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 September 30, 1996
Commission File Number 0-24972
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
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Page
Number
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PART 1 - FINANCIAL INFORMATION
BALANCE SHEETS -- For September 30, 1996 (unaudited)
and June 30, 1995 . . . . . . . . . . . . . . . . . 2
STATEMENT OF OPERATIONS (unaudited) -- For the Three
Months Ended September 30, 1995 and September 30, 1996
and the Period from July 1, 1993 (Commencement of
Operations) through September 30, 1996 . . . . . . . 3
STATEMENT OF CASH FLOWS (unaudited) -- For the Three
Months Ended September 30, 1995 and September 30, 1996
and the Period From July 1, 1993 (Commencement of
Operations) through September 30,1996. . . . . . . . 4
NOTE TO FINANCIAL STATEMENTS . . . . . . . . . . . . 5
PLAN OF OPERATIONS . . . . . . . . . . . . . . . . . 5
PART II - OTHER INFORMATION . . . . . . . . . . . . 6
SIGNATURES . . . . . . . . . . . . . . . . . . . . . 7
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PANAX PHARMACEUTICAL COMPANY LTD.
(a development stage company)
BALANCE SHEET
<TABLE>
<CAPTION>
September 30, 1996 June 30, 1996
------------------ -------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents . . . . . . $280,529 $398,689
Certificate of deposit . . . . . . . 492,305 200,000
Investments to be held on maturity. . 1,925,110 2,457,979
Prepaid expenses and other current
assets . . . . . . . . . . . . . . 28,687 37,558
---------- ----------
Total current assets . . . . . . . 2,726,631 3,094,226
---------- ----------
Equipment
Testing equipment . . . . . . . . . . 109,733 109,733
Computer equipment . . . . . . . . . 15,872 15,872
---------- ----------
125,605 125,605
Less accumulated depreciation . . . . . 76,371 66,344
---------- ----------
49,234 59,261
Other Assets . . . . . . . . . . . . . 38,015 38,069
TOTAL . . . . . . . . . . . . $2,813,880 $3,191,556
========== ==========
LIABILITIES
Current liabilities:
Account payable and other
acccrued expenses . . . . . . . . . $ 57,953 $ 71,419
---------- ----------
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 3,315,710 . . . . . . . . . 331 331
Additional paid-in capital . . . . . . . 5,460,543 5,460,543
Unearned portion of compensatory stock
and warrants . . . . . . . . . . . . . . (110,693) (138,819)
Deficit accumulated during the
development stage . . . . . . . . . . . (2,734,736) (2,342,400)
Less common stock held in treasury
(180,000 shares) . . . . . . . . . . . . (18) (18)
---------- ----------
Total stockholder's equity . . . . . 2,615,427 2,979,637
---------- ----------
TOTAL . . . . . . . . . . . $2,813,880 $3,191,556
========== ==========
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PANAX PHARMACEUTICAL COMPANY LTD.
(a development stage company)
STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
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Period From Period from
July 1, 1993
(Commencement
Three Months of Operations)
Ended September 30, Through
1996 1995 September 30, 1996
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Costs and Expenses:
Research and developnment . . $ 196,901 $ 94,257 $1,362,343
General and administrative . . 221,663 189,353 1,642,216
Write-off of debt discount . . 75,000
Interest expense . . . . . . . 6,160
--------- --------- ---------
418,564 283,610 3,085,719
Interest (income). . . . . . . . (26,228) (43,090) (350,983)
--------- --------- ---------
Net Loss . . . . . . . . . . . . $ 392,336 $ 240,520 $2,734,736
========= ========= =========
Net loss per share . . . . . . $.13 $.07
========= =========
Weighted average number of
common shares outstanding . . . 3,135,710 3,315,710
========= =========
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PANAX PHARMACEUTICAL COMPANY LTD.
(a development stage company)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Period From
July 1, 1993
(Commemcements of
Three Months Operations)
Ended September 30, Through
1996 1995 September 30, 1996
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CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss . . . . . . . . $ (392,336) $ (240,520) $(2,734,736)
Adjustments to reconcile
net loss to net cash (used
in) operating activities:
Depreciation and
amortization . . . . . . . 10,027 7,259 76,870
Write-off of debt
discount . . . . . . . . . 75,000
Value of services paid
by options and
warrants . . . . . . . . 80,000
Accretion of compensatory
options and warrants . . . 28,126 106,807
(Increase)decrease in
prepaid expenses and
other assets . . . . . . . 8,925 (31,701) (66,133)
Increase (decrease) in
account payable and
accrued expenses . . . . . . (13,466) (4,327) 85,953
Expenses paid by
affiliate . . . . . . . . . . 96,682
Increase in management
fees payable. . . . . . . . . 112,500
--------- --------- ----------
Net cash (used in)
operating activities. . . (358,724) (269,289) (2,167,057)
--------- --------- ----------
CASH FLOW FROM INVESTING
ACTIVITIES:
Net sales (purchases) of
investments . . . . . . . . 240,564 (40,636) (2,417,415)
Acquisition of equipment . . (20,664) (125,604)
Organization costs . . . . . (1,069)
Net cash (used in)
investing activities . . . 240,564 (61,300) (2,544,088)
--------- --------- ----------
CASH FLOW FROM FINANCING
ACTIVITIES:
Issuance of common stock -
net of expenses . . . . . . 4,991,674
Proceeds form note payable
- affiliates . . . . . . . 14,000
Proceeds from notes payable
- stockholders . . . . . . 96,300
Proceed from notes payable
- other . . . . . . . . . . 300,000
Repayment of notes payable -
stockholders and other. . . (410,300)
--------- --------- ----------
Net cash provided by
financial activities . . . 4,991,674
--------- --------- ----------
NET INCREASE (DECREASE)IN CASH
AND CASH EQUIVALENTS . . . . . (118,160) (330,589) 280,529
Cash and cash equivalents
- beginning of period . . . . 398,689 458,534 - 0 -
CASH AND CASH EQUIVALENTS
- END OF PERIOD . . . . . . $ 280,529 $ 127,945 $ 280,529
========== ========== ==========
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<PAGE> 5
PANAX PHARMACEUTICAL COMPANY LTD.
(a development stage company)
NOTE TO FINANCIAL STATEMENTS
(unaudited)
The unaudited financial statements of Panax Pharmaceutical Company Ltd.
(The "Company") as of September 30, 1996 and three months ended September 30,
1996 and September 30, 1995 have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC) and, in the
opinion of management, reflect all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the results of operations for
the interim periods presented. Certain information and footnote disclosures
normally included in financial statements, prepared in accordance with
generally accepted accounting principles, have been condensed or omitted
pursuant to such rules and regulations. However, management believes that the
disclosures are adequate to make the information presented not misleading.
These financial statements and the note thereto should be read in conjunction
with the financial statements and notes thereto included in the Company's
Annual Report on Form 10-KSB for the fiscal year ended June 30, 1996. The
results for the interim periods are not necessarily indicative of the results
for the fiscal year.
PLAN OF OPERATION
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 its research activities in Russia, under its
long-term agreement with the Komarov Institute, and in the United States
under agreements with the National Cancer Institute, University of Kansas
and Case Western Reserve University, as well as under arrangements with other
university laboratories and contract research organizations. As of
September 30, 1996, the Company collected and catalogued approximately 1,400
species of plants and fungi and accumulated a library of pure compounds which
consists of hundreds of molecules, some of which appear to have novel
structure 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).
Currently, four compounds are undergoing preclinical testing for toxicity
and efficacy in the anti-fungal and anti-bacterial areas.
The Company incurred a loss of $392,336 and $240,520 for the three months
ended September 30, 1996 and 1995, respectively. The Company expects to incur
additional losses in the foreseeable future. The per share loss was $0.13 and
$0.07 for the three month periods ending September 30, 1996 and 1995,
respectively. The decrease in the weighted average number of common shares
outstanding in the current fiscal year is the result of the return of a total
180,000 shares in December 1995 and January 1996 which are being held in
treasury.
The Company had no revenues for the three months ended September 30, 1996
other than interest income. The Company had interest income on the proceeds
of the Company's initial public offering in January 1995 of its stock and
warrants. The interest income amounted to $26,228 and $43,090 for the three
months ended September 30, 1996 and 1995, respectively and $350,983 for the
period from inception through September 30, 1996.
<PAGE> 6
Research and development expenses amounted to $196,901 and $ 94,257 for
the three months ended September 30, 1996 and 1996, respectively.
The increase was attributable to the expansion of operations including research
conducted under the agreement with University of Kansas, hiring of Dr. Robert
Krell as Senior Vice President of Research and Development, and the addition of
scientific consultants and members of the Company's Scientific Advisory Board.
The Company does not anticipate a material increase in its current level of
research and develpment expenses through the remainder of the fiscal year from
the level for the three months ended September 30, 1996, unless a clinical
candidate is licensed by the Company in which case the Company will require
additional capital in order to fund the research and development activities.
Panax expects to further expand preclinical studies for toxicity and
efficacy in the anti-fungal and anti-bacterial areas. The Company will
conduct research activities in Russia and will continue its collaborative
relationships with the National Institute of Health, as well as with the
University of Kansas for structure modification of selected compounds
utilizing combinatorial chemistry, and with Case Western Reserve University
to perform preclinical studies on compounds with anti-fungal activity.
Utilizing contractual agreements with university laboratories, governmental
institutions and contract research organizations will allow the Company to
maintain its current comparatively low level of operating expenditures.
General and administrative expenses amounted to $221,663 and $189,353
for the three months ended September 30, 1996 and 1995, respectively.
The increase was attributable to the amortization of the value of a warrant
issued to a financial advisor, as well as higher accounting and investor
relations expenses. The increase has been partially ofset by reductions in
legal and recruiting fees. 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
September 30, 1996.
Cash and investments totaled $2,697,944 as of September 30, 1996. The
Company estimates that the cost of operations for the year ending June 30,
1997 will be approximately $2,000,000, of which approximately $1,100,000 will
be expended for research and development.
The Company will seek to enter into agreements with additional
universities and pharmaceutical companies for joint research and development
of the Company's biologically active compounds. The Company will continue
to actively seek licensing or aquisition opportunities for compounds in the
clinical stage of development or platform technologies from academic,
governmental or industry sources. If the Company is successful in this effort,
the Company will likely require and seek additional capital in order to fund
the research and development activities. No assurance can be given that the
Company will be successful in attracting such opportunities or in obtaining
the required funding.
PART II -- OTHER INFORMATION
Item 4 -- Other Information
None
Item 5 -- Exhibits and Reports on Form 8-K
None
<PAGE> 7
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 thereunto duly authorized.
PANAX PHARMACEUTICAL COMPANY LTD.
/s/ Taffy J. Williams, Ph.D.
---------------------------------
Taffy J. Williams, President
and Chief Executive Officer
/s/ Norman Eisner, Vice President
----------------------------------
Norman Eisner, Vice President,
Treasurer and Chief Financial Officer
Date: November 12, 1996
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<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> OCT-30-1996
<CASH> 280,529
<SECURITIES> 2,417,415
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,726,631
<PP&E> 125,605
<DEPRECIATION> 76,371
<TOTAL-ASSETS> 2,813,880
<CURRENT-LIABILITIES> 57,953
<BONDS> 0
0
0
<COMMON> 331
<OTHER-SE> 2,615,427
<TOTAL-LIABILITY-AND-EQUITY> 2,813,880
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (392,336)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (392,336)
<INCOME-TAX> 0
<INCOME-CONTINUING> (392,336)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (392,336)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
