10KSB: GENOMED INC
4/22/2004 9:02:56 AM
(EDGAR Online via COMTEX) -- 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 2003, our Plan of Operations during 2003 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 plan on funding the following estimated expenses totaling $1,403,907 over the
next year from the funding that we have received from Advanced Optics and
Pierpoint Investments and from revenues, if any that we generate.

Annual
Type Expenditures Estimated Amount
------------------- ------------------
Salaries $ 328,907*
------------------- ------------------
Operating Expenses** $ 125,000
------------------- ------------------
Genotyping $ 800,000
------------------- ------------------
Sample
Collection $ 100,000
------------------- ------------------
Marketing $ 50,000
------------------- ------------------
Total $ 1,403,907
==================

*Salaries include: (a) $183,907 for our Chief Executive Officer, David
Moskowitz, which represents a base salary of $135,000 plus deferred salary of
$146,720 from the period November 1, 2002 through December 31, 2003, of which
one-third or $48,907 is to be paid in cash in 2004, one-third or $48,907 is to
be paid in cash in 2005, and the balance of $48,907 is to be paid in shares of
our common stock priced at a 25% discount from the average closing price of the
period of salary deferral November 1, 2002 through December 31, 2003; and (b)
$60,000 annual salary and $15,000 of benefits for a Chief Financial Officer, who
has yet to be hired; and (c) $60,000 annual salary and $10,000 of benefits for a
Chief Technical Officer, who has yet to be hired.

** Operating Expenses include office rent, utilities, and legal and accounting expenses.

We intend to satisfy these estimated total expenditures of $1,403,907 for our Plan of Operations through our cash as of April 16, 2004 of $1,498,690 and revenues or a private placement of our equity Securities.

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.

OUR PLAN OF OPERATIONS TO DATE
To date, we have accomplished the following in our Plan of Operations:

November 2001 Dr. David Moskowitz became our Chairman of the Board and Chief Medical Officer.

Jerry E. White became our President, Chief Executive Officer, and a Director. Jerry White resigned on October 21, 2002, and our Board of Directors appointed Dr. David Moskowitz as our President and Chief Executive Officer as of October 22, 2002 to fill the vacancies created by Jerry White's resignation.

Dr. Scott Williams became the first member of our Scientific Advisory Board.

Filed Provisional Patent Application: "Modifications of Serum Potassium Concentration in Patients for Whom ACE Inhibition is Indicated." Patent application number pending. This patent concerns patients with chronic kidney disease that cannot tolerate ACE inhibitors because their serum potassium concentration is already high. ACE inhibitors make this problem worse. ACE inhibitors block the action of the ACE enzyme, and as a class have been used as anti-hypertensive drugs since the late 1970s. This provisional patent application describes the use of a second medication to control serum potassium, allowing the use of ACE inhibitors in such patients.

Filed Provisional Patent Application: "Clinical Trials Illustrating New Uses for an Existing ACE Inhibitor." Patent application number 60/347,013. This provisional patent application describes how to test ACE inhibitors for new disease indications.

Re-filed Provisional Patent Application: "Promoter SNPs." Patent application number pending. This provisional patent application specifies nearly 12,000 SNPs culled from the regulatory region of some 5,000 genes. The specific region of the gene involved is the promoter, which sits upstream of the coding portion of the gene.

December 2001 Dr. Tony Frudakis joins our Scientific Advisory Board. Filed Provisional Patent Application: "New Formulation of an Existing ACE Inhibitor." Patent Application Number 60/350,563. This provisional patent application outlines the reformulation of a particular ACE inhibitor at the higher doses required for minimal clinical effectiveness.

Letter of Intent with DNAPrint Genomics, Inc. and Orchid BioSciences, Inc. to perform 400,000 SNP-genotypes at $0.40 per genotype.

Approval obtained from American Diabetes Association to utilize its bank of DNA samples from patients with Type 2 Diabetes.

Disease Management Consultants Vince Kuraitis and Alan Kaul engaged to develop a marketing plan to form relationships with disease management firms and health care plans to commercialize our clinical research findings.

Second contract for Regulatory SNPs signed with Sequence Sciences, LLC to find more regulatory SNPs.

Filed tenth Provisional Patent Application involving a method to delay or prevent altogether most common serious diseases. Patent application number pending.

Added Peter C. Brooks and Richard A. Kranitz as members of our Board of Directors.

January 2002 Dr. Jason Moore joins our Scientific Advisory Board.

HealthChip trademark filed with United States Patent and Trademark Office.

Purchased one SNP Stream UHT (Ultrahigh Throughput) SNP Genotyping system from Orchid BioSciences, Inc. that will enable us to perform as many as 100,000 genotypes a day. Beta Test Agreement with Orchid BioSciences, Inc. completed for the SNP stream UHT system, which will permit us to operate this equipment through a joint venture with DNA Print, Inc. in Sarasota, Florida. The Beta Test Agreement involves the following: In return for providing Orchid BioSciences with information regarding their systems genotyping accuracy, the agreement allows GenoMed to perform the first 50,000 genotypes at no charge.

February 2002 Orchid BioSciences, Inc. installed our UHT SNP-stream genotyping system at DNAPrint Genomics, Inc., a company with one year's experience using the Orchid genotyping platform.

Personnel with DNAPrint Genomics began training on SNP stream-UHT system equipment. DNAPrint Genomics personnel have been trained by Orchid BioSciences to operate the new system. In return for hosting the machine, we are allowing DNAPrint Genomics to use our UHT SNP-stream machine for DNAPrint's genotyping needs during times when the machine would otherwise be idle.

Our first board meeting was held in Sarasota, Florida. Board members also visited DNAPrint Genomics to see the UHT SNP-stream technology in operation.

March 2002 - August 2002 Data analysis and manuscript preparation We conducted data analysis in conjunction with our preparation of the following publications:

From Pharmacogenomics to Improved Patient Outcomes: Angiotensin I-Converting Enzyme as an Example

Is Angiotensin I-Converting Enzyme a "Master" Disease Gene?

Is "Somatic" Angiotensin I-Converting Enzyme a Mechanosensor?

September 2002 In September 2002, we published an article in Diabetes Technology; Therapeutics, demonstrating our efforts to prevent end-stage kidney disease in diabetes and hypertension. We also published case reports showing better outcomes than with conventional treatment for emphysema and peripheral vascular disease or poor circulation.

October 2002 We published an article in Diabetes Technology and Therapeutics describing how our patent-pending treatment regarding inhibition of angiotensin II production and/or activity might benefit a total of some 160 common diseases associated with aging, such as all cardiovascular diseases, all common cancers, except prostate, several psychiatric diseases, autoimmune diseases, and viral diseases, including infection with HIV and progression to AIDS.

December 2002 We published an article in Diabetes Technology and Therapeutics describing the molecular mechanism for aging.

January 2003 We began to seek elderly volunteers in nursing homes to test ACE inhibitors, in addition to their current medications, for the purpose of delaying progression of age-related diseases.

We began to seek collaborators in a trial to treat acute kidney failure with an intravenous drug, rather than with the kidney machine. The trial would be for patients with new, sudden loss of kidney function, not for chronic dialysis patients.

We began to seek collaborators in Neonatal Intensive Care Units to test a new treatment for lung immaturity in newborns. Lung immaturity is common in babies more than a month premature.

We began to seek volunteers with glaucoma to test a new medication in addition to their current medications.

February 2003 We signed a Letter of Intent to collaborate with Dr. Huseyin Abali of Turkey to use ACE inhibitors to help treat cancer. We plan to collaborate with Dr. Abali using our ACE inhibitor treatment in lung cancer, colorectal cancer, mesenchymal tumors, and lymphomas.

March 2003 Alopecia areata, an autoimmune disease, responded dramatically in a patient with active disease to our patent pending treatment approach of inhibiting angiotensin II.

April 2003 We announced a novel anti-viral therapy that may decrease mortality in the SARS epidemic and that we were seeking patient and physician collaborators to collaborate in a world-wide trial of the efficacy of this therapy. On April 25, 2003, we filed a patent application for the use of "sartans" for SARS. A "sartan" is a drug that specifically inhibits the angiotensin II type 1 receptor. It appears that angiotensin II operates through the AT1 receptor to activate lymphocytes and macrophages, but that type 2 angiotensin II receptor promotes death of these cells and thus, an AT1 receptor blocker might be ideal for selectively turning off an overly exuberant host immune response.

On April 30, 2003, our Chief Executive Officer, Dr. David Moskowitz, presented our patient outcomes data to help stop the epidemic of end-stage kidney disease to Blue Cross/Blue Shield of Tennessee.

May 2003 We announced the granting of a license of our aminophylline treatment to Dr. Mehmet Sukru Sever. Aminophylline is an existing, generic drug that we have used to restore kidney function and avoid dialysis in the setting of acute kidney failure. Dr. Sever coordinated kidney dialysis for survivors of the earthquake in Bingol in Eastern Turkey.

June 2003 We announced that we were launching a clinical trial against age-related macular degeneration using drugs to inhibit angiotensin II, as well as other causes of blindness, such as retinitis pigmentosa.

We reported that over 300 patients had expressed interest in our clinical trials, but that less than a dozen patients with diabetes or high blood pressure had signed up to use our treatment to prevent kidney dialysis and other complications of diabetes and high blood pressure.

We announced a clinical trial using inhibitors of angiotensin II against all neurodegenerative diseases, including common ones such as Alzheimer's disease, Parkinson's disease, and rare ones like amyotrophic lateral sclerosis, which is known as "Lou Gehrig's disease", and spinal muscular atrophy.

July 2003 Our Chief Executive Officer, Dr. David Moskowitz, was invited to speak at the Nucleic Acid World Summit to be held in Boston, Massachusetts from September 15-17, 2003. The conference's subject is "Transforming Cutting-Edge Science into Business" and will focus on uses of RNA and DNA to understand and treat diseases, including viral scourges such as SARS, HIV, and West Nile virus. Dr. Moskowitz's speech is entitled "Improving the Odds of Therapeutic Efficacy: Blocking Angiotensin II." The conference is hosted by the Strategic Research Institute.

We announced that we were still seeking volunteers for our treatment to avoid complications of West Nile virus based on our belief that inhibiting angiotensin II would decrease signaling by T cells and macrophage/monocyte/microglial cells, which should in turn decrease the number of encephalitis cases due to West Nile virus.

August 2003 We acquired 10,000 more promoter SNPs for our Disease GeneNet(tm) from Sequence Sciences, LLC. This brought the number of promoter SNPs to 23,000 that we have to interrogate each disease.

We proposed our patent-pending approach, namely inhibiting angiotensin II, as a possible treatment to halt any further troop deaths due to pneumonia cases which appear to be an unusually intense allergic reaction to the anthrax vaccine.

Our Chief Executive Officer, Dr. David Moskowitz was invited to speak at an anti-aging conference sponsored by the American Academy of Anti-Aging Medicine to be held December 11-14, 2003. It is anticipated that over 4,000 scientists and physicians interested in anti-aging medicine will attend the conference. Dr. Moskowitz will discuss our clinical findings that ACE inhibitors and angiotensin II receptor blockers may be effective against almost all age-related diseases.

Our Chief Executive Officer, Dr. David Moskowitz, was asked to serve as the Chairperson and speak at the Cancer Drug Research and Development Conference in San Diego, California on November 20-21, 2003. Dr. Moskowitz will speak on the topic, "Is Angiotensin II Behind Most Cancers (Except Prostrate)?"

October 2003 We announced that we have partnered with PhenoMed, a development stage disease management and medical pharmaceutical company based in Kuala Lumpur, Malaysia, to expand GenoMed's Next Generation Disease Management(tm) services into Asia.

January 2004 We launched a free clinical trial available to anybody with the common cold. We have accumulated clinical evidence that blocking the major product of ACE, which is a small eight amino acid hormone named angitensin II, can decrease inflammation in a number of diseases, including viral disease.

We entered into a stock sale agreement with Advanced Optics Electronics, in which Advanced Optics agreed to purchase a total of $900,000 of our shares of common stock at a discount of 25% from the average closing bid price of our common stock for the month of December 2003. In accordance with the agreement terms, we issued 33,364,230 of our common stock to Advanced Optics during the period from January 2004 to March 2004.

During January 2004 and March 2004, Research Capital purchased an aggregate of 10,716,327 shares of our common stock for cash totaling $480,000 and also forgave $1,000,000 of the note payable discussed in Note 4 to our 2003 year end financial statements. In addition, $153,081 in accrued interest and $180,657 in other advances were converted into 12,737,995 shares of our common stock.

February 2004 We announced we launched a web-based course on genomics for practicing physicians. This course is aimed at 650,000 physicians who require continuing medical education credits to keep their medical license active. The course is worth 50 hours of such credit.

We announced that our treatment approach to viruses, which tones down the host's immune response rather than trying to kill the virus, should be effective against the bird flu.

March 2004 We joined the Leadership Circle of St. Louis Regional Commerce and Growth Association, which serves as the Chamber of Commerce and Economic Development Organization the a 12-county, bi-state region.

We executed an agreement with Pierpoint Investissements SA, a Swiss-based venture capital group that is registered in the British Virgin Islands, which provides for minimum funding of $500,000 and a maximum of $2,000,000 annually for up to 10 years.

The United States Patent and Trademark Office awarded us two the following two trademarks for use in our marketing: (a) "Next Generation Disease Management"; and (b) "Clinical Outcomes Improvement Program."

OUR PLAN OF OPERATIONS
Our Plan of Operations over the next twelve months will focus on common cancers
such as lung, prostate, colon, breast and pancreas. We will conduct screening
genotyping, followed by validation genotyping. In addition, our Plan of
Operations includes the following:

Market to Health Care Plans We will contact health care plans for the purpose of establishing agreements with these companies to provide our patent-pending cost-saving medical treatments. We do not yet have such an agreement in place.

Data Analysis The computational demands expand when you consider that some of the many SNPs we genotype for may work together to produce the disease. Sorting through all the combinations of 10,000 SNPs, that is, one SNP at a time, then any two SNPs out of 10,000, then any three SNPs out of the same 10,000, then any four SNPs out of 10,000, and so on, will take advanced software and considerable computing power. Therefore, we will lease a computer or network of computers which will cost approximately $100,000.

Patent Writing As in every aspect of this project, high throughput patent application is required. A template patent application has been prepared by our Chairman of the Board and Chief Medical Officer, Dr. David Moskowitz. As data becomes available, it will be incorporated into the existing template patent application.

Marketing IP We will attempt to recruit personnel with research pharmaceutical and healthcare industry experience to market our disease-gene associations to the research pharmaceutical industry and our cost-saving treatments to the healthcare industry.

Chief Financial Officer During approximately May 2004, we plan to hire a Chief Financial Officer that will direct our financial operations.

Chief Technical Officer During approximately June 2004, we plan to hire a Chief Technical Officer that will: o be responsible for the Bioinformatics of our operations, which is the science of developing computer databases and algorithms to facilitate and expedite our genomics research, o perform DNA extraction from whole blood; o supervise shipment of samples and SNPs to our genotyping partner; o receive data from our genotyping partner and assist with data analysis; and o assist with writing patents.

Liquidity and Capital Resources Cash at December 31, 2003 amounted to $11,469. Cash at April 16, 2004 amounted to $1,498,690. We have experienced significant losses from our operations. For the period ended December 31, 2003, we incurred a net loss of $1,299,347. For the period from our inception of January 3, 2001 to December 31, 2003, we incurred a net loss of $3,397,429.

Apr 22, 2004

Positive news today regarding their trial treatment 100% response rate.