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 June 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
6650 Telecom Drive, Suite 100
Indianapolis, IN 46278
(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 September 13 2002, 25,176,245 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 $.01 per share
(Title of Class)
1
Table of Contents
Part I. Financial Information.......................................... 2
Item No. 1. Financial Statements............................... 2
Item No. 2 Management's Discussion and Analysis............... 15
Part II Other information............................................. 17
Item No. 2. Changes in Securities and Use of Proceeds......... 17
Item No. 6. Exhibits and Reports on Form 8-K.................. 17
Exhibits.............................................................. 17
Reports on Form 8-K................................................... 17
Signatures............................................................ 17
2
Item 1. Financial Statements
PANAMED CORPORATION
(A development stage company)
BALANCE SHEET - JUNE 30, 2002 AND DECEMBER 31, 2001
ASSETS
June 30, 2002 Dec. 31, 2001
(Unaudited)
------------- -------------
CURRENT ASSETS:
Cash $ -- $ 106
Prepaid expenses -- 21,000
-------- --------
Total current assets -- 21,106
-------- --------
PROPERTY AND EQUIPMENT (net of accumulated
depreciation of $488 and $0, respectively) 5,618 --
-------- --------
OTHER ASSETS:
Investment 104,798 176,783
Notes receivable - related parties -- 29,593
-------- --------
104,798 206,376
-------- --------
$110,416 $227,482
======== ========
The accompanying notes are an integral part of the
financial statements.
3
PANAMED CORPORATION
(A development stage company)
BALANCE SHEET - JUNE 30, 2002 AND DECEMBER 31, 2001
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, 2002 Dec. 31, 2001
(Unaudited)
------------- -------------
CURRENT LIABILITIES:
Bank overdraft $ 24,194 $ --
Accounts payable 65,704 5,887
License fee payable 54,600 --
Notes payable - related parties 110,000 7,400
Other current liabilities 500 20,000
----------- -----------
Total current liabilities 254,998 33,287
----------- -----------
OTHER LIABILITIES 107,400 --
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock - $0.01 and $ 0.0001
par value, respectively Authorized -
100,000,000 shares Issued and
outstanding - 23,405,970 and
>>19,750,000 shares, respectively 234,060 1,975
Additional paid-in capital 3,727,834 255,987
Accumulated deficit during development stage (4,163,876) (63,767)
----------- -----------
(201,982) 194,195
Less subscriptions receivable (50,000) --
----------- -----------
Total stockholders' equity (251,982) 194,195
----------- -----------
$ 110,416 $ 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 SIX MONTHS ENDED JUNE 30, 2002 AND
FOR THE PERIOD FROM AUGUST 21, 2001 (DATE OF INCEPTION)
THROUGH JUNE 30, 2002
(Unaudited)
Period from
August 21, 2001
3 months ended 6 months ended (Inception) to
June 30, 2002 June 30, 2002 June 30, 2002
----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited)
SALES $ -- $ -- $ --
COST OF SALES -- -- --
----------- ----------- -----------
Gross margin -- -- --
OPERATING EXPENSES 467,753 3,609,905 3,664,254
----------- ----------- -----------
Loss from operations (467,753) (3,609,905) (3,664,254)
----------- ----------- -----------
OTHER INCOME (EXPENSES):
Miscellaneous income 1,461 1,461 1,461
Acquisition expense -- (445,000) (445,000)
Loss on sale of investment -- (29,240) (29,240)
Loss on investment (4,214) (16,125) (25,543)
Interest expense (500) (500) (500)
----------- ----------- -----------
(3,253) (489,404) (498,822)
----------- ----------- -----------
Net loss before income taxes (471,006) (4,099,309) (4,163,076)
PROVISION FOR INCOME TAXES -- (800) (800)
----------- ----------- -----------
Net loss $ (471,006) $(4,100,109) $(4,163,876)
=========== =========== ===========
NET LOSS PER SHARE
Basic and diluted $ (0.02) $ (0.18) $ (0.21)
=========== =========== ===========
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 SIX MONTHS ENDED JUNE 30, 2002 AND
FOR THE PERIOD FROM AUGUST 21, 2001 (DATE OF INCEPTION)
THROUGH JUNE 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 SIX MONTHS ENDED JUNE 30, 2002 AND
FOR THE PERIOD FROM AUGUST 21, 2001 (DATE OF INCEPTION)
THROUGH JUNE 30, 2002
(Unaudited)
(Continued)
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) -- --
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 SIX MONTHS ENDED JUNE 30, 2002 AND
FOR THE PERIOD FROM AUGUST 21, 2001 (DATE OF INCEPTION)
THROUGH JUNE 30, 2002
(Unaudited)
(Continued)
Deficit
Accumulated
Additional During The Total
Common Stock Paid-in Development Stockholders'
Shares Amount Capital Stage Equity
--------------------------------------------------------------------
Issuance of stock for cash
March 18, 2002
($1.00 per share) 132,500 1,325 131,175 -- 132,500
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
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 SIX MONTHS ENDED JUNE 30, 2002 AND
FOR THE PERIOD FROM AUGUST 21, 2001 (DATE OF INCEPTION)
THROUGH JUNE 30, 2002
(Unaudited)
(Continued)
Deficit
Accumulated
Additional During The Total
Common Stock Paid-in Development Stockholders'
Shares Amount Capital Stage Equity
--------------------------------------------------------------------
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
($0 per share) 20,500 205 20,295 -- 20,500
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) $ (201,982)
(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 SIX MONTHS ENDED JUNE 30, 2002 AND
FOR THE PERIOD FROM AUGUST 21, 2001 (DATE OF INCEPTION)
THROUGH JUNE 30, 2002
(Unaudited)
Period from
August 21, 2001
6 months ended (Inception) to
June 30, 2002 June 30, 2002
----------- -----------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(4,100,109) $(4,163,876)
Adjustments to reconcile net loss to net cash used
>>in operating activities -
>>>>Common stock issued for services 2,990,602 2,990,602
>>>>Depreciation 488 488
>>>>Loss on investment 16,125 25,543
Net change in operating assets and liabilities 115,917 120,805
----------- -----------
Net cash used in operating activities (976,977) (1,026,438)
----------- -----------
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 663,330 735,090
Proceeds from deposits on common stock 107,400 107,400
Other financing activities 102,600 110,000
----------- -----------
Net cash provided by financing activities 897,524 976,684
----------- -----------
NET CHANGE IN CASH (106) --
CASH, BEGINNING OF PERIOD 106 --
----------- -----------
CASH, END OF PERIOD $ -- $ --
=========== ===========
The accompanying notes are an integral part of the
financial statements.
10
PANAMED CORPORATION
(A Development stage company)
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2002 AND FOR THE PERIOD FROM
AUGUST 21, 2001 (DATE OF INCEPTION) THROUGH JUNE
30, 2002
(Unaudited)
(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
June 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 June 30, 2002, and cash flows for the six months
ended June 30, 2002 and the period from date of inception through June
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 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 JUNE 30, 2002 AND FOR THE PERIOD FROM
AUGUST 21, 2001 (DATE OF INCEPTION) THROUGH JUNE
30, 2002
(Unaudited)
(Continued)
(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) NOTES RECEIVABLE - RELATED PARTIES
June 30, 2002 Dec. 31, 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
================== ====================
(4) 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.
(4) INVESTMENT (Continued)
Pertinent financial information for the Company as of June 30, 2002 is
as follows:
June 30, 2002 Dec. 31, 2001
(Unaudited)
Balance sheet:
Assets $ 390,344 $ 527,560
============== =============
Liabilities $ 1,216,036 $ 1,300,565
Deficit (825,692) (773,005)
-------------- -------------
$ 390,344 $ 527,560
============== =============
Income statement:
Revenues $ 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 $ (16,125) $ (9,418)
============== =============
12
PANAMED CORPORATION
(A Development stage company)
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2002 AND FOR THE PERIOD FROM
AUGUST 21, 2001 (DATE OF INCEPTION) THROUGH JUNE
30, 2002
(Unaudited)
(Continued)
(5) NOTES PAYABLE - RELATED PARTIES
June 30, 2002 Dec. 31, 2001
(Unaudited)
Note payable to United Pentecostal Assembly of Bellflower, due on
December 6, 2002, interest at 6% per annum, with
150,000 shares of common stock as collateral. $ 100,000 $ --
Note payable to John Badger, due on September 21, 2002,
interest at 6% per annum. 10,000 --
------------------- -------------------
$ 110,000 $ --
=================== ===================
(6) COMMITMENTS AND CONTINGENCIES
As of June 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.
(7) NET LOSS PER SHARE
Basic net loss per share is based on the weighted average number of
common shares outstanding of 23,303,988 for the three months ended June
30, 2002. The weighted average number of common shares outstanding for
the six months ended June 30, 2002 was 22,169,105. The weighted average
number of common shares outstanding for the period from August 21, 2001
(date of inception) through June 30, 2002 was 19,923,083. The basic and
diluted earnings per share calculations are the same because the
Company has no dilutive securities outstanding.
13
PANAMED CORPORATION
(A Development stage company)
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2002 AND FOR THE PERIOD FROM
AUGUST 21, 2001 (DATE OF INCEPTION) THROUGH JUNE
30, 2002
(Unaudited)
(Continued)
(8) 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.
(9) 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 June 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.
(10) 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:
14
PANAMED CORPORATION
(A Development stage company)
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2002 AND FOR THE PERIOD FROM
AUGUST 21, 2001 (DATE OF INCEPTION) THROUGH JUNE
30, 2002
(Unaudited)
(Continued)
Period from
August 21, 2001
6 months ended (Inception) to
June 30, 2002 June 30, 2002
(Unaudited) (Unaudited)
(Increase) Decrease:
Prepaid expenses $ 21,000 $ --
Increase (Decrease):
Accounts payable 59,817 65,705
Other current liabilities 500 500
Common stock payable (20,000) --
------------------- -----------------
$ 61,317 $ 66,205
=================== =================
(10) STATEMENT OF CASH FLOWS - SUPPLEMENTAL DISCLOSURES (Continued)
For the period from August 21, 2001 (date of inception) to June 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 six months ended June 30, 2002, the
Company had non-cash financing transactions related to the issuance of
common stock for $50,000.
(11) SUBSEQUENT EVENTS
Subsequent to June 30, 2002 the Company issued 58,755 shares of common
stock for cash at $1 per share; 170,000 shares as loan collateral;
and 1,541,500 shares as compensation for services rendered.
15
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 that term is 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 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 Havel Investments Limited and their R&D and manufacturing associates
(hereafter collectively referred to as "Havel") for use in treating certain
medical disorders. 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 Havel'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.
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.
The program will be supervised by an experienced physician who will visit the
patients each day to monitor/record progress and resolve medical problems. 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. Subsequent blood
panels will be taken at monthly 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.
RISK FACTORS
1. General Economic Conditions
The financial success of PanaMed may be sensitive to adverse changes in general
economic conditions, such as inflation, unemployment, and interest rates. 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.
16
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 Havel. 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 growth, will require continued
improvement and expansion of management, operational, and financial systems and
controls. 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
3. 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.
4. No Substantial Tax Benefits
Potential participants should evaluate the purchase of PanaMed's stock only in
economic terms. Any tax benefits which may result from the ownership of
PanaMed's stock is minimal, and should not be a determining factor in their
decision to participate.
5. 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
Havel. The competitors may succeed in obtaining FDA or other regulatory
approvals for product candidates before Havel does. Products resulting from
Havel's research and development efforts, if approved for sale, may not compete
successfully with our competitors' existing or future products.
17
6. 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
(Executative VP International Sales) and Todd Davis (Executative VP 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. There are currently no agreements in place between PanaMed and
management with regards to stock options, stock incentives, employment policy,
and intellectual property rights.
7. 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 traditional bank financing, or a combination of both.
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.
8. 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 PanaMed. 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, Phil 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 many other corporate actions requiring stockholder
approval, such as recapitalization, as well as 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.
9. 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,
23,405,970 shares of common stock and 0 shares of Preferred stock are issued and
outstanding as of June 30, 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 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.
18
10. 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 costs of settlement and damage awards against PanaMed's officers or
directors are paid by PanaMed pursuant to such provisions.
11. Conflicts Of Interest
The Board of Directors of PanaMed Corporation are 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 which 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 are
associated, over those of PanaMed.
Officers and directors of PanaMed may engage in business separately from
activities on behalf of PanaMed or client entities for which PanaMed provides
services. 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. No limitations have been placed on the officers and
directors or shareholders of PanaMed.
12. 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.
13. Uninsured Losses
PanaMed plans to obtain comprehensive insurance, including liability, fire and
extended coverage, as is customarily obtained for businesses similar to PanaMed.
However, certain types of losses of a catastrophic nature such as losses
resulting from floods, tornadoes, thunderstorms, and earthquakes, are
uninsurable or not economically insurable to the full extend of potential loss.
Such "Acts of God", work stoppages, regulatory actions or other causes, could
interrupt production and adversely affect PanaMed's business, expansion and
results of operations.
14. Disposition Of Stock
There may be adverse tax consequences to an Investor upon any disposition of
their Stock.
15. Availability To Acquire Materials
PanaMed, Havel and their manufacturing partners 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.
19
16. 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.
17. Distribution Agreement
PanaMed has an exclusive distribution agreement with Havel Investments LTD,
which allows PanaMed to test and distribute Havel's 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, 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 Havel
products.
18. Product Risk
PanaMed has received blood test results and doctors notes on the 3 HIV/AIDS
patients discussed herein and have used these records as the primary basis for
establishing PanaMed as an operating public company and in launching the
aforementioned treatment program in Africa. However, PanaMed management has not
witnessed the patient's recovery first hand and are relying only on the
testimony of the inventor and that of a lab supervisor who claims to have
witnessed the patient's treatments and progress.
Viro-Net is based on novel, unproven technology in the preliminary stages of
testing and it is unknown how well it will perform from the standpoint of safety
and effectiveness. PanaMed does not know how much it will cost or how long it
will take before the product is accepted, or if the products will ever be
accepted, by the appropriate regulatory officials and citizens in Africa. Even
if Viro-Net proves to be safe and effective in the informal treatment programs
conducted by PanaMed, there is no assurance that Viro-Net will prove to be safe
and effective from a long term standpoint.
Also, there is no assurance that any sources will be available to purchase
PanaMed's products. There is a variety of different treatments for HIV/AIDS
available on the market today with well financed suppliers and distribution
channels. PanaMed will need to compete with these suppliers for any funding
which may become available.
19. Product Testing
PanaMed, working in conjunction with Havel, plans to conduct informal treatment
programs in Ivory Coast to demonstrate the safety and effectiveness of using
Viro-Net for treating HIV/AIDS and related disorders. Neither PanaMed nor Havel
has any experience in conducting treatment programs or clinical trials and they
are relying on the experience and knowledge 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. Neither PanaMed nor Havel have the experience, knowledge or
financial backing to conduct formal clinical trials. As a result, PanaMed's
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.
20
20. Intellectual Property
Development and protection of Havel's intellectual property is critical to
PanaMed's business. If Havel does not adequately protect its intellectual
property, competitors may be able to manufacture and distribute Havel's
technologies. PanaMed's success depends in part on Havel's ability to: 1) obtain
patent protection for its products or processes both in the United States and
other countries, 2) protect their trade secrets and 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 Havel
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. If it allows broad
claims, the number and cost of patent interference proceedings in the U.S. and
the risk of infringement litigation may increase. If it allows narrow claims,
the risk of infringement may decrease, but the value of Havel's rights under its
patents, licenses and patent applications may also decrease.
There is no assurance that Havel's pending patent applications will ever be
issued as patents or that the claims of any patents already issued to Havel will
afford meaningful protection for its technologies or products. In addition,
patents issued to Havel may be challenged and subsequently narrowed, invalidated
or circumvented. Litigation, interference proceedings or other governmental
proceedings with respect to Havel's proprietary technologies or the proprietary
technology of others 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 Havel's patent position or to determine the scope and validity of
third-party proprietary rights, and Havel may not have the required resources to
pursue such litigation or to protect its patent rights. An adverse outcome in
litigation with respect to the validity of any of Havel's patents could subject
PanaMed to significant liabilities or require PanaMed to cease in distributing a
product or technology.
Patents issued to third parties may cover Havel's products as ultimately
developed. Havel may need to acquire licenses to these patents or challenge the
validity of these patents. Havel 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. Havel
may not be able to meet its obligations under those licenses that they do enter
into. If Havel does enter into a license agreement for intellectual property
underlying any of its products, and that license were to be terminated, PanaMed
may lose our right to market and sell any products based on the licensed
technology.
21. Patent Infringement
Although Havel may attempt to monitor the patent filings of its competitors 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 or
licensed to Havel. Havel and/or PanaMed may have to pay substantial damages for
past infringement if it is ultimately determined that Havel's products infringe
on a third party's patents. Further, PanaMed may be prohibited from selling
Havel's products before a license is obtained. Even if infringement claims
against PanaMed are submitted without merit, defending a lawsuit takes
significant time, may be expensive and may divert management attention from
other business concerns.
22. Technological Obsolescence.
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 Havel, PanaMed's only partner for
supplying Viro-Net and developing new products, will have the facilities,
technical staff, financial means, or desire to develop any new products in the
future.
21
23. Dependence on third parties to manufacture and market 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 which
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 no experience in marketing, sales or distribution of pharmaceutical
products, and does not intend to develop a sales and marketing infrastructure to
distribute its products. Any products eligible for commercial sale will be
distributed by third parties such as licensees, collaborators, joint venture
partners or independent distributors. PanaMed may not be able to obtain access
to a marketing and sales force with sufficient technical expertise and
distribution capability. 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 develop and 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. 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.
25. Environmental regulations
Pharmaceutical research and development involves the controlled use of hazardous
materials including but not limited to certain hazardous chemicals and
radioactive materials. In connection with research, development and
manufacturing activities, biotechnology and biopharmaceutical companies are
subject to federal, state and local laws, rules, regulations and policies
governing the use, generation, manufacture, storage, air emission, effluent
discharge, handling and disposal of certain materials, biological specimens and
wastes. Since PanaMed does not anticipate building in-house research,
development or manufacturing facilities, but plans to have these activities
conducted by contractors and other third parties, PanaMed does not anticipate
that it will be directly affected by environmental regulations. However, Havel
and its contractors may be required to incur significant costs to comply with
environmental and health and safety regulations in the future. This could affect
our cost of doing business and might ultimately interfere with timely completion
of research or manufacturing programs if these third parties are unable to
comply with environmental regulatory requirements.
22
26. 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, preclinical 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, PanaMed could 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.
27. 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 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 which
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.
28. 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
29. 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 which 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,
23
2) 80% of the net proceeds from any investment capital raised by PanaMed must go
to Havel as a payment against the licensing fee,
3) the full $22,000,000 must be paid by February 15, 2002 or Havel will have the
option to reduce the territory covered under the licensing agreement in
proportion to the amount of money which 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)
where 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.
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 six months ended June 30, 2002
and for the period from August 21, 2001 (date of inception) through June 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 efforts.
Operating expenses totaled $467,753 for the three-month period ended June 30,
2002. Operating expenses totaled $3,609,905 for the six-month period ended June
30, 2002. Operating expenses totaled $3,664,254 for the period from the date of
inception through June 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 June 30, 2002, PanaMed had cash on hand of $(24,194) and working capital of
$(254,998) 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 $976,977 and $384,021 for the six and
three months ended June 30, 2002, respectively, is attributable primarily to net
loss due to expenditures for formulation of therapeutics, finders fees, and
legal and professional services.
Net cash provided by investing activities of $79,347 and $0 for the six and
three months ended June 30, 2002, respectively, consists primarily of proceeds
from sale of investment.
24
Net cash provided by financing activities of $897,524 and $349,044 for the six
and three months ended June 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.
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
Item 2. Changes in Securities and Use of Proceeds
From March 31, 2002, to June 31, 2002, PanaMed issued 150,950 shares of
restricted common stock in transactions that were not registered under the
Securities Act of 1933, as follows:
(A) In May and June 2002 PanaMed sold 91,000 shares of restricted common stock
at a price of $1.00 per share to four individuals and a church. These shares
were issued in reliance on the exemption from registration contained in section
4(2) of the Securities Act of 1933, as amended, and the certificates
representing such shares bear a restricted legend reflecting the limitations on
future transfer of those shares.
(B) In May and June 2002 PanaMed issued 59,950 shares of restricted common stock
in accordance with the exchange agreement between PanaMed, Inc and Micron
Solutions, Inc. These shares were missed during the initial exchange
transaction. These shares were issued in reliance on the exemption from
registration contained in section 4(2) of the Securities Act of 1933, as
amended, and the certificates representing such shares bear a restricted legend
reflecting the limitations on future transfer of those shares.
Subsequent Events
In August 2002, PanaMed entered into an agreement with a prospective third party
funding source which required that PanaMed execute a reorganization of its board
of directors and executative management staff as a pre-requisite to obtaining
funding resources. In order to effect this reorganization, Daniel Butler was
asked to resign from the Board of Directors and Thomas Sims was asked to resign
from his positions as Chairman of the Board, President, and Treasurer. These
resignations were submitted and accepted in mid August 2002. The new management
team will be disclosed in an upcoming 8-K filing.
In July, August and September, PanaMed issued 1,770,275 shares of restricted
common stock in various transactions. These shares were issued in reliance on
the exemption from registration contained in section 4(2) of the Securities Act
of 1933, as amended, and the certificates representing such shares bear a
restricted legend reflecting the limitations on future transfer of those shares.
The following provides additional details on these transactions:
296,500 shares were issued to 9 outside consultants as compensation for
consulting services. Of this amount 150,000 shares were issued to Seth Cayer, an
owner of more than 5% of the Company's issued and outstanding shares of common
stock. Mr. Cayer also is a vice president of the Company.
25
150,000 shares were issued to John Badger as compensation for consulting
services. John was an executative and major shareholder of Micron Solutions,
Inc.
150,000 shares were issued to a church as collateral for a short term loan for
$100,000
20,000 shares were issued to an individual as collateral for a short term loan
for $5,000.
52,000 shares were sold to 3 family members of PanaMed's CEO Phillip Butler, for
cash payment at a rate of $1.00 per share.
6,775 shares were sold to 3 individuals for cash payment at a rate of $1.00 per
share.
1,095,000 shares were issued to, or for the benefit of, PanaMed's CEO, Phillip
Butler, as compensation.
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.
26
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
Date: September 16, 2002 /s/ Phillip Butler
--------------------
Phillip Butler
27