Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

November 14, 2005

Documents


SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2005.

OR

[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____.

Commission file number 000-26648

eXegenics Inc.
(Exact Name of Registrant as Specified in Its Charter)


Delaware
75-2402409
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

1250 Pittsford-Victor Road
Building 200, Suite 280
Pittsford, New York 14534
(Address of Principal Executive Offices)

(585) 218-4368
(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 [_]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2): Yes [_] No [X]

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2): Yes [X] No [_]

As of November 11, 2005, the registrant had 16,877,818 shares of common stock outstanding.

 
1
PART I. FINANCIAL INFORMATION
   
Page(s)
       
 
Item 1.
Financial Statements:
 
       
   
Balance Sheets as of September 30, 2005 (unaudited) and December 31, 2004
3
       
   
Statements of Operations for the Three Months and Nine Months Ended September 30, 2005 and 2004 (unaudited)
4
     
 
   
Statements of Cash Flows for the Nine Months ended September 30, 2005 and 2004 (unaudited)
5
     
 
   
Notes to Financial Statements
6
     
 
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
11
   
 
  
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
13
     
 
 
Item 4.
Controls and Procedures
13
 
PART II. OTHER INFORMATION
 
 
Item 1.
Legal Proceedings
14
     
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
14
       
 
Item 3.
Defaults Upon Senior Securities
14
 
 
  
 
 
Item 4.
Submission of Matters to a Vote of Security Holders
14
 
 
  
 
 
Item 5.
Other Information
14
     
 
Item 6.
Exhibits
14
       
 
Signatures
 
15
       
 
Exhibit Index
 
16
       
  Exhibit 31.1 Certification by John A. Paganelli, Chief Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended September 30, 2005.  
       
  Exhibit 31.2 Certification by David Hostelley, Chief Financial Officer, pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended September 30, 2005.  
       
  Exhibit 32.1 Certification by John A. Paganelli, Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended September 30, 2005.  
       
  Exhibit 32.2 Certification by David Hostelley, Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended September 30, 2005.  
 
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:

eXegenics Inc.
BALANCE SHEETS
(in thousands except share data)
   
September 30,
  
December 31,
  
   
2005
  
2004
  
ASSETS
  
(unaudited)
      
Current assets:
          
Cash and cash equivalents
  
$
8,954
  
$
8,734
  
Restricted cash
    
—
    
175
 
Marketable securities available for sale
    
54
    
1,124
 
Prepaid expenses and other current assets
    
122
   
35
 
Total current assets
    
9,130
    
10,068
 
               
Other assets
    
1
    
3
 
Total assets
  
$
9,131
  
$
10,071
  
               
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
              
Current liabilities:
              
Accounts payable and accrued expenses
  
$
22
  
$
239
  
Total current liabilities
    
22
   
239
 
               
               
Total liabilities
    
22
    
239
 
               
               
Commitments and contingencies
              
               
Stockholders’ equity:
              
Preferred stock - $.01 par value, 10,000,000 shares authorized; 1,018,640 and 935,332 shares of Series A convertible preferred issued and outstanding (liquidation value $2,550,000 and $2,338,000)
    
10
    
9
 
Common stock - $.01 par value, 30,000,000 shares authorized; 16,879,225 and 16,869,031 shares issued
    
169
   
169
 
Additional paid-in capital
    
68,384
   
68,385
 
Accumulated other comprehensive income
    
54
   
1,124
 
Subscriptions receivable, net of reserve
    
(101
)
  
(302
)
Accumulated deficit
    
(56,070
)
  
(56,216
)
Treasury stock, 611,200 shares of common stock, at cost
    
(3,337
)
  
(3,337
)
               
Total stockholders’ equity
    
9,109
   
9,832
 
               
Total liabilities and stockholders’ equity
  
$
9,131
  
$
10,071
  
               
See Notes to Financial Statements.
 
3
eXegenics Inc.
STATEMENTS OF OPERATIONS
(in thousands)
 
   
Three Months Ended
  
Nine Months Ended
  
   
September 30,
  
September 30,
  
   
2005
  
2004
  
2005
  
2004
  
   
(unaudited)
  
(unaudited)
  
                   
Revenue:
  
$
—
  
$
—
  
$
—
  
$
—
  
                           
Operating Expenses:
    
—
    
—
              
General and administrative
    
194
    
399
    
1,008
    
1,728
  
     
194
    
399
    
1,008
    
1,728
  
                           
Operating loss
    
(194
)
  
(399
)
  
(1,008
)
  
(1,728
)
                           
Other (income) expense
    
(1,065
)
  
(31
)
  
(1,154
)
  
(90
)
                           
Income (loss) before provision (benefit) for taxes
    
871
    
(368
)
  
146
    
(1,638
)
Provision (benefit) for taxes
    
—
    
—
    
—
    
—
  
Net Income (loss)
    
871
    
(368
)
  
146
    
(1,638
)
Preferred stock dividend
    
—
    
—
    
(234
)
  
(223
)
                           
Net income (loss) attributable to
                          
to common shareholders
  
$
871
  
$
(368
)
$
(88
)
$
(1,861
)
                           
Net income (loss) per share-basic and diluted
  
$
0.05
  
$
(0.02
)
$
(0.01
)
$
(0.12
)
                           
Weighted average number of shares outstanding - basic and diluted
    
16,267
    
16,228
    
16,265
    
15,991
  
                           
See Notes to Financial Statements.
 
4
eXegenics Inc.
STATEMENT OF CASH FLOWS
(in thousands)

   
Nine Months Ended
  
   
September 30,
  
   
2005
  
2004
  
   
(unaudited)
  
Cash flows from operating activities:
              
Net income (loss)
  
$
146
  
$
(1,638
)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
              
Depreciation and amortization
              
Reserve for subscription receivable
    
2
    
5
  
Value assigned to warrants, options and compensatory stock
    
201
    
(4
)
Changes in:
    
—
    
138
  
Restricted cash
              
Prepaids and other assets
    
175
   
425
 
Accounts payable and accrued expenses
    
(87
)
  
566
  
Net cash provided by (used in) operating activities
    
(217
)
  
(778
)
     
220
    
(1,286
)
Cash flows from financing activities:
              
Proceeds from option exercises
              
Net cash provided by financing activities
    
—
    
192
  
 
     —    
192
 
NET INCREASE (DECREASE) IN CASH
              
Cash and cash equivalents at beginning of period
    
220
    
(1,094
)
     
8,734
   
10,132
 
CASH AND CASH EQUIVALENTS AT END OF PERIOD
              
   
$
8,954
  
$
9,038
  
 
              
See Notes to Financial Statements.
5
eXegenics Inc.

NOTES TO FINANCIAL STATEMENTS
 
(1)
Financial Statement Presentation

The unaudited financial statements of eXegenics Inc., a Delaware corporation (the “Company”), included herein have been prepared in accordance with the rules and regulations promulgated by the Securities and Exchange Commission and, in the opinion of management, reflect all adjustments necessary to present fairly the results of operations for the interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, management believes that the disclosures are adequate to make the information presented not misleading. These financial statements and the notes thereto should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004. The results for the interim periods are not necessarily indicative of the results for the full fiscal year.

(2)
Cash, Cash Equivalents, Restricted Cash and Marketable Securities

The Company considers all non-restrictive, highly liquid short-term investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents, which amount to $8,954,000 and $8,734,000 at September 30, 2005 and December 31, 2004, respectively, consist principally of interest-bearing cash deposits. Restricted cash, which amounts to $0 and $175,000 at September 30, 2005 and December 31, 2004, respectively, consists of certificates of deposits that are used as collateral for equipment leases.

The Company accounts for marketable securities in accordance with Statement of Financial Accounting Standards No. 115 “Accounting for Certain Investments in Debt and Equity Securities” (“SFAS 115”). SFAS 115 establishes the accounting and reporting requirements for all debt securities and for investments in equity securities that have readily determinable fair values. All marketable securities must be classified as one of the following: held-to-maturity, available-for-sale, or trading. The Company classifies its marketable securities as available-for sale and, as such, carries the investments at fair value, with unrealized holding gains and losses reported in stockholders’ equity as a separate component of accumulated other comprehensive income (loss). The cost of securities sold is determined based on the specific identification method. Realized gains and losses, and declines in value judged to be other than temporary, are included in investment income.

The Company’s marketable securities consist of equity securities (common stock) in Javelin Pharmaceuticals, Inc. (formerly known as Intrac, Inc.). Javelin Pharmaceuticals, Inc. common stock is traded under the symbol JVPH. As of September 30, 2005 and December 31, 2004, the fair value of the Company’s investment in these securities was equal to approximately $54,000 and $1,124,000, respectively and corresponding unrealized gains were included as a component of other comprehensive income. The Company’s investments involve the risk of loss, price volatility and other uncertainties and, as such, the results of operations can vary substantially each year.

(3)
Loss Per Common Share

Basic and diluted loss per common share is based on the net loss increased by dividends on preferred stock divided by the weighted average number of common shares outstanding during the period. No effect has been given to outstanding options, warrants or convertible preferred stock in the diluted computation, as their effect would be antidilutive.
 
6
eXegenics Inc.

NOTES TO FINANCIAL STATEMENTS - (Continued)

(4)
Stock-Based Compensation

The Company accounts for stock-based compensation according to Accounting Principles Board Opinion No. 25 and the related interpretations under Financial Accounting Standards Board (“FASB”) Interpretation No. 44, “Accounting for Certain Transactions Involving Stock Compensation.” The Company adopted the required disclosure provisions under Statement of Financial Accounting Standards No. 148 and continues to use the intrinsic value method of accounting for stock-based compensation. No options to purchase shares of common stock were granted in return for consulting services for the nine months ended September 30, 2005 and September 30, 2004.

The following table illustrates the effect on net loss and loss per share if the Company had applied the fair value recognition provisions of SFAS Statement No. 123, Accounting for Stock-Based Compensation, to stock-based compensation.

   
Three Months Ended
  
Nine Months Ended
  
   
September 30,
  
September 30,
  
   
2005
  
2004
  
2005
  
2004
  
                   
Net profit (loss) attributable to common stockholders as reported
  
$
871
  
$
(368
)
$
(88
)
$
(1,861
)
                           
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects
    
(4
)
  
(7
)
  
(11
)
  
(25
)
                           
Pro forma net profit (loss)
  
$
867
  
$
(375
)
$
(99
)
$
(1,886
)
                           
Earnings per share:
                          
                           
Basic and diluted-as reported
  
$
0.05
  
$
(0.02
)
$
(0.01
)
$
(0.12
)
                           
Basic-pro forma
  
$
0.05
  
$
(0.02
)
$
(0.01
)
$
(0.12
)

(5)
Comprehensive Income

SFAS No. 130, “Reporting Comprehensive Income,” establishes standards for the reporting and display of comprehensive income and its components within the financial statements. Other comprehensive income is comprised of charges to stockholders’ equity, other than contributions from or distributions to stockholders, excluded from the determination of net income. For the nine months ended September 30, 2005, the Company’s accumulated other comprehensive income decreased by $1,070,000 as a result of the sale of 337,100 shares of Javelin Pharmaceuticals, Inc. common stock and the reduction in the fair value of available for sale marketable securities.
 
(6)
Other Income

For the nine months ended September 30, 2005, the Company’s other income increased by $1,088,000 as a result of selling 337,100 shares of Javelin Pharmaceuticals, Inc. common stock.

7
eXegenics Inc.
 
NOTES TO FINANCIAL STATEMENTS - (Continued)

(7)
Dividends

During the nine month periods ended September 30, 2005 and September 30, 2004, 10% preferred  stock dividends were declared equal to $234,000 and $223,000 respectively.
 
(8)
Subscriptions Receivable

In May, 2001, the Company entered into a limited recourse note and pledge agreement with a former President and Chief Executive Officer (Dr. Ronald Goode) in connection with a stock subscription arrangement. The principal amount of this note is $300,000 plus 4.71% interest paid on a semi-annual basis. Dr. Goode failed to make the semi-annual interest payment due May 2005. The Company is in discussions with Dr. Goode relative to the interest payment due and the status of the note. During the second quarter period ended June 30, 2005, the Company created a reserve and the subscription receivable balance on September 30, 2005 is presented net, equal to the value of the underlying collateral.

(9)
Recently Issued Accounting Standards

In December 2004, the FASB issued FASB Staff Position 109-1, Application of FASB Statement No. 109, “Accounting for Income Taxes” (“SFAS No. 109”) to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004” (“FSP 109-1”). The American Jobs Creation Act of 2004 (the “Jobs Act”) enacted October 22, 2004, provides a tax deduction for income from qualified domestic production activities. FSP 109-1 provides the treatment for the deduction as a special deduction as described in SFAS No. 109. FSP 109-1 is effective prospectively as of January 1, 2005. The Company is currently evaluating the effect that the manufacturer’s deduction will have on the future results and has completed a preliminary evaluation of the impact the deduction for qualified production activities will have on its effective tax rate for 2005.

In December 2004, the FASB issued FASB Staff Position 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Action of 2004” (“FSP 109-2”), which provides guidance under SFAS No. 109 with respect to recording the potential impact of the repatriation provisions of the Jobs Act on enterprises’ income tax expense and deferred tax liability. FSP 109-2 states that an enterprise is allowed time beyond the financial reporting period of enactment to evaluate the effect of the Jobs Act on it plan for reinvestment or repatriation of foreign earnings for purposes of applying FASB Statement No. 109. The Company has not yet completed evaluating the impact of the repatriation provisions and has not adjusted its tax expense or deferred tax liability to reflect the repatriation provisions of the Jobs Act.

In March 2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional Retirement Obligations, an interpretation of FASB Statement No. 143” (“FIN 47”), which requires an entity to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liabilities fair value can be reasonably estimated. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. The Company does not expect the adoption of this Interpretation to have a material impact on its consolidated financial statements.

8
eXegenics Inc.

NOTES TO FINANCIAL STATEMENTS - (Continued)
 
In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections-a replacement of APB Opinion No. 20 and FASB Statement No. 3” (SFAS 154”). This Statement replaces APB Opinion No. 20, “Accounting Changes,” and FASB Statement No. 3, “Reporting Accounting Changes in Interim Financial Statements.” SFAS 154 requires retrospective application to prior periods’ financial statements for changes in accounting principle, unless it is impractical to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 also requires that a change in depreciation, amortization, or depletion method for long, non-financial assets be accounted for as a change in accounting estimate effected by a change in accounting principle. SFAS is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company believes that adoption of the provisions of SFAS 154 will not have a material effect on the Company’s consolidated financial statements.

In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment”. SFAS No. 123R is a revision of SFAS No. 123, “Accounting for Stock Based Compensation”, and supersedes APB 25. Among other items, SFAS 123R eliminates the use of APB 25 and the intrinsic value method of accounting, and requires companies to recognize the cost of employee services received in exchange for awards of equity instruments, based on the grant date fair value of those awards, in the financial statements. The effective date of SFAS 123R is the first reporting period beginning after June 15, 2005, which is third quarter 2005 for calendar year companies, although early adoption is allowed. However, on April 14, 2005, the Securities and Exchange Commission (SEC) announced that the effective date of SFAS 123R will be suspended until January 1, 2006, for calendar year companies.

SFAS 123R permits companies to adopt its requirements using either a “modified prospective” method, or a “modified retrospective” method. Under the “modified prospective” method, compensation cost is recognized in the financial statements beginning with the effective date, based on the requirements of SFAS 123R for all share-based payments granted after that date, and based on the requirements of SFAS 123 for all unvested awards granted prior to the effective date of SFAS 123R. Under the “modified retrospective” method, the requirements are the same as under the “modified prospective” method, but also permits entities to restate financial statements of previous periods based on proforma disclosures made in accordance with SFAS 123.

The Company currently utilizes a standard option pricing model (i.e., Black-Scholes) to measure the fair value of stock options granted to employees. While SFAS 123R permits entities to continue to use such a model, the standard also permits the use of a “lattice” model. The Company has not yet determined which model it will use to measure the fair value of employee stock options upon the adoption of SFAS 123R.

SFAS 123R also requires that the benefits associated with the tax deductions in excess of recognized compensation cost be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after the effective date. These future amounts cannot be estimated because they depend on, among other things, when employees exercise stock options.


9
eXegenics Inc.

NOTES TO FINANCIAL STATEMENTS - (Continued)
 
The Company currently expects to adopt SFAS 123R effective January 1, 2006, based on the new effective date announced by the SEC; however, the Company has not yet determined which of the aforementioned adoption methods it will use. In addition, the Company has not yet determined the financial statement impact of adopting SFAS 123R for periods beyond 2005.

(10)
Subsequent Events
 
On October 5, 2005 the jury, in the matter brought by Abdel Hakim Labidi (one of our former employees) against the Company, ruled in favor of Dr. Labidi determining that the Company converted certain biological research materials owned by Dr. Labidi, and the Company committed theft of biological materials owned by Dr. Labidi. The jury awarded Dr. Labidi a total of $600,000. The Company is reviewing this matter to determine the validity of appealing the decision of the jury. The final amount due by the Company to Dr. Labidi under such judgment is uncertain at this time, and as such no provision has been provided for in the financial statements.
 
10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

In this section, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” references to “we,”“us,”“our,” and “ours” refer to eXegenics Inc.

The following discussion should be read in conjunction with, and is qualified in its entirety by, the Financial Statements and the Notes thereto included in this report. This report contains certain forward-looking statements as that term is defined in the Private Securities Litigation Reform of 1995. Such statements are based on management’s current expectations and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. When used in this report the words “anticipate,”“believe,”“estimate,”“expect” and similar expressions as they relate to our management or us are intended to identify such forward-looking statements. Our actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements. Historical operating results are not necessarily indicative of the trends in operating results for any future period.

We have historically operated as a drug discovery company, exploiting new enabling technologies to advance and shorten the new drug development cycle. Our Company has been unsuccessful at advancing research programs. Our Board and management are focused on redeploying the remaining residual assets of the Company. The Board has established a committee to study strategic direction and identify potential business opportunities.

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to investments, intangible assets, income taxes, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements. We record a reserve against a note and pledge agreement that was generated in connection with a stock subscription arrangement with a former President and Chief Executive Officer. The subscription receivable accounts are presented net of this reserve. We also record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event we were to determine that we would be able to realize deferred tax assets in the future in excess of its net recorded amount, an adjustment to the net deferred tax asset would increase income in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an adjustment to the net deferred tax asset would be charged to income in the period such determination was made.
 
11
RESULTS OF OPERATIONS

FOR THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

Revenue

There were no revenues for the three months ended September 30, 2005 and September 30, 2004.

General and Administrative Expenses

We incurred general and administrative expenses of $194,000 and $399,000 for the three months ended September 30, 2005 and 2004, respectively, a decrease of $205,000 or 51%. The decrease is attributable to the following: a $2,000 increase in leased equipment, a $127,000 decrease in director and officer insurance premium expense, a $17,000 decrease in investor relations expenses, a $4,000 increase in professional consulting fees, a $3,000 increase in legal and accounting expense, a $66,000 decrease in compensation and overhead expenses, a $15,000 increase in Board of Directors fees, and a $19,000 decrease in corporate travel expenses as a result of no employees.

Interest Income

Interest income was $26,000 and $31,000 for the three months ended September 30, 2005 and 2004, respectively.

Other Income and Expenses

Other income and expenses was a profit of $1,039,000 and $0 for the three months ended September 30, 2005 and 2004, respectively. The increase was due to the sale by the Company of Javelin Pharmaceuticals, Inc. common stock.

Net Profit and Loss

We recognized a net profit attributable to common shareholders of $871,000 and a net loss of $368,000 for the three months ended September 30, 2005 and 2004, respectively. Net profit (loss) per common share was $0.05 and ($0.02) for the three months ending September 30, 2005 and 2004, respectively.

FOR NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

Revenue

There were no revenues for the nine months ended September 30, 2005 and September 30, 2004.

General and Administrative Expenses

We incurred general and administrative expenses of $1,008,000 and $1,728,000 for the nine months ended September 30, 2005 and 2004, respectively, a decrease of $720,000 or 42%. The decrease is attributable to the following: a $55,000 decrease in leased equipment expenses, a $394,000 decrease in director and officer insurance premium expense, a $44,000 decrease in investor relations expenses, a $69,000 decrease in professional consulting fees, a $28,000 decrease in business travel related expenses, a $77,000 decrease in legal and accounting expenses, a $132,000 decrease in compensation and overhead expenses and a $79,000 increase in other miscellaneous expenses.

12
Interest Income

Interest income was $116,000, and $90,000 for the nine months ended September 30, 2005 and 2004, respectively. The increase was primarily due to increased interest rates.

Other Income and Expenses

Other income and expenses was a net profit of $1,039,000 and $0 for the nine months ended September 30, 2005 and 2004, respectively. The increase was due to the sale by the Company of Javelin Pharmaceuticals, Inc. common stock.

Net Loss

We incurred a net loss attributable to common shareholders of $88,000 and $1,861,000 for the nine months ended September 30, 2005 and 2004, respectively. Net loss per common share was $0.01 and $0.12 for the nine months ending September 30, 2005 and 2004, respectively.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2005, we had cash and cash equivalents of approximately $8,954,000. During the nine months ended September 30, 2005, net cash provided by operating activities was $220,000. In addition, during the nine months ended September 30, 2005, we received no cash from financing activities related to the exercise of stock options.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our exposure to financial market risk, including changes in interest rates, relates primarily to our marketable security investments. We do not believe that a 100 basis point increase or decrease in interest rates would significantly impact our business. We do not have any derivative instruments. We operate only in the United States. We do not have any material exposure to changes in foreign currency exchange rates.


Item 4. Controls and Procedures

An evaluation was carried out by the Company’s Interim Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s “Disclosure Controls and Procedures”. They have concluded that, given our limited operation, our Disclosure Controls and Procedures were effective. As such term is used above, the Company’s Controls and Procedures are controls and other procedures of the Company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure Controls and Procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, as appropriate to allow timely decisions regarding required disclosure.

Further, there were no significant changes in the internal controls over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the quarter ended September 30, 2005 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
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PART II. OTHER INFORMATION

Item1.  Legal Proceedings

We are not a party to any litigation in any court, and management is not aware of any contemplated proceeding by any governmental authority or individual against us which had a material development during the period covered by this report. Please see Item 5 below for recent developments on the litigation between the Company and Dr. Labidi.
 
Item2.  Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.  Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5.  Other Information

On October 5, 2005 the jury, in the matter brought by Abdel Hakim Labidi (one of our former employees) against the Company, ruled in favor of Dr. Labidi determining that the Company converted certain biological research materials owned by Dr. Labidi, and the Company committed theft of biological materials owned by Dr. Labidi. The jury awarded Dr. Labidi a total of $600,000. The Company is reviewing this matter to determine the validity of appealing the decision of the jury. 

Item 6. Exhibits

  Exhibit 31.1 Certification by John Paganelli, Chief Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended September 30, 2005.
     
  Exhibit 31.2
Certification by David Hostelley, Chief Financial Officer, pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended September 30, 2005.
     
  Exhibit 32.1 Certification by John Paganelli, Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended September 30, 2005.
     
  Exhibit 32.2 Certification by David Hostelley, Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended September 30, 2005.

 
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
 
eXegenics Inc.    
   
Date: November 11, 2005
 		  
 		  
 
    /s/ John A. Paganelli 
 
John A. Paganelli
Chairman of the Board,
Chief Executive Officer (Interim)
     
   
 
 		  
 		  
 
    /s/ David Hostelley 
 
David Hostelley
Chief Financial Officer
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EXHIBIT INDEX

EXHIBIT NUMBER DESCRIPTION
   
Exhibit 31.1 Certification by John A. Paganelli, Chief Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended September 30, 2005.
   
Exhibit 31.2 Certification by David Hostelley, Chief Financial Officer, pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended September 30, 2005.
   
Exhibit 32.1 Certification by John A. Paganelli, Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended September 30, 2005.
 
Exhibit 32.1
Certification by John A. Paganelli, Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended September 30, 2005.
 
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