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, 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.
- --------------------------------------------------------------------------------
(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
-----------------------------
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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 April 30, 2000
was 240,852,928 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
March 31, 2000 [Unaudited] and
December 31, 1999 [Audited] ............................... 3
Consolidated Statements of Operations
for the three months ended
March 31, 2000 and 1999 [Unaudited] ....................... 4
Consolidated Statement of Stockholders'
Equity for the three months ended
March 31, 2000 [Unaudited] ................................ 5
Consolidated Statements of Cash Flows for
the three months ended March 31, 2000 and
1999 [Unaudited] .......................................... 6-7
Notes to Consolidated Financial Statements ................. 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ............. 9-13
Part II. Other Information .......................................... 14-15
Signatures ........................................................... 16
Exhibit .............................................................. 17
2
<PAGE>
XECHEM INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---- ----
(UNAUDITED) (AUDITED)
----------- ---------
CURRENT ASSETS:
<S> <C> <C>
Cash $ 123,000 $ 632,000
Accounts receivable less allowance for doubtful
accounts of $4,000 and $4,000 14,000 13,000
Inventory:
Raw materials -- --
Finished goods 142,000 133,000
Prepaid expenses and other current assets 5,000 1,000
-----------------------------
TOTAL CURRENT ASSETS 284,000 779,000
Equipment, less accumulated depreciation of
$827,000 and $789,000 584,000 621,000
Leasehold improvements, less accumulated
amortization 564,000 581,000
Cash surrender value of officer's life
insurance 35,000 35,000
Deposits 20,000 20,000
-----------------------------
$ 1,487,000 $ 2,036,000
=============================
CURRENT LIABILITIES
Accounts payable $ 503,000 $ 678,000
Accrued expenses to related parties 223,000 253,000
Accrued liabilities to others 117,000 149,000
Loans payable 328,000 359,000
Other current liabilities 35,000 36,000
-----------------------------
TOTAL CURRENT LIABILITIES 1,206,000 1,475,000
-----------------------------
NOTES PAYABLE-RELATED PARTIES 312,000 312,000
-----------------------------
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,
2,996,000 shares authorized; 200,000
shares issued and outstanding -- --
Common stock,$.000001 par value, 247,000,000
shares authorized; 240,853,000 and
240,460,000 respectively, issued and
outstanding 2,000 2,000
Additional paid in capital 32,819,000 32,740,000
Deficit accumulated during development stage (32,852,000) (32,493,000)
-----------------------------
TOTAL STOCKHOLDERS EQUITY (31,000) 249,000
-----------------------------
$ 1,487,000 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
--------
INCEPTION) TO
-------------
THREE MONTHS ENDED MARCH 31, MARCH 31,
---------------------------- ---------
2000 1999 2000
---- ---- ----
REVENUES:
<S> <C> <C> <C>
Consulting fees from Asian company $ -- $ -- $ 300,000
Other 7,000 9,000 842,000
----------------------------------------------
7,000 9,000 1,142,000
----------------------------------------------
EXPENSES:
Research and development 130,000 119,000 9,017,000
General and administrative 230,000 156,000 10,603,000
Writedown of inventory
& intangibles -- -- 1,723,000
----------------------------------------------
360,000 275,000 21,343,000
----------------------------------------------
LOSS FROM OPERATIONS (353,000) (266,000) (20,201,000)
----------------------------------------------
OTHER INCOME(EXPENSE) - NET:
Interest Expense - Related Party (9,000) (10,000) (8,679,000)
Interest Expense -- -- (4,925,000)
Sale of New Jersey net operating
loss carryforwards -- -- 651,000
Other(net) 3,000 -- 302,000
----------------------------------------------
(6,000) (10,000) (12,651,000)
----------------------------------------------
NET LOSS $ (359,000) $ (276,000) $(32,852,000)
==============================================
BASIC AND DILUTED LOSS PER SHARE $ (0.001) $ (0.020)
=============================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 240,590,974 131,791,000
=============================
</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>
Additional Deficit Accumulated
Number of Paid-In During Development
shares issued Par Value Capital 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)
===========================================================
</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
inception) to
Three months ended March 31, March 31,
------------------------------------------------
2000 1999 2000
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (359,000) $ (276,000) $(32,852,000)
Adjustments to reconcile net loss to net cash
Provided (used) by operating activities:
Depreciation 38,000 40,000 730,000
Amortization 17,000 17,000 622,000
Interest and compensation expense in connection
with issuance of equity securities 75,000 -- 16,308,000
Write down of inventories 0 -- 1,206,000
Write down of patents -- -- 517,000
Loss on investment in related party 0 17,000 89,000
Changes in operating assets and liabilities
(Increase) decrease in:
Accounts receivable (1,000) (46,000) (14,000)
Inventories (9,000) 4,000 (1,343,000)
Prepaid expenses (4,000) 5,000 70,000
Other current assets -- (6,000) 43,000
Other -- 6,000 (30,000)
Increase (decrease) in:
Accounts payable (176,000) 32,000 502,000
Other current liabilities (1,000) 20,000 (5,000)
Accrued expenses (62,000) (63,000) 340,000
----------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES $ (482,000) $ (250,000) $(13,817,000)
----------------------------------------------
</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
inception) to
Three months ended March 31, March 31,
------------------------------------------------
2000 1999 2000
---- ---- ----
<S> <C> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES $ (482,000) $ (250,000) $(13,817,000)
----------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Patent issuance costs -- -- (548,000)
Purchases of equipment and leasehold improvements -- -- (1,975,000)
Investment in related party -- -- (23,000)
Other -- -- (8,000)
----------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES: 0 0 (2,554,000)
----------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party loans -- 254,000 1,658,000
Proceeds from notes payable - others -- -- 628,000
Proceeds from interim loans -- -- 2,947,000
Capital contribution -- -- 95,000
Payments on interim loans -- -- (498,000)
Payments on notes payable - others -- -- (525,000)
Payments on stockholder loans (31,000) -- (603,000)
Proceeds from issuance of capital stock 4,000 -- 12,792,000
----------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES: (27,000) 254,000 16,494,000
----------------------------------------------
NET CHANGE IN CASH (509,000) 4,000 123,000
CASH, BEGINNING OF PERIOD 632,000 41,000 0
----------------------------------------------
CASH, END OF PERIOD $ 123,000 $ 45,000 $ 123,000
==============================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the periods for:
Interest paid - related party $ -- $ 10,000 $ 138,000
==============================================
Interest paid - other $ 9,000 $ -- $ 170,818
==============================================
Income taxes paid $ -- $ -- $ --
==============================================
NONCASH FINANCING ACTIITIES
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]
- --------------------------------------------------------------------------------
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, 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 March 31, 2000 and the consolidated results of its operations for the
three months ended March 31, 2000 and 1999 and for the cumulative period from
March 15, 1990 (date of inception) to March 31, 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 three month
periods ended March 31, 2000 and 1999 are not necessarily indicative of the
operating results for a full year.
8
<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 Three Months Ended March 31, 2000 vs. The Three Months Ended March 31, 1999
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,
2000 and for each of the three months ended March 31, 2000 and March 31, 1999.
THREE MONTHS CUMULATIVE
ENDED INCEPTION TO
MARCH 31, MARCH 31,
2000 1999 2000
(in thousands)
Revenue $ 7 $ 9 $ 1,142
Research and Development Expense $ 130 $ 119 $ 9,017
Rent, general and administrative expenses $ 230 $ 156 $ 10,603
Writedown of Inventory and intangibles $ -- $ -- $ 1,723
(Loss) from operations $ (353) $ (266) $(20,201)
- ----------------------------
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" 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.
9
<PAGE>
Revenue
- -------
The $2,000 decrease in sales from three months ended March 31, 1999 to the
three months ended March 31, 2000 represents a $4,000 decrease or 50 % from
product sales by the Company's subsidiary XetaPharm, Inc. Xechem Inc. had sales
of $2,000 for Paclitaxel to be used only for testing purposes.
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 $11,000 to $130,000, or 9%, for the three months ended March 31,
2000 as compared to the three months ended March 31, 1999.
Expenditures for research and development increased during the first
quarter 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.
Rent, General and Administrative
- --------------------------------
Rent, general and administrative expenses increased $74,000 or 47% for the
three months ended March 31, 2000 as compared to the three months ended March
31, 1999. The most significant increase was legal fees due to the incentive
options granted to two legal firms for future services. 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.
10
<PAGE>
Liquidity and Capital Resources; Plan of Operations
- ---------------------------------------------------
On March 31, 2000, the Company had cash and cash equivalents of $123,000
negative working capital of $922,000 and negative stockholder's equity of
$31,000.
As a result of its net losses to March 31, 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 2000. 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 two European
companies, 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.
11
<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.
During the twenty-seven months ended March 31, 2000, the Company cut
administrative expenses, reduced its monthly cash requirements and has sold a
portion of its state net operating loss carryforwards.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.
On December 30, 1999 the Company received the Certificates of Approval for
$784,236 from the New Jersey Economic Development Authority (NJEDA) for the sale
of Xechem, Inc., XetaPharm, Inc. and Xechem International's unused New Jersey
net operating loss carryovers. This represents the Company's maximum first year
allocation under a State tax benefit transfer program for emerging technology
and biotechnology companies, which is administered by the NJEDA. The tax credits
are based on the net operating losses for the Company and each subsidiary filing
in New Jersey. The credits are calculated at a tax rate of 9% and the Company is
then allowed to sell the credits for a minimum of 75% of the Tax Benefits
Authorized. The Company's tax benefits have been purchased by a Fortune 500
Company for $650,917. The Company expects to receive an additional $430,000 in
2000 from the sale of the remainder of its already-approved NJEDA tax benefits.
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.
12
<PAGE>
In an exclusive License Agreement with Xechem China, Xechem International
will allow the use of its patents, trademarks and technical information to use
the process 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 and 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.
In the first phase, Xechem China will start the (i) manufacture
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)).
13
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
On March 2, 2000, the Company filed a complaint in the United States District
Court for the District of New Jersey against the University of Texas M.D.
Anderson Cancer Center and the Board of Regents of the University of Texas, as
defendants. This complaint is for declaratory judgment against the defendants in
connection with a certain Patent and Technology License Agreement dated August
18, 1997 (the "License Agreement"), which was the outgrowth of a Sponsored
Laboratory Study Agreement dated December 12, 1995. The License Agreement
granted to Xechem certain exclusive worldwide rights to use, license and
sublicense patented technology related to a new formulation for the delivery of
paclitaxel. The M.D. Anderson Cancer Center sent a letter to Xechem's counsel
seeking to terminate the License Agreement. This letter also contained a
counterproposal to Xechem, which Xechem rejected, and Xechem also rejected the
claim that the License Agreement should be terminated. The defendants delivered
a termination letter to Xechem purporting to terminate the License Agreement on
the basis of the claim that Xechem was "insolvent." This alleged insolvency was
based upon 1998 financial records. Xechem states in its complaint that it is
currently solvent and denies the claim that it was insolvent in 1998. Xechem has
made all required payments to the M.D. Anderson Cancer Center pursuant to the
License Agreement.
14
<PAGE>
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
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
Exhibit 15
(b). Reports on Form 8-K
None
15
<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: May 19, 2000
/s/ Ramesh C. Pandey
--------------------
Ramesh C. Pandey, Ph.D.
President/Chief Executive Officer/
Chief Accounting Officer
16
Exhibit 15
----------
Board of Directors
Xechem International, Inc.
We have reviewed the accompanying consolidated balance sheet of Xechem
International, Inc. and its subsidiaries as of March 31, 2000, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the three month period then ended. These consolidated financial statements are
the responsibility of the Company's management
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly we do not express such an opinion
Based on our review, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements for them to
be in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming Xechem International, Inc. and its subsidiaries will continue as a
going concern. As discussed in Note 2 to the consolidated financial statements
appearing in Form 10-KSB for the year ended December 31,1999, 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.
Management's plans in regard to these matters are also described in Note 2. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Wiss & Company
--------------------------
Wiss & Company, LLP
Livingston, New Jersey
May 19, 2000
17
