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 June 30, 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 August 10, 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
June 30, 1998 [Unaudited]................................ 3..4
Consolidated Statements of Operations
for the three months and six months ended
June 30, 1998 and 1997 [Unaudited] ...................... 5
Consolidated Statement of Stockholders'
Equity for the six months ended
June 30, 1998 [Unaudited]................................ 6..7
Consolidated Statements of Cash Flows for
the six months ended June 30, 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 JUNE 30, 1998
[UNAUDITED]
- ------------------------------------------------------------------------------
Current Assets:
Cash and Cash Equivalents $ 83,785
Accounts Receivable 88,503
Loans Receivable - Related Parties 333,981
Inventory 360,011
Prepaid Expenses 155,656
-----------
Total Current Assets 1,021,936
Equipment, Net of Accumulated
Depreciation of $537,972 867,926
Leasehold Improvements - Net of Accumulated
Amortization of $330,088 685,088
Deposits 18,867
-----------
Total Assets $ 2,593,817
===========
See Accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE ENTERPRISE]
- ------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1998
[UNAUDITED]
- ------------------------------------------------------------------------------
Current Liabilities:
Accounts Payable $ 540,534
Accrued Expenses 250,960
Loans Payable 685,545
Notes Payable 128,300
Due To Related Parties 145,786
-----------
Total Current Liabilities 1,751,125
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; 139,850,839 Shares Issued and Outstanding 1,397
Additional Paid-in Capital [Common] 29,741,396
(Deficit) Accumulated During the Development Stage (28,902,601)
-----------
Total Stockholders' Equity 842,692
Total Liabilities and Stockholders' Equity $ 2,593,817
===========
See Accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE ENTERPRISE]
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
- ------------------------------------------------------------------------------
<TABLE>
March 15, 1990
[Date of
Three months ended Six months ended Inception to
June 30, June 30, June 30,
1 9 9 8 1 9 9 7 1 9 9 8 1 9 9 7 1 9 9 8
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues $ 18,037 $ 11,018 $ 62,112 $ 14,290 $ 752,029
---------- ---------- ----------- ---------- -----------
Expenses:
Research & Development 300,853 503,748 713,590 852,542 7,768,947
Rent -- -- -- -- 410,065
Rent - Related Party 32,798 39,479 66,825 76,966 185,386
General & Administrative 173,848 304,982 461,958 675,804 6,529,443
Writedown of Inventory -- -- -- -- 1,020,000
Writedown of Intangibles -- -- -- -- 517,000
--------- ---------- ----------- ---------- -----------
Total Expenses 507,499 848,209 1,242,373 1,605,312 16,430,841
---------- ---------- ----------- ---------- -----------
(Loss) from Operations (489,462) (837,191) (1,180,261)(1,591,022) (15,678,812)
Other Income 9,336 1,734 16,139 4,618 293,928
Interest (Expense) - Related
Party -- -- -- -- (8,589,081)
Interest (Expense) (5,179) (3,553) (9,403) (6,753) (4,928,636)
---------- ---------- ----------- ---------- -----------
(Loss) Before Income
Taxes (485,305) (839,010) (1,173,525)(1,593,157) (28,902,601)
Income Taxes -- -- -- -- --
---------- ---------- ----------- ---------- -----------
Net (Loss) $ (485,305) $ (839,010)$(1,173,525)$(1,593,157)$(28,902,601)
========== ========== =========== =========== ============
Preferred Stock Dividends$ -- $ -- $ -- $ 233 $ 101,361
========== ========== =========== ========== ===========
Net (Loss) Available to
Common Stockholders $ (485,305) $ (839,010)$(1,173,525)$(1,593,390)$(29,003,962)
========== ========== =========== =========== ============
Net (Loss) per Share $ (0.004) $ (0.009)$ (0.009)$ (0.021)
========== ========== ======================
Average Number of Shares
Outstanding 133,984,172 1,507,839 126,927,505 74,639,006
=========== ========== =========== ==========
</TABLE>
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.
6
<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 -- -- -- -- --
Private Placement - Common Stock
at $.05 Per Share -- -- -- -- -- -- -- --
Net (loss) for the Six Months
Ended June 1998 -- -- -- -- -- -- -- --
------- -------- -------- ------- ------ -------- -------- -------
Balance - June 30, 1998 [Unaudited] 2,500 $ -- $ 2,500 -- $ -- $ -- -- $ --
======= ======== ======== ======= ====== ======== ======== =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
6
<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
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)
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
7
<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)
Private Placement - Common Stock
at $.05 Per Share -- -- -- -- -- 19,980,000 200 988,800 --
Net (loss) for the Three Months
Ended March 1998 -- -- -- -- -- -- -- -- (688,220)
-------- ------- -------- --------- -------- ----------- --------- ----------- ------------
Balance - June 30, 1998
[Unaudited] -- $ -- $ -- -- $ -- 139,850,839 $ 1,397 $29,741,396 $(28,902,601)
======== ======= ======== ========= ======== =========== ========= =========== ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
7
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE ENTERPRISE]
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
- ------------------------------------------------------------------------------
March 15, 1990
[Date of
Six months ended Inception to
June 30, June 30,
-------- ---------
1 9 9 8 1 9 9 7 1 9 9 8
------- ------- -------
Operating Activities:
Net (Loss) $(1,173,525)$(1,593,157) $(28,902,601)
Adjustments to Reconcile Net (Loss)
to Net Cash Provided (Used) by
Operating Activities:
Depreciation 86,401 88,200 458,478
Amortization -- 6,000 469,164
(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 (22,274) (16,079) (88,503)
Inventory (148,504) (349,708) (1,380,011)
Prepaid Expenses (37,915) (15,639) (155,656)
Other Current Assets (218,981) -- (325,003)
Deposits 1,650 -- (18,867)
Organizational Costs -- -- (13,828)
Other Assets -- -- (1,592)
Increase (Decrease) in:
Accounts Payable 36,958 (201,085) 540,490
Accrued Interest Payable, Other
Current Liabilities and Due to
Related Parties 19,858 (80,611) 145,783
Accrued Expenses 88,730 (11,786) 251,004
----------- ----------- -----------
Total Adjustments (194,077) (550,708) 15,683,808
----------- ---------- -----------
Net Cash (Used) by Operating
Activities - Forward (1,367,602) (2,143,865) (13,218,793)
----------- ---------- -----------
Investing Activities:
Patent Issuance Costs -- (116,886) (548,174)
Purchases of Equipment and
Leasehold Improvements (3,984) (220,496) (1,915,203)
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 (3,984) (337,382) (2,434,677)
------------ ----------- ------------
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
Six months ended Inception to
June 30, June 30,
--------- ---------
1 9 9 8 1 9 9 7 1 9 9 8
------- ------- -------
Net Cash (Used) by Operating
Activities - Forwarded $(1,367,602)$(2,143,865) $(13,218,793)
Net Cash (Used) by Investing
Activities - Forwarded (3,984) (337,382) (2,434,677)
----------- ----------- -----------
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 685,545 241,000 1,935,840
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 719,000 750,000 8,094,343
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 1,404,545 2,241,440 15,737,255
----------- ---------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents 32,959 (239,807) 83,785
Cash and Cash Equivalents - Beginning
of Periods 50,826 335,912 --
----------- ---------- -----------
Cash and Cash Equivalents - End of
Periods $ 83,785 $ 96,105 $ 83,785
=========== ========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the periods for:
Interest - Related Party $ -- $ -- $ 104,992
Interest - Other $ 10,759 $ 1,150 $ 144,577
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 June 30, 1998 and the consolidated results of its operations for the
six months ended June 30, 1998 and 1997 and for the cumulative period from March
15, 1990 (date of inception) to June 30, 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 six month periods
ended June 30, 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
[UNAUDITED]
- ------------------------------------------------------------------------------
[5] Related Parties
(A) Loans Receivable - Related Parties - In 1997 and the six months ended June
30, 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 June 30, 1998 was $100,000.
In 1997 and the six months ended June 30, 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 June 30, 1998 was $144,000.
In the six months ended June 30, 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 June
30, 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
$17,981 and $13,769, respectively, at June 30, 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 June 30,
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 $66,825 and $76,966 for the six months ended
June 30, 1998 and 1997, respectively. As of June 30, 1998, the Company is in
arrears with respect to rental payments in the amount of $65,175.
[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 $0 and
$7,698, respectively, at the six months ended June 30, 1998.
The weighted average interest rate on short-term borrowings as of June 30, 1998
was approximately 10%.
11
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE ENTERPRISE]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
- ------------------------------------------------------------------------------
[7] Loans Payable
In February, 1998, an individual made a loan to the Company in the amount of
$10,000.
In the six months ended June 30, 1998, the Company received $675,545 from David
Blech and five non-affiliated individuals in the form of loans. At June 30,
1998, outstanding loans amounted to $685,545.
[8] Subsequent Events
(A) In the period from July 1, 1998 to August 3, 1998, the Company has received
additional loans of $220,000 from two 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 $675,545 (See Note 7) and (ii))
additional funding of $220,000 in anticipation of the Rights Offering are
converted into equity, a pro forma balance sheet would be as follows:
Actual Effect Pro Forma
June 30, of August 3,
1 9 9 8 Transaction 1 9 9 8
------- ----------- -------
Current Liabilities $1,751,125 $ (675,545) $1,075,580
Stockholders Equity 842,692 895,545 1,738,237
---------- ----------- ----------
Totals $2,593,817 $ 220,000 $2,813,817
------ ========== =========== ==========
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 Six Months Ended June 30, 1998 vs. The Six Months Ended June 30, 1997
The following table sets forth certain statement of operations data of the
Company for the cumulative period from inception (March 15, 1990) to June 30,
1998 and for each of the six months ended June 30, 1998 and June 30, 1997.
Six months Cumulative
Ended Inception to
June 30, March 31,
1998 1997 1998
(in thousands)
Revenue $ 62.1 $ 14.3 $ 752.1
Research and Development Expense $ 713.6 $ 852.5 $ 7,769.0
Rent $ -- $ -- $ 410.1
Rent - Related Party $ 66.8 $ 77.0 $ 185.4
General and Administrative $ 462.0 $ 675.8 $ 6,529.4
Writedown of Inventory $ -- $ -- $ 1,020.0
Writedown of Intangibles $ -- $ -- $ 517.0
(Loss) from operations $ (1,180.3) $ (1,591.0) $(15,678.8)
Revenue
The $47,800 increase in revenue from the six months ended June 30, 1997 to the
six months ended June 30, 1998 was attributable to an increase in product sales.
There were no service sales in the six months ended June 30, 1998 The 1998
product sales of $62,100 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.
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 decreased by $138,900 to $713,600, or
16.3%, for the six months ended June 30, 1998 as compared to the six months
ended June 30, 1997.
- --------
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>
Expenditures on the development of the Company's process for producing
paclitaxel of $156,500 represents a decrease of $113,400, or 42.0%, as compared
to the six months ended June 30, 1997. Research and development costs for
bleomycin were $9,800 for the six months ended June 30, 1998, an increase of
$9,800, or 100%, as compared to the six months ended June 30, 1997.
XetaPharm had research and development expenses of $90,700 for market
readiness on alternative medicines and nutraceuticals in the six months ended
June 30, 1998. This represents a net increase of $52,700, or 138.7% of expenses
for the period ended June 30, 1998 as compared to the period ended June 30,
1997.
One cholesterol-lowering project, still in development, represented $29,900 of
decreased costs as compared to this same period in 1997. The Company's other
research and development projects, both for customers and in-house research,
totaled $390,300 for the six months ended June 30, 1998, a decrease of $98,000,
or 20.1% 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 $224,000, or 29.8%, for
the six months ended June 30, 1998 as compared to the six months ended June 30,
1997. Significant expense increases for the period ended June 30, 1998, were:
Travel expenses of $13,300; Meals and Entertainment expenses of $12,800; and
Sales and Use Tax expenses of $12,300. The sales and use tax figure represents
an amount that was above the 1997 estimate of $23,200. These increases were
offset by significant expense decreases of $174,100, which included: NASDAQ fees
$34,700; Consulting $30,700; Repairs & Maintenance $29,100; Promotions $26,100;
Office $19,300; General Insurance $19,000; and Annual Meeting expenses $15,200.
Legal and accounting expenses totaled $126,700 for the six months ended June
30, 1998. This represents a decrease of $77,500 or 38.0%, as compared to the
same period in 1997. Other general and administrative costs decreased $10,800 or
3.4%, to $311,500, 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 $1,180,300, a decrease of $390,700,
or 25.8%, for the six months ended June 30, 1998 as compared to the same period
in 1997, and is primarily a result of the foregoing.
Interest expense increased approximately $2,700, or 38.2%, to $9,400, in the
six months ended June 30, 1998 as compared to the six months ended June 30,
1997.
Liquidity and Capital Resources; Plan of Operations
On June 30, 1998, the Company had cash and cash equivalents of $83,800,
negative working capital of $729,100 and stockholder's equity of $842,700.
14
<PAGE>
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 - None
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 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 10, 1998
/s/ Ramesh C. Pandey
---------------------
Ramesh C. Pandey, Ph.D.
President/Chief Executive Officer/
Chief Accounting Officer
18
<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> 6-Mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Jun-30-1998
<CASH> 83,785
<SECURITIES> 0
<RECEIVABLES> 88,503
<ALLOWANCES> 0
<INVENTORY> 360,011
<CURRENT-ASSETS> 1,021,936
<PP&E> 867,926
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,593,817
<CURRENT-LIABILITIES> 1,751,125
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0
0
<COMMON> 1,397
<OTHER-SE> 841,295
<TOTAL-LIABILITY-AND-EQUITY> 2,593,817
<SALES> 62,112
<TOTAL-REVENUES> 62,112
<CGS> 1,242,373
<TOTAL-COSTS> 1,242,373
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (9,403)
<INCOME-PRETAX> (1,173,525)
<INCOME-TAX> 0
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<EPS-DILUTED> (0.009)
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