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1.
NATURE OF OPERATIONS AND ORGANIZATION
MoneyLogix Group, Inc. ("MoneyLogix" or the “Company”), which registered a change of name with the State of Nevada on January 29, 2008, was formerly known as Homelife, Inc. and is organized under the laws of the State of Nevada.
MoneyLogix Group, Inc. entered into a share exchange agreement which closed on June 30, 2010 with Panacea Global, Inc. (“Panacea”), a Delaware private corporation incorporated on February 5, 2010. The reverse merger transaction effected a change of control of the Company. The accounting acquirer is Panacea and the historical operations of the Company are the operations of Panacea. Pursuant to the terms of the share exchange agreement, MoneyLogix agreed to issue 74,800,000 shares of its common stock to the stockholders of Panacea Global, Inc. in exchange for 100% of Panacea’s issued and outstanding stock, making Panacea a wholly owned subsidiary of the Company on June 30, 2010.
The Company is a development stage company that has currently acquired the global rights except for the United States of America for early detection cancer tests.
Effective June 2, 2011, MoneyLogix Group, Inc. registered a change of name with the State of Nevada to Panacea Global, Inc. Effective June 15, 2011, the trading symbol for the Company on the OTC Bulletin Board changed from "MLXG" to “PANG”.
2.
BASIS OF PRESENTATION
The Company has not earned any revenues from limited principal operations and accordingly, the Company's activities have been accounted for as those of a "Development Stage Enterprise" as set forth in Accounting Standard Codification (“ASC”) 915 Accounting and Reporting by Development Stage Enterprises. Among the disclosures required by ASC 915 are that the Company's consolidated financial statements be identified as those of a development stage company, and that the consolidated statements of operations, stockholders' deficit and cash flows disclose activity since the date of the Company's inception.
3.
GOING CONCERN
These unaudited interim condensed consolidated financial statements have been prepared assuming the Company will continue on a going-concern basis. The Company incurred losses since inception and the ability of the Company to continue as a going-concern depends upon its ability to raise additional finance to fund its operations and develop profitable operations. Accumulated net losses from inception to March 31, 2014 totaled $5,180,741. In order for the Company to meet its liabilities as they come due and to continue its operations, the Company is solely dependent upon its ability to generate such financing. There is no assurance that the Company will be able to obtain such financing. These conditions create material uncertainty that cast significant doubt about the Company’s ability to continue as a going concern.
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of the Company are in accordance with accounting principles generally accepted in the United States. Presented below are those policies considered particularly significant:
Basis of Consolidation and Presentation
The accompanying interim condensed consolidated financial statements include the accounts of the Company, and its wholly-owned subsidiary Panacea (a Delaware incorporated Company) and Panacea Global Inc. (a Canadian incorporated Company). All inter-company transactions and balances have been eliminated upon consolidation.
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The interim condensed consolidated financial statements of the Company included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in conjunction with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These interim condensed consolidated financial statements should be read in conjunction with the Company’s 2013 year end annual consolidated audited financial statements and the notes thereto included in the Company’s annual report on Form 10-K.
The accompanying interim condensed consolidated financial statements reflect all adjustments of a normal and recurring nature which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented. The results of operations for these periods are not necessarily comparable to, or indicative of, results of any other interim period or for the fiscal year taken as a whole. Certain information that is not required for interim financial reporting purposes has been omitted.
Translation of Foreign Currency Financial Statements and Foreign Currency Transactions
The functional currency of the Company is Canadian dollars. The functional currency of the Company’s subsidiaries is United States dollars. The interim condensed financial statements of the Company have been translated into United States dollars by translating balance sheet accounts at year end and period end exchange rates except for non-current assets which are translated at historical exchange rates, and statement of operations accounts at average exchange rates for the periods. Foreign currency translation gains and losses are reflected in the equity section of the Company’s consolidated balance sheet in Accumulated Other Comprehensive Income (Loss). The balance of the foreign currency translation adjustment, included in Accumulated Other Comprehensive Loss, was ($79,218) for the three months ended March 31, 2014. For the period from inception (February 5, 2010) through March 31, 2014, $53,988 foreign currency translation adjustment was included in Accumulated Other Comprehensive Income (Loss).
Earnings or Loss Per Share
The Company accounts for earnings per share pursuant to ASC 260-10-05, Earnings per Share, which requires disclosure on the financial statements of "basic" and "diluted" earnings (loss) per share. Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common stock outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common stock outstanding plus common stock equivalents (if dilutive) related to stock options and warrants for each period. In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential shares outstanding would be anti-dilutive.
Financial Instruments
In accordance with ASC 825-10-50, Defining Fair Value Measurement, the estimated fair value of financial instruments has been determined by the Company using available market information and valuation methodologies. Considerable judgment is required in estimating fair value. Accordingly, the estimates may not be indicative of the amounts the Company could realize in a current market exchange. As of March 31, 2014, the carrying value of accounts payable and accrued liabilities, due to related parties and license fee payable approximate their fair value because of the short-term maturity of these instruments. The fair value of the investment is not readily determinable.
In accordance with ASC 820-10, Defining Fair Value Measurement, the Company adopted the standard which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements.
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Income Taxes
The Company accounts for income taxes pursuant to ASC 740-10,Accounting for Income Taxes. Deferred tax assets and liabilities are recorded for differences between the financial statements and tax basis of the assets and liabilities as well as loss carry forward that will result in taxable or deductible amounts in the future based on enacted tax laws and rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is recorded for the amount of income tax payable or refundable for the period increased or decreased by the change in deferred tax assets and liabilities during the period.
Impairment of Long-lived Assets
In accordance with ASC 360-10-05,Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company evaluates whether events and circumstances have occurred that indicate possible impairment. If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value of asset less cost to sell. The Company evaluated the Global Diagnostic License on March 31, 2014 and noted no impairment.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known. The accounting estimates that require management’s most significant judgments are the valuation of the intangible asset and measurement of accrued liabilities.
Cash and Cash Equivalents
For the purposes of the balance sheets and statement of cash flows, cash and cash equivalents include deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. The Company maintains cash and cash equivalents at financial institutions which periodically may exceed federally insured limits.
Property and Equipment
Property and equipment are initially recorded at cost. Depreciation is provided using the declining balance method at rates intended to amortize the cost of assets over their estimated useful lives
The investment in Laboratories was $911,464 and $911,672 as of March 31, 2014 and December 31, 2013 respectfully. The reduction in the investment during the 3 months ended March 31, 2014 represents the Company’s share of the operating expenses incurred at laboratories.
6.
INTANGIBLE ASSET
The Company’s intangible asset consists of the GDL, as described in Note 5, which contains certain issued and pending patent rights. Upon commencement of licensed services to customers, amortization will be taken over the estimated useful life of the respective patent rights, which vary and are determined on a country-by-country basis.
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| | | | | | |
| As at February 5, 2010 (inception) | Acquired | Accumulated Amortization | As at December 31, 2013 | Accumulated Amortization | As at March 31, 2014 |
Global Diagnostic License | - | $ 50,000,000 | - | $ 50,000,000 | - | $ 50,000,000 |
As at March 31, 2014, the Company has not commenced any services relating to GDL and as a result, no amortization has been recorded.
7.
CAPITAL STOCK
a)
Authorized
100,000 Class A Preferred shares with a par value of $0.001. There were no shares issued and outstanding at March 31, 2014.
300,000,000 Common shares of $0.001 par value.
b)
Issued
105,997,586 Common Shares (105,997,586 common shares – March 31, 2013).
Common Shares
On April 5, 2012, the Company issued an additional 500,000 common shares for cash of $121,652. On August 17, 2012, the Company issued an additional 100,000 common shares for cash of $49,985. On September 17, 2012, the Company issued an additional 280,000 common shares for cash of $139,477. On September 25, 2012, the Company issued an additional 320,000 common shares for cash of $160,000. On October 12, 2012, the Company issued an additional 100,000 common shares for cash of $50,000. On March 1, 2013, the Company issued an additional 40,000 common shares for services valued at $20,000. On April 29, 2013, the Company issued an additional 1,184,000 common shares for cash of $592,000. On May 31, 2013, the Company issued an additional 860,000 common shares for cash of $380,000. On June 4, 2013, the Company issued an additional 20,000 common shares for cash of $10,000. On July 8, 2013, the Company issued an additional 680,000 common shares for cash of $287,105. On July 26, 2013, the Company issued an additional 100,000 common shares for cash of $50,000. On August 13, 2013, the Company issued an additional 100,000 common shares for cash of $50,000. On December 4, 2013, the Company issued an additional 50,000 common shares for cash of $25,000. On December 31, 2013, the Company issued an additional 6,000,000 common shares for cash of $3,000,000.
Warrants
On February 25, 2013, the Company issued an additional 1,600,000 common shares for cash of $352,895.
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| | | | |
| |
| Number of Shares | Capital Stock | Additional paid in capital |
Capital stock as at December 31, 2011 | 94,063,586 | 94,064 | 49,869,603 |
Stock issuances in 2012 | 1,300,000 | 1,300 | 519,814 |
Capital stock as at December 31, 2012 | 95,363,586 | $95,364 | $50,389,417 |
Stock issuance in 2013 | 10,634,000 | 10,634 | 4,756,366 |
Capital stock as at December 31, 2013 | 105,997,586 | $105,998 | $55,145,783 |
Stock issuance in 2014 | Nil | Nil | Nil |
Capital stock as at March 31, 2014 | 105,997,586 | $105,998 | $55,145,783 |
The following table provides consolidated information on the Company’s warrants for as at December 31, 2013. Each warrant provides the warrant holder the option to purchase one share.
| | | | |
| Number of Warrants | Exercise Price | Exercisable Date | Expiry Date |
Warrants issued on April 10, 2011 | 2,000,000 | $0.25 | Anytime | April 10, 2013 |
Warrants issued on April 15, 2011 | 100,000 | $0.25 | Anytime | April 15, 2013 |
Warrants issued on April 5, 2012 | 500,000 | $0.25 | Anytime | April 5, 2014 |
Warrants exercised on February 25, 2013 | (200,000) | $0.25 | | |
Warrants exercised on February 28, 2013 | (200,000) | $0.25 | | |
Warrants exercised on March 22, 2013 | (200,000) | $0.25 | | |
Warrants exercised on March 27, 2013 | (600,000) | $0.25 | | |
Warrants exercised on May 22, 2013 | (200,000) | $0.25 | | |
Warrants expired on April 10, 2013 | (600,000) | $0.25 | | |
Warrants expired on April 15, 2013 | (100,000) | $0.25 | | |
Warrants outstanding as at March 31, 2014 | 500,000 | $0.25 | | |
8.
INCOME TAXES
The Company accounts for income taxes in accordance with ASC 740-20. ASC 740-20 prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates. The effects of future changes in tax laws or rates are not anticipated.
Under ASC 740-20 income taxes are recognized for the following: a) amount of tax payable for the current year, and b) deferred tax liabilities and assets for future tax consequences of events that have been recognized differently in the financial statements than for tax purposes.
The Company has a Delaware subsidiary which pays an asset-based tax. Tax expense in the current year relate to asset based taxes on the Company’s Delaware subsidiary. Other than the Delaware subsidiary, the Company pays taxes based on income. The Company has income tax losses available to be applied against future year’s income as a result of the losses incurred since inception. However, due to the losses incurred since inception and expected future operating results, management determined that it is more likely than not that the deferred tax asset resulting from the tax losses available for carry forward will not be realized through the reduction of future income tax payments. Accordingly a 100% valuation allowance has been recorded for income tax losses available for carry forward.
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As of March 31, 2014, the Company did not have any amounts recorded pertaining to uncertain tax positions. The Company files federal and provincial income tax returns in Canada and federal, state and local income tax returns in the U.S., as applicable. The Company may be subject to a reassessment of federal and provincial income taxes by Canadian tax authorities for a period of three to five years from the date of the original notice of assessment in respect of any particular taxation year. In certain circumstances, the U.S. federal statute of limitations can reach beyond the standard three year period. U.S. state statutes of limitations for income tax assessment vary from state to state.
9.
PROPERTY AND EQUIPMENT
| | | |
| As at March 31, 2014 |
| Cost | Accumulated Depreciation | Net Book Value |
Leasehold improvements | $ 79,866 | $ 31,338 | $ 48,528 |
Furniture & Equipment | 20,001 | 6,460 | 13,541 |
Lab Equipment | 14,448 | 3,904 | 10,544 |
Computer equipment | 1,820 | 1,159 | 661 |
| $ 116,135 | $ 42,861 | $ 73,274 |
| | | |
| As at December 31, 2013 |
| Cost | Accumulated Depreciation | Net Book Value |
Leasehold improvements | $ 79,866 | $ 28,516 | $ 51,350 |
Furniture & Equipment | 20,001 | 5,659 | 14,342 |
Lab Equipment | 14,448 | 2,628 | 11,820 |
Computer equipment | 1,820 | 1,096 | 724 |
| $ 116,135 | $ 37,899 | $ 78,236 |
During the year, the Company began acquiring and using property and equipment which were depreciated accordingly.
10.
EQUITY COMPENSATION
The following table provides consolidated summary information on the Company’s equity compensation plans as at March 31, 2014.
12.
LEASE COMMITMENTS
In 2011, the Company entered into lease for premise in Toronto, Ontario. The lease term is for 60 months. Rent expense under all operating leases (exclusive of real estate taxes and other expenses payable under the leases) was approximately $17,068 and $7,728 for the three months ended March 31, 2014 and 2013 respectively.
In addition, the Company is required to pay its pro rata share of common area maintenance costs and property taxes.
13.
SUBSEQUENT EVENT
On April 10, 2014, the Company approved the grant of 800,000 non-qualified stock options to employees and 1,910,000 non-qualified stock options to consultants to purchase shares of the Company’s common stock at an option price of $0.55 per share. The options will vest until April 10, 2016 unless sooner terminated according to the term of the separate Non-Qualified Stock Option Agreements signed by each employee and consultant.
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Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto contained elsewhere in this Report. The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements.
Overview
Panacea Global, Inc. is a corporation that was incorporated under the laws of Nevada in 1995. On June 30, 2010 we entered into a share exchange agreement with Panacea Global, Inc., a privately held Delaware corporation (“Panacea Delaware”), and the shareholders of Panacea Delaware pursuant to which we acquired all of the outstanding capital stock of Panacea Delaware from the Panacea Delaware shareholders and Panacea Delaware became our wholly owned subsidiary and our operating business.
Through Panacea Delaware, we are a company that sells early detection cancer tests through our licensing agreement with Panacea Pharmaceuticals, Inc. (“Pharmaceuticals”). More specifically, Panacea Global Inc. is a biopharmaceutical company focused on providing blood (protein), serum and tissue tests to diagnose and monitor cancer through a licensing agreement with Panacea Pharmaceuticals, Inc. The Company’s mission is to discover, develop and commercialize innovative diagnostic products. Panacea’s current product development focus is on novel proteins and biochemical pathways related to cellular regulation and cell cycle abnormalities in oncology diseases.
Panacea Pharmaceuticals, Inc. was founded in 1999 to discover, develop and commercialize innovative therapeutic and diagnostic products for cancer and diseases of the central nervous system. In-house research and development activities are performed at an 11,000 square foot facility in Gaithersburg, Maryland.
Panacea Laboratories, Inc. is certified under the Clinical Laboratory Improvement Amendments of 1988 (CLIA) to perform high complexity testing, and offers several cancer diagnostic tests to patients, physicians and clinical laboratories.
On March 24, 2010, Panacea Delaware entered into a licensing agreement (the “Licensing Agreement”) with Pharmaceuticals. Pursuant to the Licensing Agreement, Panacea Delaware was granted the exclusive right to develop, use, and market Pharmaceuticals’ HAAH based cancer diagnostic technologies, with rights to sublicense worldwide, except for the United States of America. In consideration for the Licensing Agreement, Panacea Delaware issued 35,500,000 shares of its common stock to Pharmaceuticals and is obligated to pay Pharmaceuticals a license fee of $2,500,000, due within 30 days of the Company raising a minimum $10,000,000 equity investment (the “License Fee”). One-half of any equity investments raised shall be remitted to Pharmaceuticals, until the License Fee is paid in full. The aggregate consideration paid and therefore fair value of the Licensing Agreement equals $50,000,000. Further, the Company will pay Pharmaceuticals 25% of all sublicensing revenue and will purchase all conforming reagent at a cost of $20 per test or 10% of the sale price of the individual test with a minimum $8.00 test price. We hope to market and sell products through strategic partnerships with companies in different countries by entering into sublicensing agreements to sell our products. We may enter into sublicensing agreements with one or more third parties under all or some of the related Pharmaceuticals patents. Additionally, we hope to develop standalone operations in certain countries including Canada. We anticipate that our licensing agreements, with amenable profits margins, will underpin our revenue for the 2014 year.
On June 2, 2011, we filed a Certificate of Amendment to our Articles of Incorporation with the State of Nevada changing the Company’s name to Panacea Global, Inc.
On November 18, 2011 we entered into an amendment to the Licensing Agreement whereby the Licensing Agreement was amended to clarify that the license granted to us is exclusive.
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On January 18, 2013, we entered into a second amendment to the Licensing Agreement (“Amendment No. 2”). The Company entered into Amendment No. 2, extending the payment term of the Licensing Agreement. Amendment No. 2 provides that the Company shall pay the remaining License Fee within two years from the execution date of Amendment No. 2.
The License Fee was fully repaid during the quarter.
On June 2, 2011, we filed a Certificate of Amendment to our Articles of Incorporation with the State of Nevada changing the Company’s name to Panacea Global, Inc.
As of March 31, 2014, we are in the development stage and have limited working capital, have not earned any revenues from operations and have accumulated a deficit.
Exclusive Sublicense Agreement with Panacea Laboratories (Canada)
On November 18, 2011, we entered into an exclusive sublicense agreement by and between Panacea Global, Inc. corporation organized under the laws of Ontario and our wholly owned subsidiary (“Panacea Canada”), Pharmaceuticals, Panacea Global, Inc., a corporation organized under the laws of the State of Delaware and our wholly subsidiary, and Panacea Laboratories, Inc., a corporation organized under the laws of Ontario (the “Sublicense Agreement”). Pursuant to the Sublicense Agreement, we granted Panacea Laboratories the exclusive right to sublicense our license to develop, use, and market Pharmaceuticals’ HAAH based cancer diagnostic technologies throughout Canada.
Patents
Pursuant to the Licensing Agreement, we acquired a global diagnostic license (“GDL”) with rights to sublicense our technology worldwide, except for the United States of America. The GDL allows the Company to develop, market and use licensed products related to HAAH based laboratory tests for the following two patents pending:
Methods of Diagnosing, Predicting Therapeutic Efficacy and Screening for New Therapeutic Agents for Leukemia – Pending
Methods of Diagnosing Lung Cancer – Pending
Exclusive Master Purchase Agreement with Palmverse Limited
On July 7, 2011, we, through our wholly owned subsidiary, Panacea Delaware, entered into an exclusive master purchase agreement with Palmverse Limited, a Belarus corporation (“Palmverse”) (the “Agreement”) to provide Palmverse with the exclusive right to use the Company’s blood, serum and tissue testing services to diagnose and monitor cancer (the “Cancer Testing Products”) within the Republic of Belarus. We have agreed to provide Palmverse with an exclusive right to become the sole purchaser of the Company’s Cancer Testing Products within the Republic of Belarus. The initial term of the Agreement expires on December 31, 2011 (the “Initial Term”). Following the expiration of the Initial Term, the Agreement will renew automatically on an annual basis, provided Palmverse meets minimum purchase amounts, unless either party gives sixty (60) days prior written notice of its intention not to renew the Agreement.
The Agreement provides that Palmverse will be required to meet a minimum purchase amount threshold of the Cancer Testing Products for each year the Agreement is in effect. In that regard, during the Initial Term, Palmverse will be required to purchase a minimum of $280,000 in Cancer Testing Products. Thereafter, in the period ranging from January 1, 2012 to December 31, 2012 (the “First Renewal Term”), Palmverse is required to purchase a minimum of $3,500,000 in Cancer Testing Products. During the period ranging from January 1, 2013 to December 31, 2013 (the “Second Renewal Term”), Palmverse is required to purchase a minimum of $5,250,000 in Cancer Testing Products. Finally, in each renewal term commencing after the Second Renewal Term, Palmverse is required to purchase a minimum of $7,000,000 in Cancer Testing Products.
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Palmverse failed to make the minimum purchase amounts during the Initial Term, and is therefore in default of the Agreement. We will not be terminating the Agreement, and we are providing Palmverse the opportunity to cure their default and begin to order the Cancer Testing Products.
Reverse Split
On September 6, 2011, the Board approved resolutions authorizing the Company to implement a reverse stock split of the outstanding shares of common stock at a ratio of up to one-to-thirty (the “Reverse Stock Split”). On September 6, 2011, we also received approval for the Reverse Stock Split from our shareholders. The Board may determine in its discretion whether to effect the Reverse Stock Split at any time, if at all, and if so at what exchange ratio up to one-to-thirty. If the Board determines to effect a Reverse Stock Split, the Reverse Stock Split will become effective upon the filing of a Certificate of Amendment to our Certificate of Incorporation with the Secretary of State of the State of Nevada. The exact timing of the filing of the amendment will be determined by the Board based on its evaluation as to when such action will be the most advantageous to us and our stockholders, and the Board. In addition, the Board reserves the right, notwithstanding stockholder approval and without further action by the stockholders, to elect not to proceed with the Reverse Stock Split if, at any time prior to filing the amendment, the Board, in its sole discretion, determines that it is no longer in our best interests and the best interests of our stockholders. To date our Board has not yet implemented the reverse split.
Valuation Analysis of Global Diagnostic License
As of March 31, 2014, there was no updated valuation analysis regarding our Global Diagnostic License (the “License”) to replace the report dated December 31, 2011 discussed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2012. Reznick Group performed a valuation analysis to estimate the fair value of our License as of December 31, 2011 (the “Valuation Date”).
According to the License Agreement, Panacea Pharmaceuticals granted us the global right (excluding the United States and its territories and protectorates) with respect to the development, use, and marketing of the technology, method, process, patent rights, and know-how related to the cancer testing products. Based on the valuation analysis, the fair market value of the License was determined to be $55.8 million as of the Valuation Date.
Results of Operations
As of March 31, 2014, the Company had not begun its business operations in connection with the Licensing Agreement. Accordingly, we have not had any revenues during the three ended March 31, 2014 or during the period from February 5, 2010 (inception) to March 31, 2014.
Total expenses for the three months ended March 31, 2014 were $459,563, as compared to total expenses of $167,352 for the three months ended March 31, 2013 and $4,974,554 for the period from February 5, 2010 (inception) to March 31, 2014. The increase in expenses for the three months ended March 31, 2014 was primarily attributable to salaries and benefits and office and general expenses.
The Company recorded a net loss of $459,771 for the three months ended March 31, 2014. We recorded a net loss for the three months ended March 31, 2013 of $167,402 and a net loss of $5,180,741 for the period from February 5, 2010 (inception) to March 31, 2014.
Liquidity and Capital Resources
At March 31, 2014 the Company had $52,025,747 in assets comprised of the $50,000,000 intangible asset, investment of $911,464, property and equipment totaling $73,274, $765,668 cash in hand and other assets of $275,341. The intangible asset allows the Company to develop market and use licensed products related to HAAH based laboratory tests. Comparatively, at December 31, 2013 we had $53,348,511 in assets comprised of the $50,000,000 intangible asset, investment of $911,672, property and equipment totaling $78,236, cash in hand of $2,309,563 and other assets of $49,040.
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At March 31, 2014 the Company had liabilities of $1,900,719 comprised of deferred revenue of $1,000,000, amounts due to related parties of $562,915 and accounts payable and accrued liabilities totaling $337,804. Comparatively at December 31, 2013, we had $2,684,494 in liabilities comprised of the license fee payable of $574,211 deferred revenue of $1,000,000, amounts due to related parties of $720,209 and accounts payable and accrued liabilities totaling $390,074.
Net cash used in operating activities during the three months ended March 31, 2014 was $1,307,383 and was $5,303,613 for the period from February 5, 2010 (inception) to March 31, 2014. Net cash used by investing activities was $Nil for the three months ended March 31, 2014 and was $1,115,736 for the period from February 5, 2010 (inception) to March 31, 2014 due to the company’s investment in Panacea Laboratories, Inc. and the purchase of property and equipment. Net cash used by financing activities during the three months ended March 31, 2014 was $157,294 due to financing to related parties and net cash provided by financing activities was $7,131,029 for the period from February 5, 2010 (inception) to March 31, 2014 due to financing from related parties and the issuance of common stock.
As there were no revenues from operating activities as of March 31, 2014, we must rely upon the issuance of common stock and additional capital contributions from shareholders and/or loans from shareholders and third-party lenders to meet our working capital needs. It is expected by management that we will need to rely upon new capital contributions to pay our liabilities.
Critical Accounting Policies
Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimate; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, and revenue and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
Recent Accounting Pronouncements
Changes to GAAP accounting are established by the Financial Accounting Standards Board (FASB) in the form of accounting standards updates (“ASU’s”) to the FASB’s Accounting Standards Codification.
The Company has assessed the applicability and impact of all ASU’S and they have been determined to be either not applicable or are expected to have minimal impact on our consolidated financial position and results of operations.
Going Concern
These financial statements have been prepared assuming the Company will continue on a going-concern basis. The Company has incurred losses since inception and the ability of the Company to continue as a going-concern depends upon its ability to develop profitable operations and to continue to raise adequate financing. Accumulated Losses from inception to March 31, 2014 total $5,180,741. Management is actively targeting sources of additional financing to provide continuation of the Company’s operations. In order for the Company to meet its liabilities as they come due and to continue its operations, the Company is solely dependent upon its ability to generate such financing.
There can be no assurance that the Company will be able to continue to raise funds, in which case the Company may be unable to meet its obligations. Should the Company be unable to realize its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the amounts recorded in these financial statements.
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The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.
Impairment of Long-lived Assets
In accordance with ASC 360-10-05,Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company evaluates whether events and circumstances have occurred that indicate possible impairment. If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value of asset less cost to sell. The Company evaluated the Global Diagnostic License on December 31, 2011 indicating no impairment. As at March 31, 2014, management is of the opinion that there have been no changes in circumstances.
Off-Balance Sheet Arrangements
None.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
Smaller reporting companies are not required to provide the information required by this item.
Item 4.
Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2014. This evaluation was accomplished under the supervision and with the participation of our chief executive officer and chief financial officer who concluded that our disclosure controls and procedures are not effective due to material weakness to ensure that all material information required to be filed in the Form 10-Q has been made known to them.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In connection with our management’s assessment of our internal control over financial reporting as required under Section 404 of the Sarbanes-Oxley Act of 2002, we identified certain material weaknesses in our internal control over financial reporting as of March 31, 2014:
·
Reliance upon independent financial reporting consultants for review of critical accounting areas and disclosures and material non-standard transaction.
·
Lack of sufficient accounting staff which results in a lack of segregation of duties necessary for a good system of internal control.
Because of the material weaknesses above, management has concluded that we did not maintain effective internal control over financial reporting as of March 31, 2014, based on Internal Control over Financial Reporting – Guidance for Smaller Public Companies issued by COSO.
Remediation of Material Weaknesses in Internal Control Over Financial Reporting
In order to remedy our existing internal control deficiencies, as our finances allow, we will hire a Chief Financial Officer and additional accounting staff.
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Changes in Internal Controls over Financial Reporting
We have not yet made any changes in our internal controls over financial reporting that occurred during the period covered by this report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1.
Legal Proceedings.
The following descriptions have previously been disclosed in the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2014:
Moneylogix Group, Inc. et al. v. Panacea Global, Inc. et al.
On October 7, 2011, Moneylogix Group, Inc., Maximus Investments, Inc., Bakirkoy Financial Holdings, Inc., Bowen Financial Advisory Group LTD., Marciafor Holdings, Inc., Alex Haditaghi and Gary Cilevitz (collectively, the “Moneylogix Plaintiffs”) filed a lawsuit in the Superior Court of Justice in Ontario, Canada against the Company and other parties. The Moneylogix Plaintiffs generally allege that the Company breached its obligations pursuant to a Consulting Agreement and various verbal agreements regarding the Share Exchange Agreement. As previously disclosed in the Company’s Current Report on Form 8-K, dated September 5, 2013, the Company, on August 20, 2013, filed a Statement of Claim with the Ontario Superior Court of Justice against the Moneylogix Plaintiffs. For procedural reasons, the Company’s Statement of Claim was discontinued and replaced by a Statement of Defence and Counterclaim, which the Court has also deemed filed on August 20, 2013. There have been no material developments in this litigation since the filing of the Statement of Defence and Counterclaim. The Company believes the Moneylogix Plaintiffs’ claims against it are entirely without merit and intends to continue to vigorously defend itself against and pursue, as applicable, its legal recourses against the Moneylogix Plaintiffs in court.
Baywood Homes Partnership et al. v. Moneylogix Group, Inc. et al.
On September 9, 2010, Baywood Homes Partnership, 2131059 Ontario Limited, 2206659 Ontario Limited, 2147789 Ontario Limited, 1367169 Ontario Limited and Ralph Canonaco (collectively, the " Baywood Plaintiffs") filed a lawsuit in the Superior Court of Justice in Ontario, Canada against Alex Haditaghi, Majid Haditaghi, Moneylogix Group, Inc. (a Canadian company), Mortgagebrokers.com, Financial Group of Companies Inc., Gary Cilevitz, Michael Knarr, and Farideh Ronhbakhsh (the “Baywood Non-Company Defendants”) and the Company. As previously disclosed, the Company did not participate in the initial defence put forth by the Baywood Non-Company Defendants. On April 18, 2013, Justice Edward Belobaba granted, in part, the Baywood Non-Company Defendants’ summary judgment motion and dismissed the Baywood Plaintiffs’ action in its entirety. Justice Belobaba denied the Baywood Non-Company Defendants’ summary judgment motion with regard to granting their counter-claim against the Baywood Plaintiffs. The Baywood Plaintiffs appealed Justice Belobaba’s decision and the appeal was heard on March 4, 2014. The Company believes that the Baywood Plaintiff’s claims against its are entirely without merit and intends to vigorously defend itself against and pursue, as applicable, its legal recourses against the Baywood Plaintiffs in court.
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Panacea Global, Inc. et-al. v. Moneylogix Group, Inc. et-al.
On September 24, 2013, the Company, Panacea Pharmaceuticals, Inc., a corporation organized under the laws of the State of Maryland and a principal shareholder of the Company, Mahmood Moshiri, the Company's Chief Executive Officer, President, Chief Medical Officer, Interim Chief Financial Officer and Director, and Binnay Sethi, the Company's Vice President and also a Director (collectively, the “Panacea Global Plaintiffs”) filed a lawsuit in the Superior Court of Justice in Ontario, Canada against Alex Haditaghi, Gary Cilevitz, Lateral Management Corp, I Stock Daily Inc., Daniel Putnam, Marcelle Lean, Mike Knarr, Mark Lindsay, Dong-Soo Lee, Robert Hyde, David Nelson, Vince Calicha, Stephen Conville, and Joseph Ferraro (collectively, the “Panacea Global Defendants”).
The Panacea Global Plaintiffs allege that the Panacea Global Defendants, prior to the entering into of the Share Exchange Agreement, conspired to cause the entity then known as Moneylogix Group, Inc., a Nevada Corporation (“Moneylogix USA” and the entity that is now the Company), to issue a substantial number of shares to Ferraro and Lateral Management Corp. for no or otherwise inadequate consideration. In addition, the Panacea Global Plaintiffs allege that after the entering into of the Share Exchange Agreement, Cilevitz wrote a letter to Moneylogix USA’s transfer agent in which he engaged in fraudulent misrepresentation in order to cause Moneylogix USA to improperly issue 1,000,000 shares to Putnam, Lateral Management Corp., Lean, Knarr, Lindsay, Lee, Hyde, Nelson, I Stock, Calicha, and Conville for no or otherwise insufficient consideration.
The Panacea Global Plaintiffs seek a number of different forms of relief, including general damages in the amount of approximately $10 million, exemplary or punitive damages in the amount of approximately $1 million, and the cancellation of certain shares. The Panacea Global Defendants have not yet delivered a Statement of Defence. The Company intends to vigorously pursue its legal recourses against the Panacea Global Defendants in court.
Item 1A.
Risk Factors.
Smaller reporting companies are not required to provide the information required by this item.
Item 2.
Unregistered Sales Of Equity Securities And Use Of Proceeds
None.
Item 3.
Defaults Upon Senior Securities.
None.
Item 4.
Mine Safety Disclosure.
Not applicable.
Item 5.
Other Information.
On April 10, 2014 the Board approved the issuance of non-qualified stock options (the “Options”) to each of: Mahmood Moshiri (“Moshiri”), the Company’s Chief Executive Officer, President, Interim Chief Financial Officer, Chief Medical Officer and Director, and Binnay Sethi (“Sethi,” and together with Moshiri, the “Optionees”), the Company’s Vice President and Director. Dr. Moshiri was issued Options to purchase 500,000 shares of the Company’s common stock and Mr. Sethi was issued Options to purchase 100,000 shares of the Company’s common stock. The Options were granted pursuant to, and are subject to, the Company’s 2011 Omnibus Incentive Plan, which was approved by the Board on July 26, 2011.The Options vested and became exercisable on April 10, 2014 at an exercise price of $0.55 per share and expire on April 10, 2016.
The Option will automatically terminate upon the finding that the applicable Optionee has committed fraud, willful misconduct, misappropriation of funds or other dishonesty.
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The foregoing description of the terms of the Options is qualified in its entirety by reference to the provisions of the Non-Qualified Stock Option Agreements with each of Dr. Moshiri and Mr. Sethi, filed as Exhibits 10.1 and 10.2 to this Quarterly Report on Form 10-Q, which is incorporated by reference herein.
On April 15, 2014 the Board of Directors (the “Board”) of Panacea Global, Inc. (the “Company”) unanimously appointed Dr. Zahra Shariat as a member of the Board bringing the number of members of the Board to three. Dr. Shariat will hold office until the next annual general meeting of our shareholders or until removed from office in accordance with the Company’s bylaws. Dr. Shariat is currently the Company’s office administrator and assistant.
Dr. Zahra Shariat, 47, studied pharmacy at Azad University of Tehran and graduated in 1994. From 1994 to 2007 she practiced as a clinical pharmacist at Fayazbakhsh Hospital, one of the largest hospitals in Tehran. Dr. Shariat was the pharmacist in chief and technical officer in charge of Shariat Pharmacy in Tehran from 1997 to 2006.
Since 2010, Dr. Shariat has established a high level of credibility and experience in managing, marketing and guiding public companies. Dr. Shariat is an advisory Board member of Proteus Imaging Canada Inc. and Panacea Pharmaceuticals, Inc.
Dr. Shariat’s qualifications to serve on the Board include her experience as a pharmacist as well as her experience advising other companies.
Family Relationships
Dr. Shariat is the sister-in-law of Dr. Mahmood Moshiri (the sister of Dr. Moshiri’s wife), the Company’s Chief Executive Officer.
Arrangements or Understandings
There are no arrangements or understandings between Dr. Shariat and any other persons pursuant to which Dr. Shariat was selected to serve as a member of the Board.
Committees
The Board does not currently have nominating, audit or other committees.
Related Party Transactions
There are no related party transactions reportable under Item 5.02 of Form 8-K or Item 404(a) of Regulation S-K.
Material Plans, Contracts or Arrangements
While Dr. Shariat was an employee of the Company, the Board approved, on two occasions, the issuance of non-qualified stock options to Dr. Shariat. The first issuance was on July 26, 2011 to purchase 500,000 shares of the Company’s common stock and expires on July 26, 2021. The second issuance was on April 10, 2014 to purchase 200,000 shares of the Company’s common stock and expires on April 10, 2016. Both issuances were granted pursuant to, and are subject to, the Company’s 2011 Omnibus Incentive Plan, which was approved by the Board on July 26, 2011.
On April 17, 2014, the Company entered into an employment services agreement with Dr. Moshiri, itsChief Executive Officer, President, Interim Chief Financial Officer, and Chief Medical Officer (the “Employment Services Agreement”). Under the terms of the Employment Services Agreement, Dr. Moshiri will be paid $240,000 in base salary per year.
The foregoing description of the terms of the Employment Services Agreement is qualified in its entirety by reference to the provisions of the Employment Services Agreement, filed as Exhibit 10.3 to this Quarterly Report on Form 10-Q, which is incorporated by reference herein.
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Item 6
Exhibits.
