UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2004
Commission file number 333-67232
GenoMed, Inc.
(Exact name of registrant as specified in its charter)
Florida 43-1916702
(State or other jurisdiction of incorporation) (IRS Employer
Identification No.)
9666 Olive Blvd Suite 310 St Louis, Missouri 63132
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (314) 983-9933
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Securities registered under Section 12(g) of the Exchange Act:
Common Stock
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(Title of class)
Check whether the issuer (1) 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 |_|
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. |_|
The issuer's revenues for its most recent fiscal year were $3,186
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60
days. (See definition of affiliate in Rule 12b-2 of the Exchange Act.) Trading
on March 4, 2005 was at a high of $0.081 and a low of $0.075 based on a volume
406,500 shares.
Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate market
value of the common equity held by non-affiliates on the basis of reasonable
assumptions, if the assumptions are stated.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
As of December 31, 2004, there were 195,232,824 shares of our common stock
issues and outstanding. As of March 4, 2005, there were 197,001,040 shares of
our common stock issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
We have incorporated the following documents by reference.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
TABLE OF CONTENTS TO ANNUAL REPORT
ON FORM 10-KSB
YEAR ENDED DECEMBER 31, 2004
PART I............................................................................................................1
Item 1. Description of Business...........................................................................1
Item 2. Description of Property...........................................................................8
Item 3. Legal Proceedings.................................................................................8
Item 4. Submission of Matters to a Vote of Security Holders...............................................8
PART II...........................................................................................................8
Item 5. Market for Common Equity and Related Stockholder Matters..........................................8
Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operation.............11
Item 7. Financial Statements.............................................................................14
Item 8. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.............15
PART III.........................................................................................................15
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of
the Exchange Act.................................................................................15
Item 10. Executive Compensation...........................................................................18
Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters...21
Item 12. Certain Relationships and Related Transactions...................................................22
Item 13. Exhibits and Reports on Form 8-K.................................................................22
Item 14. Principal Accountant Fees and Services...........................................................25
Forward-Looking Statements
The words or phrases "would be," "will allow," "intends to," "will likely
result," "are expected to," "will continue," "is anticipated," "estimate,"
"project," or similar expressions are intended to identify "forward-looking
statements." Actual results could differ materially from those projected in the
forward looking statements as a result of a number of risks and uncertainties.
Statements made herein are as of the date of the filing of this Form 10-KSB with
the Securities and Exchange Commission and should not be relied upon as of any
subsequent date. Unless otherwise required by applicable law, we do not
undertake and we specifically disclaim any obligation to update any
forward-looking statements to reflect occurrences, developments, unanticipated
events or circumstances after the date of such statement.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
ORGANIZATIONAL HISTORY
On January 3, 2001, we were formed in the State of Florida under the name e-Kids
Network, Inc. to engage in the e-commerce business of selling toys, games,
merchandise, and educational products. We were formed along with 12 other
commonly owned companies in accordance with the March 6, 2001 Bankruptcy Court
approved Amended Plan of Reorganization of e-Miracle Network, Inc., United
States Bankruptcy Court, Southern District of Florida, Miami Division on March
6, 2001 (Case No. 00-18144-BKC-AJC So. Dist. Fla.) in which the debtors and
shareholders of e-Miracle Network, Inc. were issued shares of our common stock
and the other 12 commonly owned companies. On October 3, 2001, we changed our
name to GenoMed, Inc. We are a development stage company.
On November 9, 2001, we executed an Agreement and Plan of Share Exchange with
Genomic Medicine, LLC, a Delaware Limited Liability Company formed on February
9, 2001, and its sole owner, whereby we acquired 100% of all of the issued and
outstanding shares of Genomic Medicine, LLC, a Medical Genomics development
stage company with no revenue or revenue generating operations. Under the terms
of this agreement, we were required to make a $1,000,000 investment in Genomic
Medicine, LLC during the initial 12 months from the date of the agreement in
return for our immediate issuance of 12,500,000 shares of our common stock to
Genomic Medicine's sole principal, Dr. David Moskowitz, which we issued on
November 9, 2001. In addition, we agreed to issue an additional 37,500,000
shares of our common stock to Dr. Moskowitz. Genomic Medicine, LLC's officers
and directors then became our officers and directors, and Genomic Medicine, LLC
became our wholly owned subsidiary. In November 2001, in conjunction with our
acquisition of Genomic Medicine, LLC, our new and current Board of Directors
decided to cease doing business in the e-commerce area of selling toys, games,
merchandise, and educational products. We made this decision due to the
declining nature of the e-commerce business and because we adopted Genomic
Medicine's business of medical genomics, which we believed held greater business
potential than e-commerce.
We have not been involved in any material reclassification, merger,
consolidation or sale of a significant amount of assets; however, we did acquire
all of the business interests of Genomic
Medicine, LLC as described above. On September 28, 2001, we affected a 50-for-1
forward stock split. Prior to this forward split, we had 12,076,200 shares
outstanding; immediately following this forward split we had 603,810,000 shares
outstanding, 500,000,000 shares of which were returned to our treasury on
November 8, 2001 by our former President/Chairman of the Board, David Siddons.
As of December 31, 2004, we had 195,232,824 shares outstanding. As of December
31, 2004, we had 45,500,000 options outstanding. As of March 4, 2005, we had
197,001,040 shares outstanding.
HOW YOU MAY CONTACT US
We are located at 9666 Olive Boulevard, Suite 310 in St. Louis, Missouri. Our
telephone number is 314-983-9933.
BUSINESS OVERVIEW
Medical Genomics is the study of how genes function in the cause, progression
and treatment of disease. We are a Medical Genomics company that intends to
translate knowledge of disease genes into the development of new treatments,
better use of existing therapies and creation of more accurate gene-based tests
for known diseases. To date, we have developed treatment products for four
diseases (diabetes, hypertension, emphysema and psoriasis) and are currently
studying many more, but we have generated revenues of only $9,569. We intend to
identify as many disease genes as possible which contribute to specific
diseases, with a concentration on common cancers. These disease associated genes
can then serve as targets for new drug development, enabling the creation of new
medicines for treating human diseases and also as an early warning system to
diagnose disease in patients before any symptoms occur. Accordingly, we plan to
develop a comprehensive database of disease-causing genes so that we can predict
with reasonable confidence what diseases a person may experience during his or
her lifetime and whether a particular drug is likely to aid treatment.
OUR RESEARCH AND DEVELOPMENT APPROACH
The human genome, which contains all the genetic instructions for each human
being, is vast since it contains over 3 billion letters and more than 30,000
genes. Our research and development focuses upon recording and cataloguing
variations in the letters between two groups: (a) "cases," which refer to the
group of specific patients that have a disease; and (b) "controls," which refer
to the group of people without the disease. These variations involve changes in
a single letter or base, known as a nucleotide and so are called "single
nucleotide polymorphisms," otherwise known as SNPs. SNPs that appear at a much
higher frequency among patients with a particular disease than among people of
the same ethnic group without that disease are defined as disease-associated
SNPs. How significant the association is between a disease-associated SNP and
the disease can be measured statistically. We use SNPs which we believe have a
high likelihood of being the cause or the functional part of the disease which
we refer to as regulatory SNPs. This approach assumes that SNPs in the
regulatory regions of each gene control how much protein is eventually produced
from that gene. As a result, we believe that these are the best SNPs to analyze
and include in our database. The higher the statistical
correlation between a particular SNP and a given disease, the more important is
the gene containing that SNP for causing the disease. Genes with the highest
statistical correlation with the disease make excellent drug targets for
treating and/or delaying the onset of a particular disease.
During 2004 we focused solely on identifying genes for common cancers, since we
believe we can already treat cardio-vascular disease effectively. Cancer-causing
genes affect a large population base with ample opportunities for disease-gene
related products and services. The first samples collected involved lung,
prostate, colon, breast, pancreas and ovarian cancers in Caucasians.
STRATEGY
Long-term goal - Our overriding/long term goal is to translate, as rapidly and
as safely as possible, the knowledge of disease genes into better patient
outcomes by constructing a comprehensive list of disease-causing genes.
Mid-term goal - Our mid-term goal over the next five years is to construct a
comprehensive database of disease-causing genes using our proprietary technology
and processes so that physicians can predict with reasonable confidence what
diseases a person may experience during their lifetime. This goal will require
us to:
Establish strategic partners or alliances with pharmaceutical companies,
health maintenance organizations, biotechnology companies and clinical
diagnostic laboratories to complement our research and development efforts.
Through these strategic partnerships, to develop licensing or royalty
revenue from: (a) the use of new drugs for common diseases; (b) the use of
existing drugs for new clinical indications; and (c) gene-based diagnostic
tests.
OUR SAMPLING AND COLLECTION PROCESS
We intend to sample disease populations throughout the world. We will use the
data derived from our sampling to conduct comparative studies of
disease-predisposition genes across ethnic groups. Some genes will be found to
be common for a disease among all of the people of the world, while other genes
will be private to just one or two closely related ethnic groups. Practically,
our sampling and collection process will involve multiple sampling operations on
multiple continents. For instance, with respect to Caucasians, sampling has been
conducted in the United States. If we were to find replication of a disease gene
in multiple populations in the United States, that would be strong evidence that
the disease association is real for Caucasians. Similarly, the same disease is
sampled across multiple ethnicities such as African, Hispanic, and Asian. A
disease gene appearing in more than one ethnic group may be more important in
causing the disease than a gene which appears in only one ethnic group.
GENOTYPING
Genotyping consists of two phases: screening, wherein a relatively small number
of cases and controls are genotyped at a large number of SNPs, and validation,
wherein a considerably larger number of cases and controls are genotyped at a
small number of SNPs.
DATA ANALYSIS
Our approach requires analysis of voluminous amounts of data. Using a neural-net
approach, these data can be analyzed on a single desktop computer.
OUR REVENUE MODEL
To date we have earned only $9,569 of revenues. Our revenue model is based upon
licensing and/or collecting royalties from:
o Discovery of new drugs for common diseases (traditional biotechnology
business model);
o Use of existing drugs for new clinical indications (Next Generation
DM(TM)); and
o Gene-based diagnostic tests.
Our licensing fees will be derived from our agreements with individual patients
and their physicians. We will attempt to derive licensing fees also from
pharmaceutical companies, large domestic and foreign health care systems,
disease management companies, and pharmacy benefit management companies.
Currently, a patient can subscribe to our Clinical Outcomes Improvement
Program(TM) for $67 a month. We have seven such agreements.
MARKETING
As a Next Generation Disease Management(TM) company, we have begun marketing our
treatments to our patients directly. If and when we discover additional disease
associated genes, we intend to market them to pharmaceutical companies, other
biotechnology companies, and diagnostic laboratories. Our marketing program will
be implemented and directed by our Chairman of the Board/Chief Executive
Officer, Dr. Moskowitz, who will directly contact licensing and development
officers of these type companies. In addition, we intend to enter into
agreements with outside marketing consultants who will actively market our
products to such companies.
COMPETITION
The gene identification research and development field is extremely competitive
and is characterized by rapid technological change. Our competitors have
substantially greater financial, scientific, and human resource, and, as a
result greater research and product development capabilities. In addition, our
competitors have greater experience in marketing gene-related products. These
competitive advantages provide our competitors with greater potential to develop
revenue streams deriving from:
o Identification of genes;
o Establishing uses for genes;
o Patenting genes;
o Product development; and
o Commercialization of products.
Our competitors are located in the United States as well as around the world and
include:
o Diagnostic companies;
o Health Care companies;
o Biotechnology companies;
o Pharmaceutical companies;
o University or university-sponsored research organizations; and
o Government-sponsored research organizations.
Examples of our competition include:
o Applera Corporation which uses high-speed gene sequencers to discover
genes, and the TaqMan Assay to score genotypes.
o United States, British, French, German and Japanese government-financed and
sponsored institutes, universities, and not-for-profit entities that
conduct research to identify genes.
o Research pharmaceutical companies such as Novartis, Merck and Glaxo Smith
Kline, which generally employ "marker" polymorphisms intended to lie
physically close to the disease-causing genes, in comparison to our
molecular epidemiology approach employing polymorphisms which may be
functional, rather than merely markers.
o Biotechnology companies such as Genome Therapeutics, Inc. and Millennium
Pharmaceuticals.
We will attempt to overcome the competitive advantages of our competitors by
attempting to accomplish the following:
o Attempt to capitalize on our core findings by identifying a class of SNPs
that appear to cause most common diseases;
o Using comparatively inexpensive genotyping in which we can type a DNA
sample at a single SNP for less cost than some of our competitors;
o Using strategic partnerships with biotechnology companies, pharmaceutical
companies, large domestic and foreign health care organizations, disease
management companies, and pharmacy benefit management companies in our
attempt to create revenue streams that will be used for further research
into disease-predisposition genes; and
o Hiring consultants in the area of typing genetic samples, collecting
patient samples, and computer technical assistance to save costs compared
with our having to hire in-house personnel for the same purposes.
GOVERNMENT REGULATION
We will attempt to partner with pharmaceutical or other companies to develop
biologics or drugs that will treat common diseases. Any drug products that we or
our strategic partners develop, prior to marketing in the United States, will
require an extensive regulatory approval process by the Federal Drug
Administration regarding the testing, manufacturing, distribution, safety,
efficacy, labeling, storage, record keeping, advertising and other promotional
practices of biologics or new drugs. Federal Drug Administration approval or
other clearances must be obtained before clinical testing, manufacturing and
marketing of biologics and drugs.
The regulatory process includes extensive pre-clinical testing and clinical
trials of each applied for product which may take up to several years to
complete. Generally, in order to gain Federal Drug Administration pre-market
approval, a developer first must conduct laboratory studies and animal-model
studies to gain preliminary information on an agent's efficacy and to identify
any safety problems. The results of these studies are submitted as a part of an
investigational new drug application, which the Federal Drug Administration must
review before human trials of an investigational drug can start. The
investigational new drug application includes a detailed description of the
initial animal studies and human investigation to be undertaken.
For any investigational new drug applications, we or our strategic partner will
be required to select qualified investigators to supervise the administration of
the products, and ensure that the investigations are conducted and monitored in
accordance with Federal Drug Administration regulations and the general
investigational plan and protocols contained in the investigational new drug
application. These qualified investigators are usually physicians with medical
institutions. Human trials are normally done in three phases:
o Phase I trials are concerned primarily with the safety and preliminary
activity of the drug and involve fewer than 100 subjects. This phase may
take from six months to over a year to complete.
o Phase II exploratory trials normally involve a few hundred patients, but in
some cases may involve fewer. Phase II trials are designed primarily to
demonstrate effectiveness in treating or diagnosing the disease or
condition for which the drug is intended, although short-term side effects
and risks in people whose health is impaired may also be examined.
o Phase III confirmatory trials are expanded trials with larger numbers of
patients which are intended to gather the additional information for proper
dosage and labeling of the drug and demonstrate its overall safety and
effectiveness.
All three phases generally take three to five years, but may take longer, to
complete.
The companies from which we may purchase human blood products are responsible
for registering with the Federal Drug Administration's Center for Biologics,
Evaluation and Research for activities involving their collection of human
blood. Such companies must also obtain a license from the Federal Drug
Administration's Center for Biologics, Evaluation and Research if they ship
blood through interstate commerce. Based on our discussions with these
companies, we believe that these companies have obtained the necessary
registration and license to collect and deliver human blood.
PRODUCT LIABILITY
The design, development, and manufacture of drug products or diagnostic tests
resulting from our gene patents involve an inherent risk of product liability
claims and damage to our brand name reputation. Such claims may involve
allegations of product failure or harm caused by the drug product. We currently
do not maintain product liability insurance.
SOURCES AND AVAILABILITY OF RAW MATERIALS
We do not use raw materials in our business.
CUSTOMER DEPENDENCY
Our customers consist of male and female patients and health plans. Although we
are not currently dependent and do not plan on being dependent upon any single
customer or group of customers, there are no assurances that we will not become
dependent upon a health plan customer in the future.
INTELLECTUAL PROPERTY
We currently have four non-provisional patents related to ACE as a "master"
disease gene, a treatment for lung immaturity in newborns and a medical
treatment for kidney failure that does not involve dialysis. We also hold
additional provisional patents for cancer-associated SNPs and genes.
Our business and competitive position are dependent upon our ability to protect
our proprietary technologies, processes, databases and information systems.
Despite our efforts to protect our proprietary rights, unauthorized parties may
attempt to obtain and use information that we regard as proprietary. We will
rely on patent, trade secret and copyright law and nondisclosure and other
contractual arrangements to protect such proprietary information. We will file
patent applications for our proprietary methods and devices for novel patient
treatments, disease-predisposition genes, discovery of biological pathways and
drug screening for pharmaceutical product development.
There can be no assurance that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to our proprietary information that such information will not be
disclosed or that we can effectively protect our rights to unpatented trade
secrets or other proprietary information.
GOVERNMENT APPROVAL REQUIREMENTS
As described above, the nature of our business requires approval of patents with
the U.S. Patent and Trademark Office and of any future drugs by the Federal Drug
Administration. Apart from these approvals, we are not aware of any government
approval of our potential future products that are required.
RESEARCH AND DEVELOPMENT
During 2002 and 2003, we spent no funds on research and development. In 2004 we
spent $613,709 on research and development. From the period of inception to
December 31, 2004, we have spent $946,973 on research and development.
COSTS ASSOCIATED WITH ENVIRONMENTAL COMPLIANCE
Our costs associated with environmental compliance are minimal since we are not
involved in manufacturing the product that may be developed as a result of our
genomics research and development. We pay only those costs required to safely
run our house lab. Safety items include sterile supplies, latex gloves, safety
glasses etc. Our overall expenses have averaged less than $1,000 each year and
are accounted for in the operational expense line item in the expected expense
budget.
EMPLOYEES
We have no part-time employees. As of December 31, 2004, we had 6 full-time
employees, our Chairman of the Board and Chief Executive Officer, Chief
Financial Officer (Robyn Owens), Chief Scientific Officer (Paula Hempen), Chief
Technical Officer (Andrew O'Guin), Chief of Bioinformatics (Ali Awan) and Vice
President of Marketing (Ellen Jones). Dr David Moskowitz is our CEO responsible
for directing our Board of Directors, overseeing all research and development
and marketing issues, and supervising all medically-related activities.
Additionally, Dr. David Moskowitz is ultimately responsible for our overall
administration and operation, including finance, marketing, and personnel.
ITEM 2. DESCRIPTION OF PROPERTY
In September 2004 we moved all of our operations to a 1903 square feet space
located at 9666 Olive Boulevard, Suite 310, St. Louis, Missouri 63132, which we
rent pursuant to a five year lease.
ITEM 3. LEGAL PROCEEDINGS
We are subject to dispute and litigation in the ordinary course of our business.
None of these matters, in the opinion of our management, is material or likely
to result in a material effect on us based upon information available at this
time.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Our common stock is traded on the Pink Sheets under the symbol GMED. Quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not represent actual transactions. Below is the market information
pertaining to the range of high and low bid information of our common stock for
each quarter within the last two fiscal years:
2003 HIGH LOW
Fourth Qtr. $0.050 $0.026
Third Qtr $0.035 $0.020
Second Qtr $0.120 $0.007
First $0.015 $0.005
2004 HIGH LOW
Fourth Qtr. $0.130 $0.051
Third Qtr $0.190 $0.051
Second Qtr. $0.370 $0.115
First Qtr. $0.280 $0.035
No regular trading market exists for our common stock and there is no assurance
that a regular trading market will develop, or if developed will be sustained. A
shareholder in all likelihood, therefore, will not be able to resell their
securities should he or she desire to do so when eligible for public resales.
Furthermore, it is unlikely that a lending institution will accept our
securities as pledged collateral for loans unless a regular trading market
develops.
COMMON STOCK. We are authorized to issue 1,000,000,000 shares of common stock at
$.01 par value. As of December 31, 2004, there were 195,232,824 shares of our
common stock outstanding. As of March 4, 2005, there were 197,001,040 shares of
common stock outstanding held of record by 636 stockholders.
Holders of our common stock are entitled to one vote per share on each matter
submitted to vote at any meeting of shareholders. A majority of the shares
entitled to vote constitutes a quorum at a meeting of the shareholders. If a
quorum is present, the affirmative vote of a majority of the shares represented
at the meeting and entitled to vote on the subject matter shall be the act of
the shareholders unless otherwise provided by law. Directors shall be elected by
a plurality of the votes cast by the shares entitled to vote at a meeting at
which a quorum is present. Our Board of Directors has authority, without action
by our shareholders, to issue all or any portion of the authorized but unissued
shares of common stock, which would reduce their percentage of ownership of our
common stock and which would dilute the book value of the common stock.
Our shareholders have no preemptive rights to acquire additional shares of
common stock. Our common stock is not subject to redemption and carries no
subscription or conversion rights. In the event of liquidation, the holders of
shares of common stock are entitled to share equally in corporate assets after
the satisfaction of all liabilities. Holders of common stock are entitled to
receive such dividends as the Board of Directors may from time to time declare
out of funds legally available for the payment of dividends. During the last two
fiscal years, we have not paid cash dividends on our common stock and we do not
anticipate that we will pay cash dividends in the foreseeable future.
HOLDERS
As of March 4, 2005, we had 636 holders of record of our common stock. We have
one class of common stock outstanding.
PENNY STOCK CONSIDERATIONS. Our shares are "penny stocks" as that term is
generally defined in the Securities Exchange Act of 1934 as equity securities
with a price of less than $5.00. Our shares may be subject to rules that impose
sales practice and disclosure requirements on broker-dealers who engage in
certain transactions involving a penny stock.
Under the penny stock regulations, a broker-dealer selling a penny stock to
anyone other than an established customer or "accredited investor" must make a
special suitability determination regarding the purchaser and must receive the
purchaser's written consent to the transaction prior to the sale, unless the
broker-dealer is otherwise exempt. Generally, an individual with a net worth in
excess of $1,000,000 or annual income exceeding $200,000 individually or
$300,000 together with his or her spouse is considered an accredited investor.
In addition, under the penny stock regulations the broker-dealer is required to:
o Deliver, prior to any transaction involving a penny stock, a disclosure
schedule prepared by the Securities and Exchange Commission relating to the
penny stock market, unless the broker-dealer or the transaction is
otherwise exempt;
o Disclose commissions payable to the broker-dealer and its registered
representatives and current bid and offer quotations for the securities;
o Send monthly statements disclosing recent price information pertaining to
the penny stock held in a customer's account, the account's value and
information regarding the limited market in penny stocks; and
o Make a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written agreement
to the transaction, prior to conducting any penny stock transaction in the
customer's account.
Because of these regulations, broker-dealers may encounter difficulties in their
attempt to sell shares of our stock, which may affect the ability of
shareholders or other holders to sell their shares in the secondary market and
have the effect of reducing the level of trading activity in the secondary
market. These additional sales practice and disclosure requirements could impede
the sale of our securities if our securities become publicly traded. In
addition, the liquidity for our securities may be adversely affected, with a
corresponding decrease in the price of our securities. Our shares may someday be
subject to such penny stock rules and our shareholders will, in all likelihood,
find it difficult to sell their securities.
DIVIDENDS
We have not declared any cash dividends on our common stock since our inception
and do not anticipate paying such dividends in the foreseeable future. We plan
to retain any future earnings for use in our business. Any decisions as to
future payment of dividends will depend on our earnings and financial position
and such other factors as the Board of Directors deems relevant. We are not
limited in our ability to pay dividends on our securities.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
We have no securities that are authorized for issuance under any equity
compensation plans.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
Forward-Looking Statements.
The following discussion and analysis contains forward looking statements and
should be read in conjunction with our financial statements and related notes.
For purposes of this plan of operations, GenoMed, Inc. is referred to herein as
"we," "us," or "our." This discussion and analysis contains forward-looking
statements based on our current expectations, assumptions, estimates and
projections overview. The words or phrases "believe," "expect," "may," "should,"
"anticipates" or similar expressions are intended to identify "forward-looking
statements". Actual results could differ materially from those projected in the
forward-looking statements as a result of the following risks and uncertainties,
which are more fully discussed in our periodic filings which are available for
review at www.sec.gov: (a) during 2004, our Plan of Operations was substantially
delayed due to lack of financing; (b) if we are not awarded patents or licenses,
we will never market potential products and our potential revenues will be
negatively affected; (c) our business may be adversely affected by regulatory
costs which would negatively affect our potential profitability; (d) because our
genomics method of gene identification is a relatively new gene identification
method, the public or prospective strategic partners may not accept it as an
acceptable gene identification method, which would negatively affect our
operations and potential revenues; (e) our competitors may develop and respond
to gene procedures and products before us due to their superior financial and
technical resources and superior technologies; (f) we may be subject to medical
or product liability claims that will negatively affect our potential
profitability and may lead to losses; (g) because we will lack control over the
outsourcing of sample collection, genotyping and data analysis, our quality
control and brand name reputation may be negatively affected; (h) if we fail to
recruit test patients for our clinical trials, our development of potential
products will be delayed which would negatively affect our potential revenues;
(i) if our strategic partners fail to obtain Federal Drug Administration
approval, our costs may increase and our revenues may decrease; (j) our entire
business plan is dependent upon forming strategic alliances or acquisitions or
partnership alliances with others for which there are no assurances, and if we
fail to do so we will never generate any revenues; (k) if we fail to abide by
the terms of our acquisition agreement in which we acquired Genomic Medicine,
LLC, the acquisition could be rescinded and we would have no business or ability
to generate revenues; (l) if we fail to conduct adequate due diligence regarding
our strategic alliances or acquisitions and partnership alliances, we will be
subject to increased costs and operational difficulties; (m) our management
decisions are made by our President/Chief Executive Officer/Chairman of the
Board/ Chief Medical Officer, Dr. David Moskowitz and if we lose his services,
our operations will be negatively impacted; (n) we have issued a substantial
amount of our common stock in connection with funding that we obtained, which
substantially dilutes the value of your shares; and (o) we have a substantial
amount of options outstanding, which if exercised, will result in the issuance
of shares of our common stock, which will substantially dilute the value of your
shares.
PLAN OF OPERATIONS
We have estimated the following expenses totaling $1,703,600 over the next year:
Annual
Type Expenditures Estimated Amount
------------------- ------------------
Salaries $ 600,000
------------------- ------------------
Operating Expenses $ 200,000
------------------- ------------------
Genotyping $ 703,600
------------------- ------------------
Sample
Collection $ 100,000
------------------- ------------------
Marketing $ 100,000
------------------- ------------------
Total $ 1,703,600
==================
We intend to satisfy these estimated total expenditures through our cash as of
March 15, 2005 of approximately $302,400 and revenues or a private placement of
our equity Securities.
We have made significant changes during 2004 due to an increase in investments.
There has been extensive advertising and marketing in general but specifically
in the St. Louis area. We have added five full time staff members, three to work
on ongoing clinical research, one for marketing and one for finance. We have
applied for several additional patents, which has resulted in an increased in
expenses, including attorneys fees.
In the next year, we will focus on validating genotyping, as well as continuing
to perform screening genotyping for the common cancers such as lung, prostate,
colon, breast and pancreas. We also plan to continue processing blood samples
from people with diseases of interest, purifying DNA and working on provisional
patients. We will market to several possible resources including, providers,
employers physicians and individuals. We intend on securing funds through
revenues and private placement of equity securities in additional to the current
Pierpoint Investissement agreement.
Our goal is to generate $100,000 in revenues from marketing in 2005. To
accomplish this goal, we plan to market directly to the following sources:
1. Direct to Practioners- MD, DO family practice residency programs, general
internists and clinically oriented medical schools such as Texas Tech
University, Health Science Center and University of Kentucky-Lexington
2. Health Plans
3. Direct to Consumers-Atlanta, Chicago, Washington, DC, New York, Los Angeles
4. Indian Tribes
5. Hispanic and African American Patients
6. State Medicaid Offices-Missouri Florida Tennessee
7. Employers
8. Overseas National Health Services
If we have additional expenses that exceed our estimates and we have
insufficient funds at the time or we are unable to obtain sufficient financing,
then we will be unable to conduct our Plan of Operations, which may negatively
impact development of our brand name and reputation. In the event that we do not
obtain adequate financing we may have to liquidate our business and undertake
any or all of the following actions:
o Sell or dispose of our assets, if any;
o Pay our liabilities in order of priority, if we have available cash to pay
such liabilities;
o If any cash remains after we satisfy amounts due to our creditors,
distribute any remaining cash to our shareholders in an amount equal to the
net market value of our net assets;
o File a Certificate of Dissolution with the State of Florida to dissolve our
corporation and close our business;
o Make the appropriate filings with the Securities and Exchange Commission so
that we will no longer be required to file periodic and other required
reports with the Securities and Exchange Commission, if, in fact, we are a
reporting company at that time; and
o Make the appropriate filings with the National Association of Security
Dealers to affect a delisting of our common stock, if, in fact, our common
stock is trading on the OTC Bulletin Board at that time.
Based upon our current assets, however, we will not have the ability to
distribute any cash to our shareholders. If we have any liabilities that we are
unable to satisfy and we qualify for protection under the U.S. Bankruptcy Code,
we may voluntarily file for reorganization under Chapter 11 or liquidation under
Chapter 7. Our creditors may also file a Chapter 7 or Chapter 11 bankruptcy
action against us. If our creditors or we file for Chapter 7 or Chapter 11
bankruptcy, our creditors will take priority over our shareholders. If we fail
to file for bankruptcy under Chapter 7 or Chapter 11 and we have creditors, such
creditors may institute proceedings against us seeking forfeiture of our assets,
if any.
We do not know and cannot determine which, if any, of these actions we will be
forced to take.
If any of these foregoing events occur, you could lose your entire investment in
our shares.
Liquidity and Capital Resources
Cash at December 31, 2004 amounted to $522,371. We have experienced significant
losses from our operations. For the period ended December 31, 2004, we incurred
a net loss of $4,271.293. For the period from our inception at January 3, 2001
to December 31, 2004, we incurred a net loss of $7,668,722.
ITEM 7. FINANCIAL STATEMENTS
GenoMed, Inc.
(A Development Stage Company)
Consolidated Financial Statements
December 31, 2004
Page
-----------
Report of Independent Registered Public Accounting Firm
- Stark Winter Schenkirn & Co. LLP F-1
Report of Independent Registered Public Accounting Firm
- Rubin, Brown, Gornstein & Co. LLP F-2
Consolidated Balance Sheet - December 31, 2004 F-3
Consolidated Statements of Operations - The Years Ended
December 31, 2004 and 2003 and the Period From
Inception (January 3, 2001) to December 31, 2004 F-4
Consolidated Statement of Stockholders' Equity
For the Period From Inception (January 3, 2001)
to December 31, 2004 F-5
Consolidated Statement of Cash Flows - The Years Ended
December 31, 2004 and 2003 and the Period the Period From
Inception (January 3, 2001) F-9
Notes to Consolidated Financial Statements F-11 to F-20
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders and Board of Directors
GenoMed, Inc.
We have audited the accompanying consolidated balance sheet of GenoMed, Inc. (A
Development Stage Company) as of December 31, 2003 and the related consolidated
statements of operations, stockholders' (deficit) and cash flows for the year
ended December 31, 2003, and the period from inception (January 3, 2001) to
December 31, 2003. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of GenoMed, Inc. (A
Development Stage Company) as of December 31, 2003, and results of its
operations and its cash flows for the year ended December 31, 2003, and the
period from inception (January 3, 2001) to December 31, 2003, in conformity with
accounting principles generally accepted in the United States of America.
Stark Winter Schenkein & Co., LLP
Denver, Colorado
April 5, 2004
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders and Board of Directors
GenoMed, Inc.
We have audited the accompanying consolidated balance sheet of GenoMed, Inc. and
subsidiary (A Development Stage Company) as of December 31, 2004, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year ended December 31, 2004 and the period from inception
(January 3, 2001) to December 31, 2004. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit. The financial
statements of GenoMed, Inc. and subsidiary for the year ended December 31, 2003
and for the period from inception (January 3, 2001) to December 31, 2003, were
audited by other auditors whose report thereon, dated April 5, 2004, expressed
an unqualified opinion. Our opinion, insofar as it relates to the amounts
included from the period from inception (January 3, 2001) to December 31, 2003,
is based solely on the report of such other auditors.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, based on our audit and report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of GenoMed, Inc. and subsidiary (A
Development Stage Company) as of December 31, 2004, and results of their
operations and their cash flows for the year ended December 31, 2004, and the
results of their operations and their cash flows for the period from inception
(January 3, 2001) to December 31, 2004, in conformity with accounting principles
generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has no guaranteed financing to
fund future operations and has suffered recurring losses from operations that
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/Rubin, Brown, Gornstein & Co., LLP
St. Louis, Missouri
March 30, 2005
GenoMed, Inc.
(A Development Stage Company)
Consolidated Balance Sheet
December 31, 2004
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $522,371
Receivables, net of allowance of $27,500 94,305
Inventory 10,530
Other current assets 2,220
----------------
Total current assets 629,426
PROPERTY AND EQUIPMENT, NET 149,268
----------------
$778,694
----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 43,170
Accrued expenses 361,378
Due to officer 48,906
----------------
Total current liabilities 453,454
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value,
1,000,000,000 shares authorized,
195,232,824 shares issued and outstanding 195,233
Additional paid in capital 7,758,729
Subscribed shares 40,000
Deficit accumulated during the development stage (7,668,722)
----------------
Total stockholders' equity 325,240
----------------
$778,694
----------------
GenoMed, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
The Years Ended December 31, 2004 and 2003
and the Period From Inception (January 3, 2001) to December 31, 2004
Year Ended Year Ended Inception to
December 31, December 31, December 31,
2004 2003 2004
------------------- ------------------ -----------------
Revenue $3,186 $6,410 $9,596
Operating expenses:
Research and development
613,709 - 946,973
Selling, general and administrative expenses
3,666,176 1,219,757 6,576,686
Impairment of web site
- - 6,939
------------------- ------------------ -----------------
$4,279,885 1,219,757 7,530,598
------------------- ------------------ -----------------
Loss from operations (4,276,699) (1,213,347) (7,521,002)
Other (income) and expenses:
Interest income
(5,469) - (5,469)
Interest expense
63 86,000 153,189
------------------- ------------------ -----------------
(5,406) 86,000 147,720
------------------- ------------------ -----------------
Net loss $(4,271,293) $(1,299,347) $(7,668,722)
------------------- ------------------ -----------------
Per share information - basic and diluted:
Weighted average shares outstanding - basic 184,110,710 122,830,727 234,599,359
------------------- ------------------ -----------------
Weighted average shares outstanding - diluted 184,110,710 122,830,727 234,599,359
------------------- ------------------ -----------------
Net income (loss) per share - basic $(0.02) $(0.01) $(0.03)
------------------- ------------------ -----------------
Net income (loss) per share - diluted $(0.02) $0.01) $(0.03)
------------------- ------------------ -----------------
GenoMed, Inc.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
For the Period From Inception (January 3, 2001) to December 31, 2004
(Deficit)
Accumulated
Additional Subscribed During the
Common Stock Paid in Common Development
Shares Amount Capital Shares Stage Total
------------- -------- ----------- ----------- ----------- -------------
Common shares issued for cash
at $.00002 per share during
January 2001 500,000,000 $ 10,000 $ - $ - $ - $ 10,000
Common shares issued for
services at $.00002 per
share during March 2001 103,810,000 2,076 - - - 2,076
Contribution to capital - - 500
Return of common shares in
November 2001 (500,000,000) - - - - -
Common shares issued for the
acquisition of subsidiary
at $.005 per share during
November 2001 12,500,000 12,500 50,000 - - 62,500
Unissued common shares
related to the acquisition
of subsidiary at $.005 per
share during November 2001 - - - 187,500 - 187,500
Stock compensation for
unissued shares earned by
consultant - - - 40,000 - 40,000
Reclassification of paid in
capital to adjust par value
of common shares - 50,000 (50,500) - -
Net (loss) for the period - - - - (516,596) (516,596)
Balance at December 31, 2001
------------- -------- ----------- ----------- ----------- -------------
(Restated) 116,310,000 75,076 - 227,500 (516,596) (214,020)
Stock options issued to
settle employment contract - - 144,000 - - 144,000
Stock options issued for
services - - 351,000 - - 351,000
Issuance of shares
subscribed for 4,000,000 4.000 236,000 (40,000) - 200,000
Contribution of value of
unissued shares related to
acquisition - - 187,500 (187,500) - -
Reclassification of amount
due to shareholder - - (46,023) - - (46,023)
Reclassification of paid
in capital - 41,234 (41,234) - - -
Stock compensation for
unissued shares earned by
advisory board - - - 3,000 - 3,000
Unissued shares due pursuant
to private placement for
cash at $.013 per share - - - 10,000 - 10,000
Net (loss) for the year - - - - (1,581,486) (1,581,486)
------------- -------- ----------- ----------- ----------- -------------
Balance at December 31, 2002 120,310,000 120,310 831,243 13,000 (2,098,082) (1,133,529)
Stock compensation for
unissued shares earned by
advisory board - - - 12,000 - 12,000
Issuance of subscribed shares 769,231 769 9,231 (10,000) - -
Value of variable price
stock options - - 912,000 - - 912,000
Common shares issued for cash
at $.01 per share 187,500 188 1,312 - - 1,500
Common shares issued for cash
at $.015 per share 1,666,667 1,667 23,333 - - 25,000
Common shares issued for cash
at $.02 per share 2,364,962 2,365 42,635 - - 45,000
Discount on shares issued
to affiliate - - 11,950 - - 11,950
Common shares issued
as commission 116,667 116 (116) - - -
Common shares issued for
services at $.02 per share 91,000 91 1,729 - - 1,820
Common shares issued for
services at $.03 per share 185,000 185 5,365 - - 5,550
Net (loss) for the year - - - - (1,299,347) (1,299,347)
------------- -------- ----------- ----------- ----------- -------------
Balance at December 31, 2003 125,691,027 125,691 1,838,682 15,000 3,397,429) (1,418,056)
Stock compensation for
unissued shares earned by
advisory board - - - 34,500 - 34,500
Issuance of subscribed shares 1,077,778 1,078 8,422 (9,500) - -
Value of variable price
stock options - - 600,000 - - 600,000
Discount on shares issued
to affiliate - - 2,222,757 - - 2,222,757
Common shares issued to satisfy
payable to affiliate 12,737,995 12,738 321,000 - - 333,738
Forgiveness of debt to affiliate as
a capital contribution - - 1,000,000 - - 1,000,000
Common shares issued for cash
at $.01 per share 200,000 200 1,800 - - 2,000
Common shares issued for cash
at $.02 per share 4,703,669 4,704 95,296 - - 100,000
Common shares issued for cash
at $.03 per share 33,464,230 33,464 879,287 - - 912,751
Common shares issued for cash
at $.045 per share 6,787,785 6,788 298,662 - - 305,450
Common shares issued for cash
at $.05 per share 1,254,668 1,255 62,207 - - 63,462
Common shares issued for cash
at $.06 per share 6,012,658 6,012 373,987 - - 379,999
Common shares issued for services
at $.02 per share 3,148,014 3,148 45,759 - - 48,907
Common shares issued for services
at $.05 per share 45,000 45 1,980 - - 2,025
Common shares issued for services
at $.07 per share 100,000 100 6,900 - - 7,000
Common shares issued for services
at $.20 per share 10,000 10 1,990 - - 2,000
Net loss for the year - - - - (4,271,293) (4,271,293)
------------- -------- ------------ ----------- ----------- -------------
Balance at December 31, 2004 195,232,824 $195,233 $7,758,729 $ 40,000 $(7,668,722) $ 325,240
============= ======== ============ =========== =========== =============
GenoMed, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
The Years Ended December 31, 2004 and 2003
and the Period From Inception (January 3, 2001) to December 31, 2004
Year Ended Year Ended Inception to
December 31, December 31, December 31,
2004 2003 2004
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (4,271,293) (1,299,347) (7,668,722)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 30,652 28,893 89,689
Common stock issued for services and other non
cash items 644,795 943,320 2,532,168
Discount on shares issued 2,222,757 2,222,757
-
Impairment of web site - 6,939
-
Provision for bad debt 27,500 27,500
-
Change in assets and liabilities:
Increase in accounts receivable (121,805) (121,805)
-
Increase in inventory (10,530) (10,530)
-
Increase in other current assets (2,220) (2,220)
-
Increase (decrease) in accounts payable (4,152) (3,410) 43,170
Increase in accrued expenses 361,378 361,378
-
Increase in accounts payable
and accrued expenses - affiliates 31,538 257,482 547,019
Decrease in due to officer (48,907) (48,907)
----------- -------- -----------
NET CASH USED IN OPERATING ACTIVITIES (1,140,287) (73,062) (2,021,564)
----------- -------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (35,642) - (237,896)
Investment in intangible asset - web site - - (8,000)
----------- -------- -----------
NET CASH USED IN INVESTING ACTIVITIES (35,642) - (245,896)
----------- -------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in note payable - affiliates (77,581) 933,419
-
Contribution to capital - 500
-
Proceeds from stock issurance 1,764,412 71,500 1,855,912
----------- -------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,686,831 71,500 2,789,831
----------- -------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 510,902 (1,562) 522,371
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 11,469 13,031 -
----------- -------- -----------
CASH AND CASH EQUIVALENTS - END OF YEAR 522,371 11,469 522,371
----------- -------- -----------
Supplemental cash flow information:
Cash paid for Interest $ - $ - $ -
Cash paid for income taxes $ - $ - $ -
Non-cash investing and financing activities:
Contribution of value of unissued shares to capital $ - $187,500 $187,500
Return of common shares for no consideration $ - $ - $ -
GenoMed, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2004
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company was incorporated on January 3, 2001 in the State of Florida as
e-Kids Network. The Company was formed along with 12 other commonly owned
companies in accordance with the March 6, 2001 Bankruptcy Court approved Amended
Plan of Reorganization of e-Miracle Network, Inc., United States Bankruptcy
Court, Southern District of Florida, Miami Division on March 6, 2001 (Case No.
00-18144-BKC-AJC So. Dist. Fla.) in which the debtors and shareholders of
e-Miracle Network, Inc. were issued shares of the Company's common stock and the
other 12 commonly owned companies. The Company had no revenue generating
operations and incurred only general and administrative expenses associated with
the development of a business plan. During October 2001 the Company changed its
name to GenoMed, Inc. GenoMed, Inc. is a development stage company, as defined
in Statement of Financial Accounting Standards ("SFAS") 7, "Accounting and
Reporting by Development Stage Enterprises". The Company's intent is to conduct
business as a biotechnology company. Prior to its decision to conduct business
in the biotechnology industry the Company had no defined business activities.
The Company has chosen December 31 as its year-end and had no significant
revenue generating activity from inception to December 31, 2004. For the year
ended December 31, 2004, revenues were minimal and the Company had a net loss of
$4,271,293 and, from January 3, 2001 (inception) to December 31, 2004, had
generated a net loss of $7,668.722. The accompanying financial statements for
the year ended December 31, 2004, have been prepared assuming the Company will
continue as a going concern. During the year 2005, management intends to raise
additional equity financing to fund future operations and provide additional
working capital. However, there is no assurance that such financing will be
consummated or obtained in sufficient amount necessary to meet the Company's
needs.
Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary. All intercompany accounts and balances have been
eliminated in consolidation.
Reclassifications
Certain items previously reported in the prior year have been reclassified to
conform to current year presentation.
Revenue Recognition
The Company will recognize revenue from licensing and royalties. Revenues from
licensing agreements will be recognized over the term of the license agreements.
Revenues from royalties will be recognized when earned pursuant to the terms of
the royalty agreements.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. The Company places its temporary
cash investments with high credit quality financial institutions. At times such
investments may be in excess of the Federal Deposit Insurance Corporation (FDIC)
insurance limit.
Financial Instruments
Fair value estimates discussed herein are based upon certain market assumptions
and pertinent information available to management as of December 31, 2004. The
respective carrying value of certain on-balance-sheet financial instruments
approximated their fair values. These financial instruments include cash,
accounts payable, accrued expenses and notes payable. Fair values were assumed
to approximate carrying values for these financial instruments because they are
short term in nature.
Net Income (Loss) Per Common Share
The Company calculates net income (loss) per share as required by SFAS 128,
"Earnings per Share." Basic earnings (loss) per share is calculated by dividing
net income (loss) by the weighted average number of common shares outstanding
for the period. Diluted earnings (loss) per share is calculated by dividing net
income (loss) by the weighted average number of common shares and dilutive
common stock equivalents outstanding.
In 2004 and 2003, the Company excluded 41,730,475 and 31,512,455 weighted
average common share equivalents, respectively, related to stock options because
their effect would have been anti-dilutive.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Segment Information
The Company follows SFAS 131, "Disclosures about Segments of an Enterprise and
Related Information." Certain information is disclosed, per SFAS 131, based on
the way management organizes financial information for making operating
decisions and assessing performance. The Company currently operates in a single
segment and will evaluate additional segment disclosure requirements as it
expands its operations.
Income Taxes
The Company follows SFAS 109, "Accounting for Income Taxes", for recording the
provision for income taxes. Deferred tax assets and liabilities are computed
based upon the difference
between the financial statement and income tax basis of assets and liabilities
using the enacted marginal tax rate applicable when the related asset or
liability is expected to be realized or settled. Deferred income tax expenses or
benefits are based on the changes in the asset or liability each period. If
available evidence suggests that it is more likely than not that some portion or
all of the deferred tax assets will not be realized, a valuation allowance is
required to reduce the deferred tax assets to the amount that is more likely
than not to be realized. Future changes in such valuation allowance are included
in the provision for deferred income taxes in the period of change.
Research and Development Costs
Research and development costs are charged to expense as incurred.
Stock-Based Compensation
SFAS 123, "Accounting for Stock-Based Compensation", encourages, but does not
require, companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has elected to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion 25, "Accounting for Stock Issued to
Employees" ("APB 25"). The Company accounts for equity instruments issued to
employees for services based on the fair value of the equity instruments issued
and accounts for equity instruments issued to other than employees based on the
fair value of the consideration received or the fair value of the equity
instruments, whichever is more reliably measurable.
SFAS 123 requires the Company to provide proforma information regarding net
income and earnings per share as if compensation cost for the Company's stock
option plans had been determined in accordance with the fair value based method
prescribed in SFAS 123. The fair value of the option grants is estimated on the
date of grant utilizing the Black-Scholes option pricing model.
Under the provisions of SFAS 123, the Company's net income (loss) and earnings
(loss) per share would have been reduced (increased) to the proforma amounts
indicated below:
2004 2003
--------------------- ---------------------
Net loss, as reported $(4,271,293) $(1,299,347)
Add: Stock-based employee compensation
expense included in reported net loss 600,000 912,000
Deduct: Total stock-based employee
compensation expense determined under fair
value based methods for all awards 600,000 (924,000)
--------------------- ---------------------
Proforma net loss $(4,721,293) $(1,311,347)
===================== =====================
Loss per share:
Basic and diluted - as reported $(0.02) $(0.01)
----------------------------------------------- --------------------- ---------------------
Basic and diluted - Proforma $(0.02) $(0.00)
Property, Equipment and Depreciation
Property and equipment are stated at cost. Depreciation is calculated using the
straight-line method over the useful lives ranging from 5 to 7 years.
Recent Pronouncements
In December 2004, the FASB issued SFAS 123(R), "Accounting for Stock-Based
Compensation" ("SFAS 123R"). SFAS 123R establishes standards for accounting for
transactions in which an entity exchanges its equity instruments for goods or
services. SFAS 123R focuses primarily on accounting for transactions in which an
entity obtains employee services in exchange for share-based payments. SFAS 123R
requires that the fair value of such equity instruments be recognized as expense
in the historical financial statements as services are performed. Prior to SFAS
123R, only certain pro forma disclosures of fair value were required. SFAS 123R
is effective beginning January 1, 2006. The adoption of this new accounting
pronouncement may have a material impact on the Company's financial statements.
In December 2003, the FASB issued FASB Interpretation 46 (revised December
2003), "Consolidation of Variable Interest Entities" ("VIE") ("FIN" 46R), which
addresses how a business enterprise should evaluate whether it has a controlling
financial interest in an entity through means other than voting rights and
accordingly should consolidate the entity. FIN 46R replaces FASB Interpretation
46, "Consolidation of Variable Interest Entities", which was issued in January
2003. The Company is required to apply FIN 46R to variable interests beginning
December 31, 2004. For any VIEs that must be consolidated under FIN 46R that
were created before January 1, 2004, the assets, liabilities and noncontrolling
interests of the VIE initially would be measured at their carrying amounts with
any difference between the net amount added to the balance sheet and any
previously recognized interest being recognized as the cumulative effect of an
accounting change. If determining the carrying amounts is not practicable, fair
value at the date FIN 46R first applies may be used to measure the assets,
liabilities and noncontrolling interest of the VIE. The Company does not have
any variable interest entities, and therefore experienced no impact on the
adoption of FIN 46R.
In May 2003, the FASB issued SFAS 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity" ("SFAS 150").
SFAS 150 changes the accounting guidance for certain financial instruments that,
under previous guidance, could be classified as equity or "mezzanine" equity by
now requiring those instruments to be classified as liabilities (or assets in
some circumstances) on the balance sheet. Further, SFAS 150 requires disclosure
regarding the terms of those instruments and settlement alternatives. SFAS 150
is generally effective for all financial instruments entered into or modified
after May 31, 2003, and is otherwise effective at the beginning of the first
interim period beginning after June 15, 2003. The adoption of SFAS 150 in the
first quarter of fiscal 2004 has not had a material impact on the Company's
financial position, results of operations or cash flows.
In April 2003, the FASB issued SFAS 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities" ("SFAS 149"), which amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
133. The Statement is effective (with certain exceptions) for contracts entered
into or modified after June 30, 2003. The Company does not own any
derivative instruments or participate in any hedging activities, and therefore
experienced no impact of the adoption of SFAS 149.
Note 2. ACQUISITION
During November 2001 the Company acquired all of the issued and outstanding
shares of Genomic Medicine, LLC ("LLC"), a development stage company involved in
research and development, with no revenue generating operations, from its
current president (See Note 6). The business combination has been accounted for
as a purchase. The results of operations of LLC have been included in the
accompanying financial statements since the date of acquisition. In exchange for
the membership interest of LLC the Company issued 12,500,000 shares of its
common stock valued at $62,500 and agreed to issue an additional 37,500,000
shares of its common stock during May and November 2002 valued at $187,500. The
purchase price was allocated as follows:
Cash $ 6,529
Other current assets 1,212
Current liabilities (88,929)
Purchased research and development 331,188
------------
$ 250,000
============
The assets acquired and liabilities assumed were recorded at the historical
basis of LLC. The excess of the purchase price paid over the value of the assets
acquired of $331,188 has been recorded as purchased research and development,
for which feasibility had not been established and there were no alternative
future uses, and has been charged to operations.
The agreement was amended in March 2002 to reduce the purchase price to require
the issuance of 12,500,000 shares of common stock and the payment of $46,023 to
affect the acquisition (see Note 6). The reduction of the purchase price has
been recorded as a capital contribution at the date of the amendment.
In addition, pursuant to the terms of the agreement the Company was required to
provide working capital aggregating $1,000,000 to LLC. The Company has arranged
for loans to provide this working capital (see Note 4).
Note 3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
Furniture and equipment $ 225,172
Computer equipment 12,724
Less: accumulated depreciation 88,628
-----------
$ 149,268
===========
Depreciation expense charged to operations was $30,652 in 2004 and $28,893 in
2003.
Note 4. NOTE PAYABLE - AFFILIATE
At December 31, 2003, the Company had an outstanding note aggregating
$1,000,000, which had been advanced by an affiliated entity by virtue of stock
ownership in the Company. During March 2004 the holder contributed the
$1,000,000 principal balance of the note to the capital of the Company and
converted the unpaid interest into common shares (see Note 5).
Note 5. STOCKHOLDERS' EQUITY
Common Stock
At inception, the Company issued 500,000,000 shares of its common stock to its
president for cash aggregating $10,000.
During the periods covered by these financial statements the Company issued
shares of common stock for cash and non cash consideration, without registration
under the Securities Act of 1933. Although the Company believes that the sales
did not involve a public offering of its securities and that the Company did
comply with the "safe harbor" exemptions from registration, it could be liable
for rescission of the cash sales and other penalties if such exemptions were
found not to apply and this could have a material negative impact on the
Company. To date the Company is unaware of any violations.
During March 2001 the Company issued 103,810,000 shares of its common stock in
exchange for services valued at $2,076. This amount has been charged to
operations during 2001.
During September 2001 the Company affected a 50 for 1 forward stock split. All
share and per share amounts have been adjusted to reflect this split.
During November 2001 the Company's president returned 500,000,000 shares of
common stock to the Company for no consideration.
During November 2001 the Company issued 12,500,000 shares of common stock valued
at $62,500 and agreed to issue 37,500,000 shares of common stock valued at
$187,500 in exchange for the membership interest of LLC (see Notes 2 and 6).
Pursuant to the terms of a consulting contract the Company recorded a stock
subscription of $40,000 (see Note 6) at December 31, 2001.
During December 2002 the Company agreed to issue 769,231 shares of its common
stock pursuant to a private placement for cash received aggregating $10,000.
These shares were issued in March 2003.
During 2003, 1,064,962 shares of common stock were issued to the affiliate.
These shares have been issued at a discount to the fair market value of the
shares of $11,950, which has been charged to operations during the year.
During 2003, the Company issued 392,667 shares of common stock for services and
commissions. The fair market value of the shares issued for services of $7,370
has been charged to operations during the year.
During 2003, the Company issued an aggregate of 4,219,129 shares of common stock
for cash totaling $71,500.
During 2004, the Company issued an aggregate of 10,716,327 shares of common
stock to an affiliate who held the note described in Note 4 for cash aggregating
$480,000. In addition, the Company issued 12,737,995 shares of common stock to
this affiliate related to the conversion of $333,738 in debt. The discount on
these shares of $2,222,757 had been charged to operations during the period. In
addition, the affiliate forgave the balance of $1,000,000 due on the note
payable described in Note 4, which has been recorded as a contribution to
capital.
During the year ended December 31, 2004, the Company issued 6,981,000 shares of
common stock to Pierpoint Investissements SA ("Pierpoint") and its designees for
$333,950, respectively, in cash. These shares were sold at a discount from the
trading price of common stock. Under the Company's agreement with Pierpoint,
Pierpoint is entitled to 5,000,000 warrants to purchase our common stock with a
strike price fixed at the 30-day average immediately prior to the exercise of
the warrants less a discount of 50% with a two-year expiration date from issue.
As of December 31, 2004 the warrants to Pierpoint had been earned but not
issued.
Stock-based Compensation
During the year ended December 31, 2003 the Company issued options to purchase
shares of common stock to two officers and certain other employees and
consultants. Compensation costs related to these options charged to operations
aggregated was $600,000 during 2004 and $912,000 during 2003 (see Note 6). No
options to purchase shares of common stock were issued during 2004.
A summary of stock option activity is as follows:
Weighted Weighted
Number of average average
Shares exercise price fair value
--------------- ----------------- -------------
Balance at December 31, 2001 -- $-- $--
Granted 47,278,100 .003 .040
Exercised -- -- --
Forfeited -- -- --
--------------- ----------------- -------------
Balance at December 31, 2002 47,278,100 .003 .040
Granted 956,731 .050 .010
Exercised -- -- --
Forfeited -- -- --
--------------- ----------------- -------------
Balance at December 31, 2003 48,234,831 .004 .040
Granted -- -- --
Exercised (1,969,231) (.024) (0.146)
Forfeited (765,600) (.027) (.017)
--------------- ----------------- -------------
Balance at December 31, 2004 45,500,000 $0.011 $0.011
=============== ================= =============
The following table summarizes information about stock options at December 31,
2004:
Outstanding Exerciseable
Weighted Weighted Weighted
Average Average Average
Exercise Number Contractual Exercise Number Exercise
Price Outstanding Life Price Exercisable Price
$0.002 6,000,000 7.75 years $0.002 6,000,000 $0.002
$0.006 2,000,000 0.17 years $0.006 2,000,000 $0.006
$0.010 37,500,000 7.5 years $0.010 37,500,000 $0.010
------------------ ----------------
45,500,000 45,500,000
================== ================
Note 6. COMMITMENTS
During August 2001 the Company entered into a five-year employment contract with
an officer. The contract calls for annual salary payments of $135,000 per year.
During November 2001 the Company entered into a one year consulting agreement
with Research Capital, which is automatically renewable for one year if not
cancelled by either party. Pursuant to the agreement the consultant agreed to
provide financial and public relations services to the Company and to provide
$1,000,000 in working capital (see Notes 2 and 4). In addition, the consultant
agreed to assist the Company in raising $5,000,000 through a private placement.
As consideration for the services the consultant agreed to accept $20,000 per
month payable in common shares of the Company. During February 2002 the
consultant agreed to accept 4,000,000 shares of the company's common stock as
payment in full for the consulting services. The shares issued were valued at
their fair market value of $.06 per share. This agreement was not renewed.
During October 2003 the Company granted this entity the right to purchase
$500,000 in common stock through October 1, 2004 at a 40% discount from market
price. During November and December 2003 this entity purchased an aggregate of
1,064,962 common shares for $20,000. During January and March 2004 Research
Capital purchased an aggregate of 10,716,327 shares of common stock for cash
aggregating $480,000. Research Capital also forgave $1,000,000 of the note
payable described in Note 4 and contributed the balance to the capital of the
Company as a result of the funding described above. In addition, $153,081 in
accrued interest and $180,657 in other advances were converted into 12,737,995
shares of common stock.
During 2004 and 2003 the Company charged an aggregate of $34,500 and $12,000 to
operations pursuant to agreements to issue shares of common stock at various
dates in accordance with the terms of advisory board contracts. As of December
31, 2004, 225,000 shares had been earned and had not been issued. The shares
have been valued at the trading price of the stock as of the measurement date.
The above amount has been included as subscribed common shares. Through December
31, 2004, an aggregate of 975,000 shares with a value of $78,750 have been
earned pursuant to the advisory board contracts.
During March 2002 the Company granted an officer options to purchase 37,500,000
shares of common stock at an exercise price of 20% of the fair market value of
the common stock on the exercise date. The options may be exercised after May 6,
2002 for a period of 10 years as to 12,500,000 options and after November 6,
2002 for a period of 10 years as to 25,000,000 options. During 2004 and 2003 the
Company charged an aggregate of $600,000 and $912,000 to operations related to
these options.
In addition, this officer is entitled to receive a performance option to
purchase up to 100,000,000 common shares for a period of 10 years at an exercise
price of 20% of the fair market value of the common stock on the exercise date.
The performance options will only be granted to the officer upon the occurrence
of future specified events. The discount from the fair market value of the
common stock related to the performance options will be charged to operations at
such time as they are earned.
On September 5, 2003, the Company entered into an agreement with PhenoMed, Sdn
BHd (a development stage company with no significant assets, liabilities or
operations), doing business as PhenoMed, a Malaysian corporation. This agreement
provides that:
o PhenoMed will have the exclusive rights to offer the Company's genomic
medical technologies and disease management therapeutics to customers in
the Asia Pacific region;
o The Company will license to PhenoMed all necessary technology, know how,
and processes required for PhenoMed to implement the Company's disease
management program throughout the region;
o The Company and PhenoMed agree to share equally (50-50) in the net profits
obtained from the licensing and sale of the disease management services and
related services sold anywhere throughout the Asia - Pacific region;
o Genotyping services provided by the Company to PhenoMed will be priced at
$0.50 per genotype;
o Any of PhenoMed third party genotyping contracts will abide by the
contracted royalty payment and transfer terms the Company has made with any
of our genotyping subcontractors;
o PhenoMed will grant the Company 15% of the common equity in PhenoMed.
In May 2004, the Company signed an agreement with Genome Quebec to begin a
large-scale genotyping project to find genes which the Company believes may
cause common cancers. Genome Quebec will perform the genotyping and provide the
Company with data about the genes it analyzes. The cost of this project to the
Company will be approximately $1,000,000. During the year ended December 31,
2004, the Company incurred $595,983 related to this project. These costs are
included in research and development on the statement of operations.
In July 2004, the Company signed a five-year lease for 1,903 square feet of new
office space in St. Louis, Missouri at an initial annual rental rate of $26,642,
escalating to $32,351 in year five. Total rent paid in 2004 amounted to $10,604.
We are subject to dispute and litigation in the ordinary course of business.
None of these matters, in the opinion of management, is material or likely to
result in a material effect on the Company based upon information available at
this time.
Note 7. INCOME TAXES
The Company accounts for income taxes under SFAS 109, which requires use of the
liability method. SFAS 109 provides that deferred tax assets and liabilities are
recorded based on the differences between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes,
referred to as temporary differences. Deferred tax assets and liabilities at the
end of each period are determined using the currently enacted tax rates applied
to taxable income in the periods in which the deferred tax assets and
liabilities are expected to be settled or realized.
The provision for income taxes differs from the amount computed by applying the
statutory federal income tax rate to income before provision for income taxes.
The sources and tax effects of the differences are as follows:
Income tax provision at the federal statutory rate 34%
Deferred tax asset valuation allowance (34)%
-----
-
As of December 31, 2004, the Company has a net operating loss carryforward of
approximately $3,500,000. This loss will be available to offset future taxable
income. If not used, the carryforward will begin to expire in 2021. The deferred
tax asset relating to the operating loss carryforward of approximately
$1,200,000 has been fully reserved at December 31, 2004. This carryforward may
be limited as to use in any particular year based on Internal Revenue Code
sections related to change of ownership restrictions.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On July 19, 2004, we dismissed, with the approval of our board of directors,
Stark Winter Schenkein & Co., LLP ("SWS") as our independent auditor. During our
two most recent fiscal years (the year ended 2003 and the period from January 1,
2004 to the date we dismissed SWS), SWS did not issue an adverse opinion,
disclaimer of opinion or modification or qualification of opinion of our
financial statements, except that the financial statements for the period ended
December 31, 2001, and the year ended December 31, 2002 contained going concern
qualifications. There has been no disagreement with SWS on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which, if not resolved to the satisfaction of SWS, would
have caused it to make reference to the subject matter of the disagreement in
connection with its report.
ITEM 8A. CONTROLS AND PROCEDURES.
There were no changes in our internal control over financial reporting during
the year ended December 31, 2004 that have materially affected or are reasonably
likely to materially affect our internal control over financial reporting.
Our Chief Executive Officer and Chief Financial Officer do not have accounting
or finance backgrounds or formal training in accounting, finance or financial
reporting. We can give no assurance that our procedures for monitoring
disclosure controls and procedures or internal control over financial reporting
are adequate.
Our lack of experience in accounting, finance and financial reporting represents
a material weakness in our disclosure controls and procedures.
ITEM 8B. OTHER INFORMATION.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
DIRECTORS AND EXECUTIVE OFFICERS
Our Board of Directors elects our executive officers annually. A majority vote
of the directors who are in office is required to fill vacancies. Each director
shall be elected for the term of one year, and until his successor is elected
and qualified, or until his earlier resignation or removal. Our bylaws provide
that we have at least one director. Our directors and executive officers are as
follows:
The names and ages of our executive officers and directors as of December 31,
2004:
Name Age Position Current term to expire
--------------------- -------- ----------------------- -----------------------
David W. Moskowitz 53 Director, Chief February 2005
Executive Officer and
Chairman of the Board
--------------------- -------- ----------------------- -----------------------
Richard A. Kranitz 64 Secretary and Director February 2005
--------------------- -------- ----------------------- -----------------------
Robyn Owens 45 Chief Financial Officer
--------------------- -------- ----------------------- -----------------------
Paula Hempen 33 Chief Scientific Officer
--------------------- -------- ----------------------- -----------------------
Ali Awan 22 Chief Bioinformatics
--------------------- -------- ----------------------- -----------------------
Directors serve for a one year term. Our Bylaws state: the number of directors
of the corporation shall be not less than one (1) nor more than fifteen (15),
the number of the same to be fixed by the Board of Directors at any annual or
special meeting. Each director shall hold office until the next annual meeting
of stockholders and until such director's successor shall have been duly elected
and shall have qualified, unless such director dies sooner, resigns or is
removed by the stockholders at any annual or special meeting. The annual meeting
of the stockholders is expected to occur in May or June of 2005.
DR. DAVID W. MOSKOWITZ. Dr. Moskowitz has been our Chairman of the Board and
Chief Medical Officer since our inception in November 2001. Since October 22,
2002, Dr. Moskowitz has been our Chairman of the Board and Chief Executive
Officer. From February 2001 to October 2001, Dr. Moskowitz was the President and
Chief Executive Officer of Monopath, LLC, a medical genomics company registered
as a limited liability company in Delaware. From February 1998 to January 2001,
Dr. Moskowitz was the founder and President of DzGenes, LLC, a Biotechnology
company located in St. Louis, Missouri. From January 1990 to June 1998, Dr.
Moskowitz was an Assistant Professor with the Department of Pharmacological and
Physiological Science, St. Louis University School of Medicine, located in St.
Louis, Missouri. From July 1987 to June 1998, Dr. Moskowitz was an Assistant
Professor with the Nephrology Division of the Department of Internal Medicine at
the St. Louis University School of Medicine located in St. Louis, Missouri. In
1974, Dr. Moskowitz graduated Summa Cum Laude from Harvard College with a degree
in Chemistry. In 1976, Dr. Moskowitz graduated with First Class Honours from
Merton College, Oxford University with an Honours B.A. degree in Biochemistry.
In 1983, he took his M.A. from Oxford University. In 1980, Dr. Moskowitz
received an MD degree from Harvard Medical School-MIT Division in Health
Sciences and Technology where he graduated Cum Laude.
RICHARD A. KRANITZ. Mr. Kranitz has been our Corporate Secretary and one of our
Directors since December 2, 2001. Since 1970, Mr. Kranitz has been an attorney
in private practice with concentration in the areas of securities, banking and
business law. In 1969, Mr. Kranitz graduated from the University of Wisconsin
Law School with a Juris Doctor Degree. In 1966, Mr. Kranitz graduated from the
University of Wisconsin with a BS degree in Political Science. Since 1990, Mr.
Kranitz has been a Director of Grafton State Bank, a subsidiary of Merchants &
Manufacturers Bancorporation (symbol: MMBI). Since January 1990, Mr. Kranitz has
been a
Director of Harp & Eagle, Ltd. (symbol: HARP). Since March 2000, Mr. Kranitz has
been a Director of Mentor Capital Consultants, Inc., (symbol MCAP).
ROBYN OWENS. Ms. Owens has over twenty years' experience in the health care
industry, she has worked on both the payor and the providers side. Her
experience includes claims customer service and educating new providers in
managed care. She negotiated physician and hospital contracts for Group Health
Plan, a large HMO in St. Louis. She educated providers about documentation
requirements to increase revenue as a Reimbursement Specialist for Spectrum, the
administrator for OCHAMPUS. OCHAMPUS is the healthcare system for tens of
millions of military dependents worldwide. Most recently, she negotiated managed
care contracts for a network of physical therapy providers, including SSM
Healthcare. She is a member of Group Health Association of America, Medical
Group Managers Association, and National Association of Female Executives.
PAULA HEMPEN. Dr. Hempen has extensive research experience in cancer genetics,
the regulation of gene transcription, immunology, and genomics. Dr. Hempen spent
the last three years in the laboratory of Dr. Scott Kern at the Sydney Kimmel
Comprehensive Cancer Center at Johns Hopkins University in Baltimore, Maryland.
Dr. Hempen's research at Hopkins led to the discovery of two new tumor
suppressor genes in pancreatic cancer. Her findings have recently been
published.
ALI AWAN. Mr. Awan is a graduate of Stanford University. After completing his
Bachelor's degree (majoring in Biological Sciences, minoring in Computer
Science) with distinction, his interest in the interface between biology and
computer science led him to a Master's degree in Bioinformatics, also at
Stanford. Ali has programmed bioinformatics projects in Perl and Java for data
mining and pattern discovery. His work has also involved extensive application
of internet technology including HTML, CSS, CGI, XML, and SQL for database
development and maintenance. On the purely biological side, his projects have
included carrying out genetic screens on C. elegans to isolate innate immunity
mutations, and implementing species specific primers to distinguish rat
transcipts from mouse transcripts in rat-mouse heterokaryons.
SIGNIFICANT EMPLOYEES
Other than those listed above, we have no other significant employees:
FAMILY RELATIONSHIPS
There are no family relationships among our officers and directors.
LEGAL PROCEEDINGS
There have been no legal proceedings to disclose.
Section 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the our executive
officers, directors and persons who beneficially own more than 10% of our common
stock to file initial reports of ownership and reports of changes in ownership
with the SEC. Such persons are
required by SEC regulations to furnish us with copies of all Section 16(a) forms
filed by such persons.
Based solely on our review of such forms furnished to us and representations
from certain reporting persons, we believe that all filing requirements
applicable to our executive officers, directors and more than 10% stockholders
were complied with during the most recent fiscal year, ended December 31, 2004.
CODE OF ETHICS
We do not currently have a code of ethics in place, however, we are in the
process of developing such a code. The code of ethics will be completed and
posted to our website within sixty days.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth summary information concerning the compensation
received for services rendered to it during the current year and the years ended
December 31, 2001, 2002, 2003, respectively, by our only executive officer who
received aggregate compensation during our last fiscal year which exceeded, or
would exceed on an annualized basis, $100,000.
--------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
--------------------------------------------------------------------------------------------------------------------
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
----------------------------------- -------------------------- ------------------------
Name and Year Salary ($) Bonus Other Annual Restricted Securities LTIP All Other
Principle ($) Compensation Stock Underlying Payouts Compensation
Position ($) Award(s) Options/ SARS ($) ($)
($) (#)
David 2002 $135,000 0 0 0 See footnote*
Moskowitz
Chairman of
the Board
2003 $135,000
2004 $135,000 0 0 0 0
Jerry White 2002 $75,521 0 0 0 6,000,000
Prior See options -
President / footnote** see
CEO footnote**
* On March 18, 2002, we entered into an agreement with our Chairman of the
Board, Dr. David Moskowitz, in which we granted officer options to Dr. Moskowitz
to purchase 37,500,000 shares of our common stock at an exercise price of 20% of
the fair market value of the common stock on the exercise date. The options may
be exercised after May 6, 2002 for a period of ten years as to 12,500,000
options and after November 6, 2002 for a period of ten years as to 25,000,000
options. In addition, Dr. Moskowitz was granted a performance option to purchase
up to 100,000,000 common shares for a period of ten years at an exercise price
of 20% of the fair market value of the common stock on the exercise date. The
performance options will only be granted to Dr. Moskowitz based upon the
occurrence of any of the following "Triggering Events:"
o Gross Profit Triggering Event - Dr. Moskowitz will be entitled to receive
one option to purchase one share of our common stock for every one cent of
gross profit we produce, up to a maximum of 100,000,000 shares of our
common stock; or
o Exchange Triggering Event - Dr. Moskowitz will be entitled to receive an
option to purchase up to 100,000,000 shares of our common stock if we
become listed and quoted on the NASDAQ Small Cap or the NASDAQ National
Market Systems Exchange; or
o Sale Triggering Event - Dr. Moskowitz will be entitled to receive an option
to purchase up to 100,000,000 shares of common stock if we are purchased or
acquired by a larger biotech firm for a minimum of $100,000,000 in value.
We have no compensation committee or other board committee performing equivalent
functions. Dr. Moskowitz, our Chairman of the Board, and Mr. White, our previous
President and Chief Executive Officer who resigned on October 21, 2002,
participated in deliberations of our Board of Directors concerning executive
officer compensation.
We have an August 10, 2001 employment agreement with our Chairman of the Board,
David Moskowitz, providing for a $135,000 annual salary. This agreement expires
on August 15, 2003, but provides for unlimited automatic one year period
extensions.
** Our prior President/Chief Executive Officer, Jerry White, who resigned on
October 21, 2002, was granted options to purchase 6,000,000 shares of our common
stock according to the Settlement Agreement between Mr. White and us.
** Mr. White received $75,521 during 2002 as salary compensation until he
resigned on October 21, 2002.
** On November 15, 2001 we entered into a five year employment agreement with
our previous President/Chief Executive Officer, Jerry E. White, providing for a
$125,000 annual salary. The agreement provided that Mr. White was entitled to
receive 5,000,000 shares of our common stock payable at the end of each full
year of his employment. Because we employed Mr. White during 2001 as a
consultant for a total of only one and one-half months based on a verbal
agreement we had with Mr. White, he was not entitled to receive and, in fact,
did not receive any stock compensation during 2001. Mr. White was not scheduled
to receive his first 5,000,000 shares of our common stock until the end of
December 2002. On October 21, 2002, Mr. White resigned his position as
President/Chief Executive Officer. On October 25, 2002, we entered into a
Settlement Agreement with Mr. White whereby Mr. White was granted options to
purchase 6,000,000 shares of our common stock. The options may be exercised for
a period of ten years or until October 25, 2012 at an exercise price per share
of twenty percent of the average of the bid and ask of the common stock at the
close of business on October 25, 2002 which was $0.0265.
If no "Triggering Event" has occurred by November 9, 2006, we are not obligated
to grant the performance option.
Options/SAR Grants in Last Fiscal Year (2004)
---------------------------------------------
There were no Option/SAR Grants made during 2004, our last completed
fiscal year, to any of our executive officers.
--------------------------------------------------------------------------
% of Total
Number Options
Name and Securities Granted To Exercise
Principle Underlying Employees or Expiration
Position Options in 2003 Base Price Date
------------------- ------------ ---------- ------------ ------------
David Moskowitz
Chairman of the
Board and Chief
Executive Not Not
Officer 0 0 applicable applicable
------------------- ------------ ---------- ------------ ------------
Richard Kranitz Not Not
Secretary/Director 0 0 applicable applicable
---------------------------------------------------------------------------------------------------------
TOTAL 0 0
------------------------------------------------------------------------------------------------------------
Aggregate Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-the Money
Shares Value Options/SARs at FY-End Options/SARs
at FY-End
Acquired on Realized ($) Exercisable/
Name Exercise (#) ($) Unexercisable
------------------------------------------------------------------------------------------------------------
David Moskowitz Chairman
of the Board and Chief Not Not
Executive Officer applicable applicable 38,500,000 / 0 $308,500 / $0 (1)
Richard A. Kranitz Not Not 1,000,000 / 0 $31,000 / $0 (2)
Secretary, Director applicable applicable
------------------------------------------------------------------------------------------------------------
(1) The value of the unexercised in-the-money options at fiscal year end
(December 31, 2003) is calculated as follows: 1,000,000 are exercisable at
$0.006 per share; 37,500,000 are exercisable at 20% of the fair market value of
the common stock on the exercise date. The value of the common stock on December
31, 2003 was $0.037 per share. The options were not exercised, but had they
been, the value would have been as reflected above. In addition, Dr. Moskowitz
was granted a performance option to purchase up to 100,000,000 common shares for
a period of ten years at an exercise price of 20% of the fair market value of
the common stock on the exercise date. The performance options will only be
granted to Dr. Moskowitz based upon the occurrence of any of the following
"Triggering Events:" (1) Gross Profit Triggering Event - Dr. Moskowitz will be
entitled to receive one option to purchase one share of our common stock for
every one
cent of gross profit we produce, up to a maximum of 100,000,000 shares of our
common stock; or (2) Exchange Triggering Event - Dr. Moskowitz will be entitled
to receive an option to purchase up to 100,000,000 shares of our common stock if
we become listed and quoted on the NASDAQ Small Cap or the NASDAQ National
Market Systems Exchange; or (3) Sale Triggering Event - Dr. Moskowitz will be
entitled to receive an option to purchase up to 100,000,000 shares of common
stock if we are purchased or acquired by a larger biotech firm for a minimum of
$100,000,000 in value. If no "Triggering Event" has occurred by November 9,
2006, we are not obligated to grant the performance option. As of December 31,
2003, Dr, Moskowitz had not been granted any of these performance options;
therefore, they are not included in the table.
(2) The options are exercisable at $0.006 per share; the value of the common
stock on December 31, 2003 was $0.037 per share. The options were not exercised,
but had they been, the value would have been as reflected above.
Board Compensation
Other than provided above, our directors do not receive any compensation for
their services as directors, although some directors are reimbursed for
reasonable expenses incurred in attending board or committee meetings.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth the ownership of our Common Stock as of the date
of this Form 10-KSB by:
o Each shareholder known by us to own beneficially more than 5% of our common
stock;
o Each executive officer;
o Each director or nominee to become a director; and
o All directors and executive officers as a group.
Security Ownership of Beneficial Owners:
-------------------------------------------
Title of Class Name & Address Amount Nature Percent
-------------- --------------------------- ------------ -------- --------
Common David W. Moskowitz 51,000,000* Direct 29.24%
9666 Olive Blvd.
Suite 310
St. Louis, Missouri 63132
Common Advanced Optics Electronics 33,364,230 Direct 17.1%
8301 Washington Street
Suite 5
Albuquerque, New Mexico
Security Ownership of Management:
-------------------------------------------
Title of Class Name & Address Amount Nature Percent
-------------- --------------------------- ------------ -------- --------
Common David W. Moskowitz 51,000,000* Direct 29.24%
9666 Olive Blvd.
Suite 310
St. Louis, Missouri 63132
Common Richard A. Kranitz 1,000,000 Direct 0.57%
1238 12th Avenue
Grafton, Wisconsin 53024
-------------- --------------------------- ------------ -------- --------
Total of Officers and Directors 52,000,000* Direct 29.81%
====================================================================
*David Moskowitz's ownership consists of: (a) his ownership of 12,500,000 shares
of common stock; (b) 1,000,000 options to purchase 1,000,000 shares of our
common stock, the options of which are exercisable at $0.006 per share; and (c)
37,500,000 options to purchase 37,500,000 shares of our common stock, the
options of which are exercisable at 20% of the fair market value of the common
stock on the exercise date.
This table is based upon information derived from our stock records. Unless
otherwise indicated in the footnotes to this table and subject to community
property laws where applicable, we believe that each of the shareholders named
in this table has sole or shared voting and investment power with respect to the
shares indicated as beneficially owned. Applicable percentages are based upon
187,716,591 shares of common stock outstanding as of March 18, 2004. There are
no pending or anticipated arrangements that we are aware of that may cause a
change in our control.
Change in Control
We are not currently engaged in any activities or arrangements that we
anticipate will result in a change in our control.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Financial Statements.
The following Financial Statements and Report of Independent Accountants are
contained in this Form 10-KSB
Page
-----------
Report of Independent Registered Public Accounting Firm
- Stark Winter Schenkirn & Co. LLP F-1
Report of Independent Registered Public Accounting Firm
- Rubin, Brown, Gornstein & Co. LLP F-2
Consolidated Balance Sheet - December 31, 2004 F-3
Consolidated Statements of Operations - The Years Ended
December 31, 2004 and 2003 and the Period From
Inception (January 3, 2001) to December 31, 2004 F-4
Consolidated Statement of Stockholders' Equity
For the Period From Inception (January 3, 2001)
to December 31, 2004 F-5
Consolidated Statement of Cash Flows - The Years Ended
December 31, 2004 and 2003 and the Period the Period From
Inception (January 3, 2001) F-9
Notes to Consolidated Financial Statements F-11 to F-31
EXHIBIT
NUMBER DESCRIPTION
------ ---------------------------------------------------------------------
2 In re: e-Miracle Network, Inc. - Amended Plan of reorganization*
3.1 Articles of Incorporation - E-Kids Network, Inc.*
3.2 Articles of Amendment of the Articles of Incorporation of E-Kids
Network, Inc.*
3.3 Amended and Restated By Laws of GenoMed, Inc.*
10.1 Agreement and Plan of Exchange by and Between GenoMed, Inc. and
Genomic Medicine, LLC and its sole owner*
10.2 Amendment to the Agreement and Plan of Exchange*
10.3 Agreement with Research Capital, LLC*
10.4 Amendment to Agreement with Research Capital, LLC*
10.5 Agreement with DNAPrint Genomics*
10.6 Agreement with Muna, Inc.*
10.7 Agreement with Sequence Sciences, LLC*
10.8 Agreement with Better Health Technologies, Inc.*
10.9 Employment Agreement with Jerry E. White*
10.10 Employment Agreement with David Moskowitz*
10.11 Option Agreement with David Moskowitz*
10.12 Scientific Advisory Board Agreement with Jason Moore*
10.13 Scientific Advisory Board Agreement with Scott Williams*
10.14 Scientific Advisory Board Agreement with Tony Frudakis*
10.15 Resignation of Jerry E. White**
10.16 Settlement Agreement with Jerry E. White**
10.17 Convertible Promissory Note dated April 9, 2003 payable to Research
Capital, LLC***
10.18 Scientific Advisory Board Agreement with Frank Johnson**
10.19 Scientific Advisory Board Agreement with Sergio Danilov**
10.20 Scientific Advisory Board Agreement with Geoffrey Boner**
10.21 Stock Option Agreement with Peter C. Brooks**
10.22 Stock Option Agreement with David W Moskowitz**
10.23 Stock Option Award Letter to Jason Moore**
10.24 Stock Option Award Letter to Scott Williams**
10.25 Stock Option Award Letter to Tony Frudakis**
10.26 Stock Option Agreement with Richard A. Kranitz**
10.27 Agreement with Advanced Optics Electronics***
10.28 Agreement with Pierpoint Investissements SA***
10.29 Agreement with E & E Communications***
10.30 Amendment to Agreement with Pierpoint Investissements SA
21 List of subsidiaries*
31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
32 Certification of Chief Executive Officer and Chief Financial Officer
*Previously filed on April 4, 2002 - Form 10-SB Registration Statement
**Previously filed on May 6, 2003 - Form 10-KSB Annual Report
***Previously filed on April 22, 2004 - Form 10-KSB Annual Report
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Our Board of Directors reviews and approves audit and permissible non-audit
services performed by its independent accountants, as well as the fees charged
for such services. In its review of non-audit service fees and its appointment
of Rubin, Brown, Gornstein & Co. LLP, as our independent accountants, the Board
of Directors considered whether the provision of such services is compatible
with maintaining independence. All of the services provided and fees charged by
Stark Winter Schenkein & Co., LLP in 2003 and 2004 and those charged by Rubin,
Brown, Gornstein & Co. LLP in 2004, were approved by the Board of Directors.
Audit Fees
The aggregate fees billed by for professional services for the audit of our
annual financial statements of the Company and the reviews of the financial
statements included in our quarterly reports on Form 10-QSB for 2004 and 2003
were $25,745 and $14,500, respectively, net of expenses.
Audit-Related Fees
There were no other fees billed by our independent accountants during the last
two fiscal years for assurance and related services that were reasonably related
to the performance of the audit or review of our financial statements and not
reported under "Audit Fees" above.
Tax Fees
The aggregate fees billed during the last two fiscal years for professional
services rendered for tax compliance for 2004 and 2003 were $1,600 and $1,750,
respectively.
All Other Fees
There were no other fees billed by our independent accountants during the last
two fiscal years for products and services provided.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GenoMed, Inc.
(Registrant)
By /s/ David Moskowitz
-------------------------
David Moskowitz, Chairman of the Board and Chief Executive Officer,
Principal Financial Officer, Principal Accounting Officer
Date: April 1, 2005
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Signature Title Date
/s/ David Moskowitz Chairman of the Board, April 1, 2005
------------------------- President
David Moskowitz
/s/ Robyn Owens Chief Financial Officer April 1, 2005
-------------------------
Robyn Owens