by Cornell Capital Partners may cause holders of our
common stock to sell their shares, or it may encourage short
sales of our common stock or other similar transactions. This
could contribute to a decline in the price of our common stock.

At this time we are not be able to draw funds from the SEDA
until an amendment to our registration statement relating to
the SEDA is filed and declared effective by the SEC.

We may not be able to pay our debt and other obligations and
our assets may be seized as a result.
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We may not generate the cash flow required to pay our
liabilities as they become due. Our outstanding debt includes
approximately $5.0 million of Senior Convertible notes due
March 31, 2007, and approximately $9.5 million of our
Convertible Subordinated Notes of which $4.0 million is due in
April 2007 and $5.5 million is due in September 2010.

If our cash flow is inadequate to meet these obligations, we
will default on the notes. Any default on the notes could allow
our note holders to foreclose upon our assets, force us into
bankruptcy. We may be unable to repay, repurchase or
restructure the convertible subordinated notes due in April
2007 and September 2010 and be forced into bankruptcy. In the
event of a default, the holders of our secured convertible
notes have the right to foreclose on all of our assets, which
could force us to curtail or cease our business operations.

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The holders of our Convertible Notes may require us to
repurchase or prepay all of the outstanding Convertible Notes
under certain circumstances. We may not have sufficient cash
reserves to repurchase the Convertible Notes at such time,
which would cause an event of default under the Convertible
Notes and may force us to declare bankruptcy.

We may not successfully commercialize our drug candidates.
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Our drug candidates are subject to the risks of failure
inherent in the development of pharmaceutical products based on
new technologies and our failure to develop safe, commercially
viable drugs would severely limit our ability to become
profitable or to achieve significant revenues. We may be unable
to successfully commercialize our drug candidates because:

* some or all of our drug candidates may be found to be unsafe
or ineffective or otherwise fail to meet applicable regulatory
standards or receive necessary regulatory clearances;

* our drug candidates, if safe and effective, may be too
difficult to develop into commercially viable drugs;

* it may be difficult to manufacture or market our drug
candidates on a large scale;

* proprietary rights of third parties may preclude us from
marketing our drug candidates; and

* third parties may market superior or equivalent drugs.

The success of our research and development activities, upon
which we primarily focus, is uncertain.
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Our primary focus is on our research and development activities
and the commercialization of compounds covered by proprietary
biopharmaceutical patents and patent applications. Research and
development activities, by their nature, preclude definitive
statements as to the time required and costs involved in
reaching certain objectives. Actual research and development
costs, therefore, could exceed budgeted amounts and estimated
time frames may require extension. Cost overruns, unanticipated
regulatory delays or demands, unexpected adverse side effects
or insufficient therapeutic efficacy will prevent or
substantially slow our research and development effort and our
business could ultimately suffer. We anticipate that we will
remain principally engaged in research and development
activities for an indeterminate, but substantial, period of
time.

We may be unable to successfully develop, market, or
commercialize our products or our product candidates without
establishing new relationships and maintaining current relationships.
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Our strategy for the research, development and
commercialization of our potential pharmaceutical products may
require us to enter into various arrangements with corporate
and academic collaborators, licensors, licensees and others, in
addition to our existing relationships with other parties.
Specifically, we may seek to joint venture, sublicense or enter
other marketing arrangements with parties that have an
established marketing capability or we may choose to pursue the
commercialization of such products on our own. We may, however,
be unable to establish such additional collaborative
arrangements, license agreements, or marketing agreements as we
may deem necessary to develop, commercialize and market our
potential pharmaceutical products on acceptable terms.
Furthermore, if we maintain and establish arrangements or
relationships with third parties, our business may depend upon
the successful performance by these third parties of their
responsibilities under those arrangements and relationships.

Our ability to successfully commercialize, and market our
product candidates could be limited if any of these existing
relationships were terminated.

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Furthermore, we may enter into a strategic licensing agreement
with a pharmaceutical company for our polymer platinate program
where the costs of developing a product would be shared.
Although we have had discussions with potential licensing
partners with respect to our polymer platinate program, to date
we have not entered into any licensing arrangement. We may be
unable to execute our licensing strategy for polymer platinate.

We may be unable to successfully manufacture our products and
our product candidates in clinical quantities or for commercial
purposes without the assistance of  contract manufacturers,
which may be difficult for us to obtain and maintain.
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We have limited experience in the manufacture of pharmaceutical
products in clinical quantities or for commercial purposes and
we may not be able to manufacture any new pharmaceutical
products that we may develop. As a result, we have established,
and in the future intend to establish arrangements with
contract manufacturers to supply sufficient quantities of
products to conduct clinical trials and for the manufacture,
packaging, labeling and distribution of finished pharmaceutical
products if any of our potential products are approved for
commercialization. If we are unable to contract for a
sufficient supply of our potential pharmaceutical products on
acceptable terms, our preclinical and human clinical testing
schedule may be delayed, resulting in the delay of our clinical
programs and submission of product candidates for regulatory
approval, which could cause our business to suffer. Our
business could suffer if there are delays or difficulties in
establishing relationships with manufacturers to produce,
package, label and distribute our finished pharmaceutical or
other medical products, if any, market introduction and
subsequent sales of such products. Moreover, contract
manufacturers that we may use must adhere to current Good
Manufacturing Practices, as required by the FDA. In this
regard, the FDA will not issue a pre-market approval or product
and establishment licenses, where applicable, to a
manufacturing facility for the products until the manufacturing
facility passes a pre-approval plant inspection. If we are
unable to obtain or retain third party manufacturing on
commercially acceptable terms, we may not be able to
commercialize our products as planned. Our potential dependence
upon third parties for the manufacture of our products may
adversely affect our ability to generate profits or acceptable
profit margins and our ability to develop and deliver such
products on a timely and competitive basis.

ProLindac(TM) is manufactured by third parties for our Phase
I/II clinical trials. Manufacturing will be required for any
additional clinical trials. Certain manufacturing steps are
conducted by the Company to enable significant cost savings to
be realized.

We are subject to extensive governmental regulation which
increases our cost of doing business and may affect our ability
to commercialize any new products that we may develop.
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The FDA and comparable agencies in foreign countries impose
substantial requirements upon the introduction of
pharmaceutical products through lengthy and detailed
laboratory, preclinical and clinical testing procedures and
other costly and time-consuming procedures to establish their
safety and efficacy. All of our drugs and drug candidates
require receipt and maintenance of governmental approvals for
commercialization. Preclinical and clinical trials and
manufacturing of our drug candidates will be subject to the
rigorous testing and approval processes of the FDA and
corresponding foreign regulatory authorities. Satisfaction of
these requirements typically takes a significant number of
years and can vary substantially based upon the type,
complexity and novelty of the product. The status of our
principal products is as follows:

* ProLindac(TM) is currently in a Phase II trial in Europe and
has commenced a Phase II trial in the US.

* ProLindac(TM) has been approved for an additional Phase I
trial in the US by the FDA.

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* We filed a 510(k) device approval application in September
2006 for our mucoadhesive liquid technology product, MuGard(TM).

* Vitamin mediated delivery technology is currently in the pre-
clinical phase.

* We also have other products in the preclinical phase.

Due to the time consuming and uncertain nature of the drug
candidate development process and the governmental approval
process described above, we cannot assure you when we,
independently or with our collaborative partners, might submit
a NDA, for FDA or other regulatory review.

Government regulation also affects the manufacturing and
marketing of pharmaceutical products. Government regulations
may delay marketing of our potential drugs for a considerable
or indefinite period of time, impose costly procedural
requirements upon our activities and furnish a competitive
advantage to larger companies or companies more experienced in
regulatory affairs. Delays in obtaining governmental regulatory
approval could adversely affect our marketing as well as our
ability to generate significant revenues from commercial sales.
Our drug candidates may not receive FDA or other regulatory
approvals on a timely basis or at all. Moreover, if regulatory
approval of a drug candidate is granted, such approval may
impose limitations on the indicated use for which such drug may
be marketed. Even if we obtain initial regulatory approvals for
our drug candidates, Access, our drugs and our manufacturing
facilities would be subject to continual review and periodic
inspection, and later discovery of previously unknown problems
with a drug, manufacturer or facility may result in
restrictions on the marketing or manufacture of such drug,
including withdrawal of the drug from the market. The FDA and
other regulatory authorities stringently apply regulatory
standards and failure to comply with regulatory standards can,
among other things, result in fines, denial or withdrawal of
regulatory approvals, product recalls or seizures, operating
restrictions and criminal prosecution.

The uncertainty associated with preclinical and clinical testing
may affect our ability to successfully commercialize new products.
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Before we can obtain regulatory approvals for the commercial
sale of any of our potential drugs, the drug candidates will be
subject to extensive preclinical and clinical trials to
demonstrate their safety and efficacy in humans.  Preclinical
or clinical trials of any of our future drug candidates may not
demonstrate the safety and efficacy of such drug candidates at
all or to the extent necessary to obtain regulatory approvals.
In this regard, for example, adverse side effects can occur
during the clinical testing of a new drug on humans which may
delay ultimate FDA approval or even lead us to terminate our
efforts to develop the drug for commercial use. Companies in
the biotechnology industry have suffered significant setbacks
in advanced clinical trials, even after demonstrating promising
results in earlier trials. In particular, polymer platinate has
taken longer to progress through clinical trials than
originally planned. This extra time has not been related to
concerns of the formulations but rather due to the lengthy
regulatory process. The failure to adequately demonstrate the
safety and efficacy of a drug candidate under development could
delay or prevent regulatory approval of the drug candidate. A
delay or failure to receive regulatory approval for any of our
drug candidates could prevent us from successfully
commercializing such candidates and we could incur substantial
additional expenses in our attempts to further develop such
candidates and obtain future regulatory approval.

We may incur substantial product liability expenses due to the
use or misuse of our products for which we may be unable to
obtain insurance coverage.
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Our business exposes us to potential liability risks that are
inherent in the testing, manufacturing and marketing of
pharmaceutical products. These risks will expand with respect
to our drug candidates, if any, that receive regulatory
approval for commercial sale and we may face substantial
liability for damages in the event of adverse side effects or
product defects identified with any of our products that

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are used in clinical tests or marketed to the public. We generally
procure product liability insurance for drug candidates that
are undergoing human clinical trials. Product liability
insurance for the biotechnology industry is generally
expensive, if available at all, and as a result, we may be
unable to obtain insurance coverage at acceptable costs or in
a sufficient amount in the future, if at all. We may be unable
to satisfy any claims for which we may be held liable as a
result of the use or misuse of products which we have
developed, manufactured or sold and any such product liability
claim could adversely affect our business, operating results or
financial condition.

We may incur significant liabilities if we fail to comply with
stringent environmental regulations or if we did not comply
with these regulations in the past.
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Our research and development processes involve the controlled
use of hazardous materials. We are subject to a variety of
federal, state and local governmental laws and regulations
related to the use, manufacture, storage, handling and disposal
of such material and certain waste products. Although we
believe that our activities and our safety procedures for
storing, using, handling and disposing of such materials comply
with the standards prescribed by such laws and regulations, the
risk of accidental contamination or injury from these materials
cannot be completely eliminated. In the event of such accident,
we could be held liable for any damages that result and any
such liability could exceed our resources.

Intense competition may limit our ability to successfully
develop and market commercial products.
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The biotechnology and pharmaceutical industries are intensely
competitive and subject to rapid and significant technological
change. Our competitors in the United States and elsewhere are
numerous and include, among others, major multinational
pharmaceutical and chemical companies, specialized
biotechnology firms and universities and other research
institutions.

The following products may compete with polymer platinate:

* Cisplatin, marketed by Bristol-Myers-Squibb, the originator
  of the drug, and several generic manufacturers;

* Carboplatin, marketed by Bristol-Myers-Squibb in the US; and

* Oxaliplatin, marketed exclusively by Sanofi-Synthelabo.

The following companies are working on therapies and
formulations that may be competitive with our polymer
platinate:

* Antigenics and Regulon are developing liposomal formulations; and

* American Pharmaceutical Partners, Cell Therapeutics, Daiichi,
  Enzon and Debio are developing alternate drugs in combination
  with polymers and other drug delivery systems.

Companies working on therapies and formulations that may be
competitive with our vitamin mediated drug delivery system are
Bristol-Myers-Squibb, Centocor (acquired by Johnson & Johnson),
GlaxoSmithKline, Imclone and Xoma which are developing targeted
monoclonal antibody therapy.

Amgen commercializes Palifermin(R). CuraGen, McNeil, MGI Pharma
and OSI Pharmaceuticals are developing products to treat
mucositis that may compete with our mucoadhesive liquid
technology.

BioDelivery, Biovail Corporation, Cellgate, CIMA Labs, Inc.,
Depomed Inc., Emisphere Technologies, Inc., Eurand, Flamel Technologies,
Nobex and Xenoport are developing products which compete with

                                  15
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our oral drug delivery system.

Many of these competitors have and employ greater financial and
other resources, including larger research and development,
marketing and manufacturing organizations. As a result, our
competitors may successfully develop  technologies and drugs
that are more effective or less costly than any that we are
developing or which would render our technology and future
products obsolete and noncompetitive.

In addition, some of our competitors have greater experience
than we do in conducting preclinical and clinical trials and
obtaining FDA and other regulatory approvals. Accordingly, our
competitors may succeed in obtaining FDA or other regulatory
approvals for drug candidates more rapidly than we do.
Companies that complete clinical trials, obtain required
regulatory agency approvals and commence commercial sale of
their drugs before their competitors may achieve a significant
competitive advantage. Drugs resulting from our research and
development efforts or from our joint efforts with
collaborative partners therefore may not be commercially
competitive with our competitors' existing products or products
under development.

Our ability to successfully develop and commercialize our drug
candidates will substantially depend upon the availability of
reimbursement funds for the costs of the resulting drugs and
related treatments.
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The successful commercialization of, and the interest of
potential collaborative partners to invest in the development
of our drug candidates, may depend substantially upon
reimbursement of the costs of the resulting drugs and related
treatments at acceptable levels from government authorities,
private health insurers and other organizations, including
health maintenance organizations, or HMOs. Limited
reimbursement for the cost of any drugs that we develop may
reduce the demand for, or price of such drugs, which would
hamper our ability to obtain collaborative partners to
commercialize our drugs, or to obtain a sufficient financial
return on our own manufacture and commercialization of any
future drugs.

The market may not accept any pharmaceutical products that we
successfully develop.
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The drugs that we are attempting to develop may compete with a
number of well-established drugs manufactured and marketed by
major pharmaceutical companies. The degree of market acceptance
of any drugs developed by us will depend on a number of
factors, including the establishment and demonstration of the
clinical efficacy and safety of our drug candidates, the
potential advantage of our drug candidates over existing
therapies and the reimbursement policies of government and
third-party payers. Physicians, patients or the medical
community in general may not accept or use any drugs that we
may develop independently or with our collaborative partners
and if they do not, our business could suffer.

Trends toward managed health care and downward price pressures
on medical products and services may limit our ability to
profitably sell any drugs that we may develop.
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Lower prices for pharmaceutical products may result from:

* third-party payers' increasing challenges to the prices
  charged for medical products and services;

* the trend toward managed health care in the United States and
  the concurrent growth of HMOs and similar organizations that
  can control or significantly influence the purchase of
  healthcare services and products; and

* legislative proposals to reform healthcare or reduce
  government insurance programs.

                                  16
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The cost containment measures that healthcare providers are
instituting, including practice protocols and guidelines and
clinical pathways, and the effect of any healthcare reform,
could limit our ability to profitably sell any drugs that we
may successfully develop. Moreover, any future legislation or
regulation, if any, relating to the healthcare industry or
third-party coverage and reimbursement, may cause our business
to suffer.

We may not be successful in protecting our intellectual property
and proprietary rights.
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Our success depends, in part, on our ability to obtain U.S. and
foreign patent protection for our drug candidates and
processes, preserve our trade secrets and operate our business
without infringing the proprietary rights of third parties.
Legal standards relating to the validity of patents covering
pharmaceutical and biotechnological inventions and the scope of
claims made under such patents are still developing and there
is no consistent policy regarding the breadth of claims allowed
in biotechnology patents. The patent position of a
biotechnology firm is highly uncertain and involves complex
legal and factual questions. We cannot assure you that any
existing or future patents issued to, or licensed by, us will
not subsequently be challenged, infringed upon, invalidated or
circumvented by others. As a result, although we, together with
our subsidiaries, are either the owner or licensee to 11 U.S.
patents and to 11 U.S. patent applications now pending, and 4
European patents and 12 European patent applications, we cannot
assure you that any additional patents will issue from any of
the patent applications owned by, or licensed to, us.
Furthermore, any rights that we may have under issued patents
may not provide us with significant protection against
competitive products or otherwise be commercially viable.


Our patents for the following technologies expire in the years
and during the date ranges indicated below:

* ProLindac(TM) in 2021
* Mucoadhesive technology, patents are pending
* Vitamin mediated technology between 2007 and 2019

In addition, patents may have been granted to third parties or
may be granted covering products or processes that are
necessary or useful to the development of our drug candidates.
If our drug candidates or processes are found to infringe upon
the patents or otherwise impermissibly utilize the intellectual
property of others, our development, manufacture and sale of
such drug candidates could be severely restricted or
prohibited. In such event, we may be required to obtain
licenses from third parties to utilize the patents or
proprietary rights of others. We cannot assure you that we will
be able to obtain such licenses on acceptable terms, if at all.
If we become involved in litigation regarding our intellectual
property rights or the intellectual property rights of others,
the potential cost of such litigation, regardless of the
strength of our legal position, and the potential damages that
we could be required to pay could be substantial.

Our business could suffer if we lose the services of, or fail
to attract, key personnel.
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We are dependent upon the efforts of our senior management and
scientific team. The loss of the services of one or more of
these individuals could delay or prevent the achievement of our
research, development, marketing, or product commercialization
objectives. While we have employment agreements with David
Nowotnik, PhD our Senior Vice President Research and
Development, and Stephen Thompson, our Vice President and Chief
Financial Officer, their employment may be terminated by them
or us at any time. Mr. Thompson's and Dr. Nowotnik's agreements
expire within one year and are extendable each year on the
anniversary date. Dr. Mazanet, our acting CEO is currently an

                                17
<PAGE>
employee at will. We do not have employment contracts with our
other key personnel. We do not maintain any "key-man" insurance
policies on any of our key employees and we do not intend to
obtain such insurance. In addition, due to the specialized
scientific nature of our business, we are highly dependent upon
our ability to attract and retain qualified scientific and
technical personnel. In view of the stage of our development
and our research and development programs, we have restricted
our hiring to research scientists and a small administrative
staff and we have made only limited investments in
manufacturing, production, sales or regulatory compliance
resources. There is intense competition among major
pharmaceutical and chemical companies, specialized
biotechnology firms and universities and other research
institutions for qualified personnel in the areas of our
activities, however, and we may be unsuccessful in attracting
and retaining these personnel.

An investment in our common stock may be less attractive
because it is not traded on a recognized public market.
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In February, 2006, our common stock was de-listed from trading
on American Stock Exchange, and traded on the "Pink Sheets"
until May 18, 2006. Our common stock is currently traded on the
OTC Bulletin Board. This is viewed by most investors as a less
desirable, and less liquid, marketplace.  As a result, an
investor may find it more difficult to purchase, dispose of or
obtain accurate quotations as to the value of our common stock.

Our common stock is subject to Rules 15g-1 through 15g-9 under
the Exchange Act, which imposes certain sales practice
requirements on broker-dealers who sell our common stock to
persons other than established customers and "accredited
investors" (as defined in Rule 501(c) of the Securities Act).
For transactions covered by this rule, a broker-dealer must
make a special suitability determination for the purchaser and
have received the purchaser's written consent to the
transaction prior to the sale.  This rule adversely affects the
ability of broker-dealers to sell our common stock and purchasers
of our common stock to sell their shares of our common stock.

Additionally, our common stock is subject to SEC regulations
applicable to "penny stock." Penny stock includes any non-
Nasdaq equity security that has a market price of less than
$5.00 per share, subject to certain exceptions.  The
regulations require that prior to any non-exempt buy/sell
transaction in a penny stock, a disclosure schedule proscribed
by the SEC relating to the penny stock market must be delivered
by a broker-dealer to the purchaser of such penny stock.  This
disclosure must include the amount of commissions payable to
both the broker-dealer and the registered representative and
current price quotations for our common stock.  The regulations
also require that monthly statements be sent to holders of
penny stock that disclose recent price information for the
penny stock and information of the limited market for penny
stocks.  These requirements adversely affect the market
liquidity of our common stock.

Ownership of our shares is concentrated, to some extent, in the
hands of a few investors which could limit the ability of our
other stockholders to influence the direction of the company.
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SCO Capital Partners LLC and its affiliates, Larry N. Feinberg
(Oracle Partners LP, Oracle Institutional Partners LP and
Oracle Investment Management Inc.), and Kerry P. Gray each
beneficially owned, as determined under the SEC's beneficial
ownership rules, approximately 72.4%, 26.4%, and 9.3%,
respectively, of our common stock as of November 20, 2006.
Accordingly, they collectively may have the ability to
significantly influence or determine the election of all of our
directors or the outcome of most corporate actions requiring
stockholder approval. They may exercise this ability in a
manner that advances their best interests and not necessarily
those of our other stockholders.

                                  18
<PAGE>
Provisions of our charter documents could discourage an
acquisition of our company that would benefit our stockholders
and may have the effect of entrenching, and making it difficult
to remove, management.
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Provisions of our Certificate of Incorporation, By-laws and
Stockholders Rights Plan may make it more difficult for a third
party to acquire control of the Company, even if a change in
control would benefit our stockholders. In particular, shares
of our preferred stock may be issued in the future without
further stockholder approval and upon such terms and
conditions, and having such rights, privileges and preferences,
as our Board of Directors may determine, including, for
example, rights to convert into our common stock. The rights of
the holders of our common stock will be subject to, and may be
adversely affected by, the rights of the holders of any of our
preferred stock that may be issued in the future. The issuance
of our preferred stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for
a third party to acquire control of us. This could limit the
price that certain investors might be willing to pay in the
future for shares of our common stock and discourage these
investors from acquiring a majority of our common stock.
Further, the existence of these corporate governance provisions
could have the effect of entrenching management and making it
more difficult to change our management.

Substantial sales of our common stock could lower our stock price.
------------------------------------------------------------------

The market price for our common stock could drop as a result of
sales of a large number of our presently outstanding shares or
shares that we may issue or be obligated to issue in the
future. All of the 3,535,108 shares of our common stock that
are outstanding as of November 20, 2006, are unrestricted and
freely tradable or tradable pursuant to a resale registration
statement or under Rule 144 of the Securities Act or are
covered by a registration rights agreement.

Failure to achieve and maintain effective internal controls
could have a material adverse effect on our business.
------------------------------------------------------------

Effective internal controls are necessary for us to provide
reliable financial reports. If we cannot provide reliable
financial reports, our operating results could be harmed. All
internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined
to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation.
While we continue to evaluate and improve our internal
controls, we cannot be certain that these measures will ensure
that we implement and maintain adequate controls over our
financial processes and reporting in the future. Any failure to
implement required new or improved controls, or difficulties
encountered in their implementation, could harm our operating
results or cause us to fail to meet our reporting obligations.

Failure to achieve and maintain an effective internal control
environment could cause investors to lose confidence in our
reported financial information, which could have a material
adverse effect on our stock price.

ITEM 2 SALES OF UNREGISTERED EQUITY SECURITIES AND USE OF PROCEEDS

In connection with the Separation Agreement with Kerry P. Gray,
former President, CEO and Director of the Company, Mr. Gray is
entitled to receive 700 shares of Access common stock per month
for a total of 12, 600 shares from May 30, 2005 until October 30, 2006.

On October 24, 2006, we entered into a note and warrant
purchase agreement pursuant to which we sold and issued an
aggregate of $500,000 of 7.5% convertible notes due March 31,
2007 and warrants to

                                 19
<PAGE>
purchase 386,364 shares of common stock of
Access. Net proceeds to Access were $450,000. The notes and
warrants were sold in a private placement to a group of
accredited investors led by SCO Capital Partners LLC ("SCO") and affiliates.

The notes mature on March 31, 2007, are convertible into Access
common stock at a fixed conversion rate of $1.10 per share,
bear interest of 7.5% per annum and are secured by certain
assets of Access. Each note may be converted at the option of
the noteholder or Access under certain circumstances as set
forth in the notes.

Each noteholder received a warrant to purchase a number of
shares of common stock of Access equal to 75% of the total
number shares of Access common stock into which such holder's
note is convertible.  Each warrant has an exercise price of
$1.32 per share and is exercisable at any time prior to October
24, 2012. In the event SCO and its affiliates were to convert
all of their notes and exercise all of their warrants, it would
own approximately 72.4% of the voting securities of Access.

The underlying shares of common stock for convertible notes and
warrants have not been registered. We relied on Section 4(2)
and/or 3(b) of the 1933 Securities Act and the provisions of
Regulation D as exemptions from the registration thereunder.
The proceeds of the offering will be used principally for
general corporate purposes and to fund the development of our
portfolio of product candidates.

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5 OTHER INFORMATION

None

ITEM 6 EXHIBITS

Exhibits:

31.1 Certification of Chief Executive Officer of Access
Pharmaceuticals, Inc. pursuant to Rule 13a-14(a)/15d-14(a)

31.2 Certification of Chief Financial Officer of Access
Pharmaceuticals, Inc. pursuant to Rule 13a-14(a)/15d-14(a)

32.1* Certification of Chief Executive Officer of Access
Pharmaceuticals, Inc. pursuant to 18 U.S.C. Section 1350

32.2* Certification of Chief Financial Officer of Access
Pharmaceuticals, Inc. pursuant to 18 U.S.C. Section 1350

______________
* This exhibit shall not be deemed "filed" for purposes of
Section 18 of the Securities Exchange Act of 1934 or otherwise
subject to the liabilities of that Section, nor shall it be
deemed incorporated by reference in any filings under the
Securities Act of 1933 or the Securities and Exchange Act of
1934, whether made before or after the date hereof and
irrespective of any general incorporation language in any
filings.

                                  20
<PAGE>
                               SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                              ACCESS PHARMACEUTICALS, INC.


Date: November 20, 2006       By: /s/Rosemary Mazanet
     -------------------         -------------------------
                                 Rosemary Mazanet
                                 Acting Chief Executive Officer
                                 (Principal Executive Officer)

Date: November 20, 2006       By: /s/ Stephen B. Thompson
     -------------------         -------------------------
                                 Stephen B. Thompson
                                 Vice President and Chief Financial Officer
                                 (Principal Financial and Accounting Officer)


                                 21
<PAGE>
            Access Pharmaceuticals, Inc. and Subsidiaries

               Condensed Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                            September 30, 2006 December 31, 2005
                                               --------------  --------------
                                                (unaudited)
<S>                                            <C>             <C>
      ASSETS
Current assets
 Cash and cash equivalents                      $    482,000    $    349,000
 Short term investments, at cost                     223,000         125,000
 Receivables                                       4,709,000       4,488,000
 Prepaid expenses and other current assets            54,000         197,000
                                               --------------  --------------
Total current assets                               5,468,000       5,159,000
                                               --------------  --------------

Property and equipment, net                          236,000         300,000

Debt issuance costs, net                             194,000               -

Patents, net                                         920,000       1,046,000

Licenses, net                                         38,000          75,000

Restricted cash and other assets                     217,000         633,000
                                               --------------  --------------
Total assets                                    $  7,073,000    $  7,213,000
                                               ==============  ==============

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
 Accounts payable and accrued expenses          $  2,034,000    $  2,883,000
 Accrued interest payable                          1,457,000         652,000
 Deferred revenues                                   173,000         173,000
 Current portion of long-term debt                12,108,000         106,000
                                               --------------  --------------
Total current liabilities                         15,772,000       3,814,000

Long-term debt                                     5,500,000       7,636,000
                                               --------------  --------------
Total liabilities                                 21,272,000      11,450,000
                                               --------------  --------------

Commitments and contingencies

Stockholders' deficit
Preferred stock - $.01 par value;
 authorized 2,000,000 shares;
 none issued or outstanding                                -               -
Common stock - $.01 par value;
 authorized 100,000,000 shares;
 issued, 3,534,408 at September 30, 2006 and
 3,528,108 at December 31, 2005                       35,000          35,000
Additional paid-in capital                        63,182,000      62,942,000
Notes receivable from stockholders                (1,045,000)     (1,045,000)
Treasury stock, at cost - 163 shares                  (4,000)         (4,000)
Accumulated deficit                              (76,367,000)    (66,165,000)
                                               --------------  --------------
Total stockholders' deficit                      (14,199,000)     (4,237,000)
                                               --------------  --------------
Total liabilities and stockholders' deficit     $  7,073,000    $  7,213,000
                                               ==============  ==============
</TABLE>

   The accompanying notes are an integral part of these statements.

                                  22
<PAGE>
              Access Pharmaceuticals, Inc. and Subsidiaries

             Condensed Consolidated Statements of Operations
                              (unaudited)

<TABLE>
<CAPTION>

                                 Three months ended        Nine months ended
                                   September 30,             September 30,
                             ------------------------- -------------------------
                                 2006         2005         2006         2005
                             ------------ ------------ ------------ ------------
<S>                          <C>          <C>          <C>          <C>
Expenses
 Research and development    $   379,000  $   410,000  $ 1,769,000  $ 1,604,000
 General and administrative      800,000      693,000    2,129,000    3,198,000
 Depreciation and amortization    77,000       82,000      231,000      249,000
                             ------------ ------------ ------------ ------------
Total expenses                 1,256,000    1,185,000    4,129,000    5,051,000
                             ------------ ------------ ------------ ------------

Loss from operations          (1,256,000)  (1,185,000)  (4,129,000)  (5,051,000)

Interest and
 miscellaneous income             86,000        4,000      278,000       26,000
Interest and other expense    (1,976,000)    (431,000)  (5,244,000)  (1,191,000)
Unrealized gain (loss) on
 fair value of warrants
 and conversion feature        1,131,000            -   (1,107,000)           -
                             ------------ ------------ ------------ ------------
                                (759,000)    (427,000)  (6,073,000)  (1,165,000)
                             ------------ ------------ ------------ ------------
Loss before discontinued
 operations                   (2,015,000)  (1,612,000) (10,202,000)  (6,216,000)
Discontinued operations                -     (452,000)           -   (2,072,000)
                             ------------ ------------ ------------ ------------
Net loss                     $(2,015,000) $(2,064,000)$(10,202,000) $(8,288,000)
                             ============ ============ ============ ============

Basic and diluted loss per
 common share
Loss from continuing
 operations allocable to
 common shareholders              $(0.57)      $(0.51)      $(2.89)      $(1.98)
Discontinued operations                -        (0.14)           -        (0.66)
                             ------------ ------------ ------------ ------------
Net loss allocable to
 common Shareholders              $(0.57)      $(0.65)      $(2.89)      $(2.64)
                             ============ ============ ============ ============

Weighted average basic
 and diluted common
 shares outstanding            3,534,408    3,169,018    3,530,941    3,140,016
                             ============ ============ ============ ============

</TABLE>

    The accompanying notes are an integral part of these statements.

                                  23
<PAGE>
             Access Pharmaceuticals, Inc. and Subsidiaries

            Condensed Consolidated Statements of Cash Flows
                              (unaudited)
<TABLE>
<CAPTION>

                                                 Nine months ended September 30,
                                                  ------------------------------
                                                       2006            2005
                                                  --------------  --------------
<S>                                               <C>             <C>
Cash flows from operating activities:
Net loss                                           $(10,202,000)   $ (8,288,000)
Adjustments to reconcile net loss to cash
 used in operating activities:
Amortization of restricted stock grants                       -         150,000
Stock issued for interest                                     -         609,000
Depreciation and amortization                           230,000         494,000
Stock option expense                                    171,000               -
Stock compensation expense                               69,000               -
Amortization of debt costs and discounts              4,192,000         297,000
Unrealized loss on fair value of warrants
 and conversion feature                               1,107,000               -
Change in operating assets and liabilities:
 Receivables                                             14,000          26,000
 Inventory                                                    -          81,000
 Prepaid expenses and other current assets              143,000         448,000
 Restricted cash and other assets                       128,000         650,000
 Accounts payable and accrued expenses                 (849,000)        (24,000)
 Accrued interest payable                               805,000         256,000
 Deferred revenues                                            -         681,000
                                                  --------------  --------------
Net cash used in operating activities                (4,192,000)     (4,620,000)
                                                  --------------  --------------

Cash flows from investing activities:
Capital expenditures                                     (3,000)        (28,000)
Redemptions (purchases) of short term
  investments and certificates of deposit, net          (98,000)        394,000
                                                  --------------  --------------
Net cash (used in) provided by investing activities    (101,000)        366,000
                                                  --------------  --------------

Cash flows from financing activities:
Payments of notes payable                              (106,000)       (353,000)
Proceeds from secured convertible notes payable       4,532,000       2,633,000
Proceeds from SEDA, net of costs of $23,000                   -         577,000
                                                  --------------  --------------
Net cash provided by financing activities             4,426,000       2,857,000
                                                  --------------  --------------

Net increase (decrease) in cash and
 cash equivalents                                       133,000      (1,397,000)

Cash and cash equivalents at
 beginning of period                                    349,000       1,775,000
                                                  --------------  --------------
Cash and cash equivalents at end of period         $    482,000    $    378,000
                                                  ==============  ==============


Cash paid for interest                             $      5,000    $     12,000
Supplemental disclosure of non-cash
 transactions 40,000 shares of common
 stock issued pursuant to the SEDA and
 Secured Convertible Notes                         $          -    $    500,000
Issued common stock for interest on convertible notes         -         609,000

</TABLE>

    The accompanying notes are an integral part of these statements

                                  24
<PAGE>
            Access Pharmaceuticals, Inc. and Subsidiaries

          Notes to Condensed Consolidated Financial Statements
              Nine Months Ended September 30, 2006 and 2005
                              (unaudited)

(1) Interim Financial Statements

The consolidated balance sheet as of September 30, 2006 and the
consolidated statements of operations and cash flows for the
three and nine months ended September 30, 2006 and 2005 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
financial statements and notes thereto included in our Annual
Report on Form 10-K for the year ended December 31, 2005. The
results of operations for the period ended September 30, 2006
are not necessarily indicative of the operating results which
may be expected for a full year. The consolidated balance sheet
as of December 31, 2005 contains financial information taken
from the audited financial statements as of that date.

(2) Intangible Assets

Intangible assets consist of the following (in thousands):

                                September 30, 2006        December 31, 2005
                              ----------------------  -----------------------
                                Gross                    Gross
                              carrying  Accumulated    carrying  Accumulated
                               value    amortization    value    amortization
                              --------- ------------  ---------- -------------
Amortizable intangible assets
 Patents                       $ 1,680     $    760    $  1,680     $    634
 Licenses                          500          462         500          425
                               --------    ---------   ---------    ---------
Total                          $ 2,180     $  1,222    $  2,180     $  1,059
                               ========    =========   =========    =========

Amortization expense related to intangible assets totaled
$54,000 and $96,000 for each of the three months ended
September 30, 2006 and 2005, respectively and totaled $163,000
and $290,000 for each of the nine months ended September 30,
2006 and 2005. The aggregate estimated amortization expense for
intangible assets remaining as of September 30 is as follows
(in thousands):

2006             $    55
2007                 193
2008                 168
2009                 168
2010                 168
Thereafter           206
                 --------
Total            $   958
                 ========

                                  25
<PAGE>
(3) Liquidity

The Company incurred significant losses from continuing
operations of $10.2 million for the nine months ended September
30, 2006, $7.6 million for the year ended December 31, 2005 and
$7.2 million for the year ended December 31, 2004.
Additionally, at September 30, 2006, we have working capital of
($10,304,000). As of September 30, 2006, we did not have
sufficient funds to service our convertible notes, to repay our
convertible notes at their maturity and support our working
capital and operating requirements. As described below the
funds raised from SCO and affiliates together with amounts due
to us from the sale of our oral/topical care business to Uluru,
Inc. are expected to allow us to support our working capital
and operating requirements for seven months. We do not have
funds to pay the obligations which are due in March and April
2007 and will have to raise more funds or attempt to
restructure the convertible notes. The anniversary payment due
from Uluru on October 12, 2006 was not paid, Uluru has assured
us that payment is forthcoming upon the closing of a
financing, and the parties will continue to negotiate the
terms of such deferral.

SCO Capital Partners LLC Note and Warrant Purchase Agreement
------------------------------------------------------------
On February 16, 2006, we entered into a note and warrant
purchase agreement pursuant to which we sold and issued an
aggregate of $5.0 million of 7.5% convertible notes due March
31, 2007 and warrants to purchase an aggregate of 3,863,634
shares of common stock of Access. Net proceeds to Access were
$4.5 million. The notes and warrants were sold in a private
placement to a group of accredited investors led by SCO Capital
Partners LLC ("SCO").

The notes mature on March 31, 2007, are convertible into Access
common stock at a fixed conversion rate of $1.10 per share,
bear interest of 7.5% per annum and are secured by the assets
of Access. Each note may be converted at the option of the
noteholder or Access under certain circumstances as set forth
in the notes.

Each noteholder received a warrant to purchase a number of
shares of common stock of Access equal to 75% of the total
number shares of Access common stock into which such holder's
note is convertible.  Each warrant has an exercise price of
$1.32 per share and is exercisable at any time prior to
February 16, 2012.  In the event SCO and its affiliates were to
convert all of their notes and exercise all of their warrants,
they would own approximately 72.4% of the voting securities of
Access.

The Company considers the warrant agreement and the conversion
feature of the notes to be derivatives and has classified the
warrants and the conversion feature as liabilities at fair
value in the balance sheet. Information regarding the valuation
of the warrants and the conversion feature is as follows:

                                                              2006
                                                    --------------------------
                                                    February 16,  September 30,
                                                    ------------  ------------
Weighted-average fair value of warrants                 $0.93         $1.04
Black-Scholes Assumptions:
Dividend rate                                                - -
Average risk-free interest rate                           5.08%        4.69
Average volatility                                         113%         119%
Contractual life in years                                  6.0          5.4

Weighted-average fair value of conversion feature        $0.50        $0.46
Black-Scholes Assumptions:
Dividend rate                                                -            -
Average risk-free interest rate                           3.50%        5.05
Average volatility                                         113%         119%
Contractual life in years                                  1.1          .50

                                  26
<PAGE>
The change in fair value of the warrant between February 16,
2006 and September 30, 2006, has been reflected as an
unrealized loss on fair value of $1,107,000 in the accompanying
condensed consolidated statement of operations.

In connection with its sale and issuance of notes and warrants,
Access entered into an investors rights agreement whereby it
granted SCO the right to designate two individuals to serve on
the Board of Directors of Access while the notes are
outstanding, and also granted registration rights with respect
to the shares of common stock of Access underlying the notes
and warrants. SCO designated Jeffrey B. Davis and Mark J.
Alvino to the Board of Directors, and on March 13, 2006 Messrs,
Davis and Alvino were appointed to the Board of Directors.

Standby Equity Distribution Agreement (SEDA) with Cornell Capital Partners
--------------------------------------------------------------------------
On March 30, 2005, the Company executed a Standby Equity
Distribution Agreement (SEDA) with Cornell Capital Partners.
Under the SEDA, the Company may issue and sell to Cornell
Capital Partners common stock for a total purchase price of up
to $15,000,000. The purchase price for the shares is equal to
their market price, which is defined in the SEDA as 98% of the
lowest volume weighted average price of the common stock during
a specified period of trading days following the date notice is
given by the Company that it desires to access the SEDA.
Further, we have agreed to pay Cornell Capital Partners, L.P.
3.5% of the proceeds that we receive under the Equity Line of
Credit. The amount of each draw down is subject to a maximum
amount of $1,000,000. The terms of the SEDA do not allow us to
make draw downs should they cause Cornell Capital to own in
excess of 9.9% of our outstanding shares of common stock. Upon
closing of the transaction, Cornell Capital Partners received
a one-time commitment fee of 29,300 shares of the Company's
common stock. On the same date, the Company entered into a
Placement Agent Agreement with Newbridge Securities
Corporation, a registered broker-dealer. Pursuant to the
Placement Agent Agreement, upon closing of the transaction the
Company paid a one-time placement agent fee of 700 shares of
common stock. The shares issued were valued at $500,000 and
recorded as issuance costs and such costs are amortized as the
SEDA is accessed. As of September 30, 2006 we have accessed
$600,000 of the SEDA and $20,000 of the issuance costs have
been charged to additional paid-in capital and $288,000 of the
issuance costs have been charged to interest expense. At this
time the Company will not be able to access the SEDA until a
post-effective amendment to our registration statement is filed
with, and declared effective by, the SEC. The SEDA expires
March 30, 2007.

                                  27
<PAGE>
(4) Debt

The Company's debt is summarized as follows:

                                   September 30, December 31,
                                       2006          2005
                                   ------------  ------------
Convertible note                   $ 4,015,000   $ 4,015,000
Convertible note                     5,500,000     5,500,000
                                   ------------  ------------
                                     9,515,000     9,515,000
Discount                              (812,000)   (1,879,000)
                                   ------------  ------------
                                     8,703,000     7,636,000

SCO and affiliates                   5,000,000             -
Fair value - warrants                4,025,000             -
Fair value - convertible feature     2,083,000             -
                                   ------------  ------------
                                    11,108,000             -
Discount                            (2,203,000)            -
                                   ------------  ------------
                                     8,905,000             -

Bank note                                    -       106,000
                                   ------------  ------------
Total                              $17,608,000   $ 7,742,000
                                   ============  ============

Short term                         $12,108,000   $   106,000
Long term                            5,500,000     7,636,000
                                   ------------  ------------
Total                              $17,608,000   $ 7,742,000
                                   ============  ============

(5) Discontinued Operations

In October 2005, we sold our oral/topical care business to
Uluru, Inc. for up to $20.6 million. At the closing of this
agreement we received $8.7 million in cash proceeds. In
addition, at the one year anniversary, October 12, 2006, of the
agreement, we expect to receive up to $3.7 million and we will
receive an additional $1 million within 24 months after closing
or earlier upon the achievement of a milestone. Any contingent
liabilities that arise in the future relating to our former
business could reduce the $3.7 million receipt. Additional
payments of up to $7.2 million may be made upon the achievement
of certain additional milestones.

In September 2005 we closed our Australian laboratory and
office, keeping the vitamin B12 technology.

In accordance with Statement of Financial Accounting Standards
("SFAS") No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" operating results for assets sold or held
for sale are presented as discontinued operations for current
and all prior years presented. In accordance with SFAS No. 144
the operating results of these assets, along with the gain on
sale, have been presented in discontinued operations for all
periods presented.

                                     September 30, 2006 September 30, 2005
                                     ------------------ ------------------
Revenues                                $          -       $    641,000
Operating expenses                                 -          2,713,000
                                        -------------      -------------
Loss from discontinued operations       $          -       $ (2,072,000)
                                        =============      =============

                                  28
<PAGE>
We previously had licenses for the oral/topical assets. These
licenses were sold to Uluru, Inc. in October 2005. In the Asset
Sale Agreement between us and Uluru certain refunds and
receipts were incurred before the date of sale and were
assigned to either us or to Uluru. We have $173,000 recorded as
a deferred gain on the sale until such time as marketing
approvals are received.

(6) Stock Based Compensation

The Company has various stock-based employee compensation
plans, which are described more fully in Note 10 of the Notes
to Consolidated Financial Statements in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2005.

On January 1, 2006, the Company adopted SFAS No. 123 (revised
2004), "Share-Based Payment," ("SFAS 123(R)"), which requires
the measurement and recognition of all share-based payment
awards made to employees and directors including stock options
based on estimated fair values. SFAS 123(R) supersedes the
Company's previous accounting under Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"), for periods beginning in fiscal year
2006. In March 2005, the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 107 ("SAB 107") relating
to SFAS 123(R). The Company has applied the provisions of SAB
107 in its adoption of SFAS 123(R).

The Company adopted SFAS 123(R) using the modified prospective
transition method, which requires the application of the
accounting standard as of January 1, 2006, the first day of the
Company's 2006 fiscal year. The Company's consolidated
financial statements for the nine months ended September 30,
2006, reflect the impact of SFAS 123(R). In accordance with the
modified prospective transition method, the Company's
consolidated financial statements for prior periods have not
been restated to include the impact of SFAS 123(R). Stock-based
compensation expense recognized under SFAS 123(R) for the three
months and nine months ended September 30, 2006 was
approximately $49,000 and $171,000, respectively. Stock-based
compensation expense which would have been recognized under the
fair value based method would have been approximately $164,000
and $809,000 during the three months and nine months ended
September 30, 2005, respectively.

SFAS 123(R) requires companies to estimate the fair value of
share-based payment awards on the date of grant using an
option-pricing model. The value of the portion of the award
that is ultimately expected to vest is recognized as expense
over the requisite service period in the Company's Statement of
Operations. Prior to the adoption of SFAS 123(R), the Company
accounted for stock-based awards to employees and directors
using the intrinsic value method in accordance with APB No. 25
as allowed under SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). Under the intrinsic value method,
no stock-based compensation expense for stock option grants was
recognized because the exercise price of the Company's stock
options granted to employees and directors equaled the fair
market value of the underlying stock at the date of grant. In
2005, the Company did recognize stock compensation expense for
restricted stock awards based on the fair value of the
underlying stock on date of grant and this expense was
amortized over the requisite service period. There are no
restricted stock awards granted in 2006 as yet and therefore no
stock compensation expense is recognized in 2006.

Stock-based compensation expense recognized in the Company's
Statement of Operations for the first nine months ended
September 30, 2006 includes compensation expense for share-
based payment awards granted prior to, but not yet vested as of
December 31, 2005, based on the grant date fair value estimated
in accordance with the pro forma provisions of SFAS 123 and
compensation expense for the share-based payment awards granted
subsequent to December 31, 2005, based on the grant date fair
value estimated in accordance with the provisions of SFAS
123(R). Stock-based compensation expense recognized in the
Company's Statement of Operations for the first nine months ended

                                 29
<PAGE>
September 30, 2006 is based on awards ultimately expected
to vest and has been reduced for estimated forfeitures, which
currently is nil. SFAS 123(R) requires forfeitures
to be estimated at the time of grant and revised, if necessary, in
subsequent periods if actual forfeitures differ from those
estimates. In the Company's pro forma information required
under SFAS 123 for periods prior to fiscal year 2006,
forfeitures have been accounted for as they occurred.

The Company used the Black-Scholes option-pricing model
("Black-Scholes") as its method of valuation under SFAS 123(R)
in fiscal year 2006 and a single option award approach. This
fair value is then amortized on a straight-line basis over the
requisite service periods of the awards, which is generally the
vesting period. Black-Scholes was also previously used for the
Company's pro forma information required under SFAS 123 for
periods prior to fiscal year 2006. The fair value of share-
based payment awards on the date of grant as determined by the
Black-Scholes model is affected by the Company's stock price as
well as other assumptions. These assumptions include, but are
not limited to the expected stock price volatility over the
term of the awards, and actual and projected employee stock
option exercise behaviors.

717,000 stock options were granted in the third quarter of 2006
and no stock options were granted in the third quarter of 2005.

The expected volatility assumption (128%) was based upon a
combination of historical stock price volatility measured on a
twice a month basis and is a reasonable indicator of expected
volatility. The risk-free interest rate assumption (between
4.79% and 5.05%) is based upon U.S. Treasury bond interest
rates appropriate for the term of the Company's employee stock
options. The dividend yield assumption (none) is based on the
Company's history and expectation of dividend payments. The
estimated expected term (between 6 months and two years) is
based on employee exercise behavior.

At September 30, 2006, the balance of unearned stock-based
compensation to be expensed in future periods related to
unvested share-based awards, as adjusted for expected
forfeitures, is approximately $436,000. The period over which
the unearned stock-based compensation is expected to be
recognized is approximately three years. The Company
anticipates that it will grant additional share-based awards to
employees in the future, which will increase the Company's
stock-based compensation expense by the additional unearned
compensation resulting from these grants. The fair value of
these grants is not included in the amount above, because the
impact of these grants cannot be predicted at this time due to
the dependence on the number of share-based payments granted.
In addition, if factors change and different assumptions are
used in the application of SFAS 123(R) in future periods,
stock-based compensation expense recorded under SFAS 123(R) may
differ significantly from what has been recorded in the current
period.

The Company's Employee Stock Option Plans has been deemed
compensatory in accordance with SFAS 123(R). Stock-based
compensation relating to this plan was computed using the
Black-Scholes model option-pricing formula with interest rates,
volatility and dividend assumptions as of the respective grant
dates of the purchase rights provided to employees under the
plan. The weighted-average fair value of options existing under
all plans during the first nine months of 2006 was $7.18.

The following table summarizes stock-based compensation in
accordance with SFAS 123(R) for the nine months ended
September 30, 2006, which was allocated as follows (in
thousands):

                                  30
<PAGE>
                                                      Nine months ended
                                                      September 30, 2006
                                                      ------------------
Research and development                                  $     50
General and administrative                                     121
                                                          ---------
Stock-based compensation expense included
  in operating expenses                                        171
                                                          ---------
Total stock-based compensation expense                         171
Tax benefit                                                      -
                                                          ---------
Stock-based compensation expense, net of tax              $    171
                                                          =========

As a result of the adoption of Statement SFAS 123R, our
financial results were lower than under our previous accounting
method for share-based compensation by the following amounts:

                                         Three Months Ended  Nine Months Ended
                                         September 30, 2006  September 30, 2006
                                         ------------------  ------------------
Loss from continuing operations             $     48,000        $    171,000

Net loss                                          48,000             171,000

Basic and diluted net loss per common share $       0.01        $       0.05


The following table reflects net income and diluted earnings
per share for the nine months ended September 30, 2006,
compared with proforma information for the nine months ended
September 30, 2005, had compensation cost been determined in
accordance with the fair value-based method prescribed by SFAS 123(R).

                                  31
<PAGE>
                                   Three months ended      Nine months ended
                                      September 30,           September 30,
                                 ----------------------- -----------------------
                                     2006        2005        2006        2005
                                 ----------- ----------- ----------- -----------
Net loss, as reported under
APB 25 for the prior period (1)    $    N/A    $ (2,064)    $   N/A    $ (8,288)

Add back stock based employee
compensation expense in reported
net loss, net of related
tax effects                               -           -           -           -

Subtract total stock-based
compensation expense determined
under fair  value-based method
for all awards, net of related
tax effects (2)                         (48)       (164)       (171)       (809)
                                 ----------- ----------- ----------- -----------

Net loss including the effect
of stock-based compensation
expense (3)                        $ (2,015)   $ (2,228)   $(10,202)   $ (9,097)
                                 =========== =========== =========== ===========

Loss per share:
Basic and diluted, as reported
for the prior period (1)             $(0.57)     $(0.65)     $(2.89)     $(2.64)
                                 =========== =========== =========== ===========

Basic and diluted, including
the effect of stock-based
compensation expense (3)             $(0.57)     $(0.70)     $(2.89)     $(2.90)
                                 =========== =========== =========== ===========

(1) Net loss per share for periods prior to year 2006 does not
include stock-based compensation expense under SFAS 123 because
the Company did not adopt the recognition provisions of SFAS 123.

(2) Stock-based compensation expense for periods prior to year
2006 was calculated based on the pro forma application of SFAS 123.

(3) Net loss and loss per share for periods prior to year 2006
represent pro forma information based on SFAS 123.

Summary of Plans
----------------

During May 2005, the Company adopted a stock awards plan, as
amended, (the "2005 Equity Incentive Plan") which covers
1,000,000 shares of common stock. Under its terms, employees,
officers and directors of the Company and its subsidiaries are
currently eligible to receive non-qualified stock
options, restricted stock awards and incentive stock options within
the meaning of Section 422 of the Internal Revenue Code of 1986
(the "Code"). In addition, advisors and consultants who perform

                                  32
<PAGE>
services for the Company or its subsidiaries are eligible to
receive non-qualified stock options under the Stock Incentive
Plan. The Stock Incentive Plan is administered by the Board of
Directors or a committee designated by the Board of Directors.
36,873 options were granted in the first quarter of 2006 at a
weighted average exercise price of $3.10 per share and with 118
months remaining on its contractual life. No options were
granted in the second quarter of 2006. 717,000 options were
granted in the third quarter of 2006 at a weighted average
exercise price of $0.36 per share with 119 months remaining on
its contractual life.

Under the 1995 Stock Awards Plan, as amended, 500,000 shares of
our authorized but unissued common stock were reserved for
issuance to optionees including officers, employees, and other
individuals performing services for us. At December 31, 2005,
there were no additional shares available for grant under the
1995 Stock Awards Plan. A total of 474,044 options were issued
under this plan.

All stock options granted under the 2005 Equity Incentive Plan
and 1995 Stock Awards Plan are exercisable for a period of up
to ten years from the date of grant. The Company may not grant
incentive stock options pursuant to either plan at exercise
prices which are less than the fair market value of the common
stock on the date of grant.

In addition to the stock options covered by the above plans,
the Company has outstanding options to purchase 100,000 shares
of common stock under the 2000 Special Stock Option Plan. All
options under this plan are vested and there were no additional
shares available for grant under the Plan. All of the options
in the 2000 Special Stock Option Plan were exercisable at
December 31, 2005. All of the options expire on March 1, 2010
and have an exercise price of $12.50 per share.

Summarized information for our option plans are as follows:

                                                               Weighted-
                                                                average
                                                                exercise
                                                      Shares      price
                                                    ---------   ---------
1995 Stock Award Plan
---------------------
Outstanding options at December 31, 2005             430,264      $18.20
Options forfeited in 2006                             31,277       18.23
                                                    ---------
Outstanding options at September 30, 2006            398,987       18.20
                                                    =========

Exercisable at September 30, 2006                    398,987       18.20

2000 Special Stock Option Plan
------------------------------
Outstanding options at December 31, 2005             100,000       12.50
Options granted, forfeited or exercised in 2006            -           -
                                                    ---------
Outstanding options at September 30, 2006            100,000        12.50
                                                    =========

Exercisable at September 30, 2006                    100,000       12.50

2005 Equity Incentive Plan
--------------------------
Outstanding options at December 31, 2005              50,000        5.45
Options granted in 2006                              753,872         .75
Options forfeited or exercised in 2006                     -           -
                                                    ---------
Outstanding options at September 30, 2006            803,872        1.04
                                                    =========

Exercisable at September 30, 2006                    190,122        1.72

                                  33
<PAGE>
The effect of our outstanding options, warrants and convertible
notes are anti-dilutive when we have a net loss. The fully
diluted shares are:

                                Three months ended        Nine months ended
                                  September 30,              September 30,
                             ------------------------- -------------------------
                                 2006         2005         2006         2005
                             ------------ ------------ ------------ ------------
Fully diluted shares          14,387,436    4,418,383   14,390,902    4,389,382

(7) Subsequent Event

On October 24, 2006, we entered into a note and warrant
purchase agreement pursuant to which we sold and issued an
aggregate of $500,000 of 7.5% convertible notes due March 31,
2007 and warrants to purchase 386,364 shares of common stock of
Access. Net proceeds to Access were $450,000. The notes and
warrants were sold in a private placement to a group of
accredited investors led by SCO Capital Partners LLC ("SCO")
and affiliates.

The notes mature on March 31, 2007, are convertible into Access
common stock at a fixed conversion rate of $1.10 per share,
bear interest of 7.5% per annum and are secured by certain
assets of Access. Each note may be converted at the option of
the noteholder or Access under certain circumstances as set
forth in the notes.

Each noteholder received a warrant to purchase a number of
shares of common stock of Access equal to 75% of the total
number shares of Access common stock into which such holder's
note is convertible.  Each warrant has an exercise price of
$1.32 per share and is exercisable at any time prior to October
24, 2012. In the event SCO and its affiliates were to convert
all of their notes and exercise all of their warrants, it would
own approximately 72.4% of the voting securities of Access.


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