SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
-----------
Quarterly Report
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
For the period ended September 30, 2002
PANAMED CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 0-17268 77-0583516
------------------------------- ------------- -------------------
(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File Number) Identification No.)
PanaMed Corporation
127 West Main Street, Second Floor
Lebanon, Indiana 46052
(Address of principal executive office)
Issuer's telephone number: 800-388-0750
The issuer (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 issuer was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
On November 7, 2002, 25,088,645 shares of the issuer's common stock were
outstanding.
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered to Section 12(g) of the Act:
Common Stock, par value $.0001 per share
(Title of Class)
1
Table of Contents
Part I. Financial Information 3
Item No. 1. Financial Statements 3
Item No. 2 Management's Discussion and Analysis 17
Part II Other information 28
Item No. 6. Exhibits and Reports on Form 8-K 28
Exhibits 28
Reports on Form 8-K 28
Signatures 28
2
Item 1. Financial Statements
PANAMED CORPORATION
(A development stage company)
BALANCE SHEET
SEPTEMBER 30, 2002 AND DECEMBER 31, 2001
ASSETS
September 30, December. 31,
2002 2001
(Unaudited)
-------- --------
CURRENT ASSETS:
Cash $ 9,387 $ 106
Prepaid expenses -- 21,000
-------- --------
Total current assets 9,387 21,106
-------- --------
PROPERTY AND EQUIPMENT (net of accumulated
depreciation of $732 and $0, respectively) 5,371 --
-------- --------
OTHER ASSETS:
Investment 104,798 176,783
Notes receivable - related parties -- 29,593
-------- --------
104,798 206,376
TOTAL ASSETS $119,556 $227,482
======== ========
The accompanying notes are an integral part of the financial statements.
3
PANAMED CORPORATION
(A development stage company)
BALANCE SHEET
SEPTEMBER 30, 2002 AND DECEMBER 31, 2001
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
2002 2001
----------- -----------
(Unaudited)
CURRENT LIABILITIES:
Accounts payable $ 47,465 $ 5,887
License fee payable 54,600 --
Notes payable 228,000 7,400
Other current liabilities 18,740 20,000
----------- -----------
Total current liabilities 348,805 33,287
----------- -----------
OTHER LIABILITIES -- --
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock - $0.01 and $ 0.0001
par value, respectively Authorized -
100,000,000 shares Issued and
outstanding - 25,026,245 and
19,750,000 shares, respectively 233,925 1,975
Additional paid-in capital 4,314,646 255,987
Accumulated deficit during development stage (4,777,820) (63,767)
----------- -----------
Total (229,249) 194,195
Less subscriptions receivable -- --
----------- -----------
Total stockholders' equity (229,249) 194,195
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $ 119,556 $ 227,482
=========== ===========
The accompanying notes are an integral part of the financial statements.
4
PANAMED CORPORATION
(A development stage company)
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND
FOR THE PERIOD FROM AUGUST 21, 2001 (DATE OF INCEPTION)
THROUGH SEPTEMBER 30, 2002
(Unaudited)
Period from
August 21, 2001
3 months ended 9 months ended (Inception) to
September 30, 2002 September 30, 2002 September 30, 2002
(Unaudited) (Unaudited) (Unaudited)
----------- ----------- -----------
SALES $ -- $ -- $ --
COST OF SALES -- -- --
----------- ----------- -----------
Gross margin -- -- --
----------- ----------- -----------
OPERATING EXPENSES 595,544 4,205,449 4,259,798
----------- ----------- -----------
Loss from operations (595,544) (4,205,449) (4,259,798)
----------- ----------- -----------
OTHER INCOME (EXPENSES):
Miscellaneous income -- 1,461 1,461
Acquisition expense -- (445,000) (445,000)
Loss on sale of investment -- (29,240) (29,240)
Loss on investment -- (16,125) (25,543)
Interest expense (18,400) (18,900) (18,900)
----------- ----------- -----------
Total other inc.(Exp) (18,400) (507,804) (517,222)
----------- ----------- -----------
Net loss before income taxes (613,944) (4,713,253) (4,777,020)
----------- ----------- -----------
PROVISION FOR INCOME TAXES -- (800) (800)
----------- ----------- -----------
NET INCOME (LOSS) $ (613,944) $(4,714,053) $(4,777,820)
=========== =========== ===========
NET LOSS PER SHARE
Basic and diluted $ (.025) $ (.206) $ (.229)
The accompanying notes are an integral part of the financial statements.
5
PANAMED CORPORATION
(A development stage company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND
FOR THE PERIOD FROM AUGUST 21, 2001 (DATE OF INCEPTION)
THROUGH SEPTEMBER 30, 2002
(Unaudited)
Deficit
Accumulated
Additional During The Total
Common Stock Paid-in Development Stockholders'
Shares Amount Capital Stage Equity .
---------- ---------- ---------- ---------- ----------
Balance, August 21, 2001 $ -- $ -- $ -- $ -- $ --
Issuance of stock for cash
September 4, 2001
($0.0001 per share) 17,610,000 1,761 -- -- 1,761
Issuance of stock for cash
September 19, 2001
($0.50 per share) 60,000 6 29,994 -- 30,000
Issuance of stock for stock
October 15, 2001
($0.931 per share) 2,000,000 200 186,001 -- 186,201
Issuance of stock for cash
October 24, 2001
($0.50 per share) 20,000 2 9,998 -- 10,000
Issuance of stock for cash
October 30, 2001
($0.50 per share) 60,000 6 29,994 -- 30,000
Net loss -- -- -- (63,767) (63,767)
---------- ---------- ---------- ---------- ----------
Balance, Dec. 31, 2001 19,750,000 1,975 255,987 (63,767) 194,195
Issuance of stock for cash
February 20, 2002
($1.00 per share) 63,380 634 62,746 -- 63,380
Issuance of stock for services
February 20, 2002
($1.00 per share) 126,620 1,266 125,354 -- 126,620
The accompanying notes are an integral part of the financial statements.
6
PANAMED CORPORATION
(A development stage company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND
FOR THE PERIOD FROM AUGUST 21, 2001 (DATE OF INCEPTION)
THROUGH SEPTEMBER 30, 2002
(Unaudited)
Deficit
Accumulated
Additional During The Total
Common Stock Paid-in Development Stockholders'
Shares Amount Capital Stage Equity .
---------- ---------- ---------- ---------- ----------
Issuance of stock for cash
March 1, 2002
($0.80 per share) 60,000 600 47,400 -- 48,000
Issuance of stock for cash
received in prior period
March 1, 2002
($1.00 per share) 20,000 200 19,800 -- 20,000
Issuance of stock for cash
March 1, 2002
($1.00 per share) 312,000 3,120 308,880 -- 312,000
Issuance on subscription
March 1, 2002
($1.00 per share) 50,000 500 49,500 -- 50,000
Issuance of stock for services
March 1, 2002
($1.00 per share) 2,715,000 27,150 2,687,850 -- 2 ,715,000
Acquisition of Micron
Solutions, Inc., a public shell
March 1, 2002
($0.01 par value) 396,520 3,965 4,542 -- 8,507
Change in par value of
common stock
March 1, 2002
(from $0.0001 to $0.01
per share) -- 193,050 (193,050) -- --
Issuance of stock for cash
March 18, 2002
($1.00 per share) 132,500 1,325 131,175 -- 132,500
The accompanying notes are an integral part of the financial statements.
7
PANAMED CORPORATION
(A development stage company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND
FOR THE PERIOD FROM AUGUST 21, 2001 (DATE OF INCEPTION)
THROUGH SEPTEMBER 30, 2002
(Unaudited)
Deficit
Accumulated
Additional During The Total
Common Stock Paid-in Development Stockholders'
Shares Amount Capital Stage Equity .
---------- ---------- ---------- ---------- ----------
Issuance of stock for services
March 18, 2002
($1.00 per share) 109,000 1,090 107,910 -- 109,000
Cancellation of stock for cash
March 27, 2002
($0.0001 per share) (250,000) (25) -- -- (25)
Net loss -- -- -- (3,629,103) (3,629,103)
---------- ---------- ---------- ---------- ----------
Balance, March 31, 2002 23,485,020 234,850 3,608,094 (3,692,870) 150,074
(Unaudited)
Cancellation of stock for services
April 1, 2002
($1.00 per share) (30,000) (300) (29,700) -- (30,000)
Cancellation of stock for services
April 1, 2002
($0.01 per share) (200,000) (2,000) -- -- (2,000)
Issuance of stock for cash
May 22, 2002
($1.00 per share) 20,000 200 19,800 -- 20,000
Issuance of stock for cash
received in prior period
May 22, 2002
($1.00 per share) 21,000 210 20,790 -- 21,000
Issuance of stock for cash
received in prior period
May 22, 2002
($1.00 per share) 10,000 100 9,900 -- 10,000
Issuance of stock for cash
May 31, 2002
($1.00 per share) 11,000 110 10,890 -- 11,000
Issuance of stock for cash
received in prior period
May 31, 2002
($1.00 per share) 20,500 205 20,295 -- 20,500
The accompanying notes are an integral part of the financial statements.
8
PANAMED CORPORATION
(A development stage company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND
FOR THE PERIOD FROM AUGUST 21, 2001 (DATE OF INCEPTION)
THROUGH SEPTEMBER 30, 2002
(Unaudited)
Deficit
Accumulated
Additional During The Total
Common Stock Paid-in Development Stockholders'
Shares Amount Capital Stage Equity .
---------- ---------- ---------- ---------- ----------
Issuance of stock for cash
June 11, 2002
($1.00 per share) 60,000 600 59,400 -- 60,000
Issuance of stock for cash
received in prior period
June 12, 2002
($1.00 per share) 8,450 85 8,365 -- 8,450
Net loss -- -- -- (471,006) (471,006)
Balance, June 30, 2002 23,405,970 234,060 3,727,834 (4,163,876) 150,074
(Unaudited)
Issuance of stock for cash and services
July 17, 2002
($.0001 per share) 50,000 5 43,520 -- 43,525
Cancellation of stock for services
August 13, 2002
($0.01 per share) (30,000) (300) (49,700) -- (50,000)
Issuance of stock for cash
August 13, 2002
($.0001 per share) 232,200 23 64,277 -- 64,300
Issuance of stock for cash
September 12, 2002
($.0001 per share) 1,368,075 137 528,715 -- 528,715
Net loss -- -- -- (613,944) (613,944)
Balance, Sept. 30, 2002 $ 25,026,245 $ 233,925 $ 4,314,646 $ (4,777,820) $ (229,249)
(Unaudited)
The accompanying notes are an integral part of the financial statements.
9
PANAMED CORPORATION
(A development stage company)
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND
FOR THE PERIOD FROM AUGUST 21, 2001 (DATE OF INCEPTION)
THROUGH SEPTEMBER 30, 2002
(Unaudited)
Period from
August 21, 2001
9 months ended (Inception) to
September 30, September 30,
2002 2002
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(4,717,053) $(4,777,820)
Adjustments to reconcile net loss to net cash used
in operating activities -
Common stock issued for services 3,360,452 3,360,452
Depreciation 732 732
Loss on investment 16,125 25,543
Net change in operating assets and liabilities 138,684 143,572
--------- ---------
Net cash provided by
(used in) operating activities (1,198,060) (1,247,521)
--------- ---------
NET CASH PROVIDED BY INVESTING ACTIVITIES 79,347 49,754
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in bank overdraft 24,194 24,194
Proceeds from issuance of common stock 775,800 847,560
Proceeds from deposits on common stock 107,400 107,400
Other financing activities 220,600 228,000
--------- ---------
Net cash provided by financing activities 1,127,994 1,207,154
--------- ---------
NET CHANGE IN CASH 9,281 --
CASH, BEGINNING OF PERIOD 106 --
--------- ---------
CASH, END OF PERIOD $ 9,387 $ --
--------- ---------
The accompanying notes are an integral part of the financial statements.
10
PANAMED CORPORATION
(A Development stage company)
NOTES TO FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2002 AND FOR THE PERIOD FROM
AUGUST 21, 2001 (DATE OF INCEPTION) THROUGH JUNE 30, 2002
(Unaudited)
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In the opinion of management, the accompanying unaudited financial
statements of PanaMed Corporation (the "Company") include all
adjustments (consisting only of normal recurring adjustments)
considered necessary to present fairly its financial position as of
September 30, 2002, the results of operations for the three and six
months ended June 30, 2002 and the period from August 21, 2001 (date
of inception) through September 30, 2002, and cash flows for the nine
months ended September 30, 2002 and the period from date of inception
through September 30, 2002. The results of operations are not
necessarily indicative of the results to be expected for the full
year or for any future period. The information included in this Form
10-QSB should be read in conjunction with Management's Discussion and
Analysis and financial statements and notes thereto included in the
Company's 2001 Form 10-KSB and 8-K and the March 31, 2002 and June
30, 2002 Form 10-QSB.
a) Equity Method of Accounting for Investments
Investment in Quintek Technologies, Inc. in which the
Company has a 3.5% interest, is carried at cost, adjusted
for the Company's proportionate share of undistributed
earnings or losses.
b) Property, Equipment, and Depreciation
Property is recorded at cost. Depreciation of equipment is
provided using the straight line and accelerated methods
over the following estimated useful lives:
Estimated
Asset Classification Useful Life
-------------------- -----------
Computer equipment 3-5 Years
Expenditures for repairs and maintenance are charged
against operations when incurred.
2 - GOING CONCERN
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which
contemplate continuation of the Company as a going concern; however,
the Company has sustained substantial operating losses. In view of
this matter, realization of a major portion of the assets in the
accompanying balance sheet is dependent upon continued operations of
the Company, which in turn is dependent upon the Company's ability to
meet its financing requirements, and the success of its future
operations.
11
PANAMED CORPORATION
(A Development stage company)
NOTES TO FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2002 AND FOR THE PERIOD FROM
AUGUST 21, 2001 (DATE OF INCEPTION) THROUGH JUNE 30, 2002
(Unaudited)
Note 2 - GOING CONCERN (Continued)
Management believes the Company's current cash and cash generated
from operations may not be sufficient to meet its anticipated cash
needs for the year ended December 2002. Accordingly, the Company will
require an additional capital infusion or revenues from sales to
continue operations. Management is not certain if additional capital
or sales proceeds will become available. If unsuccessful in obtaining
an additional capital infusion, the Company may be required to cease
operations.
3 - NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards ("SFAS") No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," is
effective for fiscal years beginning after December 15, 2001, and
interim periods within those fiscal years, with early application
encouraged. SFAS 144 supersedes Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be disposed of" and amends
Accounting Principles Board Opinion No. 30, "Reporting Results of
Operations - Reporting the Effects of Disposal of a Segment of a
Business." This statement develops one accounting model (based on the
model in SFAS 121) for long-lived assets to be disposed of, expands
the scope of discontinued operations and modifies the accounting for
discontinued operations. This standard did not have a material impact
on our financial position, results of operations or cash flows for
the nine- or three-month periods ended September 30, 2002.
Statement of Financial Accounting Standards No. 143, "Accounting for
Asset Retirement Obligations," addresses financial accounting and
reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement cost. This
statement is effective for fiscal years beginning after June 15,
2002. We have adopted this statement, which did not have a material
impact on our financial position, results of operations or cash flows
for the nine- or three-month periods ended September 30, 2002.
Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets," addresses the financial accounting and
reporting for acquired goodwill and other intangible assets.
Amortization of goodwill, including goodwill recorded in past
business combinations, will cease upon adoption of this statement.
This statement is effective for fiscal years beginning after December
15, 2001. Effective January 1, 2002, we adopted SFAS 142. Other
provisions of this statement require that goodwill be measured
periodically for impairment. We currently do not have goodwill
recorded subject to potential goodwill impairment.
Statement of Financial Accounting Standards No. 141, "Business
Combinations," requires all business combinations initiated after
September 30, 2001 to be accounted for under the purchase method of
accounting. SFAS No. 141 also sets forth guidelines for applying the
purchase method of accounting in the determination of intangible
assets, including goodwill acquired in a business combination, and
expands financial disclosures concerning business combinations
consummated after June 1, 2001. Management does not believe that
this statement will have a material effect on our financial
statements.
12
PANAMED CORPORATION
(A Development stage company)
NOTES TO FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2002 AND FOR THE PERIOD FROM
AUGUST 21, 2001 (DATE OF INCEPTION) THROUGH JUNE 30, 2002
(Unaudited)
Note 4 - NOTES RECEIVABLE - RELATED PARTIES
September 30, December 31,
2002 2001
------- -------
(Unaudited)
Note receivable from Thomas Sims, President
and Chairman of the Board, due on demand,
interest at the applicable federal rates ("AFR") $ -- $ 5,536
Note receivable from Phillip Butler, CEO,
due on demand, interest at the applicable
federal rates ("AFR") -- 24,057
------- -------
$ -- $29,593
======= =======
5 - INVESTMENT
The investment held by the Company consists of a 3.5% ownership
interest in Quintek Technologies, Inc., a California corporation
related by common management. The investment is accounted for on the
equity method base upon the latest financial information available
from Quintek as of June 30, 2002.
Pertinent financial information for the Company as of June 30,
2002 is as follows:
June 30, 2002 December 31, 2001
------------- -----------------
(Unaudited)
Balance sheet:
Assets $ 394,344 $ 527,560
Liabilities $1,216,036 $1,300,565
Deficit (821,692) (773,005)
June 30, 2002 December 31, 2001
------------- -----------------
(Unaudited)
Net Equity $ 390,344 $ 527,560
Income statement:
Revenue 242,677 145,629
Expenses 642,176 (316,860)
Net loss (399,499) (171,231)
Weighted average ownership 4.04% 5.50%
Company's share of net loss $ (16,140) $ (9,418)
13
PANAMED CORPORATION
(A Development stage company)
NOTES TO FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2002 AND FOR THE PERIOD FROM
AUGUST 21, 2001 (DATE OF INCEPTION) THROUGH JUNE 30, 2002
(Unaudited)
Note 6 - NOTES PAYABLE
September 30, 2002 December 31, 2001
----------------- -----------------
(Unaudited)
Note payable to United Pentecostal Assembly of Bellflower, due on
December 6, 2002, interest at 6% per annum, with150,000 shares
of common stock as collateral $100,000 $ --
Note payable to Dr. G Hogenson, due on
August 20, 2002, interest at 18% per annum 100,000
Note payable to Information Imaging Corp , due
on August 24, 2002, with loan fee of $5,000 13,000
Note payable to Kent Freeman, due on January
9, 2003, with loan fee of $2,500 5,000
Note payable to John Badger, due on September
21, 2002, interest at 6% per annum 10,000 --
----------------- -----------------
$228,000 $ --
----------------- -----------------
7 - RENTAL AND LEASE INFORMATION
We lease certain office facilities and equipment. Rental expense for
the three and nine months ended September 30, 2002 were $3,245 and
$26,484, respectively.
At September 30, 2002, we were committed to minimal rental payments
under certain noncancellable operating leases. As of September 30,
2002, the minimum future rental commitments for each of the
succeeding five years subsequent to September 30, 2002 were as
follows:
2003 $ 29,948
2004 29,342
2005 29,040
2006 27,830
2007 -
Thereafter -
--------
Total $116,160
14
PANAMED CORPORATION
(A Development stage company)
NOTES TO FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2002 AND FOR THE PERIOD FROM
AUGUST 21, 2001 (DATE OF INCEPTION) THROUGH JUNE 30, 2002
(Unaudited)
Note 8 - COMMITMENTS AND CONTINGENCIES
As of September 30, 2002, the Company has an outstanding note payable
to United Pentecostal Assembly of Bellflower ("United"), as shown in
Note 5. The Company issued 150,000 shares of common stock as
collateral on the note. If the Company defaults on the note, United
has the option of foreclosing on those shares. At the date of
issuance of the note, the fair market value of the shares was
$327,000. If the Company defaults on the note there may be a charge
against income to the extent the value of the shares exceeds the note
balance.
9 - NET LOSS PER SHARE
Basic net loss per share is based on the weighted average number of
common shares outstanding of 24,216,208 for the three months ended
September 30, 2002. The weighted average number of common shares
outstanding for the nine months ended September 30, 2002 was
22,851,473. The weighted average number of common shares outstanding
for the period from August 21, 2001(date of inception) through
September 30, 2002 was 20,891,457. The basic and diluted earnings per
share calculations are the same because the Company has no dilutive
securities outstanding.
10 -LICENSING AGREEMENT
Effective May 13, 2002, the Company entered into a licensing
agreement with Havel Investments, Ltd. ("Havel") whereby the Company
has the exclusive right to market Havel's therapeutic product for
treatment of HIV/AIDS in Ivory Coast Africa. The Company must remit
to Havel 66.7% of all proceeds from the sale of the Company's stock
up to a maximum of $22 million. Until the full amount of expansion
fee is paid, the Company's rights are limited to testing and
distribution only within the country of Ivory Coast.
11 -PURCHASE AGREEMENT
As of March 1, 2002, the Company, then known as Micron Solutions,
Inc. ("Micron"), entered into an Exchange Agreement with PanaMed,
Inc., a California corporation, and all of its shareholders, under
which; (a) Micron and its existing shareholders were to effect a one
for ten reverse stock split of the 3,965,200 shares of its common
voting stock then issued and outstanding; (b) the PanaMed Inc.
shareholders were then to transfer and assign their PanaMed shares to
Micron, thereby causing PanaMed Inc. to become its wholly owned
subsidiary, and in exchange such shareholders were to receive an
identical number of Micron's authorized but previously unissued
shares of voting common stock, $.01 par value; (c) Micron's board of
directors and officers were to resign and be replaced by PanaMed Inc.
nominees; (d) Micron was then to change its name to PanaMed
Corporation; and (e) certain of Micron's former management were to be
engaged as consultants to the Company, in connection with which
engagement they were to receive $225,000 in cash payments and 210,000
Company shares. Such transaction was concluded as of that same date,
resulting in the receipt by the former PanaMed shareholders of
23,121,000 Company shares, or 98% of its equity ownership. Micron's
assets and liabilities, as distinguished from those of the Company
being reported herein as of September 30, 2002 and December 31, 2001,
were immaterial, and have not been separately identified. Its audited
balance sheet as of December 31, 2001, does appear, however, in
Micron's Form 10-KSB, as filed with the Securities and Exchange
Commission on April 16, 2002.
15
PANAMED CORPORATION
(A Development stage company)
NOTES TO FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2002 AND FOR THE PERIOD FROM
AUGUST 21, 2001 (DATE OF INCEPTION) THROUGH JUNE 30, 2002
(Unaudited)
Note 12 -STATEMENT OF CASH FLOWS - SUPPLEMENTAL DISCLOSURES
The net change in operating assets and liabilities shown on the
statement of cash flows consists of the following:
Period from
August 21, 2001
9 months ended (Inception) to
September 30, September 30,
2002 2002
--------- ----------
(Increase) Decrease:
Prepaid expenses $ 21,000 $ -
Increase (Decrease):
Accounts payable 47,465 47,465
Other current liabilities 70,219 96,107
Common stock payable - -
--------- ----------
$138,684 $143,572
========= ==========
For the period from August 21, 2001 (date of inception) to September
30, 2002, the Company had non-cash financing transactions related to
the issuance of common stock for $50,000 and related to a stock swap
transaction for $186,201. For the nine months ended September 30,
2002, the Company had non-cash financing transactions related to the
issuance of common stock for $50,000.
13 -SUBSEQUENT EVENTS
Subsequent to September 30, 2002 the Company issued 12,400 shares of
common stock for cash at $.001 per share; shares as loan collateral;
and 50,000 shares as compensation for services rendered.
16
Item 2. Management's Discussion and Analysis
1.1 Results of Operations
GENERAL
Statements contained herein that are not historical facts are forward-looking
statements as defined by the Private Securities Litigation Reform Act of 1995.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, the forward-looking statements are
subject to risks and uncertainties that could causes actual results to differ
from those projected. The Company cautions investors that any forward-looking
statements made by the Company are not guarantees of future performance and that
actual results may differ materially from those in the forward-looking
statements. Such risks and uncertainties are described below.
PanaMed is primarily engaged in the bio-tech industry, with a primary focus on
testing and distributing a patented line of therapeutic products developed,
manufactured and supplied by MSL, Inc. and Havel Investments, Limited. MSL, Inc.
is the Research and Development and manufacturing aspect of the business and
Havel Investments, Ltd is the business management side of the technology. These
two entities work in concert and hereafter will be collectively referred to as
"Supplier". PanaMed currently has an exclusive license to test and distribute
"Viro-Net" in the African country of Ivory Coast. Viro-Net is the name given to
the Supplier's product for treating HIV/AIDS, Herpes Simplex 1, Herpes Simplex
2,and Shingles. The descriptions herein will be oriented primarily towards the
treatment of HIV/AIDS. Further business ventures of PanaMed Corporation are
described below.
Viro-Net can be described as an immuno-modulating biological compound which
signals the body's own immune system to fight off the virus by blocking the
receptors of healthy cells, boosting the immune system, and halting the
replication of viral cells. PanaMed believes that Viro-Net may provide an
effective means to reverse the HIV virus to a non-detect level while providing a
number of advantages over conventional HIV/AIDS medication. The expected
benefits include: simple to administer (sublingual application), minimal side
effects, effective against different HIV viral derivatives, cost effective,
non-patient specific and suitable for large scale treatment programs. These
expectations are based primarily on theory and results from the treatment of 3
AIDS patients in an uncontrolled environment.
In order to demonstrate the effectiveness of Viro-Net on a larger group of
patients and under a controlled environment, PanaMed initiated a residential
treatment program for 21 HIV/AIDS patients on June 14, 2002 in the country of
Ivory Coast, Africa. The African patients are comprised of both males and
females, with ages ranging from 4 to 43 years old and health conditions ranging
from early stage to late stage HIV/AIDS. The patients are housed in a clean
facility where their diet, medical treatments, and life style can be carefully
controlled and monitored. A blood panel was taken on all patients prior to
starting treatment in order to obtain a baseline on HIV levels and CD4 counts.
An experienced physician who will visit the patients each day to monitor/record
progress and resolve medical problems is supervising the program. One or more
nurses will be available at the treatment facility 24 hours per day to
administer Viro-Net treatments and care for the patients. Also, an Administrator
is working the treatment program on a full-time basis. Blood samples are taken
at regular intervals and compared to the baseline blood panels in order to
monitor patient progress. The blood measurement and analysis will be performed
at a certified clinical laboratory under the supervision of a highly competent
and experienced scientist.
17
RISK FACTORS
PanaMed Corp. acknowledges the following risk factors and addresses these
factors below.
1. General Economic Conditions
The financial success of PanaMed may be sensitive to adverse changes in general
economic conditions, such as inflation, unemployment, interest rates and other
factors which influence public companies. These changes could cause the cost of
supplies, labor, and other expenses to rise faster than PanaMed can raise
prices. Such changing conditions also could reduce demand in the market place
for PanaMed's products. PanaMed has no control over any of these changes.
2. Development Stage Company
PanaMed has limited operating history, has not generated any sales revenues or
profits, has no products which can be sold to generate revenues or profits, is
in the development stage, and its operations are subject to all of the risks
inherent in a growing business enterprise, including the likelihood of continued
operating losses. The likelihood of PanaMed's success must be considered in
light of the problems, expenses, difficulties, complications and delays
frequently encountered in connection with the growth of an existing business,
development of new products and channels of distribution, and the competitive
and regulatory environment in which PanaMed will operate. Prior to acceptance,
the Company's products must undergo testing, which may never prove to be
successful. Even if the testing is successful, the Company must then seek
acceptance by the African people, government agencies, and funding sources prior
to distribution. If the products are accepted, there is no assurance that funds
will be available to purchase the products. Until the company is in a position
to generate revenues, it will be totally dependent on investment capital to
sustain internal operations, fund its treatment program in Africa, and expand
the rights for distribution as required in its agreement with the Suppliers. If
the company is unable to generate revenues or profits, there may be no means for
investors to ever recoup their investment or receive any type of return on their
investment.
PanaMed management has no experience in manufacturing or procuring products in
commercial quantities or in selling pharmaceutical products, and has only
limited experience in negotiating, establishing and maintaining strategic
relationships. PanaMed has no experience with respect to the launch of a
commercial product. PanaMed's ability to manage these trying circumstances will
require continued improvement and expansion of management, operational, and
financial systems and controls.
3. Explosive Growth
In the event that the therapeutics prove to be successful, then the pent up and
dramatic demand for such a product as "Viro-Net" will require the expansion of
production, management, operations, capital requirements and other factors
related to explosive growth. If management is unable to manage growth
effectively, the resulting business and financial condition could be materially
harmed. In addition, if rapid growth occurs, it could strain operational,
managerial and financial resources.
4. Dilution
PanaMed will attempt to raise additional equity capital, conduct offerings,
acquire technology or other companies, and/or establish, at some future date,
stock incentive and stock option plans for its employees, directors and
advisors. Each of these events will have a dilutive effect on the Shares and
could substantially reduce the value of the shares.
18
5. No Substantial Tax Benefits
Potential participants should evaluate the purchase of PanaMed's stock only in
economic terms. Any tax benefits that may result from the ownership of PanaMed's
stock is minimal, and should not be a determining factor in their decision to
participate.
6. Competition
PanaMed is faced with the possibility of intense competition from a wide variety
of pharmaceutical companies. Competitors include; major, multinational
pharmaceutical and chemical companies, specialized biotechnology firms and
universities and other research institutions. Many of these competitors have
greater financial and other resources, larger research and development staffs
and more effective marketing and manufacturing organizations, than PanaMed. In
addition, academic and government institutions have become increasingly aware of
the commercial value of their research findings. These institutions are now more
likely to enter into exclusive licensing agreements with commercial enterprises,
including our competitors, to market commercial products. Smaller companies may
also prove to be significant competitors, particularly through collaborative
arrangements with large pharmaceutical and established biotechnology companies.
Many of these competitors have significant products that have been approved or
are in development and operate large, well-funded research and development
programs.
PanaMed's competitors may succeed in developing or licensing technologies and
products that are more effective or less costly than the products developed by
the Supplier. The competitors may succeed in obtaining FDA or other regulatory
approvals for product candidates before PanaMed or our Supplier does. Products
resulting from the Supplier's research and development efforts, if approved for
sale, may not compete successfully with our competitors' existing or future
products.
7. Dependence On Key Personnel
PanaMed's success depends to a considerable degree on the continued services of
its executive management staff, Phillip Butler (President & CEO), Seth Cayer
(Executive VP of International Sales) and Todd Davis (Executive VP of Corporate
Development). The loss of one or more of these people could have a materially
adverse effect on the future of PanaMed. In addition, the loss of other key
management personnel or the failure to attract and retain such personnel could
have a material adverse effect on PanaMed's business, operations, and financial
condition.
8. Future Financing Requirements
PanaMed will require additional capital in order to operate its business
efficiently and to implement its treatment programs, internal operations, sales,
and/or other aspects of its business plan. PanaMed plans to raise additional
capital to meet such needs in either the form of a private placement of its
securities or by using convertible debt instruments or by other means of
financing. There can be no assurance that PanaMed will be able to raise
additional funds necessary to meet such needs or that such funds, if available,
can be obtained on terms acceptable to PanaMed. The failure to raise additional
capital on terms acceptable to PanaMed could force PanaMed to alter its business
strategy or close operations.
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9. Majority Control by Executive Officers, Directors and Major Shareholders
PanaMed's officers, directors and major shareholders beneficially own a
significant portion of the outstanding Common Stock of the company. If the
executive officers, directors and major shareholders act collectively, assuming
they continue to maintain ownership of all of their shares, there is a
substantial likelihood that such holders will be able to elect all of the
directors of PanaMed and determine the outcome of all corporate actions
requiring the approval of the holders of the majority of shares, such as mergers
and acquisitions.
Two principal stockholders, Phillip J. Butler, Tom Sims, and their affiliates
own or control over 51% of the outstanding shares of stock in the corporation.
Some or all of these stockholders, acting in concert, would be able to elect the
Board of Directors and take corporate actions requiring stockholder approval,
such as recapitalization and/or other decisions that would dictate the direction
and policies of the company. Such concentration of ownership could have the
effect of delaying, deterring or preventing a change in control of the company
that might otherwise be beneficial to the other stockholders.
10. Ownership of Quintek, Inc. shares.
PanaMed, in its original capitalization entered into a stock-swap arrangement
with Quintek, Inc. PanaMed currently owns approximately 1.5 million shares of
Quintek. Quintek, Inc. and its President are under SEC investigation and/or
possible sanctions for disseminating a press release that contained some
erroneous information. PanaMed is considering the best possible means to either
divest itself of the Quintek stock or to otherwise deal with this association
that could contain negative connotations for the PanaMed Corporation
stockholders.
11. Future Dilution and Anti-Takeover Issues
PanaMed's Articles of Incorporation authorizes the issuance of 100,000,000
shares of Common Stock and 10,000,000 shares of Preferred stock. Of this,
25,176,245 shares of common stock and 0 shares of Preferred stock are issued and
outstanding as of November 10, 2002.
The Board of Directors of PanaMed ("The Board of Directors") has the power to
issue substantial amounts of new stock or distribute substantial amounts of
pre-issued stock without shareholder approval. As such, PanaMed may issue
substantial amounts of new stock or distribute substantial amounts of pre-issued
stock in connection with this offering, future financing plans, or acquisitions.
To the extent that additional shares of Common Stock are issued, dilution of the
interests of PanaMed's stockholders will occur. In addition, the issuance of
Preferred Stock and Common Stock could be utilized, under certain circumstances,
as a method of discouraging, delaying or preventing a change in the control of
PanaMed. PanaMed currently has no commitments to issue any additional shares of
Preferred Stock.
Certain provisions of PanaMed's Certificate of Incorporation, Bylaws and
California law may delay, defer or prevent a change in control of PanaMed and
may adversely affect the voting and other rights of the holders of Common Stock.
20
12. Limitations of Liability; Indemnification
PanaMed's Articles of Incorporation and Bylaws contain provisions that limit the
liability of directors for monetary damages and provides for indemnification of
officers and directors under certain circumstances. Such provisions may
discourage stockholders from initiating lawsuits against directors for breach of
fiduciary duty and may also have the effect of reducing the likelihood of
derivative litigation against directors and officers even though such action, if
successful, might otherwise have benefited PanaMed's stockholders. In addition,
a stockholder's investment in PanaMed may be adversely affected to the extent
that PanaMed pays such costs of settlement and damage awards against PanaMed's
officers or directors pursuant to such provisions.
13. Conflicts Of Interest
The Board of Directors of PanaMed Corporation is subject to various conflicts of
interest arising out of their relationship with PanaMed. As an example, officers
and directors of PanaMed may form other companies to engage in activities
similar to those of PanaMed. Should such additional activities take place, it is
possible that investors in PanaMed will not be allowed to share in the income,
assets or other benefits of such additional activities. The officers and
directors of PanaMed will devote such time as they deem necessary to the
business and affairs of PanaMed. Officers and directors of PanaMed are required
by law to deal fairly and in good faith with PanaMed and they intend to do so.
However, in any Company there may be certain inherent conflicts between the
officers/directors and investors that cannot be fully mitigated.
Because the officers and directors may engage in operations independent of
PanaMed, some of these activities may conflict with those of PanaMed. The
officers and directors thus may be placed in the position where their decisions
could favor their own operations, or other operations with which they might be
associated, over those of PanaMed. The officers and directors of PanaMed are
free to engage generally in business for their own account in addition to any
participation arising out of PanaMed's activities.
14. Dividends On Stock
No dividends have ever been paid on PanaMed's stock and no dividends will be
paid on PanaMed's stock until PanaMed has been able to generate sufficient
profit from product sales, as determined by the Board of Directors, to warrant
distribution of dividends. Accordingly, there can be no assurance that any
dividends will ever be distributed to shareholders.
15. Disposition Of Stock
There may be adverse tax consequences to an Investor upon any disposition of
their Stock.
16. Availability To Acquire Materials
PanaMed and the suppliers will need to utilize, on a continuing basis, numerous
suppliers to provide compounds, biologic agents and other materials for the
production of Viro-Net. The inability to obtain these materials from outside
suppliers could have a material impact on PanaMed's operations.
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17. Product Development
PanaMed has no internal capability to develop new products or improvements to
the existing products. As a result, PanaMed must rely on its partners and
suppliers to create new products and improve existing ones. There is no
assurance that these relationships will remain intact or that future development
efforts will be successful.
18. Distribution Agreement
PanaMed has an exclusive distribution agreement with the suppliers that allow
PanaMed to test and distribute the therapeutics for treatment of HIV/AIDS,
Herpes 1&2 and Shingles throughout the country of Ivory Coast, Africa. PanaMed
plans to conduct treatment programs in Ivory Coast and in the future in
Australia, New Zealand and throughout Africa. These endeavors will not only
demonstrate the effectiveness of the therapeutics and launch a distribution
program in accordance with the terms of the distribution agreement. The
distribution agreement contains a number of risk factors for PanaMed, including;
1) no indemnification of PanaMed for product failure or safety issues associated
with the product and 2) PanaMed must defend itself against any infringement
claims which are brought against PanaMed based on the use or sale of the
suppliers products.
19. Reporting of Results Risk
PanaMed has received initial blood test results and doctors notes on the initial
HIV/AIDS Ivorian patients discussed herein and have used these records as the
primary basis for establishing PanaMed as an operating public company and for
assisting us in the launching of the company. PanaMed is relying on data
provided by the attending physician and the laboratory in the Ivory Coast. While
we have complete confidence in the laboratory results sent to us, PanaMed
management has not witnessed the patient's recovery first hand.
20. Product Risk
Viro-Net is based on novel technology that is in the early stages of product
verification. Based on the testimony of lab technicians and treatment of three
individuals that where treated several years ago, there appears what might be
long-term recovery with no known side effects. Regarding the patients in Ivory
Coast, the long-term safety and effectiveness have not yet been determined.
PanaMed does not know how much it will cost or how long it will take before the
product is accepted, or if the appropriate regulatory officials and citizens in
Africa will ever accept the products. We do however, believe, based on the
preliminary results that Viro-Net will be accepted and endorsed. But we cannot
be sure, at this time, of the long-term safety and efficacy issues.
Also, there is no assurance that any sources will be available to purchase
PanaMed's products. There are a variety of different treatments for HIV/AIDS
available on the market today with well-financed companies and known
distribution channels. PanaMed will need to compete with these companies for any
funding that may be available.
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21. Product Testing
PanaMed, has commenced a treatment program in Ivory Coast to demonstrate the
safety and effectiveness of using Viro-Net for treating HIV/AIDS and related
disorders. PanaMed, prior to June of 2002 did not have any experience in
conducting treatment programs or clinical trials and we are relying on the
experience and knowledge and contacts of third party contractors to supervise
and manage the treatment programs. If successful, the company hopes to use the
results of the treatment programs to gain approval to distribute Viro-Net within
the Ivory Coast and possibly expand into other third-world countries. It would
not be possible to expand distribution to non third-world counties without
conducting expensive and time-consuming formal clinical trials and then
receiving FDA (or equivalent) approval based on the positive results of the
clinical trials. As of November 10, 2002, PanaMed does not have the financial
backing to conduct formal clinical trials. As a result, our potential sales
revenue will be limited to distribution in third world countries. There is
substantial risk in dealing with third world countries, in particular from the
standpoint of product distribution and collection of sales proceeds. If product
distribution and revenue collection efforts are unsuccessful, the company may be
required to cease operations.
22. Intellectual Property
Development and protection of the Suppliers intellectual property is critical to
PanaMed's success. If the Supplier does not adequately protect its intellectual
property, competitors may be able to manufacture and distribute the
technologies. PanaMed's success depends in part on the Suppliers ability to:
1) Obtain and maintain patent protection for its products or processes
both in the United States and other countries,
2) Protect their trade secrets
3) Prevent others from infringing on their proprietary rights.
Since patent applications are normally maintained in secrecy until patents are
issued, and since publication of discoveries in the scientific or patent
literature often lag behind actual discoveries, it cannot be certain that the
Supplier is the first to create the inventions to be covered by their patent
applications. The patent position of biopharmaceutical firms generally is highly
uncertain and involves complex legal and factual questions. The U.S. Patent and
Trademark Office has not established a consistent policy regarding the breadth
of claims that it will allow in biotechnology patents.
Patents issued to the Supplier may be challenged and subsequently narrowed,
invalidated or circumvented. Litigation, interference proceedings or other
governmental proceedings with respect to the Supplier's proprietary technologies
could result in substantial cost to PanaMed. Patent litigation is widespread in
the biotechnology industry, and any patent litigation could harm PanaMed's
business. Costly litigation might be necessary to protect the Supplier's patent
estate or to determine the scope and validity of the Intellectual Property and
the Supplier may not have the required resources to pursue such litigation. An
adverse outcome in litigation with respect to the validity of any of the
Suppliers patents could subject PanaMed to significant liabilities or require
PanaMed to cease in distributing a product or technology.
23
The supplier may need to acquire licenses to these patents or challenge the
validity of these patents and they may not be able to license any patent rights
on acceptable terms or successfully challenge such patents. The need to do so
will depend on the scope and validity of these patents and ultimately on the
final design or formulation of the products and services that were developed.
The Supplier may not be able to meet its obligations under those licenses that
they do enter into. If the Supplier where to enter into a license agreement for
intellectual property underlying any of its products, and that license were to
be terminated, PanaMed could lose our right to market and sell any products
based on the licensed technology.
23. Patent Infringement
Although may attempt to monitor the patent filings of its competitors and in an
effort to guide the design and development of its products to avoid
infringement, third parties may challenge the patents that have been issued to
the Suppliers. If a patent infringement claim is upheld and enforced this would
be detrimental to the Supplier and to PanaMed Corporation.
24. Technological Obsolescence.
The biotechnology and related pharmaceutical technology has undergone rapid and
significant change and PanaMed believes that the technologies associated with
biotechnology research and development will continue to develop rapidly.
PanaMed's success will depend largely on its ability to maintain a competitive
position with respect to these technologies. Any compounds, products or
processes that are developed may become obsolete before development expenses can
be recovered. There is no assurance that the Suppliers, although they are
developing new products and second and third generation of the existing
products, will have the facilities, technical staff, financial means, or desire
to develop any new products and/or associated improvements in the future.
25. Dependence on Third Parties to Manufacture the Products.
PanaMed does not have, and does not intend to develop, internal facilities for
the manufacture of any products for clinical or commercial production. Instead,
PanaMed plans to develop relationships with third-party manufacturing resources
and enter into collaborative arrangements with licensees or other parties that
have established manufacturing capabilities. PanaMed expects to be dependent on
such collaborators or third parties to supply products manufactured in
compliance with standards imposed by the FDA and foreign regulators. The
manufacturing facilities of contract manufacturers may not comply with
applicable manufacturing regulations of the FDA nor meet PanaMed's requirements
for quality, quantity or timeliness.
PanaMed has limited experience in marketing, sales and distribution of
pharmaceutical products, and does not intend to develop an extensive sales and
marketing infrastructure to distribute its products. We will rely heavily on
third parties such as qualified and experienced consultants, licensees,
collaborators, joint venture partners and/or independent distributors. Also,
PanaMed will not be able to control the resources and effort that a third party
will devote to marketing the products. If PanaMed is unable to maintain
relationships for the necessary marketing and sales capabilities, PanaMed may
fail to gain market acceptance for its products and revenues could be
substantially impaired.
24
26. Product Liability Insurance.
PanaMed does not have product liability or other professional liability
insurance. In the future, PanaMed may, in the ordinary course of business, be
subject to substantial claims by, and liability to, persons alleging injury as a
result of taking PanaMed products. If PanaMed is successful in having products
approved for distribution, the sale of such products would expose PanaMed to
additional potential product liability and other claims resulting from their
use. This liability may result from claims made directly by consumers or by
pharmaceutical companies or others selling such products. PanaMed does not
currently have any product liability or professional liability insurance, and it
is possible that PanaMed will not be able to obtain or maintain such insurance
on acceptable terms or that any insurance obtained will provide adequate
coverage against potential liabilities. PanaMed's inability to obtain sufficient
insurance coverage at an acceptable cost or otherwise to protect against
potential product liability claims could prevent or limit the commercialization
of any new products which become available to PanaMed. A successful product
liability claim in excess of PanaMed's insurance coverage could exceed PanaMed's
net worth.
While PanaMed desires to reduce its risk by obtaining indemnity undertakings
with respect to such claims from licensees and distributors, PanaMed may not be
able to obtain such undertakings.
27. Volatile Stock Prices
The market price for securities of biopharmaceutical and biotechnology companies
historically has been highly volatile, and the market from time to time has
experienced significant price and volume fluctuations that are unrelated to the
operating performance of such companies. Fluctuations in the trading price or
liquidity of PanaMed's common stock may adversely affect our ability to raise
capital through future equity financings.
Factors that may have a significant impact on the market price and marketability
of PanaMed's common stock include: 1) announcements of technological innovations
or new commercial therapeutic products by PanaMed, PanaMed's collaborative
partners or PanaMed's present or potential competitors, 2) announcements by
PanaMed or others of results of treatment programs, pre-clinical testing and
clinical trials, 3) developments or disputes concerning patent or other
proprietary rights, 4) adverse legislation, including changes in governmental
regulation and the status of PanaMed's regulatory approvals or applications, 5)
changes in health care policies and practices, 6) economic and other external
factors, including general market conditions In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has often been instituted. If a securities class action suit
is filed against PanaMed we would incur substantial legal fees and its
management's attention and resources could be diverted from operating the
business in order to respond to the litigation.
28. Listing Status
PanaMed is listed on the over-the-counter bulletin board (OTCBB) sponsored by
the National Association of Securities Dealers. PanaMed is attempting to develop
a stronger trading market for its shares. However, until this market is further
developed, shareholders will find it very difficult to liquidate their stock on
reasonable terms both from the standpoint of price and volume of shares that can
be sold at any given time. PanaMed can provide no assurance as to if or when the
market for its shares will be developed to a point in which shareholders can
trade PanaMed stock on reasonable terms.
25
29. Risk in Penny Stocks
The SEC has adopted regulations imposing limitations upon the manner in which
certain low priced equity securities, referred to as "penny stocks," are
publicly traded. Under these regulations, a penny stock is defined as any equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions. These exceptions include any equity security listed on a
national exchange, the Nasdaq National Market System or Small Cap Market and any
equity security issued by a company meeting specified requirements for net
tangible assets or revenues. Unless an exception is available, the regulations
require the delivery, prior to any transaction involving a penny stock, of a
disclosure schedule explaining the penny stock market and the associated risks.
The regulations also require certain broker-dealers who recommend penny stocks
to persons other than established customers and certain accredited investors to
make a special written suitability determination for the purchaser and receive
the purchaser's written agreement to a transaction prior to sale.
These requirements make it more difficult to effect transactions in penny stocks
as compared to other securities.
Since PanaMed does not meet any of the requirements that would exempt it from
the $5.00 per share market price requirement, PanaMed's stock must trade above
that level or it will be classified as a "penny stock." PanaMed's stock is
currently trading well below the $5.00 per share price and therefore it is
classified as a penny stock at this time. This classification has, and will
continue to have, an adverse effect on the tradability of the shares. PanaMed
can provide no assurance as to when or if its stock will ever trade above $5.00
per share.
30. Licensing Agreement
The original PanaMed/Havel agreement and amending letter dated October 19, 2001
provided PanaMed with exclusive rights to test and distribute Viro-Net within
the continent of Africa under certain conditions that included:
1) The license requires a fee of $22,000,000 and an obligation to purchase at
least $1,000,000 in Viro-Net inventory,
2) 80% of the net proceeds from any investment capital raised by PanaMed must go
to the Supplies as a payment against the licensing fee,
3) The full $22,000,000 must be paid by February 15, 2002 or the Supplies will
have the option to reduce the territory covered under the licensing agreement in
proportion to the amount of money that has been paid against the license
agreement by that time.
PanaMed failed to provide payment to Havel of $22,000,000 by February 15, 2002.
The original licensing agreement with Havel was amended, as of May 13, 2002, to
provide PanaMed with a specific area within Africa (the country of Ivory Coast)
that PanaMed may test and distribute Viro-Net. This is a fully paid license,
however, PanaMed is obligated to provide 66.7% of net proceeds from any fund
raising effort to Havel for expansion of its distribution rights until a total
of $22,000,000 has been paid. At that time, the distribution fee will be
considered to be paid in full and the Company will be entitled to distribute
Viro-Net throughout the entire continent of Africa. Until the full amount of
expansion fee is paid, PanaMed's rights are limited to testing and distribution
only within the country of Ivory Coast.
26
Under the new agreement, PanaMed may retain only 20% of the net funding raised
for working capital, which includes rent, travel, office equipment, salaries,
office supplies, interest, officer loans, accounting, accounts payable, debt
reduction, auditing expenses, legal expenses, and the African treatment
programs. Even with the low overhead that PanaMed attempts to maintain, there is
a substantial risk that PanaMed will be unable to raise enough money to properly
conduct operations under these conditions.
Havel may consummate agreements with other companies in order to facilitate
distribution of Viro-Net in territories where PanaMed has no distribution
rights. In addition, other companies may succeed in replicating Viro-Net within
their own manufacturing facility. There is no assurance that these other
companies will not succeed in undercutting PanaMed by selling Viro-Net to
patients, doctors or distributors, in the territories assigned to PanaMed, below
the prices offered by PanaMed. These types of actions, although illegal and
improper, would be very difficult to prosecute and would severely undermine
PanaMed's distribution efforts.
REVENUES
PanaMed's revenues totaled $0 for the three and nine months ended September 30,
2002 and for the period from August 21, 2001 (date of inception) through
September 30, 2002. PanaMed is an enterprise in the development stage as defined
by Statement No. 7 of the Financial Accounting Standards Board and has not yet
engaged in any significant business other than organizational and developmental
efforts.
Operating expenses totaled $595,544 for the three-month period ended September
30, 2002. Operating expenses totaled $4,205,449 for the nine-month period ended
September 30, 2002. Operating expenses totaled $4,259,798 for the period from
the date of inception through September 30, 2002. Operating expenses primarily
consist of stock-based compensation and expenditures for formulation of
therapeutics.
1.2 Liquidity and capital resources
PanaMed has historically financed operations from the sale of common stock. As
of September 30, 2002, PanaMed had cash on hand of $9,387 and working capital of
$(339,018) as compared to cash on hand of $106 and working capital of $(12,181)
at period-end, December 31, 2001.
Net cash used in operating activities of $1,198,060 and $221,083 for the nine
and three months ended September 30, 2002, respectively, is attributable
primarily to net loss due to expenditures for formulation of therapeutics,
finder's fees, and legal and professional services.
Net cash provided by investing activities of $79,123 and $0 for the nine and
three months ended September 30, 2002, respectively, consists primarily of
proceeds from sale of investments.
Net cash provided by financing activities of $1,127,994 and $230,470 for the
nine and three months ended September 30, 2002, respectively, is due to cash
received from the issuance of common stock and other miscellaneous adjustments.
Any significant difference between line items in the financials included in this
Form 10-QSB and the Company's Form 10-QSB filed for the same period in 2001 are
the result of the change in the Company's business which occurred in March of
2002.
27
Management believes that the receipt of net proceeds from the sale of common
stock may not be sufficient to satisfy our future operations, working capital
and other cash requirements for the remainder of the fiscal year. If PanaMed is
unable to raise sufficient capital, the company may need to sell certain assets,
enter into new strategic partnerships, or merge with another company to
effectively maintain operations. PanaMed's audit for the period ended December
31, 2001 contained a going concern qualification.
Part II. Other Information
Subsequent Events
In August 2002, Mr. and Mrs. James W. Holzhauer loaned to the Corporation, via a
Promissory Note, $30,000. 30,000 shares of PanaMed Common stock secure this
note.
In November 2002, Mr. Jack Morris loaned the Corporation, via a Promissory Note,
$75,000. In addition, Mr. Morris received 50,000 shares of stock as incentive to
place this loan with PanaMed.
In October 2002, communications where initiated with Securities First for the
purpose of assisting PanaMed Corporation in the development of our stock. In
November 2002 Phillip Butler placed 250,000 shares of his personal founders
shares with them for the purpose assisting in this stock program.
In November 2002, the Auditor of PanaMed Corporation was changed from
Sprayberry, Barnes, Marietta and Luttrell of Oxnard, California to: Larry E.
Nunn and Associates of Columbus, Indiana. Phone number: 812-376-3061.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(b) Reports on Form 8-K
The Company filed a report on Form 8-K during the three-month period ended March
31, 2002, to report the audited financial statements of PanaMed, Inc. as of
December 31, 2001.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PanaMed Corporation
/s/ Phillip Butler
------------------------
Phillip Butler
Date: November 15, 2002
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CERTIFICATIONS
I, Phillip J. Butler, Chairman of the Board, Acting President and Chief
Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of PanaMed
Corporation.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: November 15, 2002
By: /s/ Phillip J. Butler
------------------------------------------------
Phillip J. Butler
Chairman of the Board, Acting President,
and Chief Executive Officer
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