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 September 30, 2000
-------------------------------------------------
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.
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(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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (732) 247-3300
-----------------------------
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(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 October 31,
2000 was 342,503,279 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 Sheets as of
September 30, 2000 [Unaudited] and December 31, 1999 [Audited] 3
Consolidated Statements of Operations
For the nine months ended
September 30, 2000 and 1999 [Unaudited]................... 4
Consolidated Statement of Stockholders'
Equity for the nine months ended
September 30, 2000 [Unaudited]............................ 5
Consolidated Statements of Cash Flows for
The nine months ended September 30, 2000 and
1999 [Unaudited].......................................... 6-8
Notes to Consolidated Financial Statements................... 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ........... 10-14
Part II. Other Information ........................................... 15-16
Signatures................................................... 17
Exhibits..................................................... 18
2
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---- ----
(Unaudited) (Audited)
------------ ------------
CURRENT ASSETS:
<S> <C> <C>
Cash $ 62,000 $ 632,000
Accounts receivable less allowance for doubtful accounts
of $0 and $4,000 32,000 13,000
Inventory:
Raw materials 1,000 --
Finished goods 127,000 133,000
Prepaid expenses and other current assets 11,000 1,000
---------------------------
TOTAL CURRENT ASSETS 233,000 779,000
Equipment, less accumulated depreciation of $902,000 and $789,000 515,000 621,000
Leasehold improvements, less accumulated amortization 530,000 581,000
Cash surrender value of officer's life insurance 35,000 35,000
Deposits 20,000 20,000
---------------------------
$ 1,333,000 $ 2,036,000
===========================
CURRENT LIABILITIES
Accounts payable $ 657,000 $ 678,000
Accrued expenses to related parties 223,000 253,000
Accrued liabilities to others 188,000 149,000
Loans payable 328,000 359,000
Other current liabilities 57,000 36,000
---------------------------
TOTAL CURRENT LIABILITIES 1,453,000 1,475,000
---------------------------
NOTES PAYABLE-RELATED PARTIES 379,000 312,000
---------------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS EQUITY
Class A voting preferred stock,$ .00001 par value, 2,500 shares
authorized; 2,500 shares issued and outstanding -- --
Class B 8% preferred stock,$ .00001 par value, 1,150 shares
authorized; none outstanding -- --
Class C preferred stock,$ .00001 par value, 49,996,350 shares
authorized; none outstanding -- --
Common stock,$.00001 par value, 700,000,000 shares authorized;
342,151,000 and 240,460,000 respectively issued and outstanding 3,000 2,000
Additional paid in capital 33,238,000 32,740,000
Deficit accumulated during development stage (33,740,000) (32,493,000)
---------------------------
TOTAL STOCKHOLDERS EQUITY (499,000) 249,000
---------------------------
$ 1,333,000 $ 2,036,000
===========================
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATION
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 15 1990
-------------
(Date of
--------
THREE MONTHS ENDED NINE MONTHS ENDED Inception) to
------------------ ----------------- -------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
------------- ------------- -------------
2000 1999 2000 1999 2000
------------ ------------ ------------ ------------ ------------
REVENUES:
<S> <C> <C> <C> <C> <C>
Consulting fees from Asian company $ -- $ 200,000 $ -- $ 200,000 $ 300,000
Other 117,000 6,000 128,000 52,000 963,000
-----------------------------------------------------------------------------
117,000 206,000 128,000 252,000 1,263,000
-----------------------------------------------------------------------------
EXPENSES:
Research and development 255,000 98,000 533,000 329,000 9,420,000
General and administrative 315,000 113,000 817,000 397,000 11,190,000
Writedown of inventory
& intangibles -- -- -- -- 1,723,000
-----------------------------------------------------------------------------
570,000 211,000 1,350,000 726,000 22,333,000
=============================================================================
LOSS FROM OPERATIONS (453,000) (5,000) (1,222,000) (474,000) (21,070,000)
-----------------------------------------------------------------------------
OTHER INCOME(EXPENSE) - NET:
Interest Expense - Related Party (11,000) (9,000) (29,000) (26,000) (8,699,000)
Interest Expense -- -- -- -- (4,925,000)
Sale of New Jersey net operating
loss carryforwards -- -- -- -- 651,000
Other(net) 2,000 -- 4,000 -- 303,000
-----------------------------------------------------------------------------
(9,000) (9,000) (25,000) (26,000) (12,670,000)
-----------------------------------------------------------------------------
NET LOSS $ (462,000) $ (14,000) $ (1,247,000) $ (500,000) $(33,740,000)
=============================================================================
BASIC AND DILUTED LOSS PER SHARE $ (0.002) $ (0.000) $ (0.005) $ (0.002)
=============================================================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 265,560,303 229,385,996 265,560,303 229,385,996
=============================================================
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Deficit
Additional Accumulated
Number of Paid-In- During
shares issued Par value Capital Development Stage
---------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1999 240,460,000 $ 2,000 $ 32,740,000 $(32,493,000)
QUARTER ENDED MARCH 31, 2000
Stock options exercised at $ .01 per share 393,000 -- 4,000
Issuance of 1,500,000 options at $.01
with a FMV of $ .06 for services rendered 75,000
Net loss for quarter (359,000)
-------------------------------------------------------------
BALANCES AT MARCH 31, 2000 240,853,000 $ 2,000 $ 32,819,000 $(32,852,000)
=============================================================
QUARTER ENDED JUNE 30, 2000
Net loss for quarter (426,000)
-------------------------------------------------------------
BALANCES AT JUNE 30, 2000 240,853,000 $ 2,000 $ 32,819,000 $(33,278,000)
=============================================================
QUARTER ENDED SEPTEMBER 30, 2000
Conversion of Class C preferred stock to
common shares 82,259,000 $ 1,000 (1,000)
Conversion of debt to shares of Common
Stock @ $0.01 16,426,000 164,000
Private placement of shares of Common
Stock @ $0.08 1,000,000 80,000
Conversion of debt to shares of Common
Stock @ $0.096 1,110,000 107,000
Stock options exercised at $ .01 per
share with a FMV of $0.076 503,000 50,000
Net loss for quarter (462,000)
-------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 2000 342,151,000 3,000 33,219,000 (33,740,000)
=============================================================
</TABLE>
See notes to consolidated financial statements
5
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
March 15,
1990(date of
Nine months ended inception) to
September 30, September 30,
---------------------------------------------
2000 1999 2000
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (1,247,000) $ (500,000) $(33,740,000)
Adjustments to reconcile net loss to net cash
Provided (used) by operating activities:
Depreciation 112,000 120,000 804,000
Amortization 51,000 51,000 656,000
Interest and compensation expense in connection
with issuance of equity securities 226,000 -- 16,459,000
Write down of inventories -- -- 1,206,000
Write down of patents -- -- 517,000
Loss on investment in related party -- 12,000 89,000
Changes in operating assets and liabilities
(Increase) decrease in:
Accounts receivable (19,000) (46,000) (32,000)
Inventories 5,000 7,000 (1,329,000)
Prepaid expenses (10,000) 24,000 64,000
Other current assets -- 2,000 43,000
Other -- 6,000 (30,000)
Increase (decrease) in:
Accounts payable (21,000) (12,000) 657,000
Other current liabilities 21,000 20,000 17,000
Accrued expenses 9,000 (82,000) 411,000
---------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES $ (873,000) $ (398,000) $(14,208,000)
---------------------------------------------
</TABLE>
See notes to consolidated financial statements
6
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(continued)
<TABLE>
<CAPTION>
March 15,
1990(date of
Nine months ended inception) to
September 30, September 30,
---------------------------------------------
2000 1999 2000
---- ---- ----
<S> <C> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES $ (873,000) $ (398,000) $(14,208,000)
---------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Patent issuance costs -- --
Purchases of equipment and leasehold improvements (5,000) --
Investment in related party -- --
Other -- --
---------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES: (5,000) --
---------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party loans 120,000 392,000 1,778,000
Proceeds from notes payable - others -- -- 628,000
Proceeds from interim loans 163,000 -- 3,110,000
Capital contribution 19,000 -- 114,000
Payments on interim loans -- -- (498,000)
Payments on notes payable - others -- -- (525,000)
Payments on stockholder loans (84,000) -- (656,000)
Proceeds from issuance of capital stock 90,000 -- 12,878,000
---------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES: 308,000 392,000 16,829,000
---------------------------------------------
NET CHANGE IN CASH (570,000) (6,000) 62,000
CASH, BEGINNING OF PERIOD 632,000 41,000 --
---------------------------------------------
CASH, END OF PERIOD $ 62,000 $ 35,000 $ 62,000
=============================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the periods for:
Interest paid - related party $ -- $ 26,000 $ 138,000
=============================================
Interest paid - other $ 29,000 $ -- $ 190,818
=============================================
Income taxes paid $ -- $ -- $ --
=============================================
NONCASH FINANCING ACTIVITIES
Net assets of Xechem India contributed to capital and
minority interest. $ -- $ -- $ 118,000
=============================================
Liabilities exchanged for preferred and common stock $ -- $ -- $ 921,000
=============================================
</TABLE>
See notes to consolidated financial statements
7
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE ENTERPRISE]
================================================================================
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES
--------------------------------------------------------------------------------
In the three months ending September 30, 2000 $164,100 of debt was
converted into 16,426,400 shares of Common Stock. Also in the three months
ending September 30, 2000 1,110,000 shares of Common Stock were issued as
compensation for $106,560 of consulting fees.
100,000 shares of Class C Series 4 Preferred Stock were converted to
40,000,000 shares of Common Stock and 100,000 shares of Class C Series 5
Preferred Stock were converted to 42,259,000 shares of Common Stock.
8
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE ENTERPRISE]
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
--------------------------------------------------------------------------------
[1] Significant Accounting Policies
The accompanying consolidated financial statements have been prepared
assuming Xechem International, Inc. and its subsidiaries will continue as a
going concern. The Company has suffered recurring losses from operations and has
a net capital deficiency that raise substantial doubt about its ability to
continue as a going concern The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
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, 1999 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 September 30, 2000 and the consolidated results of its operations for
the nine months ended September 30, 2000 and 1999 and for the cumulative period
from March 15, 1990 (date of inception) to September 30, 2000. 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, 1999. The results of operations for
the nine-month periods ended September 30, 2000 and 1999 are not necessarily
indicative of the operating results for a full year.
[3] Contingencies
The Company has filed a complaint against the University of Texas M.D.
Anderson Cancer Center and the Board of Regents of the University of Texas. This
complaint is for declaratory judgement in connection with a Patent and
Technology License agreement dated August 18, 1997 (the "License Agreement").
The License Agreement granted certain exclusive worldwide rights to use, license
and sublicense patented technology related to a new formulation for the delivery
of paclitaxel. An answer has not yet been filed on behalf of the defendants. A
motion to change venue to Texas has been filed by defendant's counsel. It is
expected that the case will take at least one year before it is ready for trial.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.(8)
General
-------
The Company is the holder of all of the capital stock of Xechem, Inc., a
development stage biopharmaceutical company engaged in the research,
development, and production of niche 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),
XetaPharm, Inc. (formed in 1996) and Xechem (India) Pvt. Ltd. are subsidiaries
of the Company. Xechem (Europe) an affiliate of Xechem, Inc., was closed in June
1999.
Results of Operations
---------------------
THE NINE MONTHS ENDED SEPTEMBER 30, 2000 VS. THE NINE MONTHS ENDED SEPTEMBER 30,
1999
The following table sets forth certain statement of operations data of the
Company for the cumulative period from inception (March 15, 1990) to September
30, 2000 and for each of the nine months ended September 30, 2000 and September
30, 1999.
Cumulative
Inception
Nine Months Ended to
September 30, September 30,
2000 1999 2000
(in thousands)
Revenue $ 128 $ 252 $ 1,263
Research and Development Expense $ 533 $ 329 $ 9,420
General and administrative expenses $ 817 $ 397 $ 11,190
Writedown of Inventory and intangibles $ -- $ -- $ 1,723
Loss from operations $ (1,222) $ (474) $(21,070)
-------------------------
(8) 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" indicates 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.
10
<PAGE>
Revenue
-------
The $124,000 decrease in sales for the nine months ended September 30, 2000
as compared to the nine months ended September 30, 1999 represents a $100,000
decrease or 50% resulting from a reduction in consulting fees. Product sales by
the Company's subsidiary XetaPharm Inc. increased $17,000 or 65% due to the
first shipment of Gugulon to China. Xechem Inc. had a $32,000 decrease in
testing services for the nine months ended September 30, 2000 as compared to the
nine months ended September 30, 1999.
Research and Development
------------------------
The Company's research and development expenditures were made in
conjunction with the development of compounds to make niche 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 $204,000 to $533,000 or 62% primarily from a $72,000 increase in
employee compensation and a $113,000 increase in consulting fees related to
research and development by the Company, for the nine months ended September 30,
2000 as compared to the nine months ended September 30, 1999.
Expenditures for research and development increased during the first three
quarters of 2000 and should continue to increase for the remainder of the year.
The Company believes that increased research and development expenditures could
significantly hasten the development of new products as well as the
marketability of paclitaxel and its second-generation analogs.
General and Administrative
--------------------------
General and administrative expenses increased $420,000 or 106% for the nine
months ended September 30, 2000 as compared to the nine months ended September
30, 1999. Legal fees increased nearly $300,000 due primarily to the stock
options granted to two legal firms for continued and past services and the
continuing court case against M.D. Anderson Cancer Center. The Company has also
incurred increases in advertising of $29,000 due to new marketing campaign,
accounting fees of $12,000 due to new quarterly reviews and increased rates and
annual meeting expenses of $27,000 which was not held in 1999.
The Company anticipates that general and administrative expenses will
continue to 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 additional funding to finance these efforts.
11
<PAGE>
Liquidity and Capital Resources; Plan of Operations
---------------------------------------------------
On September 30, 2000, the Company had cash and cash equivalents of $62,000
negative working capital of $1,220,000 and negative stockholder's equity of
$499,000.
As a result of its net losses to September 30, 2000 and accumulated deficit
since inception, the Company's accountants, in their report on the Company's
financial statements for the year ended December 31, 1999, 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 bulk paclitaxel
manufacturing in June 1997; however, the Company's facilities have yet to be
inspected by the FDA for current Good Manufacturing Practices ("cGMP"). The
Company has sufficient raw materials to produce commercial bulk paclitaxel that
has a market value of approximately $2,000,000 at current prices; however the
book value was written down to $0.00 in 1997, and the Company anticipates, but
can provide no assurances, that it will commence sales of paclitaxel in the
international market in 2001. 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). Alternatively, 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 assurance 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 has "Strategic Alliance Agreements" with one European company,
and is negotiating with several other companies outside of the United States to
license production, market and sell bulk and injectable paclitaxel. These
companies will be responsible for the registration of injectable paclitaxel in
their respective countries. Xechem will also grant a license to these 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 these 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. The Company
estimates that the aggregate market for these products currently exceeds
$1,000,000,000.
12
<PAGE>
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.
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.
There can be no assurance that management's plans to obtain additional
financing to fund operations will be successful. The financial statements do not
include any adjustments relating to the recoverability and classification of
recorded assets, or the amounts and classification of liabilities that might be
necessary in the event that the Company cannot continue in existence.
The Company has been approved for over $500,000 in NJEDA tax credits and
has applied for an additional $400,000 to be issued in the later part of 2000.
The Company anticipates, but can provide no assurances, the State of New Jersey
will grant approval for the full amount of the tax credits which will result in
a cash benefit to the Company of up to $750,000.
On March 30, 2000 the Company signed a joint venture agreement with J & M
Consultants to establish Xechem Pharmaceutical China Ltd. with offices in Hong
Kong and Beijing, Peoples Republic of China. The purpose of establishing Xechem
China is to carry on the business of, among other things, manufacturing,
marketing and distributing pharmaceutical and nutraceutical products. Xechem
China will also carry out research, development, clinical studies and production
of new drugs based on Xechem technology on traditional Chinese medicine and
other disciplines, provide consulting services for drug development and set up a
certified laboratory in P.R. China to screen, verify and certify pharmaceutical
products for the public.
Pursuant to the terms of an exclusive License Agreement with Xechem China,
Xechem International will allow the use of its patents, trademarks and technical
information to manufacture, market and sell the products in the Territory of
People's Republic of China, Hong Kong, Macao, Taiwan (The Republic of China),
Mongolia, Korea, Singapore, Malaysia, Indonesia, Republic of Philippines,
Thailand, Vietnam, Brunei, Cambodia, Myanmar, and such other countries or
regions which may be agreed between the parties. A non-exclusive license is
granted in Japan. J & M has committed a sum of over $1,200,000, management
support to the joint venture and up to $240,000 as an interest free loan to
Xechem over 24 months. Profits of the joint venture are to be split 55% to J & M
and 45% to Xechem.
13
<PAGE>
In the first phase, Xechem China will start the (i) manufacture and
pre-clinical and clinical studies of a new paclitaxel formulation for ovarian
and breast cancers, (ii) toxicological studies on two of Xechem's second
generation patented paclitaxel analogs and (iii) registration of
Xechem/XetaPharm's nutritional products (GinkgoOnce(R), GarlicOnce(R),
GinsengOnce(R), Gugulon(TM), Co-Enzyme Q-10 and Vida Pras(TM)).
To date the Company has received $120,000 as part of the interest free loan
and Xetapharm has received purchase orders totaling $125,000, of which $25,000
was shipped in the third quarter with the remainder to be shipped in the near
future.
The Company announced on July 11, 2000 that it had received 7 new U.S. and
2 international patents during the past year, 7 of which are related to the
field of the anticancer drug Paclitaxel and its second generation Paclitaxel
analogs and two for diagnostic microbiological HEXOID(TM) plates. In addition,
there are currently 30 international patents pending, with more on the way
during the coming year. On October 17, 2000 the Company announced that Xechem
has received notice of issuance of an Australian Patent # 724929 and two South
African Patents #s 97/6833 & 97/6834 for several dihalo analogs of paclitaxel,
the well known antitumor drug sold under the name Taxol(R) by Bristol-Myers
Squibb.
14
<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
The Company held it's annual meeting on July 11, 2000 at 100 Jersey Ave.
Suite 310 Building B, New Brunswick N.J., where:
1. Ramesh C. Pandey Ph.D. and Stephen F. Burg were re-elected to the Company's
Board of Directors until the next meeting of stockholders or otherwise as
provided in the Corporation's By-Laws. 186,117,151 shares of Common Stock
and 2,500 shares of Class A Preferred Stock, having 1,000 votes per share,
100,000 shares of Class C Series 4 Preferred Stock, having 400 votes per
share, and 100,000 shares of Class C Series 5 Preferred Stock, having
422.59318 votes per share, were cast in favor of electing Dr. Pandey and
Stephen F. Burg representing approximately 99.9% of the shares of Common
Stock, Class A Preferred Stock, Class C Series 4 Preferred Stock, and Class
C Series 5 Preferred Stock present and voting.
2. The Corporations Certificate of Incorporation was amended to increase the
number of authorized shares from 250,000,000 to 750,000,000 shares
consisting of 700,000,000 shares of Common Stock and 50,000,000 shares of
Preferred Stock. 184,114,251 shares of Common Stock and 2,500 shares of
Class A Preferred Stock, having 1,000 votes per share, 100,000 shares of
Class C Series 4 Preferred Stock, having 400 votes per share, and 100,000
shares of Class C Series 5 Preferred Stock, having 422.59318 votes per
share, were cast in favor of the proposed amendment representing
approximately 99.3% of the shares of Common Stock, Class A Preferred Stock,
Class C Series 4 Preferred Stock, and Class C Series 5 Preferred Stock
present and voting.
3. An increase in the number of shares of Common Stock which may be issued
under the Xechem International, Inc. Amended and Restated Stock Option Plan
to 25,000,000 shares was approved. 186,093,151 shares of Common Stock and
2,500 shares of Class A Preferred Stock, having 1,000 votes per share,
100,000 shares of Class C Series 4 Preferred Stock, having 400 votes per
share, and 100,000 shares of Class C Series 5
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Preferred Stock, having 422.59318 votes per share, were cast in favor of
the proposal representing approximately 99.9% of the shares of Common
Stock, Class A Preferred Stock, Class C Series 4 Preferred Stock, and Class
C Series 5 Preferred Stock present and voting.
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibit 15
(b). Reports on Form 8-K- none
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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: November 03, 2000
/s/ Ramesh C. Pandey
----------------------------------
Ramesh C. Pandey, Ph.D.
President/Chief Executive Officer
17
