[DESCRIPTION]FORM 10-QSB FOR PERIOD ENDED MARCH 31, 1996
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
Commission File Number 0-14278
PANAX PHARMACEUTICAL COMPANY LTD.
(Exact name of registrant as specified in its charter)
NEW YORK 13-3754005
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
425 Park Avenue
New York, NY 10022
(Address of principal executive office)
Registrant's telephone number, including area code: (212) 319-8300
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
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PANAX PHARMACEUTICAL COMPANY LTD.
TABLE OF CONTENTS
Page
PART 1 - FINANCIAL INFORMATION
BALANCE SHEETS -- For March 31, 1996 (unaudited) and June 30, 1995 2
STATEMENT OF OPERATIONS (unaudited) -- For the Three and Nine Months
Ended March 31, 1995 and March 31, 1996 and the Period from
July 1, 1993 (Commencement of Operations) through March 31, 1996 3
STATEMENT OF CASH FLOWS (unaudited) -- For the Nine Months Ended
March 31, 1995 and March 31, 1996 and the Period From
July 1, 1993 (Commencement of Operations) through March 31,1996 4
PLAN OF OPERATIONS 5
PART II - OTHER INFORMATION 7
SIGNATURES 8
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Part I - Financial Information
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PANAX PHARMACEUTICAL COMPANY LTD.
(a development stage company)
BALANCE SHEET
<TABLE>
<CAPTION>
March 31,1996 June 30, 1995 (1)
------------ ------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $184,640 $458,534
Certificate of deposit 0 400,000
Investments to be held on maturity 3,203,789 1,350,808
Other current assets 56,966 9,462
--------- ---------
Total current assets 3,445,395 2,218,804
--------- ---------
Equipment
Research equipment 106,017 83,847
Other equipment 12,844
--------- ---------
118,861 83,847
Less accumulated depreciation 56,215 30,631
--------- ---------
62,646 53,216
Other Assets
Investments to be held to maturity 0 2,035,669
Organization costs 623 785
Prepaid expenses and others 36,591 14,524
--------- ---------
37,214 2,050,998
TOTAL $3,545,255 $4,322,998
========== ==========
LIABILITIES
Current liabilities
Account payable and other accrued expenses $ 39,780 $ 64,612
--------- ----------
Management fees payable 112,500 112,500
Accrued salary - stockholder 28,000 28,000
STOCKHOLDERS' EQUITY
Common stock, $0001 par value; authorized 10,000,000
shares; outstanding 3,135,710 less tresury stock
of 180,000 shares on March 31, 1996 331 331
Additional paid-in capital 5,443,025 5,243,025
Unamortized value of warrants (148,540)
Deficit accumulated during the development stage (1,929,841) (1,125,470)
----------- -----------
Total stockholder's equity 3,364,975 4,117,886
----------- -----------
TOTAL $3,545,255 $4,322,998
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</TABLE>
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(1) unaudited
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<TABLE>
PANAX PHARMACEUTICAL COMPANY LTD.
(a development stage company)
STATEMENT OF OPERATIONS
(unaudited)
<CAPTION>
Three Months Nine Months Period from July 1, 1993
Ended March 31 Ended March 31 (Commencement of Operations)
-------------------- -------------------- Through March 31, 1996
1996 1995 1996 1995
------- ------- -------- -------- -----------------------------
<S> <C> <C> <C> <C> <C>
Costs and Expenses:
Research and Developnment 152,144 80,087 385,199 190,723 906,590
General and administrative 198,018 75,757 621,946 157,094 1,230,598
Write-off of debt discount 53,125 75,000
Interest expense - - - - 6,160
-------- -------- --------- --------- ---------
350,162 155,844 1,007,145 400,942 2,218,348
-------- -------- --------- --------- ---------
Interest Income 62,200 2,143 202,774 2,143 288,507
-------- -------- --------- --------- ----------
Net Loss $ 287,962 $ 153,701 $ 804,371 $ 398,799 $1,929,841
======== ========= ========= ========= ==========
Net loss per share $.09 $.05 $.25 $.17
====== ====== ====== =====
Weighted average number of common
shares outstanding 3,163,732 2,954,998 3,262,692 2,333,830
========= ========= ========= =========
</TABLE>
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<TABLE>
PANAX PHARMACEUTICAL COMPANY LTD.
(a development stage company)
STATEMENT OF CASH FLOWS
<CAPTION>
Period from
July 1, 1993
(Commemcements of Operations)
Nine Months Ended March 31, Through
--------------------------- ---------------------
1996 1995 March 31, 1996
--------- ----------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (804,371) $ (398,799) $ (1,929,841)
Adjustments to reconcile net loss to
Depreciation and amortization 25,746 15,585 56,661
Write-off of debt discount 53,125 75,000
Value of services paid by options & warrants 51,460 131,460
(Increase)decrease in prepaid expenses
and other assets (69,571) 19,267 (93,557)
Increase (decrease) in account payable
and accrued expenses (24,832) (7,577) 67,780
Expenses paid by affiliate (12,282) 96,682
Increase in management fees payable 112,500
--------- ---------- -----------
Net cash (used in) operation activities (821,568) (330,681) (1,483,315)
--------- ---------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
Net sales (purchases) of investments 582,688 (3,717,738) (3,203,789)
Acquisition of equipment (35,014) (30,675) (118,861)
Organization costs (1,069)
Net cash (used in) investing activities 547,674 (3,748,413) (3,323,719)
---------- ------------ -----------
CASH FLOW FROM FINANCING ACTIVITIES
Issuance of common stock - net of expenses 4,989,382 4,991,674
Proceeds form note payable - affiliates 14,000
Proceeds from notes payable - stockholders 41,800 96,300
Proceed from notes payable - other 212,500 300,000
Repayment of notes payable - stockholders
and other (410,300) (410,300)
---------- ------------ ------------
Net cash provided bu financial activities 4,833,382 4,991,674
---------- ------------ ------------
NET INCREASE (DECREASE)IN CASH AND CASH
EQUIVALENTS (273,894) 754,288 184,640
Cash and cash equivalents - beginning of period 458,534 23,258 - 0 -
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 184,640 $ 777,546 $ 184,640
========= ========= =========
</TABLE>
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PLAN OF OPERATIONS
- - ------------------
Panax Pharmaceutical Company Ltd. ("the Company") is primarily engaged
in the discovery and development of new pharmaceutical compounds identified in
and isolated from plants. The Company takes the ethnobotanical approach to
the study of plants which is supplemented by medical science and natural
product chemistry. Many of the plants targeted by the Company are indigenous
to Russia and other States of the Commonwealth of Independent States.
The Company conducts most of its research activities in Russia, under
its long-term agreement with the Komarov Botanical Institute and arrangements
with laboratories at a number of leading Russian pharmacological and medical
research institutions which helps the Company to maintain its current
comparatively low level of operating expenditures. As of March 31, 1996, the
Company collected and catalogued approximately 850 species of plants and fungi
and accumulated a library of pure compounds which consists of approximately
150 molecules, some of which appear to have novel structures and/or previously
unknown pharmacological activity. The Company's testing program has focused
on selected targets in the following therapeutic areas: anti-fungal,
anti-bacterial, anti-viral, immune system stimulation and suppression,
anti-cancer, and the central nervous system (CNS).
The Company incurred a loss of $287,962 and $804,371 for the three and
nine months ended March 31, 1996. The Company expects to incur additional
losses in the foreseeable future. The per share loss was $0.05 and $0.09 for
the three month periods ending March 31, 1995 and 1996, respectively, and
$0.17 and $0.25 for the nine month periods ending March 31, 1995 and 1996,
respectively. The increase in the weighted average shares outstanding has
been caused by the issuance in January 1995, of 1,265,710 shares in connection
with the Company's initial public offering and repayment of a loan and the
exercise in April 1995 of a stock option for 50,000 shares. The decrease in
the current fiscal year is the result of the return of 180,000 shares in
December 1995 and January 1996 which are being held in treasury.
The Company had no revenues for the three and nine months ended March
31, 1996 other than interest income. The Company had interest income of
$62,200 and $202,774 for the three and nine months ended March 31, 1996 and
$288,507 for the period from inception through March 31, 1996. Interest has
been earned on the proceeds of the Company's initial public offering of stock
and warrants in January 1995.
Research and development expenses amounted to $80,087 and $152,144 for
the three months ended March 31, 1995 and March 31, 1996, respectively, and
$190,723 and $385,199 for the nine months ended March 31, 1995 and March 31,
1996, respectively. The increase was attributable to the expansion of
operations following the completion of the initial public offering, including
the collection of plant material, screening and building up of a synthetic
chemistry group. The level of the Company's research and development expenses
is expected to increase partially as a result of the expansion of the staff,
principally through the employment in April 1996 of Dr. Robert Krell as Senior
Vice President of Research and Development, and with increased activities in
plant collection, chemical fractionation, screening and synthesis of chemical
analogs.
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Dr. Krell brings to Panax a total of twenty-three years experience in
the U.S. pharmaceutical industry. Prior to joining Panax, Dr. Krell served as
Vice President and General Manager of Biofor, Inc. and prior to Biofor, Dr.
Krell spent thirteen years at Zeneca Pharmaceuticals, Inc. Dr. Krell has been
responsible for programs in the antifungal and elastase inhibitor areas, has
placed numerous compounds in the development process and coordinated Phase I
through Phase III clinical trials.
Panax expects to further expand preclinical studies for toxicity and
efficacy in the following therapeutic areas: anti-fungal, anti-viral,
anti-bacterial and immune system stimulation. In April 1996, the Company
commenced animal studies on a class of novel anti-fungal compounds. Several
novel anti-viral compounds are currently being evaluated by investigators in
Europe and the United States for activity against Cytomegalovirus (CMV), HIV
and other viruses.
The performance of research and development primarily by a Russian based
scientific staff of approximately 20 qualified individuals has resulted in
substantial savings for the Company when compared with the amounts which would
be required if performed in the United States.
The Company plans to expand its discovery and early development efforts
through license or acquisition of targeted biologically active compounds and
is currently in discussions for this purpose with certain universities and
pharmaceutical companies. When a compound has been developed to a suitable
stage, it is the Company's intention to seek to enter into agreements with
pharmaceutical or biotechnology companies for marketing and sales, clinical
development and/or manufacturing.
General and administrative expenses amounted to $75,757 and $198,018 for
the three months ended March 31, 1995 and March 31, 1996, respectively, and
$157,094 and $621,946 for the nine months ended March 31, 1995 and March 31,
1996, respectively. The increase was attributable to the hiring in June 1995
of Dr. Taffy Williams, President and Chief Executive Officer of the Company,
the establishment of new administrative offices and associated legal and
consulting expenses (including the amortization of the value assigned to a
warrant issued to a financial advisor). The Company does not anticipate a
material increase in its current level of general and administrative expenses
through the remainder of the fiscal year from the level for the three months
ended March 31, 1996.
Cash and investments totaled $3,388,429 as of March 31, 1996. The
Company estimates that the cost of operations for the year ending June 30,
1996 will be approximately $1,600,000, of which approximately $1,000,000 will
be expended for research and development. Included in research and
development is $100,000 representing a portion of the salary and related
expenses for the Company's Chief Executive Officer who was hired in June 1995
and who has devoted and is expected to devote over 50% of his time in the
planning and supervision of the research and development activities.
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PART II -- OTHER INFORMATION
Item 4 -- OTHER INFORMATION
In February 1996, Dr. Rudolf Kamelin, Vice President, Ethnobotany,
resigned as an employee of the Company. Pursuant to the Amended Employment
Agreement originally entered into by Dr. Kamelin and the Company in June 1993,
Dr. Kamelin has returned 150,000 shares of common stock to the Company which
is being held in treasury.
Item 5 -- EXHIBITS AND REPORTS ON FORM 8-K
None
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Signatures
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Pursuant to the requirements of the Securities Exchange Act of l934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PANAX PHARMACEUTICAL COMPANY LTD.
/s/ Taffy J. Williams, Ph.D.
-----------------------------------------
Taffy J. Williams, President and
and Chief Executive Officer
/s/ Norman Eisner, Vice President
----------------------------------------
Norman Eisner, Vice President, Treasurer
and Chief Financial Officer
Date: May 10, 1996
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING FINANCIAL STATEMENT AND IS QUALIFED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 184,640
<SECURITIES> 3,203,789
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,445,395
<PP&E> 118,861
<DEPRECIATION> 56,215
<TOTAL-ASSETS> 3,545,255
<CURRENT-LIABILITIES> 39,780
<BONDS> 0
0
0
<COMMON> 331
<OTHER-SE> 3,364,644
<TOTAL-LIABILITY-AND-EQUITY> 3,545,255
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (804,371)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (804,371)
<INCOME-TAX> 0
<INCOME-CONTINUING> (804,371)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (804,371)
<EPS-PRIMARY> (0.25)
<EPS-DILUTED> (0.25)
</TABLE>
