SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. __)
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| | o | Definitive Proxy Statement |
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| | o | Soliciting Material Under Rule 14a-12 |
CHINA YONGXIN PHARMACEUTICALS INC.
(Name of Registrant as Specified In Its Charter)
N/A
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China Yongxin Pharmaceuticals Inc.
August __, 2010
Dear Stockholder:
You are cordially invited to attend our Annual Meeting of the Stockholders of China Yongxin Pharmaceuticals Inc. (the “Company”) to be held at 10:00 a.m., September 23, 2010 at the company’s offices at 927 Canada Court, City of Industry, California.
At this meeting you are being asked to (i) elect seven directors for a one year term, (ii) approve and ratify the Company’s 2010 Equity Incentive Plan, as amended, and (iii) ratify the appointment of Kabani & Company, Inc. as our independent auditor. Your Board of Directors recommends that you vote FOR each of these proposals. You should read with care the attached Proxy Statement, which contains detailed information about each of these proposals.
Your vote is important regardless of the number of shares you own. Accordingly, we urge you to complete, sign, date and return your proxy card promptly in the enclosed postage-paid envelope. This will not limit your right to vote in person or attend the meeting.
Thank you for your continued interest in us. We hope that you will be able to join us on September 23, 2010.
| |
| | Very truly yours, |
| | |
| | Yongxin Liu |
| | Chief Executive Officer |
YOUR VOTE IS IMPORTANT
In order to assure representation of your shares at the meeting, please complete, sign, date and return the enclosed proxy card.
CHINA YONGXIN PHARMACEUTICALS INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
August __, 2010
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of China Yongxin Pharmaceuticals Inc. (“Company”, “we”, “our” or “us”) will be held at the Company’s offices at927 Canada Court, City of Industry, California on September 23, 2010 at 10:00 a.m., to consider and act upon the following:
| | 1. | The election of seven directors to serve until our next Annual Meeting of Stockholders, and thereafter until their successors shall have been duly elected and shall have qualified. |
| | 2. | A proposal to approve and ratify the Company’s 2010 Equity Incentive Plan, as amended. |
| | 3. | A proposal to ratify the appointment of Kabani & Company, Inc as our independent auditor of our financial statements for the year ending December 31, 2010. |
| | 4. | The transaction of such other business as may properly come before the meeting or any adjournment thereof that was not known a reasonable time before the solicitation. |
All stockholders of record at the close of business on August 23, 2010 are entitled to notice of and to vote at this meeting and any adjournments thereof.
You are requested to sign and date the enclosed proxy card and return it in the enclosed envelope.
Our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and our quarterly report on Form 10-Q for the six months ended June 30, 2010, which are not part of the proxy soliciting materials, are enclosed.
| | BY ORDER OF THE BOARD OF DIRECTORS |
| | |
| | |
| | /s/ Harry Zhang |
| | Chief Financial Officer |
| | |
| | August __, 10 |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Proxy Statement contains forward-looking statements within the meaning of the Federal securities laws. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “plans,” “intends,” “expects,” “goals” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these words. Actual results may differ materially from those projected in the forward-looking statements due to various uncertainties and risks, including without limitation risks associated with the effects of general economic and market conditions, lessening demand in the information technology market, successful integration of acquisitions, difficulty managing operations and difficulty in keeping pace with rapid industry, technological and market changes, as well as those described in Item 1A of Part I (Risk Factors) of our Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and any updates to the Risk Factors set forth in our Quarterly Reports on Form 10-Q filed since our Annual Report. We disclaim any obligation to update any forward-looking statements contained herein after the date of this Proxy Statement.
CHINA YONGXIN PHARMACEUTICALS INC.
PROXY STATEMENT
This Proxy Statement, our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, our quarterly report on Form 10-Q for the six months ended June 30, 2010, and the accompanying proxy card are first being distributed to shareholders on or about August __, 2010.
INFORMATION CONCERNING SOLICITATION AND VOTING
General
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of China Yongxin Pharmaceuticals Inc., a Delaware corporation (“CYXN”, the “Company”, “we”, “our” or “us”), for our Annual Meeting of Stockholders to be held on September 23, 2010, and any adjournments thereof. You are receiving this Proxy Statement because you own shares of the Company’s Common Stock that entitle you to vote at the Annual Meeting of the Stockholders. By use of proxy, you can vote, whether or not you attend the meeting. This Proxy Statement describes the matters we would like you to vote on and provides information on those matters so you can make an informed decision.
The information included in this Proxy Statement relates to the proposals to be voted on at the Annual Meeting of the Stockholders, the voting process, the Company’s Board of Directors and committees, the compensation of directors and certain executive officers and other required information.
Purpose
The purpose of the Annual Meeting is to elect directors and to conduct the business described in the Notice of the Annual Meeting of Stockholders.
Record Date and Voting Rights
The holders of our common stock, par value $0.001 per share (the “Common Stock”), and our Series A Preferred Stock, par value $0.001 per share, are entitled to vote at the Annual Meeting. Each share of Common Stock entitles the holder of record thereof at the close of business on August 23, 2010 to one vote on each of the matters to be voted upon at the Annual Meeting. Each share of Series A Preferred Stock, when voting with the common stockholders as a single class, entitles the holder of record thereof at the close of business on August 23, 2010 to 25 votes on each of the matters to be voted upon at the Annual Meeting. In addition, the holders of Series A Preferred Stock must also approve such matters, voting as a separate class. As of August 5, 2010, we had outstanding 5,383,952 shares of Common Stock, and 1,666,667 shares of Series A Preferred Stock. Our chief executive officer and vice president are in control of a majority of the voting capital stock based on their holdings of both Common Stock and Series A Preferred Stock.
Stockholders vote at the Annual Meeting by casting ballots (in person or by proxy) which will be tabulated by a person who is appointed by the Board of Directors before the Annual Meeting to serve as inspector of election at the Annual Meeting and who has executed and verified an oath of office.
Quorum; Broker Non-Votes and Abstentions
In order to conduct any business at the Annual Meeting, a quorum must be present in person or represented by valid proxies. A majority of the shares of Common Stock outstanding on the record date, assuming the conversion of all outstanding shares of Series A Preferred Stock, will constitute a quorum for purposes of the Annual Meeting. In addition, a majority of the shares of Series A Preferred Stock outstanding on the record date will constitute a quorum for purposes of voting as a separate class at the Annual Meeting. Abstentions and broker non-votes are considered present for purposes of determining the presence of a quorum.
Abstentions are counted as a vote against for purposes of determining whether a proposal is approved. Broker non-votes are not counted for purposes of determining whether a proposal has been approved and thus have no effect on the outcome.
Broker non-votes are proxies received from brokers or nominees when the broker or nominee has neither received instructions from the beneficial owner or other persons entitled to vote nor has discretionary power to vote on a particular matter. Brokers only possess discretionary power over matters that are considered routine, such as the election of directors described in Proposal 1 or the approval of auditors described in Proposal 3. Stockholders are advised to forward their voting instructions promptly so as to afford brokers sufficient time to process such instructions.
Vote Required for Approval of the Proposals and Election of Directors
If a quorum is met, in order for the proposals to be approved by the shareholders, the holders of a majority of all of the outstanding shares entitled to vote on the matters presented (holders of Series A Preferred Stock voting alongside holders of common stock as well as holders of Series A Preferres Stock voting as a separate class) must vote in favor of each of the proposals. Directors shall be elected by a plurality of votes.
Solicitation
Solicitation of proxies may be made by our directors, officers and regular employees by mail, telephone, facsimile transmission or other electronic media and in person for which they will receive no additional compensation. The expenses of preparing, printing and assembling the materials used in the solicitation of proxies on behalf of the Board of Directors will be borne by us. Upon request, we will reimburse the reasonable fees and expenses of banks, brokers, custodians, nominees and fiduciaries for forwarding proxy materials to, and obtaining authority to execute proxies from, beneficial owners for whose accounts they hold shares of Common Stock.
Voting of Proxies
If the enclosed form of proxy is properly signed and returned, the shares represented thereby will be voted as specified in the proxy. If you do not specify in the proxy how your shares are to be voted, the shares will be voted as recommended by the Board of Directors: FOR Proposals 2 and 3 and FOR election of the seven nominees for the board of directors.
Revocation
You have the right to revoke your proxy at any time before it is voted by attending the meeting and voting in person or filing with our Secretary either a written instrument revoking the proxy or another executed proxy bearing a later date. Stockholders entitled to vote will not have any dissenters’ rights of appraisal in connection with any of the matters to be voted on at the meeting.
Recommendations of the Board of Directors
This proxy solicitation is being made by the Company. The Board of Directors recommends a vote:
| | • | FOR the seven nominees listed under “Election of Directors”, to serve until their successors are elected and qualified (Proposal 1); |
| | • | FOR the approval and ratification of the 2010 Equity Incentive Plan (Proposal 2); |
| | • | FOR the ratification of the appointment by the Board of Directors of Kabani & Company, Inc. (“Kabani”) as our independent auditors of our financial statements for the fiscal year ending December 31, 2010 (Proposal 3). |
Should any nominee named in Proposal 1 be unable to serve or for good cause will not serve as director, the persons named in the enclosed form of proxy will vote for such other person as the Board of Directors may recommend.
Other Business
As of the date of this Proxy Statement, we have no knowledge of any business other than that described in the Notice of Annual Meeting that will be presented for consideration at the Annual Meeting. If any other business should properly come before the Annual Meeting, the persons appointed by the enclosed form of proxy shall have discretionary authority to vote all such proxies as they shall decide.
BOARD INDEPENDENCE AND COMMITTEES
Board Independence
Our stock is quoted on the OTC Bulletin Board which does not require a majority of directors who are independent. Our Board of Directors has four members who are “independent”under the listing standards of the NASDAQ Stock Market.. The Board of Directors considers all relevant facts and circumstances in its determination of the independence of all members of the Board of Directors (including any relationships set forth in this Proxy Statement under the heading “Certain Related Person Transactions”). Our Board of Directors has affirmatively determined that none of the following Directors has a material relationship with us that would interfere with the exercise of his independent judgment (either directly or as a partner, shareholder or officer of an organization that has a relationship with us): Mr. Hal Lieberman, Dr. Laura Philips, Mr. Jingang Wang and Mr. Bing Li are therefore deemed independent.
Stockholder Communications with the Board of Directors
Stockholders and other interested parties may contact the Board of Directors or the non-management directors as a group at the following address:
Board of Directors or Outside Directors
China Yongxin Pharmaceuticals Inc.
927 Canada Court,
City of Industry, California 91748
All communications received at the above address will be relayed to the Board of Directors or the non-management directors, respectively. Communications regarding accounting, internal accounting controls or auditing matters may also be reported to the Board of Directors using the above address.
Board Meetings
During the fiscal year ended December 31, 2009, our Board of Directors held 0 meetings and acted via written consent on 5 occasions. No incumbent director attended fewer than 75% of the meetings of the Board of Directors, or committees on which these directors served, during that year.
Director Attendance at Annual Meeting of Stockholders
We do not have any policy requiring directors to be present at our Annual Meeting of Stockholders, however historically more than a majority of the incumbent directors have attended the annual meeting of stockholders, and we anticipate a majority of our directors will be present, either in person or telephonically, at the Annual Meeting to be held on September 23, 2010.
Committees of the Board
The Board of Directors has an Audit Committee, a Compensation Committee and a Nominating Committee.
Audit Committee
The board of directors adopted and approved a charter for the Audit Committee on March 3, 2010. Currently, three directors comprise the Audit Committee: Hal Lieberman, Jingang Wang and Laura Philips. Mr. Lieberman serves as Chairman of the Audit Committee. The members of the Audit Committee are currently “independent directors” as that term is defined under the listing standards of the NASDAQ Stock Market. Mr. Lieberman also qualifies as an “audit committee financial expert” as defined by the rules of the SEC. Mr. Hal Lieberman has the requisite attributes of an “audit committee financial expert” as defined by regulations promulgated by the SEC and that such attributes were acquired through relevant education and experience.
Our Audit Committee is responsible, in accordance with the Audit Committee charter, recommending our independent auditors, and overseeing our audit activities and certain financial matters to protect against improper and unsound practices and to furnish adequate protection to all assets and records.
Our Audit Committee pre-approves all audit and non-audit services provided by our independent auditors. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to particular service or category of services and is generally subject to a specific budget. The Audit Committee has delegated pre-approval authority to its Chairman when expedition of services is necessary. The independent auditors and management are required to periodically report to the full Audit Committee regarding the extent of services provided by the independent auditor in accordance with this pre-approval, and the fees for the services performed to date.
Compensation Committee
The board of directors adopted and approved a charter for the Compensation Committee on March 3, 2010. The Compensation Committee currently consists of Jingang Wang, Bing Li and Laura Philips. Mr. Wang serves as Chairman of the Compensation Committee. The members of the Compensation Committee are currently “independent directors” under the listing standards of the NASDAQ Stock Market.
In accordance with the Compensation Committee’s charter, the Compensation Committee is responsible for overseeing and, and as appropriate, making recommendations to the board regarding the annual salaries and other compensation of the Company’s executive officers and general employees and other polices, providing assistance and recommendations with respect to the compensation policies and practices of the Company.
Nominating Committee
The board of directors adopted and approved a charter for the Nominating Committee on March 3, 2010. The Nominating Committee currently consists of Bing Li, Jingang Wang and Hal Lieberman. Mr. Li serves as the Chairman of the Nominating Committee. The members of the Nominating Committee are currently “independent directors” under the listing standards of the NASDAQ Stock Market.
In accordance with the Nominating Committee’s charter, the Nominating Committee is responsible for proposing to the board a slate of nominees for election by the stockholders at the Annual Meeting of Stockholders, to periodically review and develop criteria for selection of new directors and nominees for vacancies on the board, to review the desired experience and qualities to assure appropriate board composition, and to recommend to the board qualified director candidates.
PROPOSAL 1
ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF
EACH OF THE NOMINEES LISTED BELOW.
Our bylaws provide that the Board of Directors will consist of not less than two nor more than nine members
The holders of Common Stock and Series A Preferred Stock will elect seven directors at the Annual Meeting, each of whom will be elected to serve until the next annual meeting of stockholders and thereafter until their successors shall have been duly elected and shall have qualified. Unless a stockholder either indicates “withhold authority” on his proxy card or indicates on his proxy card that his shares should not be voted for certain nominees, it is intended that the persons named in the proxy will vote for the election of the persons named in the table below.
Information with Respect to Nominees. The table below sets forth the name and age as of the Record Date of each nominee, and the period during which he or she has served on our Board of Directors. Each of the nominees for director has agreed to serve if elected and has consented to being named in this Proxy Statement.
| | | | | |
| Name | | Age | | Director Since |
| Yongxin Liu(1) | | | 41 | | November 2007 |
| Ning Liu(2) | | | 47 | | November 2009 |
| Harry Zhang (3) | | | 46 | | June 2009 |
| Hal Lieberman | | | 60 | | March 2010 |
| Laura Philips, Ph. D. | | | 52 | | March 2010 |
| JinJang Wang | | | 41 | | March 2010 |
| Bing Li | | | 43 | | March 2010 |
| | (1) | Mr. Liu also serves as our Chief Executive Officer. |
| | (2) | Mr.Liu also serves as our President and Chief Operating Officer.. |
| | (3) | Mr. Zhang also serves as our Chief Financial Officer. |
Each of the persons nominated for election to our Board of Directors has previously served as a director on our board. The principal occupations and employment of each such person during the past five years is set forth below. In each instance in which dates are not provided in connection with a nominee’s business experience, such nominee has held the position indicated for at least the past five years.
Yongxin Liu is our Chief Executive Officer and Chairman of the board, and has been the Chairman of Changchun Yongxin Dirui Medical Co., Ltd. (“Yongxin”) since 2003 and Jilin Province Yongxin Chain Drugstore Co., Ltd. (“Yongxin Drugstore”) since 2001. From August 1998 to 2003, Mr. Liu served as the General Manager of Yongxin Drugstore. From 1984 to June 2006, Mr. Liu was employed by Changchun Medical Materials Marketing Co., Ltd. (“Changchun Medical”), serving as the Assistant Manager of Business and Vice-manager. From July 1991 to July 1994, Mr. Liu studied at Northeast Normal University, majoring in Management. In August 2004, he received an MBA from Beijing University. As the founder of Yongxin and the Company’s current CEO, Mr. Yongxin Liu brings extensive experience in the development, growth and management of pharmaceutical businesses to the board of directors.
Ning Liu is our President, Chief Operating Officer, and a director on our board of directors. Mr. Liu also has been the president of Succeed Group Inc., a media company, since 2003. Prior to his service at Succeed Group, Inc., Mr. Liu was the president of Super Nu-Life Products Inc., a nutraceuticals manufacturer from 1994 to 2003. From 1992 to 1994, Mr. Liu was the president of Goldenrise Development Inc. Additionally, from 1986 to 2002, Mr. Liu served as president of Accords System Inc. Mr. Liu is active in founding, organizing and managing a number of foreign investment projects to China, and he counsels China companies in doing business in the United States, and in mergers with public companies in the United States. Mr. Liu graduated from Beijing University with a Masters of Arts degree in 1985. Mr. Ning Liu’s breadth of experience in foreign investment projects in China and his many years of business experience in the United States are invaluable to the board of directors.
Harry Zhang is our Chief Financial Officer and member of our Board of Directors.Mr. Zhang served as the chief financial officer and vice president of Surplus Elegant Investment Ltd from August 2008 to November 2009. From March 2004 to August 2006, Mr. Zhang served as the Chief Financial Officer of AXM Pharma, Inc. Mr. Zhang worked as an auditor at Deloitte Touche Tohmatsu from May 1995 to March 2004. Mr. Zhang worked at the Beijing Municipal Audit Bureau from 1988 to 1995. Mr. Zhang earned his Bachelor’s degree from Nanjing Agricultural University in 1988 and received his Master of Business Administration degree from University of Northern Virginia in June 2007. Mr. Zhang is also a certified public accountant in China. Mr. Zhang’s education and background in accounting and finance coupled with his many years of experience working at a Big Four accounting firm will help the Company’s U.S. compliance and the listing process.
Hal Lieberman is a director on our board, and also serves as the president and chief executive officer of HemoTherapeutics, Inc., and has held such position from 2006 to the present. From 1998 to 2006, Mr. Lieberman acted as a consultant, provided interim management and served on the boards of a variety of health care and medical device companies. From 1988 to 1998, Mr. Lieberman served as the president and chief executive officer of HemaCare Corporation. Mr. Lieberman acted as the vice president for MEDIQ Imaging Services from 1981 to 1988. Mr. Lieberman earned his Master’s degree in Health Care Administration from The George Washington University. Mr. Lieberman is a member of American College of Health Care Administrators and Southern California Biomedical Council and has been a longstanding member since 1976 and 1998, respectively. Mr. Lieberman was also a member of The Entrepreneurship Institute from 1992 to 1998 and served as an advisor to U.S. Defense Advanced Research Projects Agency (DARPA) from 1992 to 1998. Mr. Lieberman’s vast business health care experience in the United States can help the Company develop and mature in many ways, including helping the Company understand and adapt to the U.S. regulatory environment and stock market. Mr. Lieberman’s experience includes directorships in several other companies.
Laura Philips is a director on our board, and also serves on the Boards of Directors of Delcath Systems, Inc, Wellgen Inc., and the Boyce Thompson Institute. From 2003 to 2006, she was Chief Operating Officer and Acting Chief Financial Officer of NexGenix Pharmaceuticals. From 2002 to 2003, she was Vice President, Program Management for the AMDeC Foundation. Dr. Philips worked at Corning Incorporated from 1997 to 2002, where she held several positions including Program Director of the Fuel Cells Division. From 1994 to 1996 Dr. Philips held various government positions in Washington, D.C., most recently in a Presidential appointment as Senior Policy Advisor to Secretary of Commerce Ronald Brown. Dr. Philips was on the faculty of Cornell University in the Department of Chemistry from 1987 to 1994 and was an NIH Post-Doctoral Fellow at the University of Chicago. She received a B.A. in Chemistry from Williams College, a Ph.D. in Physical Chemistry from the University of California Berkeley and an MBA with Distinction from Cornell University’s Johnson School of Management. Ms. Philips is very experienced in the management, operation and development of U.S. companies and has held various government positions. Her diverse background and knowledge of finance, management and government relations accumulated from decades of business experience is an invaluable asset to the board of directors.
Jingang Wang is a director on our board, and also serves as the executive director for CoSci Med-Tech Co., Ltd., and has held such position since May 2003 to the present. From June 2002 to May 2003, Mr. Wang worked as the executive director in Beijing Lingtainbicheng Medicine Technology Co., Ltd. Mr. Wang served as the deputy general manager and assistant general manager of Mudanjiang Lingtai Pharmaceuticals Co., Ltd from October 1998 to June 2002. Mr. Wang acted as the deputy chief in Mudanjiang’s Food and Drugs Administration from August 1990 to October 1998. Mr. Wang was an assistant engineer in Mudanjiang No. 3 Pharmaceutical Factory from September 1998 to August 1990. Mr. Wang received his Bachelor’s degree in Medical Research and Development from Heilongjian Chinese Medical University in 1998. Mr. Wang’s comprehensive knowledge and his many years of working experience in the pharmaceutical industry in China are invaluable to the board of directors.
Bing Li is a director on our board, and also serves as the general manager of Jilin Province Fire Fighting Engineering Co., Ltd., the general manager of Jilin Province Yinjian Small & Medium Enterprises Credit Guaranty Co., Ltd., the vice-chairman of the board of directors of Changchun JLU Technology Park Construction and Development Co., Ltd, the deputy managing director of Jilin Province Intelligentization Committee, and the general manager of Beijing Kunshanjinhai Film & TV Cultural Investment Co., Ltd, and has held such positions from 1999 to the present. From March 1990 to June 1990, Mr. Li served as the manager of Export Department of Jilin Provincial Forestry Import & Export Company. From August 1988 to March 1990, Mr. Li worked on various foreign affairs for Jilin Provincial Forestry Department. Mr. Li received his Bachelor’s degree in English from Changchun University in 1988. Mr. Li’s diverse background and relationships with the local government and other key players in the Jilin province are invaluable to the board of directors.
Yongxin Liu and Yongkui Liu are brothers. Additionally, Yongkui Liu, one of our Vice Presidents, is the spouse of Yongmei Wang, who is also one of our Vice Presidents.
NAMED EXECUTIVE OFFICERS AND KEY EMPLOYEES
The named executive officers and key employees for the fiscal year ending December 31, 2009 were Yongxin Liu, Chief Executive Officer; Ning Liu, President and Chief Operating Officer; Yongkui Liu, Chief Financial Officer, and Harry Zhang, Chief Financial Officer upon Mr. Yongkui Lui’s resignation.
Mr. Yongkui Liu resigned as our Chief Financial Officer effective December 4, 2009 and he resigned as a director effective March 3, 2010. Mr. Harry Zhang was appointed as our Chief Financial Officer effective December 4, 2009. These individuals are referred to collectively as the “Named Executive Officers.”
Executive Officers
The following is a list of our officers and key employees:
| Name | | Age | | Title |
| | | | | |
| Yongxin Liu | | | 41 | | Chief Executive Officer and Chairman of the Board |
| Ning Liu | | | 47 | | President, Chief Operating Officer and Director |
| Harry Zhang | | | 46 | | Chief Financial Officer and Director |
The principal occupations and employment of each such person during the past five years is set forth above. In each instance in which dates are not provided in connection with a nominee’s business experience, such nominee has held the position indicated for at least the past five years.
There is no past, pending or, to our knowledge, threatened litigation or administrative action to which any director, officer or affiliate of the Company, holders of over 5% of any class of voting securities of the Company, or any associate of any of the foregoing persons are a party, which is adverse to us or, or in which such persons have a material interest that is adverse to us.
PROPOSAL 2
APPROVAL AND RATIFICATION OF 2010 EQUITY INCENTIVE PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 2
At the Annual Meeting, shareholders will be asked to approve the 2010 Equity Incentive Plan, as amended (“Plan”), which was adopted, subject to shareholder approval, by the Board on July 26, 2010:
Description of the Plan
The following is a summary of the principal features of the Plan. This summary does not purport to be a complete description of all of the provisions of the Plan. It is qualified in its entirety by reference to the full text of the Plan. A copy of the Plan has been filed with this Proxy Statement and can be reviewed on the SEC’s website at www.sec.gov. Any shareholder who desires to obtain a copy of the Plan may do so by written request to the Company’s Chief Executive Officer at 927 Canada Court, City of Industry, California.
Under the Plan, the Company is authorized to issue up to 250,000 shares of common stock as awards over the term of the Plan, subject to adjustment to reflect stock splits, reorganizations and other changes in corporate structure affecting the common stock. . Under the Plan, the Company is authorized to issue incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified stock options, restricted stock and other stock or cash awards to eligible directors, officers and employees of, and consultants and advisors to, the Company or subsidiary of the Company. The Plan is initially administered by the Company’s board of directors (the “Board”). The Board determines which employees, directors, officers, consultants and advisors will participate in the Plan, as well as the terms of award grants.
Stock options granted under the Plan may not be exercisable more than 10 years after the date such option is granted. Awards under the Plan may be conditioned on continued employment or the passage of time. Vesting requirements are determined by the Board, provided, however, that stock options shall vest and become exercisable as to one-twelfth (1/12th) of the total number of shares subject to the option every three months following the date of grant.
The Plan provides that in the event of the Company’s change in control, each outstanding award will be assumed or an equivalent option or right will be substituted by the successor corporation or a parent of subsidiary of the successor corporation”). In the event that the successor corporation refuses to assume or substitute for an award granted under the Plan, all options will fully vest and become exercisable and all restrictions on restricted stock will lapse. In addition, if an option right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a change of control, the Board or committee will notify the participant in writing or electronically that the option will be fully vested and exercisable for the term of the option, and the option will terminate upon the expiration of such period.
The Plan provides that in the event a participant in the Plan terminates service with the Company for any reason other than death, disability, normal or early retirement or good reason, any options which have become exercisable prior to the time of termination will remain exercisable for the lesser of 90 days from the date of termination or the balance of the option’s term, whichever period is shorter. If termination was caused by death, any options which have become exercisable prior to the time of termination will remain exercisable for 12 months from the date of termination or until the expiration of the term of the option, whichever period is shorter. If termination was caused by disability, any options which have become exercisable prior to the time of termination will remain exercisable for 90 days from the date of termination, provided, however, that, if the optionee dies within such ninety (90) day period, any unexercised option will remain exercisable for 12 months from the date of termination, or for the term of the option, whichever period is shorter. In no event may a participant exercise the option after the expiration date of the option.
FINANCIAL AND OTHER INFORMATION
The financial statements of the Company, including the consolidated financial statements for the years ended December 31, 2009 and 2008, including management’s discussion and analysis of financial condition and result of operations, and quantitative and qualitative disclosures about market risk for the said periods, may be found in our Annual Report on form 10-K for the year ended December 31, 2009, which information is incorporated by reference. Our financial statements for the six month period ending June 30, 2010, including management’s discussion and analysis of financial condition and result of operations, and quantitative and qualitative disclosures about market risk for the said period, may be found in our Quarterly Report on Form 10-Q filed on August 16, 2010, which information is incorporated by reference.
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 3
The Board of Directors, subject to stockholder approval, appointed Kabani & Company, Inc. (“Kabani”) as our independent auditors for our financial statements for the fiscal year ending December 31, 2010. The affirmative vote of a majority of votes properly cast on this proposal at the Annual Meeting is required to ratify such selection.
Stockholder ratification of the appointment is not required by our Certificate of Incorporation or bylaws or otherwise. If our stockholders fail to ratify the appointment, the Board of Directors will reconsider whether to retain that firm. Even if the appointment is ratified, the Board of Directors in its discretion may direct the appointment of a different independent accounting firm if the Board of Directors determines that such a change would be in our best interests and the best interests of our stockholders.
Kabani has audited our consolidated financial statements since 2007. A representative of that firm is expected to be present at the Annual Meeting, and will have an opportunity to make a statement to the stockholders and will be available to respond to appropriate questions.
The following table presents fees for professional audit services rendered by Kabani for the audits of our annual financial statements for the years ended December 31, 2009 and 2008.
| | | 2009 | | | 2008 | |
Audit Fees(1) | | $ | 160,000 | | | $ | 115,000 | |
| Audit-Related Fees | | | -- | | | | -- | |
| Tax Fees | | | -- | | | | -- | |
| All Other Fees | | | -- | | | | -- | |
| | (1) | Audit Fees relate to the audit of our financial statements and reviews of financial statements included in our quarterly reports on Form 10-Q. |
Our audit committee pre-approves all audit and non-audit services provided by our independent auditor, as described in the audit committee’s charter. The audit committee considers whether the provision of other non-audit services is compatible with the auditor’s independence. All of the above fees were billed to us by our independent auditor for the services categorized above, and all such services were pre-approved by our audit committee. Audit fees included fees associated with the audit of our year-end financial statements (including internal control evaluation and reporting) and the review of documents filed with the Securities and Exchange Commission, including our quarterly reports on Form 10-Q and annual report on Form 10-K. We incurred no audit-related fees, tax fees, or other fees.
AUDIT COMMITTEE REPORT
The audit committee’s primary responsibilities are to monitor the integrity of our financial statements and reporting process and systems of internal controls regarding finance and accounting and to monitor our compliance with legal and regulatory requirements, including disclosures and procedures. The committee also has the responsibility to evaluate our independent auditor’s qualifications, independence and performance as well as to evaluate the performance of the internal audit function.
Management has the primary responsibility for the financial statements and the reporting process, including our systems of internal controls. The independent auditors are responsible for auditing the annual financial statements prepared by management and expressing an opinion as to whether those financial statements conform with accounting principles generally accepted in the United States of America. The audit committee reviewed and discussed the audited financial statements with management and our independent auditors. The audit committee has discussed with the independent auditors the matters required to be discussed by the statement on Auditing Standards No. 61, as amended. In addition, the audit committee has received the written disclosures and the letter from the independent accountants required by Independence Standards Board Standard No. 1, and has discussed with the independent accountant the independent accountant’s independence.
Based upon the review and discussions described in this report, a majority of the audit committee recommended to the Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 that has been filed with the Securities and Exchange Commission.
| | AUDIT COMMITTEE | |
| | Hal Lieberman Jingang Wang Laura Philips | |
The Audit Committee Report does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference into any other Company filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates the Audit Committee Report by reference therein.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership of our common stock as of June 1, 2010 for each of our directors and officers; all directors and officers as a group; and each person known by us to beneficially own five percent or more of our common stock.
Beneficial ownership is determined in accordance with SEC rules. Unless otherwise indicated in the table, the persons and entities named in the table have sole voting and sole investment power with respect to the shares set forth opposite the shareholder’s name. Unless otherwise indicated, the address of each stockholder listed in the table is c/o China Yongxin Pharmaceuticals Inc., 927 Canada Court, City of Industry, CA 91748.
Name and Address of Beneficial Owner | | Title | | Number of Shares Beneficially Owned | | | Percent of Class* | |
| | | | | | | | | |
| Directors and Executive Officers | | | | | | | | |
| | | | | | | | | |
| Yongxin Liu | | Chief Executive Officer and Chairman of the Board | | | 1,550,001 | (1) | | | 22.6 | % |
| | | | | | | | | | | |
| Ning Liu (2) | | President, Chief Operating Officer and Director | | | — | | | | — | |
| | | | | | | | | | | |
| Harry Zhang | | Chief Financial Officer | | | — | | | | — | |
| | | | | | | | | | | |
| Hal Lieberman | | Director | | | — | | | | — | |
| | | | | | | | | | | |
| Laura Philips | | Director | | | 8,334 | (3) | | | ** | |
| | | | | | | | | | | |
| Jingang Wang | | Director | | | — | | | | — | |
| | | | | | | | | | | |
| Bing Li | | Director | | | — | | | | — | |
| | | | | | | | | | | |
| Officers and Directors as a Group (total of 7 persons) | | | | | 1,558,334 | | | | 22.7 | % |
| | | | | | | | | | | |
| 5% Holders | | | | | | | | | | |
| Accord Success Ltd., BVI | | | | | 450,000 | (4) | | | 8.5 | % |
| | | | | | | | | | | |
| Boom Day Investments, Ltd., BVI | | | | | 1,450,002 | (5) | | | 21.5 | % |
| | | | | | | | | | | |
| Yongkui Liu | | | | | 1,550,002 | (6) | | | 22.6 | % |
| | | | | | | | | | | |
| Yongmei Wang | | | | | 1,550,002 | (6) | | | 22.6 | % |
| | | | | | | | | | | |
| Misala Holdings Inc., BVI | | | | | 1,550,001 | (1) | | | 22.6 | % |
* Applicable percentage ownership is based on 5,295,047 shares of common stock issued and outstanding as of June 1, 2010.
** Less than 1%.
(1) These shares are held directly by Misala Holdings Inc., a British Virgin Islands corporation (“Misala Holdings”). Yongxin Liu is a director of Misala Holdings, and in such capacity, Yongxin Liu may be deemed to have voting and investment control over the shares held directly by Misala Holdings. Yongxin Liu is also a beneficiary of Misala Holdings. Pursuant to a certain Call Option Agreement dated May 17, 2010 (“Call Option Agreement”), Yongxin Liu has the right to acquire 100% of the issued and outstanding capital stock of Misala Holdings from a shareholder who owns the shares of capital stock of Misala Holdings, subject to a vesting period of three years. 1,000,000 of the 1,550,001 shares of common stock shown above resulted from the conversion of 2,000,000 shares of Series A Convertible Preferred Stock, upon the Company meeting certain required net income amounts for conversion for the fiscal years ending 2007 and 2008. 500,000 of the 1,550,0001 shares of common stock shown above may be acquired by Misala Holdings by converting its remaining 1,000,000 shares of Series A Convertible Preferred Stock into common stock pursuant to the Certificate of Incorporation. Please see “Description of Securities” for discussion regarding voting rights. The mailing address for this entity is 225 South Lake Avenue 9th Floor, Pasadena, CA 91101.
(2) Mr. Ning Liu’s address is 22128 Steeplechase Lane, Diamond Bar, CA 91765.
(3) Ms. Laura Philip’s address is 330 E. 38th Street, Apt 48J, New York, NY 10016.
(4) Mr. Tao Wang has voting and investment control over the shares owned by this entity. The mailing address for this entity is 1142 S. Diamond Bar Boulevard, Suite 815, Diamond Bar, CA 91765.
(5) These shares are held directly by Boom Day Investments Ltd., a British Virgin Islands corporation (“Boom Day Investments”). Yongkui Liu is a director of Boom Day Investments, and in such capacity, Yongkui Liu may be deemed to have voting and investment control over the shares held directly by Boom Day Investments. Yongkui Liu is also a beneficiary of Boom Day Investments. Pursuant to a certain Call Option Agreement dated May 17, 2010 (“Call Option Agreement”), Yongkui Liu has the right to acquire 100% of the issued and outstanding capital stock of Boom Day Investments from a shareholder who owns the shares of capital stock of Boom Day Investments, subject to a vesting period of three years. Includes 450,000 shares of common stock held by Boom Day Investments, and approximately 666,667 (post 1-for 12 reverse split) shares of common stock converted from 1,333,333 shares of Series A Convertible Preferred Stock, which were each convertible into 6 shares of common stock, upon the Company meeting certain required net income amounts for conversion for the fiscal years ending 2007 and 2008, held by Boom Day Investments. 333,334 of the 1,550,002 shares of common stock shown above may be acquired by Boom Day Investments by converting its remaining 666,667 shares of Series A Convertible Preferred Stock into common stock pursuant to the Certificate of Incorporation. Please see section entitled “Description of Securities” for discussion regarding voting rights. The mailing address for this entity is 225 South Lake Avenue 9th Floor, Pasadena, CA 91101.
(6) Includes 1,450,002 shares held directly by Boom Day Investments, over which Mr. Yongkui Liu, a director and beneficiary of Boom Day Investments, may be deemed to have voting and investment control. Also includes 100,000 shares of common stock held by Perfect Sum Investment Ltd., a British Virgin Islands corporation (“Perfect Sum”). Ms. Yongmei Wang is the director of Perfect Sum, and in such capacity, Yongmei Wang may be deemed to have voting and investment control over the shares held directly by Perfect Sum. Ms. Wang is the spouse of Mr. Yongkui Liu. The mailing address for Boom Day Investments and Perfect Sum is 225 South Lake Avenue 9th Floor, Pasadena, CA 91101.
COMPENSATION DISCUSSION AND ANALYSIS
We operate in a highly competitive industry. The key objectives of our executive compensation policies are to:
● attract, motivate and retain executives who drive our success and industry leadership; and
● provide each executive with a base salary and bonus on the market value of that role, and the individual’s demonstrated ability to perform that role.
The compensation to executive officers only contained base salary and bonuses for 2008 and only base salary for 2009. We recently formed a compensation committee. It is considering establishing criteria for calculating and paying performance based bonuses to our executive officers. Currently, it does not intend to establish any long-term incentive compensation in the form of stock options for any of our executive officers or employees, and there were no outstanding options held by any of our executive officers or employees as of July 30, 2010.
What Our Compensation Policies Are Designed to Reward
Our compensation policies are designed to reward each executive officer’s contribution to the advancement of our overall performance and execution of our goals, ideas and objectives. It is designed to reward and encourage exceptional performance at the individual level in the areas of organization, creativity and responsibility while supporting our core values and ambitions. This in turn aligns the interest of our executive officers with the interests of our shareholders, and thus with our interests.
Determining Executive Compensation
Our compensation committee will review and approve the compensation program for executive officers annually after the close of each year. Reviewing the compensation program at such time will allow the compensation committee to consider the overall performance of the past year and the financial and operating plans for the upcoming year in determining the compensation program for the upcoming year.
Our compensation policies only contained base annual salary and bonus in 2008 and only base annual salary in 2009.
A named executive officer’s base salary is determined by an assessment of his sustained performance against individual job responsibilities, including, where appropriate, the impact of his performance on our business results, current salary in relation to the salary range designated for the job, experience and mastery, and potential for advancement. The compensation committee will annually review market compensation levels with comparable jobs in the industry to determine whether the total compensation for our officers remains in the targeted median pay range.
None of our executive officers had annual compensation in excess of $100,000 for 2008 and 2009
Role of Executive Officers in Determining Executive Compensation
The compensation committee will determine the compensation for the chief executive officer, which will be based on various factors, such as level of responsibility and contributions to our performance. The chief executive officer will recommend the compensation for our executive officers (other than the compensation of the chief executive officer) to the compensation committee. The compensation committee will review the recommendations made by the chief executive officer and determine the compensation of the chief executive officer and the other executive officers.
Employment Agreements
We do not currently have an employment agreement with any of our executive officers.
Summary Compensation Table
The following table sets forth information concerning the compensation for the fiscal years ended December 31, 2009 and 2008 of the principal executive officer, principal financial officer, in addition to our two most highly compensated officers whose annual compensation exceeded $100,000, if any, and up to two additional individuals for whom disclosure would have been required but for the fact that the individual was not serving as an executive officer of the registrant at the end of the last fiscal year.
| Name and Position | | Year | | Salary | | | Bonus | | | Total | |
| Yongxin Liu, | | 2009 | | $ | 87,976 | | | $ | 0 | | | $ | 87,976 | |
| Chief Executive Officer and Chairman of the Board (1) | | 2008 | | $ | 82,392 | | | $ | 5,633 | | | $ | 88,025 | |
| Yongkui Liu, | | 2009 | | $ | 70,381 | | | $ | 0 | | | $ | 70,381 | |
| Former Chief Financial Officer and Director (2) | | 2008 | | $ | 64,787 | | | $ | 5,633 | | | $ | 70,420 | |
| Harry Zhang | | 2009 | | $ | — | | | $ | — | | | $ | — | |
| Chief Financial Officer and Director (3) | | 2008 | | $ | — | | | $ | — | | | $ | — | |
(1) Mr. Yongxin Liu was appointed as our Chief Executive Officer and Chairman of the Board in connection with the Reverse Acquisition Transaction which closed on November 16, 2007. Mr. Yongxin Liu’s compensation as reported is based on interbank exchange rate of RMB 6.84 to US$1.00 on December 31, 2009.
(2) Mr. Yongkui Liu resigned as our Chief Financial Officer effective December 4. 2009 and he resigned as a director effective March 3, 2010. Mr. Yongkui Liu’s compensation as reported is based on interbank exchange rate of RMB 6.84 to US$1.00 on December 31, 2009.
(3) Mr. Harry Zhang was appointed as our Chief Financial Officer effective December 4, 2009.
Outstanding Equity Awards at 2009 Fiscal Year End
We had no outstanding equity awards as of December 31, 2009.
Option Exercises and Stock Vested in Fiscal 2009
We had no option exercises or stock vested during the year ended December 31, 2009.
Pension Benefits
We had no pension benefit plans in effect as of December 31, 2009.
Nonqualified defined contribution and other nonqualified deferred compensation plans
We had no nonqualified defined contribution or other nonqualified deferred compensation plans in effect as of December 31, 2009.
Employment Agreements
We had no employment agreements with any of our executive officers as of December 31, 2009.
Director Compensation
For the year ended December 31, 2009, none of the members of our Board of Directors received compensation for his or her service as a director. Effective March 3, 2010, Hal Lieberman, Laura Philips, Jingang Wang and Bing Li have each executed and delivered a director offer letter evidencing their agreements with the Company regarding their director compensation. Under the agreements, Ms. Philips, Mr. Wang and Mr. Li shall be entitled to annual compensation of $20,000 and are eligible to receive either restricted stock or a stock option award for the purchase of up to 200,000 shares (pre reverse split, and subject to appropriate adjustment in the event of reverse stock splits or similar events) of the Company's common stock through the Company’s incentive stock option plan. Mr. Hal Lieberman, who will not only serve as a director, but also as Audit Committee Chairman, is entitled to annual compensation of $30,000 and is eligible to receive a stock option award for the purchase of up to 200,000 shares (pre-Reverse Split) of the Company's common stock.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth above with management and, based on such review and discussion, has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
| | Jingang Wang (Chairman of the Compensation Committee) |
| | Bing Li |
| | Laura Philips |
REVIEW AND APPROVAL OF TRANSACTIONS WITH RELATED PERSONS
All related person transactions are reviewed and, as appropriate, may be approved or ratified by the Board of Directors. If a Director is involved in the transaction, he or she may not participate in any review, approval or ratification of such transaction. Related person transactions are approved by the Board of Directors only if, based on all of the facts and circumstances, they are in, or not inconsistent with, our best interests and the best interests of our stockholders, as the Board of Directors determines in good faith. The Board of Directors takes into account, among other factors it deems appropriate, whether the transaction is on terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related person’s interest in the transaction. The Board of Directors may also impose such conditions as it deems necessary and appropriate on us or the related person in connection with the transaction.
In the case of a transaction presented to the Board of Directors for ratification, the Board of Directors may ratify the transaction or determine whether rescission of the transaction is appropriate.
CERTAIN RELATED PERSON TRANSACTIONS
Changchun Yongxin Dirui Medical Co., Ltd.
Changchun Yongxin Dirui Medical Co., Ltd. (“Yongxin”) and all of the shareholders of Yongxin entered into an amended acquisition agreement with the Company on June 15, 2007. On November 16, 2007, Yongxin and the Company closed on the reverse acquisition under the agreement. In accordance with the agreement, the Company issued newly issued common stock and 5,000,000 shares of Series A Preferred Stock to the Yongxin shareholders or their designees, representing, immediately following closing, 70% of the total issued and outstanding shares of common stock of the Company, and acquired 80% of the shares of Yongxin. Yongxin is our 80%-owned subsidiary and has interlocking executive and director positions with us. Mr. Yongxin Liu, the Chairman and Chief Executive Officer of the Company, is also the President of Yongxin. Mr. Yongkui Liu, the Vice President of the Company, is also the Vice President of Yongxin.
Loans from Related Persons
As of December 1, 2005, the Company received unsecured loans from former Company officers including Mr. Aurangzeb Bhatti, of an aggregate US$184,662, which were interest free and due on demand. Mr. Bhatti is the former Chief Executive Officer of our predecessor company, Digital Learning Management Corporation.
On January 25, 2008, Mr. Yongxin Liu, our Chief Executive Officer and Chairman, entered into a loan agreement with Changchun Yongxin Dirui Medical Co., Ltd., or Yongxin, our subsidiary in which we own 80% of its equity. The largest aggregate amount of principal under this loan was RMB 9,000,000 (equivalent US$1,320,300). As of December 31, 2009, no principal amount has been paid. The term of the loan is three years. The loan matures on January 24, 2011 and has no rate of interest.
As of the date of this proxy statement, there was no balance due to the sale of our e-learning business, through which we were able to transfer the liabilities associated with the e-learning business to the buyer, including the loans from these former Company officers.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors and executive officers, and persons who own more than 10% of the Company's Common Stock, to file with the Securities and Exchange Commission initial reports of beneficial ownership and reports of changes in beneficial ownership of Common Stock of the Company. Officers, directors and greater than 10% shareholders are required by the Securities and Exchange Commission to furnish the Company with copies of all section 16(a) reports they file. Based solely on our review of the Section 16 filings furnished to us, Yongkui Liu and Yongxin Liu filed delinquent Form 4 reports on January 5, 2010 for transactions that occurred on December 16, 2009, Yongxin Liu, Yongkui Liu, Misala Holdings Inc., Boom Day Investments Ltd. and Yongmei Wang filed delinquent Form 3 reports on March 12, 2010 for transactions that occurred on November 16, 2007, and Ning Liu filed a delinquent Form 3 report on March 11, 2010 for a transaction that occurred on November 16, 2007.
STOCKHOLDER PROPOSALS
The deadline for submitting a stockholder proposal under Rule 14a-8 of the Securities Exchange Act (“Rule 14a-8”) for inclusion in our proxy statement and form of proxy for the next annual meeting of stockholders is May 3, 2011. However, if the Company schedules its 2011 Annual Meeting of Stockholders earlier than August 23, 2011, or later than October 23, 2011, then the deadline for stockholder proposals will be a reasonable time before the Company begins to print and send its proxy materials to stockholders. The Company reserves the right to exclude stockholder proposals pursuant to SEC rules, or if untimely. Stockholders continuously holding at least 1% or $2,000 in market value of the issued and outstanding shares of a class of our securities for at least one year are eligible to submit proposals or may nominate director candidates. If a stockholder nominates a director candidate, in order for such nomination to be valid and acceptable, all information requested by the nominating committee concerning such candidate must be furnished to the nominating committee within a reasonable time prior to the above deadline for stockholder proposals.
Any proposal should be addressed to Harry Zhang, Chief Financial Officer, China Yongxin Pharmaceuticals Inc., 927 Canada Court, City of Industry, California and should be sent by certified mail, return receipt requested.
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.
Some brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. A single proxy statement will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement and annual report, please notify your broker or direct your written request to China Yongxin Pharmaceuticals Inc., Attn: Harry Zhang, Chief Financial Officer,927 Canada Court, City of Industry, California. Stockholders who currently receive multiple copies of the proxy statement at their address and would like to request “householding” of their communications should contact their broker.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC under the Securities Exchange Act of 1934, as amended. The SEC maintains an Internet world wide web site that provides access, without charge, to reports, proxy statements and other information about issuers, like China Yongxin, who file electronically with the SEC. The address of that site is http://www.sec.gov.
You also may obtain copies of these materials by mail from the Public Reference Section of the Securities and Exchange Commission, 100 F Street, N.E., Room 1580 Washington, D.C, 20549, at prescribed rates. These materials are also available from the SEC in person at any one of its public reference rooms. Please call the SEC at l-800-SEC-0330 for further information on its public reference rooms. You may read and copy this information at the following location of the SEC:
Public Reference Room
100 F Street, N.E.
Room 1580
Washington, D.C. 20549
You can also obtain, without charge, reports, proxy statements and other information, including without limitation, any information we may incorporate by reference herein, about the Company, by contacting: China Yongxin Pharmaceuticals, Inc., 927 Canada Court, City of Industry, California, Attn: Corporate Secretary, telephone:(626) 581-9098.
OTHER MATTERS
A copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and our quarterly report on Form 10-Q for the quarter ended June 30, 2010, including financial statements, accompany this proxy statement. We are incorporating by reference from this Annual Report the financial statements and supplementary data, the management discussion and analysis of financial condition and results of operation and quantitative and qualitative disclosures about market risk for the period discussed in the Annual Report. We are also incorporating by reference from our quarterly report on Form 10-Q filed on August 16, 2010, the financial statements and supplementary data, the management discussion and analysis of financial condition and results of operation and quantitative and qualitative disclosures about market risk for the six months ended June 30, 2010.
| September __, 2010 | By Order of the Board of Directors |
| | Yongxin Liu, Chief Executive Officer |
APPENDIX A
COMPENSATION COMMITTEE CHARTER
OF THE BOARD OF DIRECTORS OF
CHINA YONGXIN PHARMACEUTICALS INC.
March 3, 2010
Responsibilities
The Compensation Committee of the Board of Directors (the “Board”) of China Yongxin Pharmaceuticals Inc. (the “Company”) will be responsible for overseeing and, as appropriate, making recommendations to the Board regarding the annual salaries and other compensation of the Company’s executive officers, the Company’s general employee compensation, and other policies, providing assistance and recommendations with respect to the compensation policies and practices of the Company.
In particular, the Compensation Committee will:
| | · | On an annual basis, without the participation of the Chief Executive Officer, (i) review and approve the corporate goals and objectives with respect to compensation for the Chief Executive Officer, (ii) evaluate the Chief Executive Officer’s performance in light of the established goals and objectives, and (iii) set the Chief Executive Officer’s annual compensation, including salary, bonus, incentive, and equity compensation. |
| | · | On an annual basis, review and approve (i) the evaluation process and compensation structure for the Company’s other senior executives, and (ii) the Chief Executive Officer’s evaluation of the performance and his recommendations concerning the annual compensation, including salary, bonus, incentive, and equity compensation, of other executive officers, and (iii) the recruitment, retention, and severance programs for the Company’s senior executives, and (iv) review the compensation structure for the Board. |
| | · | As appropriate, make recommendations to the Board with respect to executive incentive compensation plans and equity-based compensation. |
| | · | Assist the Board in developing and evaluating potential candidates for senior officer positions, including the Chief Executive Officer, and oversee the development of executive succession plans. |
| | · | Review an annual report on executive compensation for inclusion in the Company’s proxy statement. |
Compensation Committee Composition
The Compensation Committee shall be comprised of that number of such number of directors as the Board appoints. The Compensation Committee’s chairperson shall be designated by the full Board, provided however, if the Board of Directors does not do so within 75 days after the Annual Stockholder Meeting in a given year, if the chairperson remains on the board as a successor director he or she shall continue as chairperson; and if the former chairperson is no longer on the Board of Directors, then the Compensation Committee members shall elect the chairperson by vote of a majority of the Compensation Committee.
Policies and Procedures
In carrying out its responsibilities, the Compensation Committee believes its policies and procedures should remain flexible in order to be able to best react to changing conditions, and to help ensure that the corporate accounting and reporting practices of the Company meet or exceed all applicable legal and business standards. However, the Compensation Committee will:
| | · | Investigate any matter brought to its attention within the scope of its duties. |
| | · | Obtain the approval of the full Board of this Charter and review and reassess this Charter at least annually or as conditions dictate. |
| | · | Meet in an executive session at least annually near the end of the Company’s fiscal year, and more frequently as circumstances dictate. |
| | · | Be governed by majority vote of its members. |
| | · | Report its actions and any recommendations to the Board after each Compensation Committee meeting and review its performance as a committee on an annual basis. |
The Compensation Committee shall have the authority to obtain advice and seek assistance from internal and external legal, accounting and other advisors such as consultants and shall determine the extent of funding necessary for the payment of compensation to such persons.
CHINA YONGXIN PHARMACEUTICALS INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
September __, 2010
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Yongxin Liu and Harry Zhang, and each of them, with full power of substitution, to vote, as a holder of the Common Stock, par value $0.001 per share (“Common Stock”), and Series A Preferred Stock, par value $0.001 per share (“Series A Preferred Stock”), of China Yongxin Pharmaceuticals, Inc., a Delaware corporation (the “Company”), all the shares of Common Stock and Series A Preferred Stock which the undersigned is entitled to vote, through the execution of a proxy with respect to the Annual Meeting of Stockholders of the Company (the “Annual Meeting”), to be held at China Yongxin Pharmaceuticals, Inc., 927 Canada Court, City of Industry, California, on September 23, 2010 at 10:00 a.m. PST, and any and all adjournments or postponements thereof, and authorizes and instructs said proxies to vote in the manner directed below.
The Board of Directors recommends the vote FOR the election of the nominees for Directors named below and proposals 2 and 3.
| 1. | Election of Directors:(i) Yongxin Liu, (ii) Harry Zhang, (iii) Ning Liu, (iv) Hal Lieberman, (v) Laura Philips, (vi) Jingang Wang, and (vii) Bing Li. |
FOR all Nominees o | WITHHOLD for all Nominees o |
If you do not wish your shares voted FOR a nominee, draw a line through that person’s name above.
2. Proposal to approve and ratify 2010 Equity Incentive Plan, as amended.
3. Proposal to ratify the appointment of the independent auditors.
4. In their discretion, the proxies are authorized to vote upon such other business as may properly come before such meeting or adjournment or postponement thereof.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE, PLEASE VOTE, SIGN AND DATE ON REVERSE SIDE AND RETURN PROMPTLY.
BACK OF CARD
PROPERLY EXECUTED AND RETURNED PROXY CARDS WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO INSTRUCTIONS TO THE CONTRARY ARE MADE, THIS PROXY WILL BE VOTED “FOR” THE ELECTION OF EACH OF THE NAMED NOMINEES AS DIRECTORS AND “FOR” PROPOSALS 2 and 3 AS DESCRIBED ON THE REVERSE SIDE OF THIS CARD.
You may revoke this proxy at any time before it is voted by (i) filing a revocation with the Secretary of the Company, (ii) submitting a duly executed proxy bearing a later date or time than the date or time of the proxy being revoked; or (iii) attending the Annual Meeting and voting in person. A stockholder’s attendance at the Annual Meeting will not by itself revoke a proxy given by the stockholder.
(Please sign exactly as the name appears below. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign with full corporate name by president or other authorized officer. If a partnership, please sign in the partnership name by authorized person.)
| PLEASE COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. |
| | | | |
| | | Signature, if held by joint owners | |
