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U.S. Securities and Exchange Commission

THOMAS D. CARTER
MICHAEL R. MACPHAIL
TRACY A. TIREY
Securities and Exchange Commission
1801 California Street, Suite 1500
Denver, Colorado 80202
Telephone: (303) 844-1000, Fax: (303) 844-1068

THOMAS A. ZACCARRO, (California Bar No. 183241)
Securities and Exchange Commission
5670 Wilshire Boulevard, 11th Floor
Los Angeles, California 90036-3648
Telephone: (323) 965-3877
Facsimile: (323) 965-3812
Attorneys for United States
Securities and Exchange Commission

Attorneys for Plaintiff
SECURITIES AND EXCHANGE COMMISSION

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA


SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

v.

QUINTEK TECHNOLOGIES, INC.
PANAMED CORPORATION and
THOMAS W. SIMS,

Defendants.


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Civil Action No.

COMPLAINT

Plaintiff Securities and Exchange Commission (the "Commission") alleges:

I. SUMMARY OF THE ACTION

1. Between October 2001 and March 2002, Thomas W. Sims ("Sims"), who was then the president of two related publicly held companies, Quintek Technologies, Inc. ("Quintek") and PanaMed Corp. ("PanaMed"), wrote or reviewed five press releases that were issued by Quintek or PanaMed. Sims also wrote memoranda and other materials that were disseminated to individuals who invested approximately $713,500 in a private offering of PanaMed stock between September 2001 and April 2002.

2. The releases and offering materials contained false and misleading statements, primarily concerning a large order for Quintek's product, testing of PanaMed's product, and/or revenue projections for PanaMed. Two of the releases caused the price and volume of Quintek stock to increase significantly, and one of the releases caused the volume of PanaMed stock to increase significantly.

3. Further, between March 2000 and December 2002, Quintek filed late eight quarterly reports and two annual reports with the Commission, and between December 2000 and November 2002, PanaMed filed late five quarterly reports, and has to date failed to file an annual report that was due on April 15, 2003.

4. The Commission brings this action pursuant to the following authorities conferred upon it: (i) Section 20(d) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. § 77t] and Section 21(d)(3) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78u(d)] for civil money penalties; (ii) Section 20(b) of the Exchange Act [15 U.S.C. § 77t] and Section 21(d)(1) of the Exchange Act [15 U.S.C. § 78u(d)] for an order permanently restraining and enjoining Defendants and granting other equitable relief; (iii) Section 20(e) of the Securities Act [15 U.S.C. § 77t] and Section 21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)] for an officer and director bar; and (iv) Section 20(g) of the Securities Act [15 U.S.C. §§ 77t(g)] and Section 21(d)(6) of the Exchange Act [15 U.S.C. § 78u(d)(6)] for a penny stock bar.

5. Against Quintek, the Commission seeks a permanent injunction for violations of Sections 10(b) and 13(a) of the Exchange Act [15 U.S.C. §§ 78j(b) and 78m(a)] and Rules 10b-5, 13a-1 and 13a-13 thereunder [17 C.F.R. §§ 240.10b-5, 240.13a-1 and 240.13a-13].

6. Against PanaMed, the Commission seeks a permanent injunction and civil money penalties for violations of Section 17(a) of the Securities Act [15 U.S.C. §§ 77q(a)], Sections 10(b) and 13(a) of the Exchange Act [15 U.S.C. §§ 78j(b) and 78m(a)] and Rules 10b-5, 13a-1 and 13a-13 thereunder [17 C.F.R. §§ 240.10b-5, 240.13a-1 and 240.13a-13].

7. Against Sims, the Commission seeks a permanent injunction, civil money penalties, an officer and director bar and a penny stock bar for violations of Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)] and Sections 10(b) of the Exchange Act and Rule 10b-5 thereunder [17 C.F.R. §§ 240.10b-5] and for aiding and abetting PanaMed's and Quintek's violations of Sections 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder [17 C.F.R. §§ 240.13a-1 and 240.13a-13].

II. JURISDICTION AND VENUE

8. This Court has jurisdiction over this action pursuant to Section 22(a) of the Securities Act [15 U.S.C. §77u(a)] and Sections 21(e) and 27 of the Exchange Act [15 U.S.C. §§78u(e) and 78aa]. Venue lies in this Court pursuant to Section 22(a) of the Securities Act and Section 27 of the Exchange Act.

9. In connection with the transactions, acts, practices, and courses of business described in this Complaint, each of the defendants, directly and indirectly, has made use of the means or instrumentalities of interstate commerce, of the mails, and/or of the means and instruments of transportation or communication in interstate commerce.

10. Defendant Quintek maintains an office within this judicial district, defendant PanaMed formerly maintained such an office and defendant Sims resides within this judicial district. Additionally, certain of the transactions, acts, practices and courses of business constituting the violations of law alleged herein occurred within this judicial district.

III. DEFENDANTS

11. Quintek is a California corporation with offices in Camarillo, California. The company develops, manufactures, and distributes "aperture cards" used for storing information. Stock of Quintek is registered pursuant to Section 12(g) of the Exchange Act and quoted on the over-the-counter Bulletin Board. Quintek has continuing obligations to file periodic reports with the Commission.

12. PanaMed is a Nevada corporation located in Lebanon, Indiana. Despite owning only ten percent of PanaMed's stock, Quintek press releases describe PanaMed as its "subsidiary." Quintek also has claimed to exert "significant influence" over PanaMed due to common management of the two companies. Stock of Quintek is registered pursuant to Section 12(g) of the Exchange Act and quoted on the over-the-counter Bulletin Board. PanaMed has continuing obligations to file periodic reports with the Commission.

13. Thomas W. Sims, age 52, resides in Camarillo, California. He was the president and chief executive officer of Quintek and chairman of its board of directors between January 1999 and January 2003, and the president of PanaMed and chairman of its board of directors between March and August 2002. Sims owns 2.5 million shares of Quintek stock (representing approximately 6% of its outstanding shares) and owns 3.3 million shares (representing approximately 13% of its outstanding shares) of PanaMed stock.

IV. FACTS

A. PRESS RELEASES AND OFFERING MATERIALS

14. Quintek disseminated press releases concerning PanaMed on October 22 and 25, 2001, and a press release concerning Quintek on March 20, 2002. PanaMed issued press releases on February 8 and March 5, 2002.

15. Sims wrote four of the releases and reviewed the fifth release, which was written by a third party. At Sims' direction, all of the Quintek press releases, including those concerning PanaMed, were posted on Quintek's Internet website until approximately March 27, 2002.

16. Further, Sims drafted offering materials, which PanaMed disseminated to investors and prospective investors in connection with a private offering of its common stock at $1.00 per share between September 2001 and April 2002. PanaMed raised $713,500 through this offering, which has resulted in substantial losses to investors.

B. FALSE AND MISLEADING STATEMENTS

17. On March 20, 2002 Quintek issued a press release that was written by a third party individual and approved by Sims. The release stated that: (a) Quintek had received a $10 million order for its data storage system components from a privately held Hungarian company; and (b) a third party entity would provide financing to the Hungarian company through a "$15 million revolving credit facility."

18. These statements were false and misleading. The statement about the $10 million order was false because the Hungarian company had not placed any order with Quintek. Further, the statement that a third party entity would provide financing to the Hungarian company was misleading because the entity did not possess, or have access to, $15 million, and therefore could not provide such financing.

19. PanaMed's offering materials stated that PanaMed had conducted "clinical trials" of its product. This statement was false because the testing of PanaMed's product was limited to three AIDS patients who took PanaMed's product for varying time periods. The patients then submitted blood samples to a laboratory for testing and sent the results to a third party, who was not a medical doctor. The third party then relayed the test results to the company. These tests did not constitute "clinical trials."

20. Two releases issued by PanaMed and two press releases issued by Quintek between October 2001 and March 2002 stated that it "plan[ned] to launch" clinical trials in April 2002, or that such trials would commence in early 2002. These statements were misleading because PanaMed lacked necessary funds to conduct clinical trials and had no access to assured financing.

21. One of the four releases, which was issued on October 25, 2001, additionally stated that PanaMed had "initiated discussions with representatives from several third world countries to select a site" for clinical trials. This statement was false because no discussions with representatives of foreign governments about such testing had occurred.

22. Moreover, this same release stated that after the completion of anticipated clinical trials, which were expected to begin in 2002, PanaMed would achieve revenues of $700 to $5,000 per patient (representing total revenues of between $245 million and $175 billion) by selling PanaMed's product to 35 million patients. This statement lacked a reasonable basis because at the time the statement was made PanaMed had no revenue generating product, and as recently as November 20, 2002, PanaMed has publicly disclosed in a Form 10-Q filed with the Commission that it still has "no products which can be sold to generate revenues or profits." Further, even if its product were ready for sale, PanaMed had minimal cash and revenues when the press release was issued, and, accordingly, lacked the means to effectively market its product.

23. Sims knew, or was reckless in not knowing that his statements about the Quintek order, testing of PanaMed's product, revenue projections for PanaMed, and other related statements were false and misleading.

C. MARKET REACTION

24. Two of the three press releases issued by Quintek (including those concerning the activities of its "subsidiary," PanaMed), caused the closing price of Quintek stock to increase by an average of 71% and the reported volume to increase by an average of 395%. Notably, the March 20, 2002 release caused the closing price of Quintek stock to increase by 100% from $.18 to $.36 per share and reported volume to increase by 704% from 216,700 to 1,742,100 shares.

D. DELINQUENT FILINGS

25. Quintek has filed all mandatory periodic reports with the Commission, but has done so on an untimely basis. Between March 2000 and December 2002, Quintek filed late eight quarterly reports and two annual reports.

26. The late quarterly reports filed by Quintek were for the quarters ended December 31, 1999, March 31, 2000, September 30, 2000, December 31, 2000, September 30, 2001, December 31, 2001, March 31, 2002 and September 30, 2002. The late annual reports filed by Quintek were for the fiscal years ended June 30, 2000 and June 30, 2001.

27. Between December 2000 and November 2002, PanaMed filed late five quarterly reports, and has to date failed to file an annual report that was due on April 15, 2003.

28. The late quarterly reports filed by PanaMed were for the quarters ended March 31, 2000, September 30, 2000, March 31, 2002, June 30, 2002 and September 30, 2002. PanaMed has failed to file its annual report for fiscal year ended December 31, 2002.

FIRST CLAIM FOR RELIEF

(Violations of Exchange Act §10(b) and Rule 10b-5)

29. Plaintiff repeats and realleges paragraphs 1 through 28 above.

30. Defendants Quintek, PanaMed, and Sims, with scienter, in connection with the purchase or sale of securities, by the use of means or instrumentalities of interstate commerce or of the mails, directly or indirectly: (a) employed devices, schemes or artifices to defraud; (b) made untrue statements of material facts or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (c) engaged in acts, practices or courses of business which operated or would operate as a fraud or deceit upon purchasers of securities in violation of Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5 [17 C.F.R. §240.10b-5] thereunder.

31. By reason of the foregoing, Defendants violated and unless restrained and enjoined will continue to violate Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

SECOND CLAIM FOR RELIEF

(Violations of Securities Act §17(a)(1))

32. Plaintiff repeats and realleges Paragraphs 1 through 28 above.

33. Defendants PanaMed and Sims, with scienter, in the offer or sale of securities, by the use of means or instruments of transportation or communication in interstate commerce, or by the use of the mails, directly or indirectly employed devices, schemes or artifices to defraud in violation of Section 17(a)(1) of the Securities Act [15 U.S.C. §77q(a)(1)].

34. By reason of the foregoing, Defendants PanaMed and Sims violated Section 17(a)(1) of the Securities Act and unless restrained and enjoined will continue to do so.

THIRD CLAIM FOR RELIEF

(Violations of Securities Act §17(a)(2) and (3))

35. Plaintiff repeats and realleges Paragraphs 1 through 28 above.

36. Defendants PanaMed and Sims, in the offer or sale of securities, by the use of means or instruments of transportation or communication in interstate commerce, or by the use of the mails, directly or indirectly (a) obtained money or property by means of untrue statements of material facts or omissions to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or (b) engaged in transactions, practices or courses of business which operated or would operate as a fraud or deceit upon purchasers of securities in violation of Section 17(a)(2) and (3) of the Securities Act [15 U.S.C. §77q(a)(2) and (3)].

37. By reason of the foregoing, Defendants PanaMed and Sims violated Section 17(a)(2) and (3) of the Securities Act and unless restrained and enjoined will continue to do so.

FOURTH CLAIM FOR RELIEF

(Violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1,
13a-11, and 13a-13 thereunder)

38. Plaintiff repeats and realleges Paragraphs 1 through 28 above.

39. Quintek violated Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder by filing late eight quarterly reports and two annual reports between March 2000 and December 2002.

40. PanaMed violated Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder by filing late five quarterly reports between December 2000 and November 2002 and by failing to file an annual report, Form 10K, for the 2002 fiscal year, which was due on about April 15, 2003.

41. As the president of Quintek and PanaMed, Sims aided and abetted their reporting violations with regard to their delinquent filings.

RELIEF REQUESTED

WHEREFORE, the Commission respectfully requests that the Court:

II.

Find that the defendants and each of them committed the violations alleged herein.

II.

Enter an injunction, in a form consistent with Rule 65(d) of the Federal Rules of Civil Procedure, permanently restraining and enjoining Quintek and persons in active concert or participation with it, from violating, directly or indirectly, Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5, 13a-1 and 13a-13 thereunder.

III.

Enter an injunction, in a form consistent with Rule 65(d) of the Federal Rules of Civil Procedure, permanently restraining and enjoining PanaMed and persons in active concert or participation with it, from violating, directly or indirectly, Section 17(a) of the Securities Act and Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5, 13a-1 and 13a-13 thereunder.

IV.

Order PanaMed to pay a civil penalty pursuant to Section 20(d) of the Securities Act and Section 21 of the Exchange Act in an amount to be determined by the Court.

V.

Enter an injunction, in a form consistent with Rule 65(d) of the Federal Rules of Civil Procedure, permanently restraining and enjoining Sims and persons in active concert or participation with him, from violating, directly or indirectly, Section 17(a) of the Securities Act and Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5, 13a-1 and 13a-13 thereunder.

VI.

Order Sims to pay a civil penalty pursuant to Section 20(d) of the Securities Act and Section 21 of the Exchange Act in an amount to be determined by the Court.

VII.

Enter an order barring Sims from serving as an officer or director of any publicly held company for a period of five years from the date of entry of this order pursuant to Section 21(d)(2) of the Exchange Act and Section 20(e) of the Securities Act and pursuant to the Court's equitable power.

VIII.

Enter an order barring Sims from serving as an officer or director of any publicly held company for a period of five years from the date of entry of this order pursuant to Section 21(d)(2) of the Exchange Act and Section 20(e) of the Securities Act and pursuant to the Court's equitable power.

IX.

Enter an order barring Sims from participating in any penny stock offering for a period of five years from the date of entry of this order pursuant to Section 20(g) of the Securities Act and Section 21(d)(6) of the Exchange Act.

X.

Order such further relief, equitable and legal, as the Court may deem just and proper.

Dated: July __, 2003 Respectfully submitted,

Thomas A. Zaccarro
Thomas D. Carter
Michael R. MacPhail
Tracy A. Tirey
Attorneys for Plaintiff

 

http://www.sec.gov/litigation/complaints/comp18268.htm

Modified: 08/04/2003