News Column

Management's Discussion and Analysis of Financial Condition and Results of Operations.

May 14, 2014

The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto contained elsewhere in this Report. The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements.

Overview

Panacea Global, Inc. is a corporation that was incorporated under the laws of Nevada in 1995. On June 30, 2010 we entered into a share exchange agreement with Panacea Global, Inc., a privately held Delaware corporation ("Panacea Delaware"), and the shareholders of Panacea Delaware pursuant to which we acquired all of the outstanding capital stock of Panacea Delaware from the Panacea Delaware shareholders and Panacea Delaware became our wholly owned subsidiary and our operating business.

Through Panacea Delaware, we are a company that sells early detection cancer tests through our licensing agreement with Panacea Pharmaceuticals, Inc. ("Pharmaceuticals"). More specifically, Panacea Global Inc. is a biopharmaceutical company focused on providing blood (protein), serum and tissue tests to diagnose and monitor cancer through a licensing agreement with Panacea Pharmaceuticals, Inc. The Company's mission is to discover, develop and commercialize innovative diagnostic products. Panacea's current product development focus is on novel proteins and biochemical pathways related to cellular regulation and cell cycle abnormalities in oncology diseases.

Panacea Pharmaceuticals, Inc. was founded in 1999 to discover, develop and commercialize innovative therapeutic and diagnostic products for cancer and diseases of the central nervous system. In-house research and development activities are performed at an 11,000 square foot facility in Gaithersburg, Maryland.

Panacea Laboratories, Inc. is certified under the Clinical Laboratory Improvement Amendments of 1988 (CLIA) to perform high complexity testing, and offers several cancer diagnostic tests to patients, physicians and clinical laboratories.

On March 24, 2010, Panacea Delaware entered into a licensing agreement (the "Licensing Agreement") with Pharmaceuticals. Pursuant to the Licensing Agreement, Panacea Delaware was granted the exclusive right to develop, use, and market Pharmaceuticals' HAAH based cancer diagnostic technologies, with rights to sublicense worldwide, except for the United States of America. In consideration for the Licensing Agreement, Panacea Delaware issued 35,500,000 shares of its common stock to Pharmaceuticals and is obligated to pay Pharmaceuticals a license fee of $2,500,000, due within 30 days of the Company raising a minimum $10,000,000 equity investment (the "License Fee"). One-half of any equity investments raised shall be remitted to Pharmaceuticals, until the License Fee is paid in full. The aggregate consideration paid and therefore fair value of the Licensing Agreement equals $50,000,000. Further, the Company will pay Pharmaceuticals 25% of all sublicensing revenue and will purchase all conforming reagent at a cost of $20 per test or 10% of the sale price of the individual test with a minimum $8.00 test price. We hope to market and sell products through strategic partnerships with companies in different countries by entering into sublicensing agreements to sell our products. We may enter into sublicensing agreements with one or more third parties under all or some of the related Pharmaceuticals patents. Additionally, we hope to develop standalone operations in certain countries including Canada. We anticipate that our licensing agreements, with amenable profits margins, will underpin our revenue for the 2014 year.

On June 2, 2011, we filed a Certificate of Amendment to our Articles of Incorporation with the State of Nevada changing the Company's name to Panacea Global, Inc.

On November 18, 2011 we entered into an amendment to the Licensing Agreement whereby the Licensing Agreement was amended to clarify that the license granted to us is exclusive.

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On January 18, 2013, we entered into a second amendment to the Licensing Agreement ("Amendment No. 2"). The Company entered into Amendment No. 2, extending the payment term of the Licensing Agreement. Amendment No. 2 provides that the Company shall pay the remaining License Fee within two years from the execution date of Amendment No. 2.

The License Fee was fully repaid during the quarter.

On June 2, 2011, we filed a Certificate of Amendment to our Articles of Incorporation with the State of Nevada changing the Company's name to Panacea Global, Inc.

As of March 31, 2014, we are in the development stage and have limited working capital, have not earned any revenues from operations and have accumulated a deficit.

Exclusive Sublicense Agreement with Panacea Laboratories (Canada)

On November 18, 2011, we entered into an exclusive sublicense agreement by and between Panacea Global, Inc. corporation organized under the laws of Ontario and our wholly owned subsidiary ("Panacea Canada"), Pharmaceuticals, Panacea Global, Inc., a corporation organized under the laws of the State of Delaware and our wholly subsidiary, and Panacea Laboratories, Inc., a corporation organized under the laws of Ontario (the "Sublicense Agreement"). Pursuant to the Sublicense Agreement, we granted Panacea Laboratories the exclusive right to sublicense our license to develop, use, and market Pharmaceuticals' HAAH based cancer diagnostic technologies throughout Canada.

Patents

Pursuant to the Licensing Agreement, we acquired a global diagnostic license ("GDL") with rights to sublicense our technology worldwide, except for the United States of America. The GDL allows the Company to develop, market and use licensed products related to HAAH based laboratory tests for the following two patents pending:





Methods of Diagnosing, Predicting Therapeutic Efficacy and Screening for New Therapeutic Agents for Leukemia - Pending





Methods of Diagnosing Lung Cancer - Pending

Exclusive Master Purchase Agreement with Palmverse Limited

On July 7, 2011, we, through our wholly owned subsidiary, Panacea Delaware, entered into an exclusive master purchase agreement with Palmverse Limited, a Belarus corporation ("Palmverse") (the "Agreement") to provide Palmverse with the exclusive right to use the Company's blood, serum and tissue testing services to diagnose and monitor cancer (the "Cancer Testing Products") within the Republic of Belarus. We have agreed to provide Palmverse with an exclusive right to become the sole purchaser of the Company's Cancer Testing Products within the Republic of Belarus. The initial term of the Agreement expires on December 31, 2011 (the "Initial Term"). Following the expiration of the Initial Term, the Agreement will renew automatically on an annual basis, provided Palmverse meets minimum purchase amounts, unless either party gives sixty (60) days prior written notice of its intention not to renew the Agreement.

The Agreement provides that Palmverse will be required to meet a minimum purchase amount threshold of the Cancer Testing Products for each year the Agreement is in effect. In that regard, during the Initial Term, Palmverse will be required to purchase a minimum of $280,000 in Cancer Testing Products. Thereafter, in the period ranging from January 1, 2012 to December 31, 2012 (the "First Renewal Term"), Palmverse is required to purchase a minimum of $3,500,000 in Cancer Testing Products. During the period ranging from January 1, 2013 to December 31, 2013 (the "Second Renewal Term"), Palmverse is required to purchase a minimum of $5,250,000 in Cancer Testing Products. Finally, in each renewal term commencing after the Second Renewal Term, Palmverse is required to purchase a minimum of $7,000,000 in Cancer Testing Products.

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Palmverse failed to make the minimum purchase amounts during the Initial Term, and is therefore in default of the Agreement. We will not be terminating the Agreement, and we are providing Palmverse the opportunity to cure their default and begin to order the Cancer Testing Products.

Reverse Split

On September 6, 2011, the Board approved resolutions authorizing the Company to implement a reverse stock split of the outstanding shares of common stock at a ratio of up to one-to-thirty (the "Reverse Stock Split"). On September 6, 2011, we also received approval for the Reverse Stock Split from our shareholders. The Board may determine in its discretion whether to effect the Reverse Stock Split at any time, if at all, and if so at what exchange ratio up to one-to-thirty. If the Board determines to effect a Reverse Stock Split, the Reverse Stock Split will become effective upon the filing of a Certificate of Amendment to our Certificate of Incorporation with the Secretary of State of the State of Nevada. The exact timing of the filing of the amendment will be determined by the Board based on its evaluation as to when such action will be the most advantageous to us and our stockholders, and the Board. In addition, the Board reserves the right, notwithstanding stockholder approval and without further action by the stockholders, to elect not to proceed with the Reverse Stock Split if, at any time prior to filing the amendment, the Board, in its sole discretion, determines that it is no longer in our best interests and the best interests of our stockholders. To date our Board has not yet implemented the reverse split.

Valuation Analysis of Global Diagnostic License

As of March 31, 2014, there was no updated valuation analysis regarding our Global Diagnostic License (the "License") to replace the report dated December 31, 2011 discussed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2012. Reznick Group performed a valuation analysis to estimate the fair value of our License as of December 31, 2011 (the "Valuation Date").

According to the License Agreement, Panacea Pharmaceuticals granted us the global right (excluding the United States and its territories and protectorates) with respect to the development, use, and marketing of the technology, method, process, patent rights, and know-how related to the cancer testing products.

Based on the valuation analysis, the fair market value of the License was determined to be $55.8 million as of the Valuation Date.

Results of Operations

As of March 31, 2014, the Company had not begun its business operations in connection with the Licensing Agreement. Accordingly, we have not had any revenues during the three ended March 31, 2014 or during the period from February 5, 2010 (inception) to March 31, 2014.

Total expenses for the three months ended March 31, 2014 were $459,563, as compared to total expenses of $167,352 for the three months ended March 31, 2013 and $4,974,554 for the period from February 5, 2010 (inception) to March 31, 2014. The increase in expenses for the three months ended March 31, 2014 was primarily attributable to salaries and benefits and office and general expenses.

The Company recorded a net loss of $459,771 for the three months ended March 31, 2014. We recorded a net loss for the three months ended March 31, 2013 of $167,402 and a net loss of $5,180,741 for the period from February 5, 2010 (inception) to March 31, 2014.

Liquidity and Capital Resources

At March 31, 2014 the Company had $52,025,747 in assets comprised of the $50,000,000 intangible asset, investment of $911,464, property and equipment totaling $73,274, $765,668 cash in hand and other assets of $275,341. The intangible asset allows the Company to develop market and use licensed products related to HAAH based laboratory tests. Comparatively, at December 31, 2013 we had $53,348,511 in assets comprised of the $50,000,000 intangible asset, investment of $911,672, property and equipment totaling $78,236, cash in hand of $2,309,563 and other assets of $49,040.

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At March 31, 2014 the Company had liabilities of $1,900,719 comprised of deferred revenue of $1,000,000, amounts due to related parties of $562,915 and accounts payable and accrued liabilities totaling $337,804. Comparatively at December 31, 2013, we had $2,684,494 in liabilities comprised of the license fee payable of $574,211 deferred revenue of $1,000,000, amounts due to related parties of $720,209 and accounts payable and accrued liabilities totaling $390,074.

Net cash used in operating activities during the three months ended March 31, 2014 was $1,307,383 and was $5,303,613 for the period from February 5, 2010 (inception) to March 31, 2014. Net cash used by investing activities was $Nil for the three months ended March 31, 2014 and was $1,115,736 for the period from February 5, 2010 (inception) to March 31, 2014 due to the company's investment in Panacea Laboratories, Inc. and the purchase of property and equipment. Net cash used by financing activities during the three months ended March 31, 2014 was $157,294 due to financing to related parties and net cash provided by financing activities was $7,131,029 for the period from February 5, 2010 (inception) to March 31, 2014 due to financing from related parties and the issuance of common stock.

As there were no revenues from operating activities as of March 31, 2014, we must rely upon the issuance of common stock and additional capital contributions from shareholders and/or loans from shareholders and third-party lenders to meet our working capital needs. It is expected by management that we will need to rely upon new capital contributions to pay our liabilities.

Critical Accounting Policies

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States ("GAAP"). GAAP requires the use of estimate; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, and revenue and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Recent Accounting Pronouncements

Changes to GAAP accounting are established by the Financial Accounting Standards Board (FASB) in the form of accounting standards updates ("ASU's") to the FASB's Accounting Standards Codification.

The Company has assessed the applicability and impact of all ASU'S and they have been determined to be either not applicable or are expected to have minimal impact on our consolidated financial position and results of operations.

Going Concern

These financial statements have been prepared assuming the Company will continue on a going-concern basis. The Company has incurred losses since inception and the ability of the Company to continue as a going-concern depends upon its ability to develop profitable operations and to continue to raise adequate financing. Accumulated Losses from inception to March 31, 2014 total $5,180,741. Management is actively targeting sources of additional financing to provide continuation of the Company's operations. In order for the Company to meet its liabilities as they come due and to continue its operations, the Company is solely dependent upon its ability to generate such financing.

There can be no assurance that the Company will be able to continue to raise funds, in which case the Company may be unable to meet its obligations. Should the Company be unable to realize its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the amounts recorded in these financial statements.

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The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

Impairment of Long-lived Assets

In accordance with ASC 360-10-05, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company evaluates whether events and circumstances have occurred that indicate possible impairment. If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value of asset less cost to sell. The Company evaluated the Global Diagnostic License on December 31, 2011 indicating no impairment. As at March 31, 2014, management is of the opinion that there have been no changes in circumstances.

Off-Balance Sheet Arrangements

None. Item 3.


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Source: Edgar Glimpses


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