Form 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
(_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended Commission File Number 0-23788
Xechem International, Inc.
(Exact name of registrant as specified in its charter)
Delaware 22-3284803
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 Jersey Avenue, Bldg. B, Suite. 310, New Brunswick, NJ 08901
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (732) 247-3300
------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 of 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
Number of shares outstanding of the issuer's common stock, as of July 31, 1998
was 139,850,839 shares.
Transitional Small Business Disclosure Format
Yes No X
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
Page No.
Part I. Financial Information
Item 1. Consolidated Balance Sheet as of
March 31, 1998 [Unaudited]............................... 3..4
Consolidated Statements of Operations
for the three months ended
March 31, 1998 and 1997 [Unaudited] ..................... 5
Consolidated Statement of Stockholders'
Equity for the three months ended
March 31, 1998 [Unaudited]............................... 6..7
Consolidated Statements of Cash Flows for
the three months ended March 31, 1998 and
1997 [Unaudited]......................................... 8..9
Notes to Consolidated Financial Statements................. 10..12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .......... 13..16
Part II. Other Information ......................................... 17
Signatures ......................................................... 18
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE ENTERPRISE]
- ------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998
[UNAUDITED]
- ------------------------------------------------------------------------------
Assets:
Current Assets:
Cash and Cash Equivalents $ 106,757
Accounts Receivable 135,373
Loans Receivable - Related Parties 326,081
Inventory 254,870
Prepaid Expenses 129,837
-----------
Total Current Assets 952,918
Equipment, Net of Accumulated Depreciation of $513,076 895,726
Leasehold Improvements - Net of Accumulated Amortization
of $314,188 700,988
Deposits 18,867
Total Assets $ 2,568,499
===========
See Accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE ENTERPRISE]
- ------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998
[UNAUDITED]
- ------------------------------------------------------------------------------
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable $ 559,143
Accrued Expenses 194,525
Loans Payable 1,244,545
Notes Payable 128,300
Due To Related Parties 112,989
-----------
Total Current Liabilities 2,239,502
Commitments and Contingencies --
Stockholders' Equity:
Class A Voting Preferred Stock, $.00001 Par Value, 2,500
Shares Authorized; 2,500 Shares Issued and Outstanding --
Additional Paid-in Capital [Class A Voting Preferred] 2,500
Class B 8% Preferred Stock, $.00001 Par Value, 1,150 Shares
Authorized; None Issued or Outstanding --
Class C Preferred Stock, $.00001 Par Value, 2,996,350 Shares
Authorized; None Issued or Outstanding --
Common Stock, $.00001 Par Value, 247,000,000
Shares Authorized; 119,870,839 Shares Issued and Outstanding 1,197
Additional Paid-in Capital [Common] 28,742,596
(Deficit) Accumulated During the Development Stage (28,417,296)
-----------
Total Stockholders' Equity 328,997
Total Liabilities and Stockholders' Equity $ 2,568,499
===========
See Accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE ENTERPRISE]
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
- ------------------------------------------------------------------------------
March 15, 1990
[Date of
Three months ended Inception to
March 31, March 31,
--------- ---------
1 9 9 8 1 9 9 7 1 9 9 8
------- ------- -------
Revenues $ 44,075 $ 3,272 $ 733,992
----------- ---------- -----------
Expenses:
Research and Development 412,737 348,794 7,468,094
Rent -- -- 410,065
Rent - Related Party 34,027 37,487 152,588
General and Administrative 288,110 370,822 6,355,595
Writedown of Inventory -- -- 1,020,000
Writedown of Intangibles -- -- 517,000
----------- ---------- -----------
Total Expenses 734,874 757,103 15,923,342
----------- ---------- -----------
(Loss) from Operations (690,799) (753,831) (15,189,350)
Other Income 6,803 2,884 284,592
Interest (Expense) - Related Party -- -- (8,589,081)
Interest (Expense) (4,224) (3,200) (4,923,457)
----------- ---------- -----------
(Loss) Before Income Taxes (688,220) (754,147) (28,417,296)
Income Taxes -- -- --
----------- ---------- -----------
Net (Loss) $ (688,220)$ (754,147) $(28,417,296)
=========== ========== ============
Preferred Stock Dividends $ -- $ 233 $ 101,594
=========== ========== ===========
Net (Loss) Available to Common
Stockholders $ (688,220)$ (754,380) $(28,518,890)
=========== ========== ============
Net (Loss) per Share, Basic and Fully
Diluted $ (0.01)$ (0.01)
=========== ==========
Average Number of Shares Outstanding,
Basic and Fully Diluted 119,870,839 56,665,105
=========== ==========
See Accompanying Notes to Consolidated Financial Statements.
5
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------
<TABLE>
Class A Additional Class B Additional Class C
Voting Preferred Paid-in 8% Preferred Paid-in Series 1
Capital Capital 8% Conv. Preferred
# of Par # of Par # of Par
Shares Value Class A Shares Value Class B Shares Value
Common Stock issued in exchange for
equipment in March 1990 at no
<S> <C> <C> <C> <C> <C> <C> <C> <C>
par value -- $ -- $ -- -- $ -- $ -- -- $ --
Capital contributions April 1990 -- -- -- -- -- -- -- --
Net (loss) for the period from
March 15, 1990 (date of
inception) to December 31, 1990 -- -- -- -- -- -- -- --
------- -------- -------- ------- ------ -------- -------- -------
Balance - December 31, 1990 -- -- -- -- -- -- -- --
Capital contributions July 1991 -- -- -- -- -- -- -- --
Capital contributions September
1991 -- -- -- -- -- -- -- --
Capital contributions October 1991 -- -- -- -- -- -- -- --
Net (loss) for the year ended
December 31, 1991 -- -- -- -- -- -- -- --
------- -------- -------- ------- ------ -------- -------- -------
Balance - December 31, 1991 -- -- -- -- -- -- -- --
Capital contributions -- -- -- -- -- -- -- --
Net (loss) for the year ended
December 31, 1992 -- -- -- -- -- -- -- --
------- -------- -------- ------- ------ -------- -------- -------
Balance - December 31, 1992 -- -- -- -- -- -- -- --
Net (loss) for the year ended
December 31, 1993 -- -- -- -- -- -- -- --
------- -------- -------- ------- ------ -------- -------- -------
Balance - December 31, 1993 -- -- -- -- -- -- -- --
Reorganization 2,500 -- 2,500 1,070 -- 107,000 -- --
Net Proceeds from Initial Public
Offering - First Quarter 1994, at
$5.00 Per Unit, Less Issuance Cost -- -- -- -- -- -- -- --
Excess of Fair Market Value over
Option Price of Non-Qualified
Stock Options - Third Quarter 1994 -- -- -- -- -- -- -- --
Excess of Fair Market Value over
Option Price of Non-Qualified
Stock Options - Fourth Quarter 1994 -- -- -- -- -- -- -- --
Net (loss) for the year ended
December 31, 1994 -- -- -- -- -- -- -- --
------- -------- -------- ------- ------ -------- -------- -------
Balance - December 31, 1994 2,500 -- 2,500 1,070 -- 107,000 -- --
Private Placement - Common Stock at
$3.00 Per Share, Less Issuance Costs -- -- -- -- -- -- -- --
Excess of Fair Market Value over
Option Price of Non-Qualified
Stock Options - First Quarter 1995 -- -- -- -- -- -- -- --
Excess of Fair Market Value over
Option Price of Non-Qualified
Stock Options and issuance of
Apotex stock - Second Quarter 1995 -- -- -- -- -- -- -- --
Excess of Fair Market Value over
Option Price of Non-Qualified
Stock Options - Third Quarter 1995 -- -- -- -- -- -- -- --
Excess of Fair Market Value over
Option Price of Non-Qualified
Stock Options - Fourth Quarter 1995 -- -- -- -- -- -- -- --
Net (loss) for the year ended
December 31, 1995 -- -- -- -- -- -- -- --
------- -------- -------- ------- ------ -------- -------- -------
Balance - December 31, 1995 -
Forward 2,500 $ -- 2,500 1,070 $ -- $107,000 -- $ --
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------
<TABLE>
Class A Additional Class B Additional Class C
Voting Preferred Paid-in 8% Preferred Paid-in Series 1
Capital Capital 8% Conv. Preferred
# of Par # of Par # of Par
Shares Value Class A Shares Value Class B Shares Value
Balance - December 31, 1995 -
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Forwarded 2,500 $ -- 2,500 1,070 $ -- $107,000 -- $ --
Private Placement - Common Stock at
$3.00 Per Share, Less Issuance Costs -- -- -- -- -- -- -- --
Private Placement - Petron at $.38
per Share -- -- -- -- -- -- -- --
Private Placement - Series 1 Preferred
Stock at $100 per Share, Less
Issuance Cost -- -- -- -- -- -- 22,500 --
Private Placement - Series 2 Preferred
Stock at $100 per Share, Less
Issuance Cost -- -- -- -- -- -- -- --
Conversion of Preferred Stock -- -- -- -- -- -- (21,000) --
Conversion of Debt to Equity at $.25
Per Share -- -- -- -- -- -- -- --
Excess of Fair Market Value over
Option Price of Non-Qualified Stock
Options - Second Quarter 1996 -- -- -- -- -- -- -- --
Excess of Fair Market Value over
Option Price of Non-Qualified
Stock Options - Third Quarter 1996 -- -- -- -- -- -- -- --
Excess of Fair Market Value over
Option Price of Non-Qualified
Stock Options - Fourth Quarter 1996 -- -- -- -- -- -- -- --
Cancellation of Apotex Stock -- -- -- -- -- -- -- --
Ocean Marine Settlement at $1.31
per Share -- -- -- -- -- -- -- --
Net (loss) for the year -- -- -- -- -- -- -- --
------- -------- -------- ------- ------ -------- -------- -------
Balance - December 31, 1996 2,500 -- 2,500 1,070 -- 107,000 1,500 --
Private Placement - Series 2
Preferred at $100 per Share -
First Quarter 1997 -- -- -- -- -- -- -- --
Conversion of Series 1
Preferred Stock at $1.25 per
Share - First Quarter 1997 -- -- -- -- -- -- (1,500) --
Conversion of Series 2
Preferred Stock at $.05 per
Share - First Quarter -- -- -- -- -- -- -- --
Conversion of Dr. Pandey's
Preferred Stock & Debt to
Equity at $.0625 per Share -
First Quarter -- -- -- (1,070) -- (107,000) -- --
Private Placement - Common Stock
At $.05 per Share -- -- -- -- -- -- -- --
Excess of Fair Market Value
Over Option Price of
Non-Qualified Stock Options
Exercised First Quarter 1997 -- -- -- -- -- -- -- --
Excess of Fair Market Value
Over Option Price of
Non-Qualified Stock Options
Exercised Third Quarter 1997 -- -- -- -- -- -- -- --
Stock Option Grants -- -- -- -- -- -- -- --
Net (loss) for the Year -- -- -- -- -- -- -- --
------- -------- -------- ------- ------ -------- -------- -------
Balance - December 31, 1997 2,500 -- 2,500 -- -- -- -- --
Net (loss) for the Three Months
Ended March 1998 -- -- -- -- -- -- -- --
------- -------- -------- ------- ------ -------- -------- -------
Balance - March 31, 1998 2,500 $ -- $ 2,500 -- $ -- $ -- -- $ --
======= ======== ======== ======= ====== ======== ======== =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------
<TABLE>
Class C Additional Xechem, Inc. Xechem International Additional (Deficit)
Series 2 Paid-in Common Stock Common Stock Paid-in Accumulated
Voting Conv. PreferredCapital Capital During the
# of Par # of Par # of Par Development
Shares Value Class C Shares Value Shares Value Common Stage
Common Stock issued in exchange for
equipment in March 1990 at no
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
par value -- $ -- $ -- 100 $125,000 -- $ -- $ -- $ --
Capital contributions April 1990 -- -- -- -- -- -- -- 170,000 --
Net (loss) for the period from
March 15, 1990 (date of
inception) to December 31, 1990 -- -- -- -- -- -- -- -- (159,271)
--------- ------- -------- -------- -------- -------- --------- ---------- ---------
Balance - December 31, 1990 -- -- -- 100 125,000 -- -- 170,000 (159,271)
Capital contributions July 1991 -- -- -- -- -- -- -- 95,971 --
Capital contributions September
1991 -- -- -- -- -- -- -- 50,172 --
Capital contributions October 1991 -- -- -- -- -- -- -- 25,000 --
Net (loss) for the year ended
December 31, 1991 -- -- -- -- -- -- -- -- (357,390)
--------- ------- -------- -------- -------- -------- --------- ---------- ---------
Balance - December 31, 1991 -- -- -- 100 125,000 -- -- 341,143 (516,661)
Capital contributions -- -- -- -- -- -- -- 95,000 --
Net (loss) for the year ended
December 31, 1992 -- -- -- -- -- -- -- -- (487,301)
--------- ------- -------- -------- -------- -------- --------- ---------- ---------
Balance - December 31, 1992 -- -- -- 100 125,000 -- -- 436,143 (1,003,962)
Net (loss) for the year ended
December 31, 1993 -- -- -- -- -- -- -- -- (819,816)
--------- ------- -------- -------- -------- -------- --------- ---------- ---------
Balance - December 31, 1993 -- -- -- 100 125,000 -- -- 436,143 (1,823,778)
Reorganization -- -- -- (100) (125,000) 4,370,500 43 13,840,487 --
Net Proceeds from Initial Public
Offering - First Quarter 1994, at
$5.00 Per Unit, Less Issuance Cost -- -- -- -- -- 1,150,000 12 4,542,670 --
Excess of Fair Market Value over
Option Price of Non-Qualified
Stock Options - Third Quarter 1994 -- -- -- -- -- 105,000 1 1,049 --
Excess of Fair Market Value over
Option Price of Non-Qualified
Stock Options - Fourth Quarter 1994 -- -- -- -- -- 105,000 1 50,060 --
Net (loss) for the year ended
December 31, 1994 -- -- -- -- -- -- -- -- (14,316,193)
--------- ------- -------- -------- -------- -------- --------- ---------- -----------
Balance - December 31, 1994 -- -- -- -- -- 5,730,500 57 18,870,409 (16,139,971)
Private Placement - Common Stock at
$3.00 Per Share, Less Issuance Costs -- -- -- -- -- 118,778 2 388,887 --
Excess of Fair Market Value over
Option Price of Non-Qualified
Stock Options - First Quarter 1995 -- -- -- -- -- 30,000 -- 328,125 --
Excess of Fair Market Value over
Option Price of Non-Qualified
Stock Options and issuance of
Apotex stock - Second Quarter 1995 -- -- -- -- -- 674,700 7 980,806 --
Excess of Fair Market Value over
Option Price of Non-Qualified
Stock Options - Third Quarter 1995 -- -- -- -- -- 24,500 -- (260,612) --
Excess of Fair Market Value over
Option Price of Non-Qualified
Stock Options - Fourth Quarter 1995 -- -- -- -- -- 5,000 -- 40,624 --
Net (loss) for the year ended
December 31, 1995 -- -- -- -- -- -- -- -- (3,133,348)
--------- ------- -------- -------- -------- -------- --------- ---------- ----------
Balance - December 31, 1995 -
Forward -- $ -- $ -- -- $ -- 6,583,478 $ 66 $20,348,239 $(19,273,319)
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------
<TABLE>
Class C Additional Xechem, Inc. Xechem International Additional (Deficit)
Series 2 Paid-in Common Stock Common Stock Paid-in Accumulated
Voting Conv. Preferred Capital Capital During the
# of Par # of Par # of Par Development
Shares Value Class C Shares Value Shares Value Common Stage
Balance - December 31, 1995 -
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Forwarded -- $ -- $ -- -- $ -- 6,583,478 $ 66 $20,348,239 $(19,273,319)
Private Placement - Common Stock at
$3.00 Per Share, Less Issuance Costs -- -- -- -- -- 163,333 1 52,784 --
Private Placement - Petron at $.38
per Share -- -- -- -- -- 260,000 1 100,000 --
Private Placement - Series 1 Preferred
Stock at $100 per Share, Less
Issuance Cost -- -- 2,137,500 -- -- 12,500 -- 28,125 --
Private Placement - Series 2 Preferred
Stock at $100 per Share, Less
Issuance Cost 10,000 -- 882,440 -- -- -- -- -- --
Conversion of Preferred Stock -- -- (1,995,000) -- -- 1,673,583 16 1,966,840 --
Conversion of Debt to Equity at $.25
Per Share -- -- -- -- -- 1,477,745 15 369,422 --
Excess of Fair Market Value over
Option Price of Non-Qualified Stock
Options - Second Quarter 1996 -- -- -- -- -- 2,000 -- 4,625 --
Excess of Fair Market Value over
Option Price of Non-Qualified
Stock Options - Third Quarter 1996 -- -- -- -- -- 600 -- 564 --
Excess of Fair Market Value over
Option Price of Non-Qualified
Stock Options - Fourth Quarter 1996 -- -- -- -- -- 51,600 1 13,205 --
Cancellation of Apotex Stock -- -- -- -- -- (75,000) -- -- --
Ocean Marine Settlement at $1.31
per Share -- -- -- -- -- 25,000 -- 32,812 --
Net (loss) for the year -- -- -- -- -- -- -- -- (3,174,205)
--------- ------- ---------- ------- -------- ----------- -------- ----------- ------------
Balance - December 31, 1996 10,000 $ -- $1,024,940 -- $ -- 10,174,839 100 $22,916,616 $(22,447,524)
Private Placement - Series 2
Preferred at $100 per Share -
First Quarter 1997 12,500 -- 1,250,000 -- -- -- -- -- --
Conversion of Series 1
Preferred Stock at $1.25 per
Share - First Quarter 1997 -- -- (142,500) -- -- 120,000 1 142,499 --
Conversion of Series 2
Preferred Stock at $.05 per
Share - First Quarter (22,500) -- (2,132,440) -- -- 45,000,000 450 2,131,180 --
Conversion of Dr. Pandey's
Preferred Stock & Debt to
Equity at $.0625 per Share -
First Quarter -- -- -- -- -- 19,430,400 194 1,214,257 --
Private Placement - Common Stock
At $.05 per Share -- -- -- -- -- 45,020,000 451 2,290,549 --
Excess of Fair Market Value
Over Option Price of
Non-Qualified Stock Options
Exercised First Quarter 1997 -- -- -- -- -- 125,000 1 31,249 --
Excess of Fair Market Value
Over Option Price of
Non-Qualified Stock Options
Exercised Third Quarter 1997 -- -- -- -- -- 600 -- 246 --
Stock Option Grants -- -- -- -- -- -- -- 16,000 --
Net (loss) for the Year -- -- -- -- -- -- -- -- (5,281,552)
--------- ------- ---------- ------- -------- ----------- -------- ----------- ------------
Balance - December 31, 1997 -- $ -- $ -- -- $ -- 119,870,839 1,197 $28,742,596 $(27,729,076)
Net (loss) for the Three Months
Ended March 1998 -- -- -- -- -- -- -- -- (688,220)
--------- ------- -------- -------- -------- ----------- -------- ---------- ------------
Balance - March 31, 1998 -- $ -- $ -- -- $ -- 119,870,839 $ 1,197 $28,742,596 $(28,417,296)
========= ======= ======== ======== ======== =========== ======== =========== ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE ENTERPRISE]
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
- ------------------------------------------------------------------------------
March 15, 1990
[Date of
Three months ended Inception to
March 31, March 31,
--------- ---------
1 9 9 8 1 9 9 7 1 9 9 8
------- ------- -------
Operating Activities:
Net (Loss) $ (688,220)$ (754,147) $(28,417,296)
----------- ---------- ------------
Adjustments to Reconcile Net (Loss) to
Net Cash Provided (Used) by Operating
Activities:
Depreciation 45,605 27,300 417,682
Amortization -- 18,900 469,164
(Gain)/Loss on Sale of Assets -- -- 5,609
Interest and Compensation Expense in
Connection with Issuance of Equities -- 30,000 14,259,740
Write Down of Inventory -- -- 1,020,000
Write Down of Intangibles -- -- 517,000
Changes in Assets and Liabilities
(Increase) Decrease in:
Accounts Receivable (69,144) (4,158) (135,373)
Inventory (43,363) (79,942) (1,274,870)
Prepaid Expenses (12,096) (66,002) (129,837)
Other Current Assets (211,081) -- (317,103)
Deposits 1,650 -- (18,867)
Organizational Costs -- -- (13,828)
Other Assets -- -- (1,592)
Increase (Decrease) in:
Accounts Payable 55,611 (290,940) 559,143
Accrued Interest Payable, Other
Current Liabilities and Due to
Related Parties (12,939) (80,611) 112,986
Accrued Expenses 32,251 (3,078) 194,525
----------- ---------- ------------
Total Adjustments (213,506) (448,531) 15,664,379
----------- ---------- ------------
Net Cash (Used) by Operating
Activities - Forward (901,726)(1,202,678) (12,752,917)
Investing Activities:
Patent Issuance Costs -- (30,050) (548,174)
Purchases of Equipment and Leasehold
Improvements (6,888) (185,760) (1,918,107)
Proceeds from Sale of Assets -- -- 28,700
Purchase of Marketable Securities -- -- (1,476,449)
Proceeds from Sale of Marketable
Securities -- -- 1,476,449
----------- ---------- ------------
Net Cash (Used) by Investing
Activities - Forward $ (6,888)$ (215,810) $ (2,437,581)
See Accompanying Notes to Consolidated Financial Statements.
8
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE ENTERPRISE]
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
- ------------------------------------------------------------------------------
March 15, 1990
[Date of
Three months ended Inception to
March 31, March 31,
--------- ---------
1 9 9 8 1 9 9 7 1 9 9 8
------- ------- -------
Net Cash (Used) by Operating
Activities - Forwarded $ (901,726)$(1,202,678)$(12,752,917)
----------- ----------- ------------
Net Cash (Used) by Investing
Activities - Forwarded (6,888) (215,810) (2,437,581)
----------- ---------- ------------
Financing Activities:
Proceeds from Note Payable - Bank -- -- (390,000)
Proceeds from Related Party Loans -- -- 1,294,582
Proceeds from Borrowings Under
Line of Credit -- -- 1,365,000
Proceeds from Notes Payable - Others -- -- 458,300
Proceeds from Interim Loans 964,545 -- 2,214,840
Proceeds from Bridge Financing -- -- 640,000
Capital Contribution -- -- 95,000
Payments on Interim Loans -- -- (305,000)
Payments on Notes Payable - Others -- -- (520,000)
Payment on Stockholder Loans -- -- (207,037)
Payment of Line of Credit -- -- (975,000)
Proceeds from Issuance of Common Stock -- 500,000 7,375,343
Proceeds from Issuance of Class C
Series 1 Preferred Stock -- -- 2,109,347
Proceeds from Issuance of Class C
Series 2 Preferred Stock -- 1,249,190 2,131,630
Proceeds from Exercise of Options -- 1,250 10,250
----------- ---------- ------------
Net Cash - Financing Activities 964,545 1,750,440 15,297,255
----------- ---------- ------------
Net Increase in Cash and Cash
Equivalents 55,931 331,952 106,757
Cash and Cash Equivalents - Beginning
of Periods 50,826 335,912 --
----------- ---------- ------------
Cash and Cash Equivalents - End of Periods $ 106,757 $ 667,864 $ 106,757
=========== ========== ============
Supplemental Disclosures of Cash Flow Information:
Cash paid during the periods for:
Interest - Related Party $ -- $ -- $ 104,992
Interest - Other $ 6,089 $ -- $ 139,907
Income Taxes $ -- $ -- $ --
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
A total of 125,000 stock options, issued to the holder of notes payable, were
exercised at a nominal price during the six months ended March 31, 1997. The
difference between the fair market value of the Common Stock at the time of
exercise and the amount paid was charged to compensation expense.
As a result of this transaction, the Company's statement of operations
reflects non-cash interest and compensation expense of $30,000 for the three
months ended March 31, 1997.
See Accompanying Notes to Consolidated Financial Statements.
9
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE ENTERPRISE]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
- ------------------------------------------------------------------------------
[1] Significant Accounting Policies
Significant accounting policies and other matters of Xechem International, Inc.
and its wholly-owned subsidiaries, Xechem, Inc., Xechem Laboratories, Inc. and
XetaPharm, Inc. (collectively the "Company"), are set forth in the financial
statements for and as of the year ended December 31, 1997 included in the
Company's Form 10-KSB, as filed with the Securities and Exchange Commission.
[2] Basis of Reporting
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, such statements include all
adjustments (consisting only of normal recurring item) which are considered
necessary for a fair presentation of the consolidated financial position of the
Company at March 31, 1998 and the consolidated results of its operations for the
three months ended March 31, 1998 and 1997 and for the cumulative period from
March 15, 1990 (date of inception) to March 31, 1998. These consolidated
financial statements should be read in conjunction with the consolidated
financial statements and related notes included in the Company's Form 10-KSB for
the year ended December 31, 1997. The results of operations for the three month
periods ended March 31, 1998 and 1997 are not necessarily indicative of the
operating results for a full year.
[3] Loss Per Share
Loss per share amounts are based on the weighted average number of shares
outstanding. Shares issuable upon the exercise of stock options are excluded
from the computation since the effect on the net loss per common share would be
anti-dilutive. The holders of Class B 8% Preferred Stock and Class C Series 1
Preferred Stock are entitled to cumulative dividends on the $100 per share
liquidation preference at the rate of 8% per annum payable quarterly. This
dividend has been reflected in the computation of loss per share available to
common stockholders. The Class B 8% Preferred Stock and Class C Series 1
Preferred Stock were converted in Common Stock in February and January 1997,
respectively.
[4] Blech Purchase Agreement
On November 18, 1996, the Company entered into and closed the initial stage of a
stock purchase agreement (the "Blech Purchase Agreement") with David Blech
and/or his designees ("Blech") providing for the sale of up to 55,000 shares of
Class C Series 2 Voting Cumulative Preferred Stock for a purchase price of $100
per share ($5,500,000 in the aggregate), or the underlying shares of Common
Stock. Subsequent to December 31, 1996, the Blech Purchase Agreement was amended
to extend the purchase period. Through December 31, 1997, Blech purchased
95,620,000 shares of Common Stock for a total of $4,781,000. In the three months
ended March 31, 1998, Blech purchased 14,380,000 shares of Common Stock for a
total of $719,000. This completed the obligations under the Blech Purchase
Agreement. (See Notes 7 and 8).
Pursuant to the Purchase Agreement, the Company, Dr. Pandey and Blech have also
entered into a stockholder's agreement, which, among other things: (i) generally
prohibits the sale of any of Dr. Pandey's shares of capital stock of the Company
for a period of five years, except with the consent of Blech; (ii) provides
Blech with the right to sell his pro rata portion (relative to the holdings of
Dr. Pandey) of any proposed sales of shares by Dr. Pandey, and a reciprocal
right in favor of Dr. Pandey to sell his pro rata portion of any shares sold by
Blech; (iii) requires Blech to vote for Dr. Pandey as a director of the Company,
and to use his efforts to cause Dr. Pandey to remain Chairman, President and
chief executive officer of the Company; (iv) requires the Company and its
directors (subject to their fiduciary duties to the Company and the shareholders
of the Company) to take such actions as Blech may request to elect his nominees
to constitute a majority of the directors of the Company; and (v) provides for
certain demand and piggyback registration rights in favor of Blech.
10
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE ENTERPRISE]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
[UNAUDITED]
- ------------------------------------------------------------------------------
[5] Related Parties
(A) Loans Receivable - Related Parties - In 1997 and the three months ended
March 31, 1998, the Company made loans totaling $90,000 and $60,000,
respectively, to Consumers Choice Systems, Inc. ("CCS"), a company engaged in
the marketing and distribution of products in the over-the counter
pharmaceutical market. The loans are collateralized by CCS inventory and
accounts receivable. The Company had entered into negotiations with CCS in
connection with possible distribution of XetaPharm nutraceuticals. CCS is
engaged in a private offering of its securities, and upon completion of this
offering, The Company understands that the Edward A. Blech Trust would own
approximately 30.8% of CCS' common stock. The outstanding balance of the loan at
March 31, 1998 was $100,000.
In 1997 and the three months ended March 31, 1998, the Company made unsecured
loans totaling $70,000 and $74,000, respectively, to Margaret Chassman. Ms.
Chassman is the wife of David Blech, a principal shareholder of the Company. The
outstanding balance at March 31, 1998 was $144,000.
In the three months ended March 31, 1998, the Company made unsecured loans
totaling $72,000 to Pacific Sensuals Inc. ("Pacific"), a company engaged in the
marketing and distribution of products sold through health stores. David Blech
has an indirect 38% ownership interest in Pacific. This balance was outstanding
at March 31, 1998.
A demand promissory note was issued for each of these loans which bears an
interest rate of 10% per annum. Accrued interest and interest income amounted to
$10,081 at March 31, 1998.
(B) Due To Related Parties:
i. Pursuant to the Blech Agreement (See Note 4), on February 7, 1997, Dr.
Pandey exchanged certain indebtedness owed by the Company to him and the
1,070 shares of Class B Preferred Stock of the Company held by him for
12,144 shares of Series 3 Preferred Shares. These shares were then converted
into 19,430,400 shares of Common Stock at $.0625 per share. At March 31,
1998, the Company has an indebtedness to Dr. Pandey for the accrued interest
on the notes totaling $80,611.
ii. The Company leases its operating facilities under an operating lease which
began in April 1991 and expires on September 30, 2000. In 1996, Dr. Pandey
purchased a 25% beneficial ownership in the lessor as a limited partner in
such entity, which may be deemed to be an affiliate of Dr. Pandey. The lease
provides the Company with renewal options for three additional five year
periods. Management has stated its intention to renew. Rent expense under
the operating lease amounted to $34,027 and $37,487 for the three months
ended March 31, 1998 and 1997, respectively. As of March 31, 1998, the
Company is in arrears with respect to rental payments in the amount of
$32,378.
[6] Notes Payable
An individual made two loans to the Company during 1996 aggregating to $115,000.
Each of these loans was evidenced by ten percent and twelve percent (at simple
interest) promissory notes, due six months from the date of the loan. Each
promissory note was subject to a six month extension, which the Company
Exercised. In September 1997, these two loans were extended for an additional
one year evidenced by 12% (at simple interest) promissory notes. The accumulated
interest of $13,300 was also converted into one year 12% promissory notes.
Accrued interest and interest expense related to these notes amounted to $2,566
and $3,849, respectively, at the three months ended March 31, 1998.
The weighted average interest rate on short-term borrowings as of March 31, 1998
was approximately 10%.
11
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE ENTERPRISE]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3
[UNAUDITED]
- ------------------------------------------------------------------------------
[7] Loans Payable
In 1997, a total of $280,000 had been received from David Blech and five
assignees under the terms of the Blech Purchase Agreement. In the three months
ended March 31, 1998, a total of $719,000 was received from David Blech and four
assignees under the terms of the Blech Purchase Agreement. (See Note 4.)
In February, 1998, an individual made a loan to the Company in the amount of
$10,000.
In the three months ended March 31, 1998, the Company received $235,545 from
David Blech and one non-affiliated individual in the form of a loan. At March
31, 1998, outstanding loans amounted to $1,244,545.
[8] Subsequent Events
(A) In the period from May 4, 1998 to July 17, 1998, the Company has received
additional loans of $560,000 from David Blech and five non-affiliated
individuals. The Company intends to conduct a rights offering (the "Rights
Offering"), pursuant to which it will offer to those holders ("Holders") of
Xechem's Common Stock, who purchased Common Stock pursuant to the Blech Purchase
Agreement, the right to subscribe for an aggregate of 275,000,000 additional
shares of Common Stock at a price of $.01 per share, subject to the proviso that
until sufficient Common Stock is authorized for issuance, the Company will issue
a new series of Class C Preferred Shares which will be converted to Common Stock
when sufficient Common Stock is authorized. If the offering is not fully
subscribed, the Company may be unable to obtain substitute financing and may be
unable to meet its obligations or continue its operations. The Company cannot
offer any assurances that all or any shares of Common Stock will be sold in the
Rights Offering and it is expected that additional funds will have to be raised
by the Company to support ongoing operations even if the Rights Offering is
fully subscribed. The Company is currently seeking additional sources of
financing.
(B) Pro Forma - When the (i) loans payable of $999,000 (See Note 7), (ii) funds
of $235,545 received, and (iii) additional funding of $560,000 in anticipation
of the Rights Offering are converted into equity, a pro forma balance sheet
would be as follows:
Actual Effect Pro Forma
March 31, of July 17,
1 9 9 8 Transaction 1 9 9 8
------- ----------- -------
Current Liabilities $2,239,502 $(1,234,545) $1,004,957
Stockholders Equity 328,997 1,794,545 2,123,542
---------- ----------- ----------
Totals $2,568,499 $ 560,000 $3,128,499
------ ========== =========== ==========
The effect of the above transactions would be antidilutive and accordingly basic
and diluted earnings per share are not shown.
(C) In July 1998, the Company received a demand from the trustee of the estate
of Kensington Wells Incorporated for payment of $40,000 alleged to be due per
the fee agreement between the Company and Kensington Wells Incorporated related
to the introduction of David Blech to the Company. The Company had written off
this purported obligation in 1997 based upon certain defenses it has asserted to
this obligation. The Company is presently in the discovery process with the
trustee and there can be no assurances as to whether the Company will be
required to pay some or all of this obligation.
. . . . . . . . . . . .
12
<PAGE>
Item 2. Management's Discussion and Analysis.1
General
The Company is the holder of all of the capital stock of Xechem, Inc., a
development stage bio-pharmaceutical company engaged in the research,
development, and production of generic and proprietary drugs from natural
sources. Xechem, Inc., was formed in March 1990 to acquire substantially all of
the assets of a subsidiary of LyphoMed, Inc. (later known as Fujisawa/LyphoMed,
Inc.), a publicly traded company, Xechem Laboratories (formed in 1993) and
XetaPharm, Inc. (formed in 1996) are subsidiaries of the Company.
Results of Operations
The Quarter Ended March 31, 1998 vs. The Quarter Ended March 31, 1997
The following table sets forth certain statement of operations data of the
Company for the cumulative period from inception (March 15, 1990) to March 31,
1998 and for each of the quarters ended March 31, 1998 and March 31, 1997.
Cumulative
Quarters Ended Inception to
March 31, March 31,
1998 1997 1998
(in thousands)
Revenue $ 44.1 $ 3.3 $ 734.1
Research and Development Expense $ 412.7 $ 348.8 $ 7,468.1
Rent $ -- $ 37.5 $ 410.1
Rent - Related Party $ 34.0 $ -- $ 152.6
General and Administrative $ 288.1 $ 370.8 $ 6,355.5
Writedown of Inventory $ -- $ -- $ 1,020.0
Writedown of Intangibles $ -- $ -- $ 517.0
(Loss) from operations $ (690.7) $ (753.8) $(15,189.2)
Revenue
The $40,800 increase in revenue from the quarter ended March 31, 1997 to the
quarter ended March 31, 1998 was attributable to an increase in product sales.
There were no service sales in the quarter ended March 31, 1998 and the quarter
ended March 31, 1997. The product sales of $44,100 were by the Company's
subsidiary, XetaPharm, which introduced its line of over-the-counter natural
health products, commonly known as nutraceuticals, in June 1996.
- --------
1 Some of the statements included in Item 2, Management Discussion and
Analysis, may be considered to be "forward looking statements" since such
statements relate to matters which have not yet occurred. For example, phrases
such as "the Company anticipates," "believes" or "expects" indicate that it is
possible that the event anticipated, believed or expected may not occur. Should
such event not occur, then the result which the Company expected also may not
occur or occur in a different manner, which may be more or less favorable to the
Company. The Company does not undertake any obligation to publicly release the
result of any revisions to the forward looking statements that may be made to
reflect any future events or circumstances.
13
<PAGE>
Research and Development
The Company's research and development expenditures continue to emphasize
compounds for generic anticancer, antiviral and antibiotic products that enjoy
significant market demand but are no longer subject to patent protection.
Research and development expenditures increased by $63,900 to $412,700, or
18.3%, for the quarter ended March 31, 1998 as compared to the quarter ended
March 31, 1997.
Expenditures on the development of the Company's process for producing
paclitaxel of $72,000 represents a decrease of $39,700, or 35.5%, as compared to
the quarter ended March 31, 1997. Research and development costs for bleomycin
were $9,800 for the quarter ended March 31, 1998, an increase of $9,800, or
100%, as compared to the quarter ended March 31, 1997.
XetaPharm had research and development expenses of $58,800, for market
readiness on alternative medicines and nutraceuticals in the quarter ended March
31, 1998. This represents a net increase of $39,000 of expenses for the period
ended March 31, 1998 as compared to the period ended March 31, 1997.
Two cholesterol-lowering projects represented $40,200 of increased costs
with no comparison in 1997. The Company's other research and development
projects, both for customers and in-house research, totaled $232,000 for the
quarter ended March 31, 1998, an increase of $14,800, or 6.8% from the same
period in 1997.
The Company anticipates that, subject to the availability of funding,
research and development expenditures will continue to increase for paclitaxel,
as well as the development of other anticancer, antiviral and memory enhancing
drugs.
Rent, General and Administrative
Rent, general and administrative expenses decreased $86,200, or 21.1%, for
the quarter ended March 31, 1998 as compared to the quarter ended March 31,
1997. A significant expense increase for the period ended March 31, 1998, was
salary and wages of $10,600. This increase was offset by expense decreases of
$79,200 which included: NASDAQ fees $34,700; Promotions $31,000; and Consulting
$13,500.
Legal and accounting expenses totaled $90,400 for the quarter ended March
31, 1998. (This represents a decrease of $22,300 or 19.8%, as compared to the
same period in 1997.) Other general and administrative costs increased $4,800 or
2.8%, to $175,000, in 1998 compared to the same period in 1997.
The Company anticipates that, provided adequate funding is available to the
Company, general and administrative expenses will increase as a result of the
expansion of its operations and marketing efforts. The Company's planned
activities will require the addition of new personnel, including management, and
the development of additional expertise in areas such as preclinical testing,
clinical trial management, regulatory affairs, manufacturing and marketing. The
exact number and nature of persons hired, and the Company's expenses for such
persons, will depend on many factors, including the capabilities of those
persons who seek employment with the Company and the availability of funding to
finance these efforts.
The Company's loss from operations totaled $690,700, a decrease of $63,100,
or 8.4%, for the quarter ended March 31, 1998 as compared to the same period in
1997, and is primarily a result of the foregoing.
Interest expense increased approximately $1,000, or 31.3%, to $4,200, in the
quarter ended March 31, 1998 as compared to the quarter ended March 31, 1997.
14
<PAGE>
Liquidity and Capital Resources; Plan of Operations
On March 31, 1998, the Company had cash and cash equivalents of $106,800,
negative working capital of $1,286,600 and stockholder's equity of $328,997.
As a result of its net losses through December 31, 1997 and accumulated
deficit since inception, the Company's accountants, in their report on the
Company's financial statements for the year ended December 31, 1997, included an
explanatory paragraph indicating there is substantial doubt about the Company's
ability to continue as a going concern. The Company's research and development
activities are at an early stage and the time and money required to determine
the commercial value and marketability of the Company's proposed products cannot
be estimated with precision. The Company expects research and development
activities to continue to require significant cost expenditures for an
indefinite period in the future.
In May 1995, the Company filed a Drug Master File ("DMF") with the Food and
Drug Administration ("FDA") for the Company's facilities. The Company has
completed its technology validation and filed a DMF for paclitaxel in June 1997;
however, the Company's facilities have yet to be inspected by the FDA for
current Good Manufacturing Practices ("cGMPs"). The Company has sufficient raw
materials to produce commercial bulk paclitaxel which has a market value of
approximately $2,000,000 at current prices and anticipates, but can provide no
assurances, that it will commence sales of paclitaxel in the international
market in 1999. Although the Company has the capability to, and may, sell
paclitaxel for research purposes, to date, the Company has not received any
revenues from sales of paclitaxel for human consumption and has received only
minimal revenues from other product sales or sales of paclitaxel for research
and development. As a result, during 1997, the Company determined to write off
its crude paclitaxel, work-in-process paclitaxel and finished (pure) paclitaxel
inventory in the amount of $1,020,000. Prior to commencing such sales, the
Company must file for and obtain approvals from appropriate regulatory agencies
in foreign jurisdictions. Additionally, to the extent the Company elects to
manufacture bulk paclitaxel domestically and ship it overseas for packaging, the
Company's facilities must be approved for cGMP and the product must either be
approved for an investigational new drug exemption (not currently so approved),
or deemed in compliance with the laws of 24 industrialized "tier one" countries
(not yet so approved). Otherwise, the Company can produce the product entirely
overseas; however, it most likely would subcontract production to others from
raw material or partially processed raw material provided by the Company, and
might also enter into joint venture or other marketing arrangements for sale of
the product overseas. There can be no such assurances that necessary approvals
will not be delayed or subject to conditions or that the Company will be able to
meet such conditions. In addition, the Company has no experience in marketing
pharmaceutical products for human consumption and there can be no assurance that
the Company will be able to successfully market its paclitaxel product in bulk,
or indirectly through others, or be able to obtain satisfactory packaging of the
product in single dosage vials from an independent manufacturer.
The Company is negotiating "Strategic Alliance Agreements" with two European
companies to license production, marketing and selling of bulk and injectable
paclitaxel. The companies will be responsible for the registration of injectable
paclitaxel in their respective countries. Xechem will also grant a license to
the companies to manufacture and sell Xechem's patented new paclitaxel analogs
as well as a new paclitaxel formulation without Cremophor(TM) or ethanol. In
return, Xechem will be cross-licensed by the companies to produce, market and
sell certain key pharmaceutical products in the United States and India. Xechem
will be responsible for the registration of these products with the FDA. There
can be no assurances that the Company will sell any of these products in the
international market.
Xechem has expended and will continue to expend substantial funds in
connection with the research and development of its products. As a result of
these expenditures, and even with revenues anticipated from commencement of
sales of paclitaxel, the Company anticipates that losses will continue for the
foreseeable future.
15
<PAGE>
Xechem's planned activities will require the addition of new personnel,
including management, and the continued development of expertise in areas such
as preclinical testing, clinical trial management, regulatory affairs,
manufacturing and marketing. Further, if Xechem receives regulatory approval for
any of its products, in the United States or elsewhere, it will incur
substantial expenditures to develop its manufacturing, sales and marketing
capabilities and/or subcontract or joint venture these activities with others.
There can be no assurance that Xechem will ever recognize revenue or profit from
any such products. In addition, Xechem may encounter unanticipated problems,
including developmental, regulatory, manufacturing or marketing difficulties,
some of which may be beyond Xechem's ability to resolve. Xechem may lack the
capacity to produce its products in-house and there can be no assurances that it
will be able to locate suitable contract manufacturers or be able to have them
produce products at satisfactory prices.
On November 18, 1996, the Company entered into and closed the initial stage
of a stock purchase agreement (the "Blech Purchase Agreement") with David Blech
and/or his designees ("Blech") providing for the sale of up to 55,000 shares of
Class C Series 2 Voting Cumulative Preferred Stock (the "Series 2 Preferred
Shares") for a purchase price of $100 per share ($5,500,000 in the aggregate),
or the underlying shares of Common Stock. Subsequent to December 31, 1996, the
Blech Purchase Agreement was amended to extend the purchase period. Through
December 31, 1997, Blech purchased 95,620,000 shares of Common Stock for a total
of $4,781,000. Subsequent to December 31, 1997, Blech purchased 14,380,000
shares of Common Stock for a total of $719,00. To date, cash payments of
$5,500,000 have been made under the Blech Purchase Agreement and 110,000,000
shares of Common Stock have been issued thereunder. This completed the
obligations under the Blech Purchase Agreement.
The Company continues to apply to various governmental agencies to fund its
research on specific projects and those projects which are in the Company's
expertise.
The Company intends to conduct a rights offering (the "Rights Offering"),
pursuant to which it will offer to those holders ("Holders") of Xechem's Common
Stock, who purchased Common Stock pursuant to the Blech Purchase Agreement, the
right to subscribe for an aggregate of 275,000,000 additional shares of Common
Stock at a price of $.01 per share, subject to the proviso that until sufficient
Common Stock is authorized for issuance, the Company will issue a new series of
Class C Preferred Shares which will be converted to Common Stock when sufficient
Common Stock is authorized. If the offering is not fully subscribed, the Company
may be unable to obtain substitute financing and may be unable to meet its
obligations or continue its operations. The Company cannot offer any assurances
that all or any shares of Common Stock will be sold in the Rights Offering and
it is expected that additional funds will have to be raised by the Company to
support ongoing operations even if the Rights Offering is fully subscribed.
The Company is currently seeking additional sources of financing.
16
<PAGE>
Part II
OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information -
The Company has not yet determined the date of its 1998 Annual
Meeting; however, the Company believes that the earliest date that
it might set for such meeting is October 2, 1998. In accordance
with Rule 14(a)(5)(f) under the Securities Act of 1934, as
amended, The Company hereby notifies shareholders that it will
accept submissions by shareholders for proposals to be included in
the Company's 1999 proxy statement which the Company receives on
or before May 15, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a).Exhibits
None
(b). Reports on Form 8-K
None
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
XECHEM INTERNATIONAL, INC.
Date: August 4, 1998
/s/ Ramesh C. Pandey
---------------------
Ramesh C. Pandey, Ph.D.
President/Chief Executive Officer/Chief
Accounting Officer
18
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial data extracted from the
consolidated balance sheet and the consolidated statement of operations and is
qualified in its entirety by reference to such statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Mar-31-1998
<CASH> 106,757
<SECURITIES> 0
<RECEIVABLES> 135,373
<ALLOWANCES> 0
<INVENTORY> 254,870
<CURRENT-ASSETS> 952,918
<PP&E> 2,423,978
<DEPRECIATION> 827,264
<TOTAL-ASSETS> 2,568,499
<CURRENT-LIABILITIES> 2,239,502
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0
0
<COMMON> 1,197
<OTHER-SE> 28,745,096
<TOTAL-LIABILITY-AND-EQUITY> 2,568,499
<SALES> 44,075
<TOTAL-REVENUES> 44,075
<CGS> 0
<TOTAL-COSTS> 734,874
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<INTEREST-EXPENSE> 4,224
<INCOME-PRETAX> (688,220)
<INCOME-TAX> 0
<INCOME-CONTINUING> (688,220)
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