<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (date of earliest event reported):
February 6, 1998
----------------
NEXMED, INC.
------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Nevada
------------------------------------------------------------------
(State or other jurisdiction of incorporation)
0-22245 87-0449967
----------------------- ----------------------
(Commission File No.) (I.R.S. Employer
Identification No.)
350 Corporate Boulevard, Robbinsville, New Jersey 08691
-----------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(609) 208-9688
--------------
(Registrant's telephone number, including area code)
N/A
-----------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
------------------------------------------------------------------
(a) Financial Statements of Business Acquired.
-----------------------------------------
ZHONGSHAN CITY XIAOLAN PHARMACEUTICALS FACTORY
FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996
<PAGE>
Report of Independent Accountants
To the Board of Directors of
Zhongshan City Xiaolan Pharmaceuticals Factory
We have audited the accompanying balance sheets of Zhongshan City Xiaolan
Pharmaceuticals Factory as of December 31, 1996 and 1995, and the statements of
operations and retained earnings and of cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits of these statements in accordance with generally
accepted auditing standards in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of Zhongshan City Xiaolan Pharmaceuticals
Factory as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the years then ended, in conformity with generally
accepted accounting principles in the United States of America.
PRICE WATERHOUSE
30 October 1997
<PAGE>
ZHONGSHAN CITY XIAOLAN PHARMACEUTICALS FACTORY
----------------------------------------------
BALANCE SHEETS
--------------
(EXPRESSED IN RENMINBI ("RMB"))
<TABLE>
<CAPTION>
December 31, September 30,
---------------------- 1997
Note 1996 1995 (unaudited)
---- --------- ---------- -------------
<S> <C> <C> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents 2,292,633 3,576,625 3,268,293
Inventories 3 4,771,889 6,791,614 6,712,214
Advances to suppliers 2,710,787 1,567,164 -
Trade accounts receivable, net of allowances
for doubtful accounts of RMB965,816 in 1996
and RMB482,908 in 1995 6,678,644 8,390,197 8,721,755
Deferred and prepaid expenses 4 1,526,870 1,703,193 1,088,877
Other receivables - 385,059 363,784
Amount due from holding company 5 2,219,621 4,186,583 -
---------- ---------- ----------
Total current assets 20,200,444 26,600,435 20,154,923
PROPERTY, PLANT AND EQUIPMENT 6 7,913,843 8,612,124 7,543,764
EQUITY IN AFFILIATED COMPANY 7 1,587,583 1,426,580 1,428,067
---------- ---------- ----------
Total assets 29,701,870 36,639,139 29,126,754
========== ========== ==========
<CAPTION>
LIABILITIES AND OWNERS' EQUITY
- ------------------------------
CURRENT LIABILITIES:
<S> <C> <C> <C> <C>
Short term loans 8 9,400,000 12,200,000 9,400,000
Other loans 9 - 6,089,000 -
Accounts payable 3,565,142 3,108,945 2,076,768
Accruals and other payables 2,735,777 4,230,727 2,045,511
Staff and workers' bonus and welfare fund 601,794 571,301 811,266
Taxes payable 1,955,570 873,558 1,526,704
Amounts due to holding company - - 2,092,568
---------- ---------- ----------
Total liabilities 18,258,283 27,073,531 17,952,817
---------- ---------- ----------
OWNERS' EQUITY
Paid - in capital 10 6,098,004 5,463,462 6,715,152
Retained earnings 5,345,583 4,102,146 4,458,785
---------- ---------- ----------
Total owners' equity 11,443,587 9,565,608 11,173,937
---------- ---------- ----------
Total liabilities and owners' equity 29,701,870 36,639,139 29,126,754
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ZHONGSHAN CITY XIAOLAN PHARMACEUTICALS FACTORY
----------------------------------------------
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
----------------------------------------------
(EXPRESSED IN RENMINBI ("RMB"))
<TABLE>
<CAPTION>
Nine Months
Year Ended December 31, Ended September 30,
----------------------- -------------------
1996 1995 1997 1996
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Sales 53,442,002 56,650,135 47,758,166 42,098,548
Cost of sales (45,895,128) (48,479,762) (42,416,071) (36,712,268)
----------- ----------- ----------- -----------
Gross profit 7,546,874 8,170,373 5,342,095 5,385,780
----------- ----------- ----------- -----------
Operating expenses
Selling expenses (2,106,990) (2,025,230) (1,388,792) (1,535,993)
General and administration expenses (2,921,398) (3,399,180) (2,015,203) (2,015,994)
----------- ----------- ----------- -----------
Total operating expenses (5,028,388) (5,424,410) (3,403,995) (3,551,987)
----------- ----------- ----------- -----------
Operating profit 2,518,486 2,745,963 1,938,100 1,833,793
Equity in net income of affiliated company 5,515 22,928 (85,906) 5,515
Interest expenses, net (724,352) (834,752) (572,823) (542,563)
Other income, net 123,206 136,958 590,773 69,312
----------- ----------- ----------- -----------
Income before income taxes 1,922,855 2,071,097 1,870,144 1,366,057
Provision for notional income taxes (634,542) (683,462) (617,148) (450,799)
----------- ----------- ----------- -----------
Net income after notional income taxes 1,288,313 1,387,635 1,252,996 915,258
Retained earnings, beginning of year 4,102,146 4,731,958 5,345,583 4,102,146
----------- ----------- ----------- -----------
Profit available for appropriation 5,390,459 6,119,593 6,598,579 5,017,404
Dividends (44,876) (2,017,447) (2,139,794) (17,520)
----------- ----------- ----------- -----------
Retained earnings, end of year 5,345,583 4,102,146 4,458,785 4,999,884
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ZHONGSHAN CITY XIAOLAN PHARMACEUTICALS FACTORY
----------------------------------------------
STATEMENT OF CASH FLOWS
-------------------------------------
(EXPRESSED IN RENMINBI ("RMB"))
<TABLE>
<CAPTION>
For the Years Ended For the Nine Months
December 31, Ended September 30,
----------------------- --------------------------
1996 1995 1997 1996
--------- --------- ----------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 1,288,313 1,387,635 1,252,996 915,258
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 699,340 390,682 691,832 518,153
Loss on disposal of property, plant and equipment 49,311 -- -- 49,311
Interest in equity in affiliated company (161,003) (221,201) 159,516 (161,003)
Changes in working capital:
Accounts receivable 1,711,553 122,131 (2,043,111) (240,622)
Other receivables 385,059 1,245,655 (363,784) 385,059
Prepayments and advances (967,300) (1,136,300) 3,148,780 (647,724)
Inventories 2,019,725 (893,200) (1,940,325) 1,160,046
Accounts payable 456,197 1,389,218 (1,488,374) 1,036,599
Amount due from holding company 1,966,962 1,620,808 4,312,189 3,516,354
Accrued salaries, wages and other compensation 30,493 79,402 209,472 (177,899)
Accruals and other payables (1,494,950) 333,941 (690,266) (1,456,146)
Taxes payable 1,082,012 730,593 (428,866) 620,688
---------- ---------- ---------- ----------
Net cash provided by operating activities 7,065,712 5,049,364 2,820,059 5,518,074
---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (50,370) (2,888,003) (321,753) (50,370)
---------- ---------- ---------- ----------
Net cash used in investing activities (50,370) (2,888,003) (321,753) (50,370)
---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Other loans -- 2,827,240 -- --
Dividends paid (44,876) (2,017,447) (2,139,794) (17,520)
Loans repaid (8,889,000) (1,000,000) -- (7,189,000)
Notional income tax contribution 634,542 683,462 617,148 450,799
---------- ---------- ---------- ----------
Net cash provided by financing activities (8,299,334) 493,255 (1,522,646) (6,755,721)
---------- ---------- ---------- ----------
Net (decrease) / increase in cash and cash equivalents (1,283,992) 2,654,616 975,660 (1,288,017)
Cash and cash equivalents at beginning of year 3,576,625 922,009 2,292,633 3,576,625
---------- ---------- ---------- ----------
Cash and cash equivalents at end of year 2,292,633 3,576,625 3,268,293 2,288,608
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ZHONGSHAN CITY XIAOLAN PHARMACEUTICALS FACTORY
----------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
---------------------------------
(unaudited with respect to the Nine Months Ended September 30, 1997 and 1996)
--------------------------
(AMOUNTS EXPRESSED IN RENMINBI ("RMB") UNLESS OTHERWISE STATED)
1. ORGANISATION AND PRINCIPAL ACTIVITIES
Zhongshan City Xiaolan Pharmaceuticals Factory ("the Company") is a collective
enterprise established in the People's Republic of China on 20 April 1986. It
is under the supervision and control of Zhongshan City Xiaolan Industrial
Holding Company ("the Holding Company") and its principal activities are the
manufacture of pharmaceutical products.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows:
Cash and cash equivalents
- -------------------------
Highly liquid investments with maturities of three months or less when purchased
are considered to be cash equivalents. Because of the short maturities of these
instruments, the carrying cost is a reasonable estimate of fair value.
Property, plant and equipment
- -----------------------------
Property, plant and equipment are recorded at historical cost. Depreciation is
provided for over the assets' estimated useful lives on a straight line basis.
The applicable useful lives of property, plant and equipment are as follows:
Buildings 10 years
Machinery 3-5 years
Motor vehicles 3-5 years
Office equipment 3 years
Foreign currency translation
- ----------------------------
The Company's financial records are maintained in Renminbi, the functional
currency. Transactions in foreign currencies at the balance sheet date are
translated into Renminbi at the exchange rates at the balance sheet date.
Exchange differences arising in these cases are recorded in the statement of
operations.
Inventories
- -----------
Inventories are stated at the lower of cost or net realisable value. Cost,
calculated on the weighted average basis, comprises materials and where
applicable, direct labour and an appropriate proportion of all production
overhead expenditures.
Deferred taxation
- -----------------
Deferred taxation is recorded for temporary differences between financial
statement carrying amounts and the tax basis of assets and liabilities.
Deferred tax assets and liabilities reflect the tax rates expected to be in
effect for the years in which the differences are expected to reverse. A
valuation allowance is provided if it is more likely than not that some or all
of the deferred tax asset will not be realized. As of December 31, 1996 and
1995, the amounts of deferred taxation are immaterial.
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income tax
- ----------
The holding company has agreed to take up the income tax liabilities of the
Company arising from its operations during the years ended December 31, 1996 and
1995.
Notional income taxes, as if the Company was a stand-alone entity, at the rate
of 33% have been charged to the profit and loss account with contributions from
the holding company being credited to the paid-in capital.
Revenues
- --------
Net revenues from product sales are recognized upon shipment of products to
customers. Allowances for estimated returns and discounts are provided when
sales are recorded.
Fair value of financial instruments
- -----------------------------------
The fair values of short term loans approximate their carrying values as these
financial instruments bear interest at variable market rates. The fair values of
the Company's other monetary assets and liabilities approximate carrying value
due to the relatively short term nature of these items.
Use of estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles in the united states of america requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Unaudited Interim Information
- -----------------------------
The information presented as of September 30, 1997 and for the nine months ended
September 30, 1997 and 1996 has not been audited. In the opinion of management,
the unaudited interim information includes all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the Company's
financial position at September 30, 1997, and the results of its operations and
its cash flows for the nine months ended September 30, 1997 and 1996.
3. INVENTORIES
December 31, September 30,
-------------------- -------------
1996 1995 1997
---- ---- ----
(unaudited)
Raw materials 1,860,797 3,838,517 3,591,533
Finished goods 2,911,092 2,953,097 3,120,681
--------- --------- ---------
4,771,889 6,791,614 6,712,214
========= ========= =========
4. DEFERRED AND PREPAID EXPENSES
December 31, September 30,
-------------------- -------------
1996 1995 1997
---- ---- ----
(unaudited)
Deferred value added tax (VAT) * 1,053,548 1,580,322 1,053,548
Prepaid expenses 473,322 122,871 35,329
--------- --------- ---------
1,526,870 1,703,193 1,088,877
========= ========= =========
* As a result of the implementation of the new value added tax ("VAT")
legislation which became effective from January 1, 1994, the Company is
entitled to an input VAT credit on the stock balance at january 1, 1994.
the deferred VAT represents the unrealised portion of the input VAT credit
which will be realised on a straight line basis over a period of four years
ending on December 31, 1998.
<PAGE>
5. AMOUNT DUE FROM (TO) HOLDING COMPANY
December 31,
-------------------- September 30,
1996 1995 1997
---- ---- ----
(unaudited)
Current account with holding company * 7,219,621 4,186,583 2,907,432
Short term loan from holding company ** (5,000,000) - (5,000,000)
---------- --------- ----------
2,219,621 4,186,583 (2,092,568)
========== ========= ==========
* Other than an interest reimbursement arrangement as detailed in note 11
(iii), the current account with the holding company is non-interest bearing
and has no fixed repayment terms.
** Short term loan from the holding company bears interest at 14.4% per annum
and is repayable on demand.
6. PROPERTY, PLANT AND EQUIPMENT
December 31,
----------------------- September 30,
1996 1995 1997
---- ---- ----
(unaudited)
Buildings 8,098,068 5,154,400 8,098,068
Machinery 4,026,688 4,029,298 4,348,441
Motor vehicles 634,100 634,100 634,100
Office equipment 53,060 49,390 53,060
Construction in progress - 2,943,668 -
---------- ---------- ----------
12,811,916 12,810,856 13,133,669
Less: accumulated depreciation (4,898,073) (4,198,732) (5,589,905)
---------- ---------- ----------
Net book value 7,913,843 8,612,124 7,543,764
========== ========== ==========
Depreciation expense was RMB577,362 and RMB699,341 for the years ended December
31, 1995 and 1996 respectively, and RMB691,832 and RMB518,154 for the nine
months ended September 30, 1997 and 1996, respectively.
7. EQUITY IN AFFILIATED COMPANY
December 31,
-------------------- September 30,
1996 1995 1997
---- ---- ----
(unaudited)
Share of net assets of affiliated company 1,587,583 1,582,068 1,501,677
Amount due to affiliated company - (155,488) (73,610)
--------- --------- --------
1,587,583 1,426,580 1,428,067
========= ========= =========
The affiliated company, Zhongshan City Xiaolan Pharmaceuticals Limited ("ZCXPL")
in which the Company holds a 50% equity interest, was established in the
People's Republic of China on 13 February 1989. The principal activity of the
affiliated company is the sale and manufacture of pharmaceutical products.
<PAGE>
8. SHORT TERM LOANS
Short term loans bear interest at rates ranging from 11% to 12% per annum.
9. OTHER LOANS
Other loans represent employee loans which bear interest at 18% per annum. The
loans were fully repaid in July 1996.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10. PAID-IN CAPITAL
December 31, September 30,
-------------------- -------------
1996 1995 1997
--------- --------- -------------
(unaudited)
Paid in capital, beginning of period 5,463,462 4,780,000 6,098,004
Notional income tax contribution 634,542 683,462 617,148
--------- --------- -------------
6,098,004 5,463,462 6,715,152
========= ========= =============
11. RELATED PARTY TRANSACTIONS
December 31, September 30,
------------------- ---------------
1996 1995 1997
-------- -------- ---------------
(unaudited)
(i) Services fees received from ZCXPL
Management fee 259,200 259,200 201,600
Factory rental 295,920 295,920 230,160
Utilities 700,639 724,909 479,536
</TABLE>
(ii) The Company charged a management fee to the holding company of
RMB1,165,880 and RMB1,255,507 for the years ended December 31, 1996 and
1995 respectively, and RMB710,188 for the nine months ended September 30,
1997. Management fee is charged at 2% of sales revenue for the year.
(iii) The holding company has agreed to reimburse the Company for interest
payments on a bank loan. Interest income reimbursed by the holding company
was RMB1,692,740 and RMB1,821,600 for the years ended December 31, 1996
and 1995, respectively, and RMB 1,025,825 and the nine months ended
September 30, 1997.
12. SUBSEQUENT EVENT
On September 26, 1997, Nexmed Pharmaceuticals (Zhongshan) Ltd was established as
a Sino-foreign joint venture. The Company has agreed to contribute the
following net assets amounting to RMB7,719,000 (equivalent US$930,000) for a 30%
equity contribution to the joint venture's total paid in capital of
US$3,100,000:
Intangibles 7,000,000
Fixed assets 6,600,000
Amount due to holding company (5,881,000)
----------
7,719,000
==========
<PAGE>
(b) Pro Forma Financial Information.
-------------------------------
The following unaudited pro forma combined balance sheet reflects the combined
balance sheet of NexMed, Inc.("NexMed" or the "Company") and the assets and
liabilities of Zhongshan City Xiaolan Pharmaceuticals Factory (the "Xiaolan
Factory") contributed to the NexMed Pharmaceuticals (Zhongshan) Ltd. joint
venture (the "Joint Venture"), adjusted to give effect to the transaction and
the debt incurred in funding the transaction. The unaudited pro forma combined
balance sheet assumes that the transaction occurred on September 30, 1997.
The following unaudited pro forma combined statement of operations for the year
ended December 31, 1996 presents the operating results of the Company as if the
transaction and the debt incurred in funding the transaction had occurred as of
January 1, 1996. The following unaudited pro forma combined statement of
operations for the nine months ended September 30, 1997 presents the operating
results of the Company as if the transaction and the debt incurred in funding
the transaction had occurred as of January 1, 1997.
The unaudited pro forma combined financial statements are provided for
informational purposes only and are not necessarily indicative of the results of
operations or financial condition that would have been achieved had the
transaction and related financing actually occurred as of the dates indicated or
of the future results of operations or financial condition of the Company. The
pro forma adjustments are based upon available information and certain
assumptions that the Company currently believes are reasonable in the
circumstances. The Company's financial statements will reflect the effect of the
transaction only from January 1, 1998, the effective date of the transaction.
The transaction has been accounted for using the purchase method of accounting.
Under purchase accounting, the total purchase cost of the Joint Venture will be
allocated to the assets and liabilities acquired based on their relative fair
values as of the date the transactions is closed, with any excess of the total
purchase price over the fair value of the tangible assets acquired less the fair
value of the liabilities assumed recorded as intangible assets. The cost
allocations will be based on studies which are not yet completed. Accordingly,
the final allocations may be different from the amounts reflected herein.
Although the final allocations may differ, the pro forma condensed combined
financial information reflects management's best estimate based on currently
available information.
<PAGE>
NexMed, Inc.
Pro Forma Combined Statement of Operations
For the Year Ended December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Xiaolan Pro Forma Combined
NexMed Factory (6) Adjustments Pro Forma
----------------- ---------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Revenue $ - $6,431,047 $ - $ 6,431,047
Operating expenses
Cost of sales - 5,522,879 72,881 (7) 5,595,760
Selling, general and administrative 2,076,360 605,101 - 2,681,461
Research and development 1,040,396 - - 1,040,396
----------------- ---------------- ----------------- ---------------
Total operating expenses 3,116,756 6,127,980 72,881 9,317,617
----------------- ---------------- ----------------- ---------------
Income (loss) from operations (3,116,756) 303,067 (72,881) (2,886,570)
Other income (expense), net - 15,490 (664) (8) 14,826
Interest income (expense), net (1,637) (87,166) (316,654) (9) (405,457)
----------------- ---------------- ----------------- ---------------
Income (loss) before taxes (3,118,393) 231,391 (390,199) (3,277,201)
Tax provision - 76,359 (57,734) (10) 18,625
----------------- ---------------- ----------------- ---------------
(3,118,393) 155,032 (332,465) (3,295,826)
Minority interest in Joint Venture - - (53,230) (11) (53,230)
----------------- ---------------- ----------------- ---------------
Net income (loss) $(3,118,393) $ 155,032 $(279,235) $(3,242,596)
================= ================ ================= ===============
Loss per common share $(0.72) $(0.75)
================= ===============
Weighted average common
shares outstanding 4,327,548 4,327,548
================= ===============
</TABLE>
See accompanying notes to pro forma combined financial statements
<PAGE>
NexMed, Inc.
Pro Forma Combined Statement of Operations
For the Nine Months Ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Xiaolan Pro Forma Combined
NexMed Factory (6) Adjustments Pro Forma
----------------- ---------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Revenue $ 50,000 $5,747,072 $ - $ 5,797,072
Operating expenses
Cost of sales - 5,160,754 54,661 (7) 5,215,415
Selling, general and administrative 1,360,274 353,093 - 1,713,367
Research and development 1,155,185 - - 1,155,185
----------------- ---------------- ----------------- ---------------
Total operating expenses 2,515,459 5,513,847 54,661 8,083,967
----------------- ---------------- ----------------- ---------------
Income (loss) from operations (2,465,459) 233,225 (54,661) (2,286,895)
Other income (expense), net - 60,754 10,338 (8) 71,092
Interest income (expense), net 16,055 (68,932) (233,933) (9) (286,810)
----------------- ---------------- ----------------- ---------------
Income (loss) before taxes (2,449,404) 225,047 (278,256) (2,502,613)
Tax provision - 94,252 (45,848) (10) 48,404
----------------- ---------------- ----------------- ---------------
(2,449,404) 130,795 (232,408) (2,551,017)
Minority interest in Joint Venture - - 22,147 (11) 22,147
----------------- ---------------- ----------------- ---------------
Net income (loss) $(2,449,404) $ 130,795 $(254,555) $(2,573,164)
================= ================ ================= ===============
Loss per common share $(0.41) $(0.43)
================= ===============
Weighted average common
shares outstanding 6,020,837 6,020,837
================= ===============
</TABLE>
See accompanying notes to pro forma combined financial statements
<PAGE>
NexMed, Inc.
Pro Forma Combined Balance Sheet
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Xiaolan Pro Forma Combined
NexMed Factory (2) Adjustments Pro Forma
----------------- ----------------- ----------------- ---------------
Assets
- ------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 165,257 $ - $1,461,000 (3) $ 1,626,257
Accounts receivable - 1,103,907 - 1,103,907
Inventory - 619,877 - 619,877
Prepaid expenses and other assets 43,449 - - 43,449
----------------- ----------------- ----------------- ---------------
Total current assets 208,706 1,723,784 1,461,000 3,393,490
Plant and equipment, net 150,113 1,383,875 - 1,533,988
Intangible assets - 252,730 - 252,730
Total assets $ 358,819 $3,360,389 $1,461,000 $ 5,180,208
================= ================= ================= ===============
Liabilities and stockholders' equity
- ------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 24,381 $ 159,405 $ - $ 183,786
Notes payable 100,000 - 2,170,000 (4) 2,270,000
Loans payable - 1,564,380 - 1,564,380
Total current liabilities 124,381 1,723,785 2,170,000 4,018,166
----------------- ----------------- ----------------- ---------------
Minority interest - 1,636,604 (709,000) (5) 927,604
Commitments and contingencies
Stockholders' equity:
Common stock 6,180 - - 6,180
Additional paid-in capital 7,071,243 - - 7,071,243
Accumulated deficit (6,773,372) - - (6,773,372)
----------------- ----------------- ----------------- ---------------
304,051 - - 304,051
Less: deferred compensation (69,613) - - (69,613)
----------------- ----------------- ----------------- ---------------
234,438 - - 234,438
$ 358,819 $3,360,389 $1,461,000 $ 5,180,208
================= ================= ================= ===============
</TABLE>
See accompanying notes to pro forma combined financial statements
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
(UNAUDITED)
1. Effective January 1, 1998, Xiaolan Factory contributed certain of its
accounts receivable, inventory, plant and equipment, intangible assets, accounts
payable and debt to the Joint Venture with a total estimated fair value of
$1,636,584 in exchange for a 30% interest in the Joint Venture. On the same
date, the Company was required to contribute $2,170,000 of cash to the Joint
Venture for a 70% interest in the Joint Venture. Upon receipt of the $2,170,000
of cash from the Company, the Joint Venture will distribute $709,000 to the
Xiaolan Factory. In order to contribute the $2,170,000 of cash to the Joint
Venture, the Company has issued debt and notes to third parties.
2. Represents the estimated fair value of the assets and liabilities
contributed to the Joint Venture.
3. Represents the proceeds of $2,170,000 from debt and notes issued by the
Company and contributed to the Joint Venture, offset by $709,000 that will be
distributed to the Xiaolan Factory.
4. Represents short-term debt and notes issued by the Company to provide cash
to contribute to the Joint Venture
5. Represents the planned distribution of $709,000 of cash to the Xiaolan
Factory.
6. Represents the historical operating results of the Xiaolan Factory,
translated for convenience at the December 31, 1997 exchange rate of $1 = RNB
8.31.
7. Represents additional depreciation related to the excess of the fair value
of the plant and equipment over their historical book value. In addition, the
adjustment includes the amortization of intangible assets contributed to the
Joint Venture.
8. Represents the elimination of other income or expense which relates to
Xiaolan Factory's equity investment in an affiliate which was not contributed to
the Joint Venture
9. Represents the adjustment of interest expense reported by Xiaolan Factory to
a pro forma figure based on the actual amount of debt contributed to the Joint
Venture. In addition, the adjustment includes interest expense related to the
short-term debt and notes issued by the Company to provide cash to contribute to
the Joint Venture.
10. Represents the adjustment of the Joint Venture's tax provision to reflect
the above pro forma adjustments.
11. Represents the Xiaolan Factory's 30% interest in the assets and liabilities
of the Joint Venture recorded at their new basis.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
NexMed, Inc. has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: March 16, 1998
NEXMED, INC.
By: /s/ Vivian H. Liu
--------------------
Vivian H. Liu
Vice President and Secretary
