UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): April 6, 2005
LIGHTEN UP ENTERPRISES INTERNATIONAL, INC.
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(Exact Name of Registrant as Specified in Charter)
Nevada 000-50073 87-0576481
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2200 Powell Street, Suite 675
Emeryville, California 94608
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 601-2000
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(Former name or former address, if changed since last report)
================================================================================
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 DFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4 (c) under the
Exchange Act (17 CFR 240.13e-4(c))
CURRENT REPORT ON FORM 8-K/A
(AMENDMENT NO. 1)
LIGHTEN UP ENTERPRISES INTERNATIONAL, INC.
APRIL 6, 2005
TABLE OF CONTENTS
PAGE
----
Items 1.01, 5.01 and 5.02. Entry into a Material Definitive Agreement, Changes in Control of the
Registrant and Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers ..................................................................1
The Merger..........................................................................................1
Changes Resulting from the Merger...................................................................1
Expansion of Board of Directors.....................................................................2
Accounting Treatment; Change of Control.............................................................2
Private Offerings...................................................................................3
Registration Statement..............................................................................3
Security Ownership of Certain Beneficial Owners and Management......................................4
Item 2.01. Completion of Acquisition or Disposition of Assets..................................................5
The Merger..........................................................................................5
Election of Board of Directors......................................................................6
Description of Our Company and Our Predecessor......................................................6
Company Overview....................................................................................7
Corporate Information...............................................................................7
Market Overview.....................................................................................8
Business Strategy...................................................................................8
Product and Drug Pipeline..........................................................................10
Scientific Discovery Platforms.....................................................................11
Intellectual Property..............................................................................13
License and Research Agreements....................................................................14
Government Regulation..............................................................................14
Manufacturing......................................................................................16
Competition........................................................................................17
Employees..........................................................................................17
Facilities.........................................................................................17
Legal Proceedings..................................................................................17
Risk Factors.......................................................................................17
Cautionary Language Regarding Forward-Looking Statements and Industry Data.........................25
Directors and Executive Officers After the Merger..................................................25
Meetings of our Board of Directors.................................................................26
Compensation of Directors..........................................................................26
Board Committees...................................................................................27
Indebtedness of Directors and Executive Officers...................................................27
Family Relationships...............................................................................28
Legal Proceedings..................................................................................28
Executive Compensation.............................................................................28
Options/SAR Grants and Fiscal Year End Option Exercises and Values.................................28
Employment Agreements..............................................................................29
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Stock Incentive Plan...............................................................................29
Simplified Employee Pension Plan...................................................................31
Certain Relationships and Related Transactions.....................................................31
Item 3.02. Unregistered Sales of Equity Securities............................................................31
Description of Securities..........................................................................33
Trading Information................................................................................34
Item 9.01. Financial Statements and Exhibits..................................................................34
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ITEMS 1.01, 5.01 AND 5.02. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT, CHANGES
IN CONTROL OF THE REGISTRANT AND DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS;
ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS
On April 6, 2005, we completed a so-called "reverse merger"
transaction, in which we caused LTUP Acquisition Corp., a Delaware corporation
and our newly-created, wholly-owned subsidiary, to be merged with and into
Bionovo, Inc., a Delaware corporation. Bionovo is a drug discovery and
development company focusing on cancer and women's health. As a result of the
merger, Bionovo became our wholly-owned subsidiary, with Bionovo's former
security holders acquiring a majority of the outstanding shares of our common
stock, par value $0.0001 per share. The reverse merger was consummated under
Delaware law and pursuant to an Agreement of Merger and Plan of Reorganization,
dated April 6, 2005 (the "Merger Agreement"), as discussed below. A copy of the
Merger Agreement was included as an exhibit to our Current Report on Form 8-K,
dated April 6, 2005, which was filed with the U.S. Securities and Exchange
Commission on April 8, 2005. Immediately prior to the closing of the merger,
Bionovo, Inc. completed a private offering of shares of Units comprised of
common stock and warrants to accredited investors, and received gross proceeds
of $8,095,500 at the closing of the private offering. On May 5, 2005, we also
completed a private offering of Units comprised of common stock and warrants and
received gross proceeds of $2,135,000.
We intend to reincorporate our company to Delaware from Nevada and
change our name to Bionovo, Inc., upon satisfaction of required stockholder
notice. In connection with the name change, we will seek a new trading symbol.
THE MERGER
Pursuant to the Merger Agreement, at closing, stockholders of Bionovo
received one share of our common stock for each share of Bionovo common stock in
the merger. As a result, at closing we issued 37,842,448 shares of our common
stock to the former stockholders of Bionovo, representing approximately 90.4% of
our outstanding common stock following the merger, in exchange for 100% of the
outstanding capital stock of Bionovo. The consideration issued in the merger was
determined as a result of arm's-length negotiations between the parties. As of
April 6, 2005, our board of directors also approved a change in our certifying
accountant. Prior to effecting the change of our certifying accountant, the
board of directors determined to retain our current accountants in connection
with the preparation of our Form 10-QSB for the quarter ended March 31, 2005.
The shares of our common stock issued to former holders of Bionovo
common stock in connection with the merger, including the investors in the
Bionovo private offering, and the shares of our common stock issued in our
subsequent private offering, were not registered under the Securities Act of
1933 in reliance upon the exemption from registration provided by Section 4(2)
of that Act and Regulation D promulgated under that section, which exempts
transactions by an issuer not involving any public offering. These shares may
not be offered or sold in the United States absent registration or an applicable
exemption from the registration requirements. Certificates representing these
shares contain a legend stating the same.
CHANGES RESULTING FROM THE MERGER. We intend to carry on Bionovo's
business as our sole line of business. Bionovo is based in Emeryville,
California, and is engaged in the business of drug discovery and development
focusing on cancer and women's health. We have relocated our executive offices
to those of Bionovo at 2200 Powell Street, Suite 675, Emeryville, California
94608. Our telephone number is (510) 601-2000.
Pre-merger stockholders of our company are not required to exchange
their existing Lighten Up Enterprises International stock certificates for
certificates of Bionovo, since the OTC Bulletin Board will consider the existing
stock certificates as constituting "good delivery" in securities transactions
subsequent to the reverse merger. The American Stock Exchange and Nasdaq
SmallCap Market, upon one of which we intend to apply to list our common stock
for trading, will also consider the submission of existing stock certificates as
"good delivery." We cannot be certain that we will receive approval to list our
common stock on that exchange or market.
Under Nevada law, we did not need the approval of our stockholders to
complete the merger, as the constituent corporations in the merger were LTUP
Acquisition and Bionovo, each of which is or was a Delaware corporation. We were
not a constituent corporation in the merger. The merger and its related
transactions were approved by the holders of a requisite number of shares of
Bionovo common stock by written consent on March 28, 2005.
EXPANSION OF BOARD OF DIRECTORS. Pursuant to the Merger Agreement, at
the closing of the merger, the board of directors of Lighten Up Enterprises
International was increased from one to four directors. In accordance with
Lighten Up Enterprises International's by-laws for filling newly-created board
vacancies, Mary E. Ross, the then existing sole director of Lighten Up
Enterprises International, appointed Isaac Cohen, a director of Bionovo, to
serve as an additional director of Lighten Up Enterprises International
effective at the closing of the merger. In connection with the appointment of
Mr. Cohen to the board of directors on April 6, 2005, Ms. Ross additionally
proposed David Naveh and Mary Tagliaferri to serve as directors of Lighten Up
Enterprises International, to take effect upon compliance by Lighten Up
Enterprises International with the provisions of Section 14(f) of the Securities
Exchange Act of 1934 and Rule 14f-1 under that Act. Ms. Ross also resigned as a
director following the closing, with her resignation to take effect only upon
compliance by Lighten Up Enterprises International with the provisions of
Section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1 under that
Act.
On April 6, 2005, Mr. Cohen was named Chairman, President, Chief
Executive Officer and Chief Scientific Officer and Ms. Tagliaferri was named
Vice President, Chief Regulatory Officer, Secretary and Treasurer. At the same
time, Ms. Ross resigned as an officer of Lighten Up Enterprises International.
On May 22, 2005, the eleventh day following the mailing of an
Information Statement in accordance with Section 14(f) of the Securities
Exchange Act of 1934 and Rule 14f-1 under that Act as referenced above, Drs.
Tagliaferri and Naveh became members of our board of directors.
All directors hold office until the next annual meeting of stockholders
and the election and qualification of their successors. Officers are elected
annually by the board of directors and serve at the discretion of the board.
ACCOUNTING TREATMENT; CHANGE OF CONTROL. The merger is being accounted
for as a "reverse merger," since the stockholders of Bionovo owned a majority of
the outstanding shares of our common stock immediately following the merger.
Bionovo is deemed to be the acquiror in the reverse merger and, consequently,
the assets and liabilities and the historical operations that will be reflected
in the financial statements will be those of Bionovo and will be recorded at the
historical cost basis of Bionovo. Despite the foregoing, however, Lighten Up
Enterprises International's Quarterly Report on Form 10-QSB for the quarter
ended March 31, 2005 will contain, in accordance with the rules and regulations
of the SEC, information regarding Lighten Up Enterprises International's
historical cookbook publishing and marketing business. Except as described in
the previous paragraphs and in "Certain Relationships and Related Transactions,"
no arrangements or understandings exist among present or former controlling
stockholders with respect to the election of members of our board of directors
and, to our knowledge, no other arrangements exist that might result in a change
of control of our company. Further, as a result of
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the issuance of the 37,842,448 shares of our common stock, a change in control
of our company occurred on the date of the consummation of the merger. We will
continue to be a "small business issuer," as defined under the Securities
Exchange Act of 1934, following the merger.
PRIVATE OFFERINGS
PRIOR PRIVATE OFFERING BY BIONOVO. Immediately prior to the closing of
the reverse merger, Bionovo completed a private offering of Units to accredited
investors at a price of $100,000 per Unit. Each Unit was comprised of 200,000
shares of Bionovo common stock and warrants to purchase 25,000 shares of Bionovo
common stock for $0.75 per share and 25,000 shares of Bionovo common stock for
$1.00 per share exercisable for a period of five years. Bionovo sold 80.955
Units and received gross proceeds of $8,095,500 at the closing of the private
offering.
In connection with the Bionovo private offering, placement agents and
advisors received an aggregate cash payment of $854,550 and warrants to purchase
1,709,100 shares of Bionovo common stock at $.50 per share which were amended to
become warrants to purchase Lighten Up Enterprises International common stock as
described above. Of such cash payment, $45,000 was paid in connection with the
conversion of $450,000 aggregate principal amount secured promissory notes of
Bionovo into a total of 1,251,448 shares of Lighten Up Enterprises International
common stock. In connection with the reverse merger, advisors received an
aggregate cash payment of $100,000 and warrants to purchase 1,979,630 shares of
Lighten Up Enterprises International common stock at $0.01 per share.
Immediately after the closing of the reverse merger, we had outstanding
41,842,448 shares of common stock, warrants to purchase 8,425,024 shares of
common stock, and stock options to purchase 1,884,465 shares of common stock.
SUBSEQUENT PRIVATE OFFERING BY LIGHTEN UP. As disclosed above, Bionovo
completed a private offering of Units which was consummated immediately prior to
the reverse merger. On May 5, 2005, Lighten Up Enterprises International
completed a private offering of Units to accredited investors, as defined in
Regulation D, upon terms similar to those provided in Bionovo's private
offering. Units of Lighten Up Enterprises International were privately offered
at $100,000, where each Unit was comprised of 200,000 shares of common stock of
Lighten Up Enterprises International, and five year warrants to purchase 25,000
shares of Lighten Up Enterprises International common stock at an exercise price
of $0.75 per share and 25,000 shares of Lighten Up Enterprises International
common stock at $1.00 per share. The aggregate number of Units offered in the
Lighten Up Enterprises International private offering was 39.045 Units
($3,904,500), of which 21.35 Units were sold on May 5, 2005 for total gross
proceeds of $2,135,000. The aggregate number and type of securities issued in
the Lighten Up Enterprises International private offering, excluding securities
issued to the placement agents for the offering, was 4,270,000 shares of Lighten
Up Enterprises International common stock and warrants to purchase 533,750
shares of Lighten Up Enterprises International common stock at an exercise price
of $0.75 per share and warrants to purchase 533,750 shares of Lighten Up
Enterprises International common stock at an exercise price of $1.00 per share.
Placement agents in the Lighten Up Enterprises International private offering
received an aggregate cash payment equal to 10% of the gross proceeds of the
offering, or $213,500, and five year warrants to purchase 427,000 shares of
Lighten Up Enterprises International common stock at an exercise price of $0.50
per share.
REGISTRATION STATEMENT. Under the terms of the above private
offerings, Lighten Up Enterprises International has agreed to file a "resale"
registration statement with the SEC on or before July 5, 2005 covering the
shares of Lighten Up Enterprises International common stock issued, or issuable
pursuant to the exercise of the warrants issued, to investors in the private
offerings. Lighten Up Enterprises will use its best efforts to have such
"resale" registration statement declared effective by the SEC as soon as
3
possible and, in any event, within 180 days (or 210 days if the registration
statement is reviewed by the SEC) after April 6, 2005. If the registration
statement is not filed or is, for any reason, not declared effective within the
foregoing time periods, Lighten Up Enterprises International will be obligated
to pay liquidated damages to the investors in the private offerings. Liquidated
damages, if any, will be paid in cash in an amount equal to 1% of the investor's
paid subscription amount for the first 30 days (or part thereof) after the
relevant date (i.e., filing date or effective date), and for any subsequent
30-day period (or part thereof), thereafter. Lighten Up Enterprises
International will be obligated to maintain the effectiveness of the "resale"
registration statement until the date when all securities registered under the
registration statement (i) have been sold pursuant to the registration statement
or an exemption from the registration requirements of the Securities Act of 1933
or (ii) may be sold without any volume or other restrictions pursuant to Rule
144(k) under the Securities Act of 1933. Additional information concerning our
private offering is included in Item 3.02, "Unregistered Sales of Equity
Securities."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the number of
shares of our common stock beneficially owned on May 31, 2005 by:
o each person who is known by us to beneficially own 5% or more of
our common stock;
o each of our directors and executive officers; and
o all of our directors and executive officers, as a group.
Except as otherwise set forth below, the address of each of the persons
listed below is c/o Bionovo, Inc., 2200 Powell Street, Suite 675, Emeryville,
California 94608.
NAME AND ADDRESS OF NUMBER OF SHARES PERCENTAGE OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED (1) BENEFICIALLY OWNED (2)
- -------------------------------------- --------------------------- ---------------------------
Isaac Cohen (3) 9,891,094 21.4%
Mary Tagliaferri (4) 9,891,094 21.4%
David Naveh (5) 510,000(6) 1.1%
Directors and executive officers as a 20,292,188(7) 43.5%
group (3 persons)
- ------------------------
* Less than 1% of outstanding shares.
(1) Unless otherwise indicated, includes shares owned by a spouse, minor
children and relatives sharing the same home, as well as entities owned
or controlled by the named person. Also includes shares if the named
person has the right to acquire those shares within 60 days after May
31, 2005, by the exercise of any warrant, stock option or other right.
Unless otherwise noted, shares are owned of record and beneficially by
the named person.
(2) Based upon 46,112,448 shares of common stock outstanding on
May 31, 2005.
(3) Mr. Cohen has served as a member of our board of directors and as our
chairman of the board, chief executive officer, president and chief
scientific officer since April 6, 2005.
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(4) Dr. Tagliaferri has served as our vice president, chief regulatory
officer, secretary and treasurer since April 6, 2005 and as a member of
our board of directors since May 22, 2005, which date was the eleventh
day following the mailing to our stockholders of an Information
Statement in accordance with Section 14(f) of the Securities Exchange
Act of 1934 and Rule 14f-1 under that Act.
(5) Dr. Naveh has served as a member of our board of directors since May
22, 2005, which date was the eleventh day following the mailing to our
stockholders of an Information Statement in accordance with Section
14(f) of the Securities Exchange Act of 1934 and Rule 14f-1 under that
Act.
(6) Represents shares of common stock that may be acquired within 60 days
of May 31, 2005 pursuant to stock options held by Dr. Naveh.
(7) Includes 510,000 shares of common stock that may be acquired by Dr.
Naveh within 60 days of May 31, 2005 pursuant to stock options.
ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
Information concerning the principal terms of the merger and the
business of Bionovo is set forth below.
THE MERGER
THE MERGER. On April 6, 2005, we, our wholly-owned subsidiary LTUP
Acquisition Corp. and Bionovo entered into the Merger Agreement. On April 6,
2005, LTUP Acquisition was merged with and into Bionovo under Delaware corporate
law, with Bionovo surviving to become our wholly-owned subsidiary.
Pursuant to the Merger Agreement, at closing, stockholders of Bionovo
received one share of our common stock for each share of Bionovo common stock in
the merger. As a result, at closing we issued 37,842,448 shares of our common
stock to the former stockholders of Bionovo, representing 90.4% of our
outstanding common stock following the merger, in exchange for 100% of the
outstanding capital stock of Bionovo. The consideration issued in the merger was
determined as a result of arm's-length negotiations between the parties. In
addition, all warrants issued by Bionovo to purchase shares of Bionovo common
stock outstanding immediately prior to the merger were amended to become
warrants to purchase our common stock on the same terms and conditions as those
warrants issued by Bionovo, including the number of shares issuable upon the
exercise of the warrants. Immediately prior to the closing of the merger, all
outstanding Bionovo warrants were exercisable for 6,445,394 shares of Bionovo
common stock, which included the warrants issued in Bionovo's private offering.
At the closing of the merger, these warrants were amended to become warrants to
purchase the same number of shares of our common stock. Further, all stock
options issued by Bionovo under its Stock Incentive Plan and otherwise to
purchase shares of Bionovo common stock outstanding immediately prior to the
merger were amended to become stock options to purchase our common stock on the
same terms and conditions as those stock options issued by Bionovo, including
the number of shares issuable upon the exercise of such stock options.
Immediately prior to the closing of the merger, all outstanding Bionovo stock
options were exercisable for 1,884,465 shares of Bionovo common stock. At the
closing of the merger, these stock options were amended to become stock options
to purchase the same number of shares of our common stock. Also as part of the
merger, we assumed Bionovo's Stock Incentive Plan which plan is intended to
promote the our success and the interests of our stockholders by attracting,
motivating, retaining and rewarding certain officers, employees, directors and
other eligible persons with awards and incentives for
5
high levels of individual performance and improved financial performance by our
company. Under the plan, 3,600,000 unissued shares of our common stock were
initially reserved for issuance upon the exercise of stock options granted and
available to be granted and restricted stock awards available to be granted. As
of May 9, 2005, we approved an amendment to the plan reducing the number of
shares of common stock issuable under the plan to 3,496,788.
In connection with the merger, a total of 21,040,000 shares of our
common stock owned by Mary E. Ross and Gary Lewis were repurchased by us in
consideration of our agreement to sell our historical business and then
cancelled at the closing of the merger. Immediately following the closing, we
sold to Ms. Ross our historical book publishing and marketing operations. Giving
effect to the cancellation of these stockholders' shares, there were 4,000,000
shares of our common stock outstanding before the impact of the stock issuances
in the merger. The 4,000,000 shares constituted our "public float" prior to the
merger.
Following the merger, all of our business operations will be conducted
through our wholly-owned subsidiary, Bionovo, Inc. See "Description of Business"
below. Prior to the merger, there were no material relationships between us and
Bionovo or any of the companies' respective affiliates, directors or officers,
or any associates of the respective officers or directors. All of our pre-merger
liabilities were settled at or prior to the merger.
ELECTION OF BOARD OF DIRECTORS. Pursuant to the Merger Agreement, at
the closing of the merger, the board of directors of Lighten Up Enterprises
International was increased from one to four directors. In accordance with
Lighten Up Enterprises International's by-laws for filling newly-created board
vacancies, Mary E. Ross, the then existing sole director of Lighten Up
Enterprises International, appointed Isaac Cohen, a director of Bionovo, to
serve as an additional director of Lighten Up Enterprises International
effective at the closing of the merger. In connection with the appointment of
Mr. Cohen to the board of directors on April 6, 2005, Ms. Ross additionally
proposed David Naveh and Mary Tagliaferri to serve as directors of Lighten Up
Enterprises International, to take effect upon compliance by Lighten Up
Enterprises International with the provisions of Section 14(f) of the Securities
Exchange Act of 1934 and Rule 14f-1 under that Act. Ms. Ross also resigned as a
director following the closing, with her resignation to take effect only upon
compliance by Lighten Up Enterprises International with the provisions of
Section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1 under that
Act.
On April 6, 2005, Mr. Cohen was named Chairman, President, Chief
Executive Officer and Chief Scientific Officer and Ms. Tagliaferri was named
Vice President, Chief Regulatory Officer, Secretary and Treasurer. At the same
time, Ms. Ross resigned as an Officer of Lighten Up Enterprises International.
On May 22, 2005, Drs. Tagliaferri and Naveh became members of our board
of directors. May 22, 2005 was the eleventh day following the mailing of an
Information Statement in accordance with Section 14(f) of the Securities
Exchange Act of 1934 and Rule 14f-1 under that Act as referenced above.
DESCRIPTION OF OUR COMPANY AND OUR PREDECESSOR
We were formed as a Nevada corporation on January 29, 1998 under the
name "K.H.F. Restaurants, Corp." On May 5, 2000 we changed our name to "K.H.F.
Technologies" and on July 11, 2002 we changed our name to Lighten Up Enterprises
International, Inc. Prior to the merger, we were a company that developed,
published, marketed, and sold a cook book of recipes. After the merger, we
discontinued our previous business and succeeded to the business of Bionovo as
our sole line of business. Accordingly, the past trading history of our common
stock is not relevant due to the change in our business. We intend to
reincorporate our company to Delaware from Nevada and change our name to
6
Bionovo, Inc., after satisfying notice requirements to our stockholders of the
approval of such actions by the written consent of the holders of a majority of
our outstanding common stock.
DESCRIPTION OF BUSINESS
Unless the context otherwise requires, "we," "our," "us" and similar
expressions refer to Bionovo, Inc., a Delaware corporation, separately prior to
the merger of a wholly-owned subsidiary of Lighten Up Enterprises International
with and into Bionovo on April 6, 2005, and Lighten Up Enterprises
International, as successor to the business of Bionovo, after giving effect to
the merger.
COMPANY OVERVIEW
We are a drug discovery and development company focusing on cancer and
women's health. Our focus is on new drugs from botanical sources, as well as new
chemical entity (or NCE) drug development.
Many of the top 35 worldwide selling prescription drugs are derived
from natural products. Moreover, approximately 62% of all chemotherapeutic
agents are derived from natural or botanical products. There were 15 new natural
product-derived drugs launched from 2000 to 2003, as well as 15 natural
product-derived compounds in Phase III clinical trials or registration at the
end of 2003. Some of the new drugs were new drug types such as the antimalarial
arteether, echinocandin- derived antifungal caspofungin and the anti-Alzheimer's
drug galantamine.
Although as many as 120 of the drugs used by physicians today are still
produced from botanical fractions and are not synthesized, like atropine,
codeine, quinine, morphine, steroids, taxanes and vinca derivatives, we are
aware of only a handful of companies attempting to create new drugs from
botanical sources. We believe opportunities to discover and develop important
new drugs from botanical extracts remain largely untapped.
We have one drug, MF101, designed to alleviate the symptoms of
menopause, entering Phase II clinical trials, and an anti-cancer agent for
breast and ovarian cancer, BZL101, for which the results of the Phase I clinical
trial are being completed and an investigational new drug (or IND) application
is being prepared to conduct a Phase II clinical trial. We are in the process of
preparing IND submissions to the U.S. Food and Drug Administration (or FDA) for
Phase I trials of a second anti-cancer agent, AA102, and another drug, VG101,
for the treatment of post-menopausal vaginal dryness.
We select plant extracts to screen against well-understood therapeutic
targets. Biological assays developed by us or others are used to screen and
validate a substantial pipeline of botanical extracts we believe have
therapeutic applications.
With MF101 entering Phase II and BZL101 completing Phase I human
trials, we are a leading company seeking FDA approval for novel formulations
derived from natural substances.
CORPORATE INFORMATION
Bionovo, Inc. was incorporated and began operations in the State of
California in February 2002 and subsequently reincorporated into the State of
Delaware in March 2004. In April 2005, Bionovo, Inc. completed a reverse merger
transaction with Lighten Up Enterprises International, Inc., with Bionovo, Inc.
surviving as a wholly-owned subsidiary of Lighten Up Enterprises International.
Our corporate headquarters are located at 2200 Powell Street, Suite 675,
Emeryville, California 94608. Our telephone number is (510) 601-2000, and our
fax number is (510) 601-5050. We maintain a website with the
7
address www.bionovo.com. We are not including the information on our website as
a part of, nor incorporating it by reference into, this report.
MARKET OVERVIEW
MENOPAUSE. Menopause refers to the period after a woman ceases
menstruating. It is estimated that approximately 75% of the 36 million
menopausal women in the U.S. experience unpleasant, menopause-related side
effects including hot flashes, depression and vaginal dryness (SOURCE:
Kronenberg F., Hot flashes: epidemiology and physiology. Ann N Y Acad Sci 1990;
592:52-86; discussion 123-33). Moreover, menopause is associated with
difficulties concentrating, mood swings, vaginal dryness, frequent urination,
weight gain, vaginal and urethral infections, depression and migraine headaches,
as well as life-threatening conditions such as heart disease, osteoporosis,
cognitive decline and breast cancer.
For decades, administration of estrogen and progesterone through
hormone replacement therapy (or HRT) has been the primary treatment for the
symptoms of menopause such as hot flashes. Recent studies, however, have found
the risks associated with long-term use of HRT outweigh the benefits. MF101 is
intended to be used in lieu of HRT and to control climacteric symptoms in
patients.
BREAST AND OVARIAN CANCER. According to the American Cancer Society
(ACS) 2005 CANCER FACTS AND Figures, breast cancer is the second leading cause
of cancer death in women, with more than 200,000 newly diagnosed cases each year
and over 2 million survivors in the U.S. Cancer is characterized by uncontrolled
cell division resulting in the growth of a mass of cells commonly known as a
tumor. Breast cancer, like other forms of cancer, if not eradicated, can spread
or metastasize throughout the body. To date, there is no cure for women with
advanced metastatic breast cancer.
Ovarian cancer is a silent disease that has no specific symptoms until
late in its course. It is the leading cause of death among gynecological
malignancies, and claims more women's lives each year than all other
gynecological tumors combined. Greater than 60% of cases are diagnosed in the
advanced stages of the disease (Stages III and IV). Among patients with disease
in Stages III and IV, the five-year overall survival rates are much lower,
ranging from 1% to 30% in the world's major pharmaceutical markets (U.S.,
Western Europe and Japan). It is estimated that approximately $1.8 billion is
spent in the U.S. each year on the treatment of ovarian cancer.
Breast cancer patients are treated with chemotherapy, hormonal therapy
or monoclonal antibody drugs. BZL101 is a capase independent apoptotic inducer
designed to kill cancer cells and increase survival rates.
The standard treatment for Stage III ovarian cancer includes surgery
followed by chemotherapy. Approximately 95% of patients diagnosed with Stage III
disease receive chemotherapy. Women diagnosed with Stage IV ovarian cancer are
treated in the same manner as Stage III, but the estimated percentage of those
treated with chemotherapy drops to 90% because chemotherapy is no longer
considered effective for some patients. We believe BZL101 can potentially be
used to lower tumor burden and improve survival.
BUSINESS STRATEGY
Our goal is to achieve a position of sustainable leadership in the
biopharmaceutical industry. Our strategy consists of the following key elements:
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INTEGRATE SCIENTIFIC DISCOVERIES WITH NATURAL SUBSTANCES USED IN
TRADITIONAL CHINESE MEDICINE
For more than 4,000 years, Chinese people have used Traditional Chinese
Medicine (or TCM), for the prevention and treatment of disease. Advances in
science and technology and analytical methodology for natural products, can be
harnessed for the discovery and development of new drugs from the botanicals
used in TCM. We intend to continue to integrate cutting edge scientific
discoveries and modern medicine with our expertise in natural substances used in
TCM to discover and screen novel formulations derived from botanicals.
FOCUS ON CANCER AND WOMEN'S HEALTH
We have intentionally directed our focus on initial medical
applications with urgent needs and very large potential markets. With this
strategy, even a small market penetration should result in relatively
substantial revenue streams. Under this strategy, we have initially directed our
attention to the design of drugs to target cancer and women's health.
Cancer is the leading cause of death in the U.S., yet there remain
unmet needs, and current treatments remain ineffective and inadequate for some
populations. In the current propitious health care regulatory environment, the
FDA regulatory requirements for approval of cancer drugs has been modified
because of the immediacy for treatment of this disease. There are approximately
27 million women suffering menopausal symptoms such as hot flashes and vaginal
dryness (SOURCE: Kronenberg F., Hot flashes: epidemiology and physiology. Ann N
Y Acad Sci 1990; 592:52-86; discussion 123-33). To date, pharmaceutical
interventions offered for women suffering menopausal symptoms are either
partially unsatisfactory, or they have significant undesirable side-effects.
Relying in part on what we believe to be our novel system for the assessment of
selective estrogen receptors ((alpha) and (beta)) modulators, or SERMs, their
downstream co-regulatory proteins and their transcriptional outcome as well as
pro-apoptotic agents, we intend to continue to target this significant market
opportunity for drugs targeting cancer and women's health.
DEVELOP OUR EXISTING PRODUCT PORTFOLIO
We currently have a portfolio of two drugs, one menopausal (MF101) and
one anti-cancer (BZL 101), which have advanced to clinical trials and are under
current development. We also are preparing IND applications for Phase I trials
for a second anti-cancer drug (AA102) and for a vaginal gel (VG101) to treat
vaginal dryness. We intend to further develop these drugs both by expanding our
internal resources and by collaborating with leading governmental and
educational institutions as well as other companies.
FOSTER ACADEMIC AND INDUSTRY COLLABORATIONS
We have developed research and development relationships with faculty
members at the University of California at San Francisco (UCSF), the University
of California at Berkeley (UCB), the University of California at Davis (UCD),
University of Texas, Southwestern (UTS) and the University of Colorado Health
Sciences College (UCHSC). These collaborations provide access to leading
intellectual and physical resources, and we believe should augment funding for
academic development and accelerate technology transfer of promising
innovations. We intend to continue our collaboration with UCSF, UCB, UCD, UTS
and UCHSC. We also intend to leverage the intellectual resources of other major
research centers by seeking additional academic collaborations.
Bionovo's initial funding for research and development was through peer
reviewed academic grants. We intend to continue to seek government grants to
fund exploratory research.
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We will also seek strategic scientific collaborations with other
biotechnology and pharmaceutical companies in order to expand and accelerate the
process to product development. We believe this will augment our research and
development capabilities as well as provide potential sales channels for our
products. We plan to target specific biotech and pharmaceutical companies in
need of Bionovo's proprietary technology or potential products in the endeavor
to reach licensing and development agreements.
DIVERSIFY APPLICATION OF DRUG CANDIDATES FOR EXTENDED INDICATIONS
Many of our initial products under development are not specific for
women's health, although the initial clinical trials will focus on this
application. Anticancer therapeutics, for example, will apply to a wide range of
oncological applications. Similarly, hormonally-active drugs could potentially
be used to treat prostate cancer or osteoporosis. Accordingly, we intend to
pursue alternative applications for our drug candidates when deemed appropriate,
to increase our chances of commercial success.
PRODUCT AND DRUG PIPELINE
We currently focus on developing drug products designed to treat cancer
and women's health through multiple targets via well-defined physiological
regulatory mechanisms. Over forty promising substances have already been
identified and are ready to be taken through the FDA approval process.
We currently have the following drug candidates in human trials in the
U.S.:
o MF101, a selective estrogen receptor beta (ER(beta)) agonist, is designed
to alleviate the symptoms of menopause, including hot flashes, night
sweats, and bone mineral loss. Results from the Phase I study show MF101 is
safe, well tolerated and effective at reducing the number of hot flashes
experienced in peri-menopausal and menopausal women. In the Phase I trial,
MF101 did not adversely alter serum reproductive hormones, suggesting that
it will not increase the risk of either breast or uterine cancer. Unlike
estrogen, MF101 does not activate genes, such as c-myc and cyclin D1,
associated with the promotion of cancer. A multicenter, Phase II
double-blind, placebo-controlled, randomized clinical trial under the
directorship of Dr. Deborah Grady at the University of California, San
Francisco is expected to commence in the Fall of 2005.
o BZL101, an apoptosis inducing factor (AIF) translocator/activator, is an
anticancer agent for breast and ovarian cancers that also may be effective
in the treatment of other solid tumors. We have completed a Phase I
clinical trial in women with advanced breast cancer and are currently
evaluating the results. Early analysis shows that BZL101 has no serious
toxicity. We are in the process of preparing an IND for a Phase II trial of
BZL101 and, assuming FDA approval, project to begin such trial when we
secure sufficient funding for this next phase of clinical testing.
Our drug pipeline also includes the following drugs that have not yet
entered human clinical trials, but for which IND applications are being
prepared:
o AA102, an apoptosis inducer, is an anticancer agent that attenuates
mitochodrial membrane potential to cause a cytochrome c release and caspase
activation to induce apoptosis. An IND application currently is being
prepared. Assuming approval of the IND, a Phase I clinical trial is
expected to commence as soon as we secure funding for the trial.
o VG101, a combination of selective ER(beta)agonist, vasodilator and an
antimicrobial agent, is an intra-vaginal gel for the treatment of
postmenopausal vaginal dryness. An IND application is being
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prepared for submission to the FDA. Assuming approval of the IND, a Phase I
clinical trial is expected to commence as soon as we secure funding for
clinical testing.
SCIENTIFIC DISCOVERY PLATFORMS
SCREENING PHILOSOPHY
A useful strategy for the discovery of biologically active compounds
from plants utilizes information about the traditional medicinal use of these
botanical agents. An advantage to this strategy over random screening is that
the extensive clinical tradition and literature may allow for some
rationalization with respect to the biological potential for their reputed use.
Since most organisms living today evolved under similar adaptation pressures, it
is plausible that plants can interact with mammalian organic processes, along
similar lines as nutrition from food, and therefore, can be utilized to regulate
pathological conditions as they do normal physiological functioning.
As an example, experimental antineoplastic (inhibiting or preventing
the growth or development of malignant cells) agents derived from botanicals
have been under study in China since the mid-fifties. Agents discovered through
this effort include: campothecin (CPT) and hydroxycampothecin (OPT) from
CAMPOTHECA ACUMINATA Decne, Harringtonine and homoheringtonine from several
species of CEPHALOTAXUS, Indirubin from BAPHICACANTHES CUSIA Bremek and
INDIGOFERA TINCTORIA L. and Kanglaite from COIX LACHRYMA- JOBI L.
Our strategic advantage for drug development is our extensive clinical
knowledge and experience with natural compounds coupled with definitive
knowledge of the proper scientific tools for screening. Instead of creating
massive screens, we select the most likely candidate compounds and test them for
efficacy and toxicity with state of the art screening models such as estrogen
receptor regulation or induction of apoptosis. To date, our positive hit rate
has varied between 25% to 40%.
Our clinical knowledge also accelerates the preclinical testing due to
the longstanding anecdotal knowledge regarding the toxicities of these agents.
The shorter time to clinic provides an opportunity to exercise major savings and
prolong the exploitation of the patent.
SCIENTIFIC DISCOVERY PLATFORM I: ANTICANCER DRUGS
A substantial number of Chinese medicinal herbs have traditionally been
used to prevent and treat cancer. These herbal preparations are purported to
have many biological effects including direct anti-proliferative effects on
cancer cells, anti-mutagenic activity, and stimulatory or suppressive effects on
immune responses.
Aqueous and ethanol extracts from seventy-one Chinese medicinal herbs
historically used for cancer treatment were evaluated for antiproliferative
activity on five breast cancer cell lines. Twenty-six percent (19/71) of the
extracts demonstrated greater than 50% growth inhibition on 80% of the cancer
cell lines tested while five more herbs showed the same activity on fewer cell
lines. These results, as well as our data from dose-response curves, DNA
fragmentation and flow cytometric analyses, indicate that many of the herbs have
significant growth inhibitory effects on breast cancer cells IN VITRO.
Furthermore, IN VIVO tests of some of the extracts in a mouse xenograph model
show a significant inhibition of tumor formation with oral administration, with
no toxicity or compromise to the mice activity including fluid and food intake.
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SCIENTIFIC DISCOVERY PLATFORM II: HORMONE REPLACEMENT THERAPY AND
SELECTIVE ESTROGEN RECEPTOR MODULATORS
Over 300 plants synthesize compounds that interact with estrogen
receptors (ER), known as phytoestrogens. Elucidating how phytoestrogens regulate
ER transcriptional and cell proliferation pathways could have a profound impact
on women. For example, phytoestrogens may prevent some cancers that are common
in postmenopausal women. In fact, the lowest rates of breast, endometrial and
colon cancers are observed in countries that have a high consumption of
phytoestrogens in their diet.
Our goal is to identify herbs that may be effective at preventing or
treating breast cancer as well as potential compounds for hormone replacement
therapy (HRT). We have tested 71 herbs that are used in Traditional Chinese
Medicine (TCM) for their ability to regulate transcriptional activity in the
presence of ER(alpha) or ER(beta). Over forty five percent (46.4%) of the herbs
show selective activity on the two ERs. In these studies, we identified the
herbs that selectively regulate ER(alpha) or ER(beta) and recruit coregulatory
proteins to ER(beta).
These studies have the potential to identify natural selective estrogen
receptor modifiers (SERMs), such as the drug tamoxifen, that may be used, with
FDA approval, to prevent and treat breast cancer. In addition, we anticipate
these studies will provide leads for HRT that do not increase the risk of breast
cancer. Other indications for estrogenic compounds or SERMs are osteoporosis,
cardiovascular disease prevention, arthritis and menopausal symptomatic
management (such as hot flashes, insomnia, vaginal dryness and decreased
libido).
PHARMACOLOGY
After assessing the functional activity of whole herb extracts in our
established assay systems, we aim to isolate anticancer and estrogenic compounds
from herbal extracts to identify their structure and to evaluate their
pharmacodynamic and pharmacokinetic properties. The following studies will be
conducted for all extracts in order to comply with FDA regulatory demands:
o FRACTIONATION OF WHOLE HERB EXTRACTS. These studies will be done in
order to discover the active components as well as for production
markers.
o EVALUATION OF THE PHARMACOKINETIC AND METABOLISM OF ISOLATED COMPOUNDS.
Since the drugs are designed to have greater selectivity and less
toxicity, these studies will allow us to further determine the
potential effects.
o BOTANICAL DRUG CONSISTENCY MEASURES. Bionovo has developed methods for
simultaneous intra batch and inter batch consistency measures using
state of the art technology.
o BIOLOGICAL MEASURES. Specific biochemical assays will be employed to
measure biological specificity and effect.
We will also repeat all quantifiable biological measures, pertaining to
the drug, available through our proposed drug platforms. This will ensure
qualitative efficacy control of proposed drugs. By identifying compounds both
biologically, as well as pharmacologically, we believe we will be able to
overcome any FDA hurdles regarding drug consistency.
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CLINICAL TRIALS DESIGN
Many companies with good science suffer from a lack of sufficient
clinical knowledge, poor clinical trials design expertise or limited access to
reputable clinical facilities to conduct their early trials. Since our approach
to drug design relies heavily on clinical experience and expertise, in our
respected fields, we emphasize sound clinical trial design as one of our
strengths.
All of our drug trials follow traditional methods for assessment as
well as auxiliary clinical and objective measures in order to strengthen our
primary and secondary claims.
Our founders and certain of the members of our scientific advisory
board together have extensive expertise in all three aspects detailed above. In
addition, our founders Dr. Tagliaferri and Mr. Cohen are pioneers in the
development and design of clinical trials for natural compounds and mixtures.
RESEARCH AND DEVELOPMENT
Our pre-clinical research is conducted at UCSF, UCB and UCHSC. We
employ two individuals who are active in our research and development
activities. We are engaged with four separate laboratories for collaboration in
our drug development. We have incurred research and development expenses of
approximately $275,600 in 2004 and $22,179 in 2003.
SCIENTIFIC CONSULTANTS
We have consulting agreements with a number of leading academic
scientists and clinicians, who collectively serve as our Scientific Advisory
Board. These individuals serve as key consultants with respect to our product
development programs and strategies. They are distinguished scientists and
clinicians with expertise in numerous scientific fields, including pharmacology,
cancer, estrogen receptor biology and clinical drug testing.
We use consultants to provide us with expert advice and consultation on
our scientific programs and strategies. They also serve as important contacts
for us throughout the broader scientific community.
We retain each consultant according to the terms of a consulting
agreement. Under such agreements, we pay them a consulting fee. In addition,
some consultants hold options to purchase our common stock, subject to the
vesting requirements contained in the consulting agreements. Our consultants are
employed by institutions other than ours, and therefore may have commitments to,
or consulting or advisory agreements with, other entities or academic
institutions that may limit their availability to us.
INTELLECTUAL PROPERTY
Patent protection is important to our business. The patent position of
companies in the pharmaceutical field generally is highly uncertain, involves
complex legal and factual questions, and has recently been the subject of much
litigation. Therefore, we cannot assure you that any patent applications
relating to our products or processes will result in patents being issued, or
that the resulting patents, if any, will provide protection against competitors
who successfully challenge our patents, obtain patents that may have an adverse
effect on our ability to conduct business, or are able to circumvent our patent
position. It is possible that other parties have conducted or are conducting
research and could make discoveries of compounds or processes that would precede
any of our discoveries. Finally, there can be no assurance that others will not
independently develop similar pharmaceutical products which will compete against
ours, or cause our drug product candidates and compounds to become obsolete. We
have filed
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two patent applications related to our drug candidates, but we cannot be certain
that they will issue as patents.
Our competitive position is also dependent upon unpatented trade
secrets. We intend to implement a policy of requiring our employees, consultants
and advisors to execute proprietary information and invention assignment
agreements upon commencement of employment or consulting relationships with us.
These agreements will provide that all confidential information developed or
made known to the individual during the course of their relationship with us
must be kept confidential, except in specified circumstances. However, we cannot
assure you that these agreements will provide meaningful protection for our
trade secrets or other proprietary information in the event of unauthorized use
or disclosure of confidential information. Further, invention assignment
agreements executed by consultants and advisors may conflict with, or be subject
to, the rights of third parties with whom such individuals have employment or
consulting relationships. In addition, we cannot assure you that others will not
independently develop equivalent proprietary information and techniques or
otherwise gain access to our trade secrets, that such trade secrets will not be
disclosed, or that we can effectively protect our rights to unpatented trade
secrets.
We may be required to obtain licenses to patents or proprietary rights
of others. We cannot assure you that any licenses required under any such
patents or proprietary rights would be made available on terms acceptable to us
or at all. If we do not obtain such licenses, we could encounter delays in
product market introductions while we attempt to design around such patents, or
could find that the development, manufacture, or sale of products requiring such
licenses could be foreclosed. Litigation may be necessary to defend against or
assert claims of infringement to enforce patents issued to us or exclusively
licensed to us, to protect trade secrets or know-how owned by us, or to
determine the scope and validity of the proprietary rights of others. In
addition, we may become involved in oppositions in foreign jurisdictions or
interference proceedings declared by the United States Patent and Trademark
Office to determine the priority of inventions with respect to our patent
applications or those of our licensors. Litigation, opposition, or interference
proceedings could result in substantial costs to and diversion of effort by, and
may have a material adverse impact on, us. In addition, we cannot assure you
that our efforts will be successful. See "Risk Factors."
LICENSE AND RESEARCH AGREEMENTS
In November 2003, Bionovo signed a development agreement with United
Biotech Company (UBC) an affiliate company of Maywufa of Taipei, Taiwan for
MF101 and BZL101 for the Taiwan region only. UBC is responsible for all material
expenses related to the development of MF101 and BZL101 in Taiwan, while Bionovo
is responsible to support the development process by providing all relevant
information for obtaining regulatory approval to proceed with clinical testing
in Taiwan.
GOVERNMENT REGULATION
Regulation by governmental authorities in the United States and foreign
countries is a significant factor in the development, manufacture, and expected
marketing of our drug product candidates and in our ongoing research and
development activities. The nature and extent to which such regulation will
apply to us will vary depending on the nature of any products developed. We
anticipate that all of our drug product candidates will require regulatory
approval by governmental agencies prior to commercialization. In particular,
human therapeutic products are subject to rigorous preclinical and clinical
testing and other approval procedures of the FDA and similar regulatory
authorities in foreign countries. Various federal statutes and regulations also
govern or influence testing, manufacturing, safety, labeling, storage, and
record-keeping related to such products and their marketing. The process of
obtaining these approvals and the subsequent compliance with the appropriate
federal statutes and
14
regulations requires substantial time and financial resources. Any failure by us
or our collaborators to obtain, or any delay in obtaining, regulatory approval
could adversely affect the marketing of any products developed by us, our
ability to receive product revenues, and our liquidity and capital resources.
The development, manufacture, marketing, and distribution of drug
products are extensively regulated by the FDA in the U.S. and similar regulatory
agencies in other countries. The steps ordinarily required before a new drug may
be marketed in the U.S., which are similar to steps required in most other
countries, include:
o preclinical laboratory tests, preclinical studies in animals,
formulation studies and the submission to the FDA of an
investigational new drug application;
o adequate and well-controlled clinical trials to establish the
safety and efficacy of the drug;
o the submission of a new drug application to the FDA; and,
o FDA review and approval of the new drug application (NDA) or
biologics license application (BLA).
Preclinical tests include laboratory evaluation of product chemistry,
formulation and toxicity, as well as animal studies. The results of preclinical
testing are submitted to the FDA as part of an investigational new drug (IND)
application. A 30-day waiting period after the filing of each IND application is
required prior to commencement of clinical testing in humans. At any time during
the 30-day period or at any time thereafter, the FDA may halt proposed or
ongoing clinical trials until the FDA authorizes trials under specified terms.
The IND application process may be extremely costly and substantially delay
development of our drug product candidates. Moreover, positive results of
preclinical tests will not necessarily indicate positive results in subsequent
clinical trials. The FDA may require additional animal testing after an initial
IND is approved and prior to Phase III trials. These additional studies are
customary for drugs intended for use by healthy populations. Our menopausal
drug, MF101, may be subjected to such studies, which may delay or damage our
ability to complete trials and obtain a marketing license.
Clinical trials to support new drug applications are typically
conducted in three sequential phases, although the phases may overlap. During
Phase I, clinical trials are conducted with a small number of subjects to assess
metabolism, pharmacokinetics, and pharmacological actions and safety, including
side effects associated with increasing doses. Phase II usually involves studies
in a limited patient population to:
o assess the efficacy of the drug in specific, targeted indications;
o assess dosage tolerance and optimal dosage; and
o identify possible adverse effects and safety risks.
If a compound is found to be potentially effective and to have an
acceptable safety profile in Phase II evaluations, Phase III trials are
undertaken to further demonstrate clinical efficacy and to further test for
safety within an expanded patient population at geographically dispersed
clinical trial sites.
After successful completion of the required clinical trials, a new drug
application (NDA) is generally submitted. The FDA may request additional
information before accepting the NDA for filing, in
15
which case the NDA must be resubmitted with the additional information. Once the
submission has been accepted for filing, the FDA reviews the NDA and responds to
the applicant. FDA requests for additional information or clarification often
significantly extend the review process. The FDA may refer the NDA to an
appropriate advisory committee for review, evaluation, and recommendation as to
whether the NDA should be approved, although the FDA is not bound by the
recommendation of an advisory committee.
If the FDA evaluations of the application and the manufacturing
facilities are favorable, the FDA may issue an approval letter or an
"approvable" letter. An approvable letter will usually contain a number of
conditions that must be met in order to secure final approval of the NDA and
authorization of commercial marketing of the drug for certain indications. The
FDA may also refuse to approve the NDA or issue a "not approvable" letter
outlining the deficiencies in the submission and often requiring additional
testing or information.
The Food and Drug Administration's Modernization Act codified the FDA's
policy of granting "fast track" approval of cancer therapies and other therapies
intended to treat severe or life threatening diseases and having potential to
address unmet medical needs. Previously, the FDA approved cancer therapies
primarily based on patient survival rates or data on improved quality of life.
The FDA considered evidence of partial tumor shrinkage, while often part of the
data relied on for approval, insufficient by itself to warrant approval of a
cancer therapy, except in limited situations. Under the FDA's revised policy,
which became effective in 1998, the FDA has broadened authority to consider
evidence of partial tumor shrinkage or other clinical outcomes for approval.
This revised policy is intended to facilitate the study of cancer therapies and
shorten the total time for marketing approvals. We intend to take advantage of
this policy; however, it is too early to tell what effect, if any, these
provisions may have on the approval of our drug product candidates.
Sales outside the United States of products we develop will also be
subject to regulatory requirements governing human clinical trials and marketing
for drugs. The requirements vary widely from country to country, but typically
the registration and approval process takes several years and requires
significant resources. In most cases, if the FDA has not approved a product for
sale in the United States, the product may be exported for sale outside of the
United States, only if it has been approved in any one of the following: the
European Union, Canada, Australia, New Zealand, Japan, Israel, Switzerland and
South Africa. There are specific FDA regulations that govern this process.
We are also subject to various Federal, state and local laws,
regulations and recommendations relating to safe working conditions, laboratory
and manufacturing practices, and the use and disposal of hazardous or
potentially hazardous substances, including radioactive compounds and infectious
disease agents, used in connection with our research work. We cannot accurately
predict the extent of government regulation that might result from future
legislation or administrative action.
MANUFACTURING
We currently have no manufacturing capabilities. To date, we have
engaged an overseas manufacturer experienced in FDA Good Manufacturing Practices
(or GMP) for drug production, for the supply of compounds solely for our
pre-clinical research and development activities.
In order to successfully commercialize our drug product candidates, we,
or third parties with whom we contract, must be able to manufacture products in
commercial quantities in compliance with the FDA's current GMP (or cGMP) at
acceptable costs and in a timely manner. As we do not own a cGMP manufacturing
facility, we expect to contract with third parties to provide us with cGMP
production capacity when appropriate.
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COMPETITION
Competition in the pharmaceutical and biotechnology industries is
intense. Our competitors include pharmaceuticals companies and biotechnology
companies, as well as universities and public and private research institutions.
In addition, companies that are active in different but related fields represent
substantial competition for us. Many of our competitors have significantly
greater capital resources, larger research and development staffs and facilities
and greater experience in drug development, regulation, manufacturing and
marketing than we do. These organizations also compete with us to recruit
qualified personnel, attract partners for joint ventures or other
collaborations, and license technologies that are competitive with ours. To
compete successfully in this industry we must identify novel and unique drugs or
methods of treatment and then complete the development of those drugs as
treatments in advance of our competitors.
The drugs that we are attempting to develop will have to compete with
existing therapies. In addition, a large number of companies are pursuing the
development of pharmaceuticals that target the same diseases and conditions that
we are targeting. Other companies have products or drug candidates in various
stages of pre-clinical or clinical development to treat diseases for which we
are also seeking to discover and develop drug candidates. Some of these
potential competing drugs are further advanced in development than our drug
candidates and may be commercialized earlier.
In particular, there are numerous companies attempting to discover and
develop drugs to treat cancer. Many of them are targeting pathways similar to
those targeted by us. However, we believe few of the companies are attempting to
develop drugs derived from natural products and fewer companies are trying to
discover drugs from botanical extracts. Moreover, we are not aware of many
companies attempting to discover and develop more selective estrogen receptor
modulators.
We believe we posses the competitive advantage of using unique
techniques with extracts that are considered to be safe and tolerable in humans.
We also believe that finding lead drugs that are orally tolerable and
potentially safe from the start of the discovery process provides an advantage
in the pharmaceutical industry.
EMPLOYEES
We had four employees as of May 31, 2005, of which two are in research
and development and two in administration. None of these employees is covered by
a collective bargaining agreement and we believe our employee relations are
good.
FACILITIES
We maintain our principal executive and administrative offices in
Emeryville, California, consisting of 1900 square feet of leased space.
LEGAL PROCEEDINGS
We are not a party to any pending or threatened legal proceedings.
RISK FACTORS
You should carefully consider the following risks and uncertainties. If
any of the following occurs, our business, financial condition or operating
results could be materially harmed. These factors
17
could cause the trading price of our common stock to decline, and you could lose
all or a part of your investment.
RISKS RELATED TO OUR BUSINESS
WE HAVE A LIMITED OPERATING HISTORY AND ARE CONSIDERED A DEVELOPMENT STAGE
COMPANY.
We are considered a development stage company for accounting purposes
because we have not generated any material revenues to date. Accordingly, we
have limited relevant operating history upon which an evaluation of our
performance and prospects can be made. We are subject to all of the business
risks associated with a new enterprise, including, but not limited to, risks of
unforeseen capital requirements, failure of market acceptance, failure to
establish business relationships and competitive disadvantages as against larger
and more established companies.
OUR PRODUCT DEVELOPMENT AND COMMERCIALIZATION INVOLVES A NUMBER OF
UNCERTAINTIES, AND WE MAY NEVER GENERATE SUFFICIENT REVENUES FROM THE SALE OF
POTENTIAL PRODUCTS TO BECOME PROFITABLE.
We have generated no significant revenues to date. To generate revenue
and to achieve profitability, we must successfully develop, clinically test,
market and sell our potential products. Even if we generate revenue and
successfully achieve profitability, it cannot predict the level of that
profitability or whether it will be sustainable. We expect that our operating
results will fluctuate from period to period as a result of differences in when
we incur expenses and receives revenues from sales of our potential products,
collaborative arrangements and other sources. Some of these fluctuations may be
significant.
All of our products in development will require extensive additional
development, including preclinical testing and human studies, as well as
regulatory approvals, before it can market them. We cannot predict if or when
any of the products we are developing or those being co-developed with us
partners will be approved for marketing. There are many reasons that we or our
collaborative partners may fail in our efforts to develop our potential
products, including the possibility that:
o preclinical testing or human studies may show that our potential
products are ineffective or cause harmful side effects;
o the products may fail to receive necessary regulatory approvals from
the FDA or foreign authorities in a timely manner, or at all;
o the products, if approved, may not be produced in commercial quantities
or at reasonable costs;
o the potential products, once approved, may not achieve commercial
acceptance;
o regulatory or governmental authorities may apply restrictions to our
potential products, which could adversely affect their commercial
success; or
o the proprietary rights of other parties may prevent us or our partners
from marketing our potential products.
WE INTEND TO BUILD MARKETING AND SALES CAPABILITIES IN THE UNITED STATES AND
EVENTUALLY INTERNATIONALLY WHICH IS AN EXPENSIVE AND TIME-CONSUMING PROCESS AND
MAY INCREASE OUR LOSSES.
Developing the sales force to market and sell our potential products is
a difficult, expensive and time-consuming process. In addition to developing a
sales force within our company, it will likely rely on third-party distributors
to distribute our potential products. The distributors would be responsible for
providing many marketing support services, including customer service, order
entry, shipping and billing and customer reimbursement assistance. Our
anticipated reliance on these third parties means our results may suffer if any
of them are unsuccessful or fail to perform as expected. We may not be able to
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successfully build sales and marketing capabilities sufficiently to successfully
commercialize our potential products in the territories where they receive
marketing approval.
OUR DRUG DEVELOPMENT PROGRAMS WILL REQUIRE SUBSTANTIAL ADDITIONAL FUTURE FUNDING
WHICH COULD HURT OUR OPERATIONAL AND FINANCIAL CONDITION.
Our drug development programs require substantial additional capital to
successfully complete them, arising from costs to:
o conduct research, preclinical testing and human studies;
o establish pilot scale and commercial scale manufacturing processes and
facilities; and
o establish and develop quality control, regulatory, marketing, sales and
administrative capabilities to support these programs.
Our future operating and capital needs will depend on many factors,
including:
o the pace of scientific progress in our research and development
programs and the magnitude of these programs;
o the scope and results of preclinical testing and human studies;
o the time and costs involved in obtaining regulatory approvals;
o the time and costs involved in preparing, filing, prosecuting,
maintaining and enforcing patent claims;
o competing technological and market developments;
o our ability to establish additional collaborations;
o changes in our existing collaborations;
o the cost of manufacturing scale-up; and
o the effectiveness of our commercialization activities.
We base our outlook regarding the need for funds on many uncertain
variables. Such uncertainties include regulatory approvals, the timing of events
outside our direct control such as negotiations with potential strategic
partners and other factors. Any of these uncertain events can significantly
change the our cash requirements as they determine such one-time events as the
receipt of major milestones and other payments.
If additional funds are required to support our operations and we are
unable to obtain them on favorable terms, we may be required to cease or reduce
further development or commercialization of our potential products, to sell some
or all of our technology or assets or to merge with another entity.
OUR POTENTIAL PRODUCTS FACE SIGNIFICANT REGULATORY HURDLES PRIOR TO MARKETING
WHICH COULD DELAY OR PREVENT SALES. EVEN AFTER APPROVAL, GOVERNMENT REGULATION
OF OUR BUSINESS IS EXTENSIVE.
Before we obtain the approvals necessary to sell any of our potential
products, we must show through preclinical studies and human testing that each
potential product is safe and effective. We have a number of products moving
toward or currently in clinical trials. Failure to show any potential product's
safety and effectiveness would delay or prevent regulatory approval of the
product and could adversely affect our business. The clinical trials process is
complex and uncertain. The results of preclinical studies and initial clinical
trials may not necessarily predict the results from later large-scale clinical
trials. In addition, clinical trials may not demonstrate a potential product's
safety and effectiveness to the satisfaction of the regulatory authorities. A
number of companies have suffered significant setbacks in advanced clinical
trials or in seeking regulatory approvals, despite promising results in earlier
trials. The
19
FDA may also require additional clinical trials after regulatory approvals are
received, which could be expensive and time-consuming, and failure to
successfully conduct those trials could jeopardize continued commercialization.
The rate at which we complete our clinical trials depends on many
factors, including our ability to obtain adequate supplies of the potential
products to be tested and patient enrollment. Patient enrollment is a function
of many factors, including the size of the patient population, the proximity of
patients to clinical sites and the eligibility criteria for the trial. Delays in
patient enrollment may result in increased costs and longer development times.
In addition, our collaborative partners may have rights to control product
development and clinical programs for products developed under the
collaborations. As a result, these collaborators may conduct these programs more
slowly or in a different manner than we had expected. Even if clinical trials
are completed, we or our collaborative partners still may not apply for FDA
approval in a timely manner or the FDA still may not grant approval.
In addition, the manufacturing and marketing of approved potential
products is subject to extensive government regulation, including by the FDA,
DEA and state and other territorial authorities. The FDA administers processes
to assure that marketed products are safe, effective, consistently uniform, of
high quality and marketed only for approved indications. Failure to comply with
applicable regulatory requirements can result in sanctions up to the suspension
of regulatory approval as well as civil and criminal sanctions.
WE FACE SUBSTANTIAL COMPETITION WHICH MAY LIMIT OUR REVENUES.
Some of the drugs that we are developing will compete with existing
treatments. In addition, several companies are developing new drugs that target
the same diseases that we are targeting. Many of our existing or potential
competitors, particularly large drug companies, have greater financial,
technical and human resources than the Company and may be better equipped to
develop, manufacture and market products. Many of these companies also have
extensive experience in preclinical testing and human clinical trials, obtaining
FDA and other regulatory approvals and manufacturing and marketing
pharmaceutical products. In addition, academic institutions, governmental
agencies and other public and private research organizations are developing
products that may compete with the products we are is developing. These
institutions are becoming more aware of the commercial value of their findings
and are seeking patent protection and licensing arrangements to collect payments
for the use of their technologies. These institutions also may market
competitive products on their own or through joint ventures and will compete
with us in recruiting highly qualified scientific personnel.
THIRD-PARTY REIMBURSEMENT AND HEALTH CARE REFORM POLICIES MAY REDUCE OUR FUTURE
SALES.
Sales of prescription drugs depend significantly on access to the
formularies, or lists of approved prescription drugs, of third-party payers such
as government and private insurance plans, as well as the availability of
reimbursement to the consumer from these third party payers. These third party
payers frequently require drug companies to provide predetermined discounts from
list prices, and they are increasingly challenging the prices charged for
medical products and services. Our potential products may not be considered
cost-effective, may not be added to formularies and reimbursement to the
consumer may not be available or sufficient to allow us to sell our potential
products on a competitive basis.
In addition, the efforts of governments and third-party payers to
contain or reduce the cost of health care will continue to affect the business
and financial condition of drug companies such as us. A number of legislative
and regulatory proposals to change the health care system have been discussed in
recent years, including price caps and controls for pharmaceuticals. These
proposals could reduce and/or cap the prices for our potential products or
reduce government reimbursement rates for such products. In
20
addition, an increasing emphasis on managed care in the United States has and
will continue to increase pressure on drug pricing. We cannot predict whether
legislative or regulatory proposals will be adopted or what effect those
proposals or managed care efforts may have on our business. The announcement
and/or adoption of such proposals or efforts could adversely affect our
business.
WE EXPECT TO RELY HEAVILY ON COLLABORATIVE RELATIONSHIPS AND TERMINATION OF ANY
OF THESE PROGRAMS COULD REDUCE THE FINANCIAL RESOURCES AVAILABLE TO US,
INCLUDING RESEARCH FUNDING AND MILESTONE PAYMENTS.
Our strategy for developing and commercializing many of our potential
products, including products aimed at larger markets, includes entering into
collaborations with corporate partners, licensors, licensees and others. These
collaborations will provide us with funding and research and development
resources for potential products. These agreements also will give our
collaborative partners significant discretion when deciding whether or not to
pursue any development program. Our collaborations may not be successful.
In addition, our collaborators may develop drugs, either alone or with
others, that compete with the types of drugs they currently are developing with
us. This would result in less support and increased competition for our
programs. If any of our collaborative partners breach or terminate their
agreements with us or otherwise fail to conduct their collaborative activities
successfully, our product development under these agreements will be delayed or
terminated.
We may have disputes in the future with our collaborators, including
disputes concerning who owns the rights to any technology developed. These and
other possible disagreements between us and our collaborators could delay our
ability and the ability of our collaborators to achieve milestones or our
receipt of other payments. In addition, any disagreements could delay, interrupt
or terminate the collaborative research, development and commercialization of
certain potential products, or could result in litigation or arbitration. The
occurrence of any of these problems could be time-consuming and expensive and
could adversely affect our business.
FAILURE TO SECURE PATENTS AND OTHER PROPRIETARY RIGHTS OR CHALLENGES TO THOSE
PATENTS AND RIGHTS MAY SIGNIFICANTLY HURT OUR BUSINESS.
Our success will depend on our ability to obtain and maintain patents
and proprietary rights for our potential products and to avoid infringing the
proprietary rights of others, both in the United States and in foreign
countries. Patents may not be issued from any of these applications currently on
file, or, if issued, may not provide sufficient protection.
Our patent position, like that of many pharmaceutical companies, is
uncertain and involves complex legal and technical questions for which important
legal principles are unresolved. We may not develop or obtain rights to products
or processes that are patentable. Even if we do obtain patents, they may not
adequately protect the technology we own or have licensed. In addition, others
may challenge, seek to invalidate, infringe or circumvent any patents we own or
license, and rights we receive under those patents may not provide competitive
advantages to us. Further, the manufacture, use or sale of our potential
products may infringe the patent rights of others.
Several drug companies and research and academic institutions have
developed technologies, filed patent applications or received patents for
technologies that may be related to our business. In addition, we may not be
aware of all patents or patent applications that may impact our ability to make,
use or sell any of our potential products. For example, US patent applications
may be kept confidential while pending in the Patent and Trademark Office and
patent applications filed in foreign countries are
21
often first published six months or more after filing. Any conflicts resulting
from the patent rights of others could limit our ability to obtain meaningful
patent protection. If other companies obtain patents with conflicting claims, we
may be required to obtain licenses to those patents or to develop or obtain
alternative technology. We may not be able to obtain any such licenses on
acceptable terms, or at all. Any failure to obtain such licenses could delay or
prevent us from pursuing the development or commercialization of our potential
products.
We may also need to initiate litigation, which could be time-consuming
and expensive, to enforce our proprietary rights or to determine the scope and
validity of others' rights. If any of our competitors have filed patent
applications in the United States which claim technology we also have invented,
the Patent and Trademark Office may require us to participate in expensive
interference proceedings to determine who has the right to a patent for the
technology.
We also rely on unpatented trade secrets and know-how to protect and
maintain our competitive position. Confidentiality agreements signed by our
employees, consultants, collaborators and others may be breached, and we may not
have adequate remedies for any breach. In addition, our competitors may
independently discover our trade secrets.
OUR BUSINESS WILL EXPOSE US TO PRODUCT LIABILITY RISKS, AND THEY MAY NOT HAVE
SUFFICIENT INSURANCE TO COVER ANY CLAIMS.
Our business will expose us to potential product liability risks. A
successful product liability claim or series of claims brought against us could
result in payment of significant amounts of money and divert management's
attention from running the business. Wer may not be able to obtain and maintain
insurance on acceptable terms, or such insurance may not provide adequate
protection in the case of a product liability claim. To the extent that product
liability insurance, if available, does not cover potential claims, we will be
required to self-insure the risks associated with such claims.
IF WE LOSE THE SERVICES OF OUR CO-FOUNDERS WHO SERVE AS DIRECTORS AND OFFICERS
OF OUR COMPANY, OUR OPERATIONS COULD BE DISRUPTED AND OUR BUSINESS COULD BE
HARMED.
Our business plan relies significantly on the continued services of our
co-founders, Isaac Cohen and Mary Tagliaferri. If were to lose the services of
one or both of them, our ability to continue to execute our business plan could
be materially impaired. In addition, while we have employment agreements with
Mr. Cohen and Dr. Tagliaferri, the agreements would not prevent either of them
from terminating their employment with us.
CONSIDERATIONS RELATED TO OUR COMMON STOCK
THERE HAS PREVIOUSLY BEEN NO ACTIVE PUBLIC MARKET FOR OUR COMMON STOCK, AND OUR
STOCKHOLDERS MAY NOT BE ABLE TO RESELL THEIR SHARES AT OR ABOVE THE PRICE AT
WHICH SUCH SHARES WERE PURCHASED, OR AT ALL.
There has been no active public market for our common stock prior to
the reverse merger transaction on April 6, 2005. We have not disclosed in this
Report information regarding past trading of our common stock because we will be
conducting a different type of business following the merger. An active public
market for our common stock may not develop or be sustained.
The market price of our common stock may fluctuate significantly in
response to factors, some of which are beyond our control, including the
following:
22
o the results of research or development testing of our or our
competitors' products;
o technological innovations related to diseases we are is studying;
o new commercial products introduced by our competitors;
o government regulation of our industry;
o receipt of regulatory approvals by our competitors;
o our failure to receive regulatory approvals for products under
development;
o developments concerning proprietary rights; or
o litigation or public concern about the safety of our products.
The stock market in general has recently experienced extreme price and
volume fluctuations. In particular, market prices of securities of drug
development companies have experienced fluctuations that often have been
unrelated or disproportionate to the operating results of these companies.
Continued market fluctuations could result in extreme volatility in the price of
our common stock, which could cause a decline in the value of our common stock.
Price volatility might be worse if the trading volume of our common stock is
low.
BECAUSE WE BECAME PUBLIC BY MEANS OF A REVERSE MERGER, WE MAY NOT BE ABLE TO
ATTRACT THE ATTENTION OF MAJOR BROKERAGE FIRMS.
Additional risks may exist since we became public through a "reverse
merger." Securities analysts of major brokerage firms may not provide us with
coverage since there is no incentive to brokerage firms to recommend the
purchase of our common stock. No assurance can be given that brokerage firms
will want to conduct any secondary offerings on our behalf in the future.
OUR COMMON STOCK MAY BE CONSIDERED "A PENNY STOCK" AND MAY BE DIFFICULT TO SELL.
The SEC has adopted regulations which generally define "penny stock" to
be an equity security that has a market price of less than $5.00 per share or an
exercise price of less than $5.00 per share, subject to specific exemptions.
Initially, the market price of our common stock is likely to be less than $5.00
per share and therefore may be designated as a "penny stock" according to SEC
rules. This designation requires any broker or dealer selling these securities
to disclose certain information concerning the transaction, obtain a written
agreement from the purchaser and determine that the purchaser is reasonably
suitable to purchase the securities. These rules may restrict the ability of
brokers or dealers to sell our common stock and may affect the ability of
investors to sell their shares. In addition, since our common stock is currently
traded on the NASD's OTC Bulletin Board, investors may find it difficult to
obtain accurate quotations of our common stock and may experience a lack of
buyers to purchase such stock or a lack of market makers to support the stock
price.
A SIGNIFICANT NUMBER OF OUR SHARES WILL BE ELIGIBLE FOR SALE, AND THEIR SALE
COULD DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.
Sales of a significant number of shares of our common stock in the
public market could harm the market price of our common stock. As additional
shares of our common stock become gradually available for resale in the public
market pursuant to the registration of those shares the supply of our common
stock will increase, which could decrease its price. We issued 20,461,000 shares
of our common stock and warrants to purchase up to 9,230,980 shares of our
common stock (inclusive of warrants issued to placement agents and advisors in
the private offerings and reverse merger transactions) in our private offerings.
Some or all of these shares of common stock may be offered from time to time in
the open market pursuant to Rule 144 (or pursuant to a registration statement,
if one is effective), and these sales may have a depressive effect on the market
for the shares of our common stock. In general, a person who has held restricted
shares for a period of one year may, upon filing with the SEC a notification on
Form
23
144, sell into the market common stock in an amount (over a three month period)
equal to the greater of 1% of the outstanding shares or the average weekly
number of shares sold in the last four weeks prior to such sale. Any of the
restricted shares may be sold by a non-affiliate after they have been held two
years.
OUTSTANDING WARRANTS MAY ADVERSELY AFFECT THE TERMS UPON WHICH WE COULD OBTAIN
ADDITIONAL CAPITAL.
As of May 31, 2005, we had outstanding warrants to purchase up to
9,919,524 shares of our common stock. Holders of warrants are likely to exercise
them when, in all likelihood, we could obtain additional capital on terms more
favorable than those provided by the warrants. Further, while the warrants are
outstanding they may adversely affect the terms on which we could obtain
additional capital.
OUR PRINCIPAL STOCKHOLDERS HAVE SIGNIFICANT VOTING POWER AND MAY TAKE ACTIONS
THAT MAY NOT BE IN THE BEST INTEREST OF OTHER STOCKHOLDERS.
Our officers, directors and principal stockholders control
approximately 42.9% of our currently outstanding common stock. If these
stockholders act together, they may be able to exert significant control over
our management and affairs requiring stockholder approval, including approval of
significant corporate transactions. This concentration of ownership may have the
effect of delaying or preventing a change in control and might adversely affect
the market price of our common stock. This concentration of ownership may not be
in the best interests of all our stockholders.
WE DO NOT ANTICIPATE PAYING CASH DIVIDENDS FOR THE FORESEEABLE FUTURE, AND THE
LACK OF DIVIDENDS MAY HAVE A NEGATIVE EFFECT ON OUR STOCK PRICE.
We have never declared or paid any cash dividends or distributions on
our capital stock. We currently intend to retain our future earnings to support
operations and to finance expansion and therefore we do not anticipate paying
any cash dividends on our common stock in the foreseeable future.
24
CAUTIONARY LANGUAGE REGARDING
FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
Some of the statements under "Risk Factors," "Description of Business"
and elsewhere in this Report constitute "forward-looking statements" that
involve risks and uncertainties, many of which are beyond our control. Our
actual results could differ materially and adversely from those anticipated in
such forward-looking statements as a result of certain factors, including those
set forth below and elsewhere in this Report.
All statements, other than statements of historical facts, included in
this Report regarding our strategy, future operations, financial position,
estimated revenue or losses, projected costs, prospects and plans and objectives
of management are forward-looking statements. When used in this Report, the
words "will," "may," "believe," "anticipate," "intend," "estimate," "expect,"
"project," "plan" and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain
such identifying words. All forward-looking statements speak only as of the date
of this Report. We are under no duty to update any forward-looking statements or
other information contained in this Report. Stockholders and potential investors
should not place undue reliance on these forward-looking statements. Although we
believe that our plans, intentions and expectations reflected in or suggested by
the forward-looking statements in this Report are reasonable, we cannot assure
stockholders and potential investors that these plans, intentions or
expectations will be achieved. We disclose important factors that could cause
our actual results to differ materially from our expectations under "Cautionary
Statements" and elsewhere in this Report. These cautionary statements qualify
all forward-looking statements attributable to us or persons acting on our
behalf.
DIrECTORS AND EXECUTIVE OFFICERS AFTER THE MERGER
The following table sets forth information regarding the members of our
board of directors and our executive officers. Mr. Cohen became a director and
officer and Dr. Tagliaferri became an officer on April 6, 2005, the closing date
of our reverse merger, and Drs. Tagliaferri and Naveh became directors effective
May 22, 2005. All directors hold office until the next annual meeting of
shareholders and the election and qualification of their successors. Officers
are elected annually by the board of directors and serve at the discretion of
the board.
NAME AGE POSITION
- ---- --- --------
Isaac Cohen 42 Chairman, President, Chief Executive Officer and Chief
Scientific Officer
Mary Tagliaferri 39 Vice President, Chief Regulatory Officer, Secretary,
Treasurer and Director
David Naveh 53 Director
The principal occupations for the past five years (and, in some
instances, for prior years) of each of our directors and officers are as
follows:
ISAAC COHEN, L.AC., O.M.D., DIRECTOR, CHAIRMAN, PRESIDENT, CHIEF
EXECUTIVE OFFICER AND CHIEF SCIENTIFIC OFFICER. Mr. Cohen is a co-founder of
Bionovo, and has served as its Chairman, President, Chief Executive Officer and
Chief Scientific Officer and a Director since February 2002. He became our
Chairman, President, Chief Executive Officer and Chief Scientific Officer and a
Director on April 6,
25
2005. In addition to his services to and research at Bionovo, Isaac Cohen has
been a Guest Scientist at the University of California, San Francisco (UCSF)
Cancer Research Center and UCSF Center for Reproductive Endocrinology since
1995. His work with UCSF encompasses basic and clinical studies of products
derived from natural products to treat cancer and menopause symptoms. Mr. Cohen
has been in private practice at The American Acupuncture Center, located in
Berkeley, California since 1989. Mr. Cohen has developed four drug products that
have been awarded Investigational New Drug licenses (INDs) from the U.S. Food
and Drug Administration (FDA) in the past seven years.
MARY TAGLIAFERRI, M.D., L.AC., VICE PRESIDENT, CHIEF REGULATORY
OFFICER, SECRETARY AND TREASURER AND DIRECTOR. Dr. Tagliaferri is a co-founder
of Bionovo, and has served as its Chief Regulatory Officer, Secretary and
Treasurer and a Director since February 2002. She became Vice President, Chief
Regulatory Officer, Secretary and Treasurer of our company on April 6, 2005, and
a director effective on May 22, 2005. Dr. Tagliaferri manages and directs all
clinical research projects of Bionovo that have been outsourced to academic
medical centers in the United States and in Taiwan. In addition to her services
to and work at Bionovo, Dr. Tagliaferri has conducted translational research
with the University of California, San Francisco since 1996. She has been
awarded four new Investigational New Drug licenses from the FDA over the past
seven years. Dr. Tagliaferri received her B.S. from Cornell University and her
medical degree from the University of California, San Francisco. She also holds
a Master's degree in traditional Chinese medicine from the American College of
Traditional Chinese Medicine.
DAVID NAVEH, PH.D., M.B.A., DIRECTOR. Dr. Naveh has served as a
director of Bionovo since August 2003. He became a director of our company
effective on May 22, 2005. Dr. Naveh has worked for Bayer Corporation since 1992
and currently serves as Chief Technical Officer of Bayer Biological Products,
Worldwide. Prior to Bayer Corporation, Dr. Naveh served in the capacity of
Process Development and Plant Management at Schering Plough from 1984 to 1988
and Director of Operations at Centocor from 1988 to 1992. Dr. Naveh has
participated in the development and commercialization of a number of FDA
approved drugs including: Intron, Reopro, Remicaid, Myoscint, Centoxin,
Kogenate, and Kogenate-FS. He currently holds seven patents including first
authorship of key GM-CSF and IL-4 patents. He is a graduate of Technion in
Haifa, Israel. He received a Ph.D. in Biochemical Engineering and an M.B.A. from
the University of Minnesota, Minneapolis. From 1982-1984, he was an Assistant
Professor (tenure track) at the University of Wisconsin, Madison where he taught
plant design and biophysical chemistry. He has authored over 30 peer reviewed
papers and is on the editorial board of "BIOSEPARATIONS."
MEETINGS OF OUR BOARD OF DIRECTORS
Our board of directors held no formal meetings during the year ended
December 31, 2004 and conducted all of its business and approved all corporate
action by the unanimous written consent of its members.
COMPENSATION OF DIRECTORS
As a member of our board of directors, Dr. Naveh receives $2,000 per
month for his service. He has also received stock options to purchase 816,000
shares of Bionovo common stock which were assumed by us in our reverse merger
with Bionovo. The stock options now represent the option to purchase the same
number of shares of our common stock.
We have not yet developed a general compensation plan for our
non-employee directors. We do not anticipate that we will compensate our
officers or employees for any services rendered as a member of our board of
directors.
26
Before April 6, 2005, directors of Lighten Up Enterprises International
were not compensated for their services as directors.
BOARD COMMITTEES
We currently does not have standing audit, nominating or compensation
committees of our board of directors, or committees performing similar
functions, and therefore our entire board of directors performs such functions.
We currently are not listed on any national exchange or national association and
are not required to maintain such committees because the volume of matters that
come before the board of directors for consideration permits each director to
give sufficient time and attention to such matters to be involved in all
decision making. Of our current directors, we believe only one, Dr. Naveh, to be
independent. All directors participate in the consideration of director
nominees. We currently do not have a policy with regard to attendance at board
meetings.
We do not have a policy with regard to consideration of nominations of
directors. We accept nominations for directors from our stockholders. There is
no minimum qualification for a nominee to be considered by our board of
directors. All of our directors will consider any nomination and will consider
such nomination in accordance with his or her fiduciary responsibility to us and
our stockholders.
Stockholders may send communications to our board of directors by
writing to Lighten Up Enterprises International, 2200 Powell Street, Suite 675,
Emeryville, California, 94608, attention Board of Directors or any specified
director. Any correspondence received at the foregoing address to the attention
of one or more directors is promptly forwarded to such director or directors.
AUDIT COMMITTEE. We intend to establish an audit committee of the
board of directors, which will consist of independent directors. The audit
committee's duties would be to recommend to our board of directors the
engagement of independent auditors to audit our financial statements and to
review our accounting and auditing principles. The audit committee would review
the scope, timing and fees for the annual audit and the results of audit
examinations performed by the internal auditors and independent public
accountants, including their recommendations to improve the system of accounting
and internal controls. The audit committee would at all times be composed
exclusively of directors who are, in the opinion of our board of directors, free
from any relationship which would interfere with the exercise of independent
judgment as a committee member and who possess an understanding of financial
statements and generally accepted accounting principles.
COMPENSATION COMMITTEE. We intend to establish a compensation
committee of the board of directors. The compensation committee would review and
approve our salary and benefits policies, including compensation of executive
officers. The compensation committee would also administer our Stock Incentive
Plan, and recommend and approve grants of stock options under that plan.
NOMINATING COMMITTEE. We intend to establish a nominating committee of
the board of directors. The nominating committee would be responsible for board
member qualification and nomination to the full board of directors.
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
No executive officer, present director, proposed director or any member
of these individuals' immediate families or any corporation or organization with
whom any of these individuals is an affiliate is or has been indebted to us
since the beginning of our last fiscal year.
27
FAMILY RELATIONSHIPS
There are no family relationships among our directors and executive
officers.
LEGAL PROCEEDINGS
As of the date of this Report, there is no material proceeding to which
any of our directors, executive officers, affiliates or stockholders is a party
adverse to us.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth, for the years
indicated, all cash compensation paid, distributed or accrued for services,
including salary and bonus amounts, rendered in all capacities by our and
Bionovo's chief executive officer and all other executive officers who received
or are entitled to receive remuneration in excess of $100,000 during the stated
periods.
SUMMARY COMPENSATION TABLE
Annual Long-term
Compensation (1) Compensation
----------------------- ---------------------------
Awards Payouts
-------------- ------------
Securities
Underlying LTIP All Other
Fiscal Salary Bonus Options/ Payouts Compensation
Name and Principal Position Year ($) ($) SARs (#) ($) ($)
- --------------------------------------- ---------- ------------ ---------- -------------- ------------ -------------------
Isaac Cohen, L.Ac., O.M.D. 2004 90,000 - - - 27,120 (2)
Chairman, President, Chief Executive 2003 - - - - -
Officer, Chief Scientific Officer and 2002 - - - - -
Director
Mary Tagliaferri, M.D., L.Ac. 2004 118,000 - - - 34,120 (3)
Vice President, Chief Regulatory 2003 - - - - -
Officer, Secretary, Treasurer and 2002 - - - - -
Director Nominee
- ------------------------
(1) Amounts paid to Mr. Cohen and Dr. Tagliaferri were paid by Bionovo,
Inc.
(2) Amount comprised of $22,500 contributed by Bionovo, Inc. pursuant to
its Simplified Employee Pension Program and $4,620 in annual automobile
allowance.
(3) Amount comprised of $29,500 contributed by Bionovo, Inc. pursuant to
its Simplified Employee Pension Program and $4,620 in annual automobile
allowance.
OPTIONS/SAR GRANTS AND FISCAL YEAR END OPTION EXERCISES AND VALUES
No stock options, restricted stock or SAR grants were granted or were
outstanding at any time to the executive officers named in the Summary
Compensation Table above.
28
EMPLOYMENT AGREEMENTS
Isaac Cohen and Mary Tagliaferri entered into employment agreements
with Bionovo in June 2004, which agreements were assumed by us in connection
with the reverse merger transaction with Bionovo on April 6, 2005. Except with
respect to their positions and duties, the agreements provide for substantially
similar terms. Each employment agreement has an initial term of three years
commencing on June 23, 2004, and will automatically renew for additional one
year periods unless either party under such agreement notifies the other that
the term will not be extended. Under their agreements, each officer is entitled
to an annual salary of $180,000, subject to annual review and potential increase
by our board of directors. In addition, they are each eligible to receive annual
bonuses in cash or stock options as awarded by our board of directors in its
discretion. Each of Mr. Cohen and Dr. Tagliaferri also is entitled under their
respective agreement to an automobile allowance of $520 per month and we have
agreed to indemnify each of them in their capacity as an officer or director. If
either officer's employment is terminated by us without cause, or by the officer
for good reason, then the officer will be entitled to continue to receive his or
her base salary, bonuses and other benefits for a period of six months. Both Mr.
Cohen and Dr. Tagliaferri are obligated to seek comparable employment if his or
her employment is so terminated, and we will have the right to offset any
amounts paid to such officer from any such other employment against amounts we
owe to him or her during the six month period following their employment
termination.
STOCK INCENTIVE PLAN
BACKGROUND AND PURPOSE. On April 6, 2005, in connection with the
completion of the reverse merger, the board of directors of our company assumed
and adopted the Stock Incentive Plan, as amended, of Bionovo, which we refer to
as the Plan, and recommended that it be submitted to our stockholders for their
approval.
The purpose of the Plan is to promote our success and the interests of
our stockholders by attracting, motivating, retaining and rewarding certain
officers, employees, directors and certain other eligible persons with stock
based awards and incentives for high levels of individual performance and
improved financial performance of our company. The Plan provides for the ability
for us to issue stock options and restricted stock awards. Stock options may be
either incentive stock options, as defined in Section 422A of the Internal
Revenue Code of 1986 (which we refer to as the Code), or non-qualified stock
options.
As of April 6, 2005, stock options to purchase a total of approximately
1,781,253 shares of our common stock had been granted under the Plan by Bionovo
prior to its acquisition by us in the reverse merger transaction. These options,
which expire ten years from the date of grant, were granted at exercise prices
ranging from $0.29167 to $0.83333 per share. In accordance with the terms of the
reverse merger transaction, these options were converted into options to
purchase shares of our common stock at the same exercise price. These options
will continue to be governed by the Plan.
SHARES AVAILABLE FOR AWARDS; ANNUAL PER-PERSON LIMITATIONS. Under the
Plan, the total number of shares of our common stock that may be subject to the
granting of awards under the Plan shall be equal to 3,496,788 shares, plus the
number of shares that are subject to or underlie awards that expire or for any
reason are not paid or delivered under the Plan.
A committee of our board of directors, which we refer to as the
Committee, is to administer the Plan. See "Administration." The Committee is
authorized to adjust outstanding awards (including adjustments to exercise
prices of options and other affected terms of awards) in the event that an
extraordinary dividend or other distribution (whether in cash, shares of our
company common stock or
29
other property), recapitalization, forward or reverse split, reorganization,
merger, consolidation, spin-off, or other similar corporate transaction or event
affects our company common stock to such extent (if any) and at such time as it
deems appropriate and equitable in the circumstances.
ELIGIBILITY. The persons eligible to receive awards under the Plan are
our officers (whether or not directors) and employees, and any director of, or
any individual consultant or advisory who renders or has rendered BONA FIDE
services (other than services in connection with the offering or sale of
securities of our company in a capital raising transaction or as a market maker
or promoter of our company's securities) to, our company and who is selected to
participate in the Plan by the Committee described below.
ADMINISTRATION. Our board of directors shall select the Committee that
will administer the Plan. All Committee members must be "non-employee directors"
as defined by Rule 16b-3 of the Exchange Act, and independent as defined by
NASDAQ or any other national securities exchange on which any securities of our
company may be listed for trading in the future. However, except as otherwise
required to comply with Rule 16b-3 of the Exchange Act, our board of directors
may exercise any power or authority granted to the Committee. Subject to the
terms of the Plan, the Committee is authorized to select eligible persons to
receive awards, determine the type and number of awards to be granted and the
number of shares of our company common stock to which awards will relate,
specify times at which awards will be exercisable or settleable, set other terms
and conditions of awards, prescribe forms of award agreements, interpret and
specify rules and regulations relating to the Plan and make all other
determinations that may be necessary or advisable for the administration of the
Plan.STOCK OPTIONS. The Committee is authorized to grant stock options,
including both incentive stock options or ISOs, which can result in potentially
favorable tax treatment to the participant, and non-qualified stock options. The
exercise price per share subject to an option are determined by the Committee,
but in the case of an ISO must not be less than the fair market value of a share
of our company common stock on the date of grant. For purposes of the Plan, the
term "fair market value" means, as of any given date, the closing sales price
per share of our company common stock as reported on the principal stock
exchange or market on which our company common stock is traded on the date as of
which such value is being determined or, if there is no sale on that date, the
last previous day on which a sale was reported. If our company common stock is
not listed to trade on a national securities exchange and is not reported on the
NASDAQ National Market Reporting System, "fair market value" means the mean
between the bid and asked price for our company's common stock on such date, as
furnissed by the National Association of Securities Dealers, Inc. In the absence
of the foregoing, "fair market value: of our common stock is as established by
the Committee. The maximum term of each option, the times at which each option
will be exercisable, and provisions requiring forfeiture of unexercised options
at or following termination of employment or service generally are fixed by the
Committee except that no option may have a term exceeding 10 years. Options may
be exercised by payment of the exercise price in cash, check, shares that have
been held for at least six months (provided the Committee in its sole discretion
may limit the use of shares as payment), if authorized by the Committee or
specified in an applicable award agreement, by a promissory note subject to the
terms of the Plan, and by notice and third party payment in such manner as may
be authorized by the Committee.
RESTRICTED STOCK. The Committee is authorized to grant restricted
stock. Restricted stock is a grant of shares of our company common stock,
subject to payment of such consideration and such conditions on vesting (which
may include, among others, the passage of time, specified performance objectives
or other factors), which may not be sold or disposed of, and which may be
forfeited in the event of certain terminations of employment or service, prior
to the end of a restricted period specified by the Committee. A participant
granted restricted stock generally has all of the rights of a stockholder of our
company, unless otherwise determined by the Committee.
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ACCELERATION OF VESTING; CHANGE IN CONTROL. The Committee may, in its
discretion, accelerate the vesting and exercisability, or the expiration of
exercisability period of any award in the event of termination of employment or
service with our company for any reason other than cause, and unless otherwise
provided in the award agreement, vesting shall occur immediately in the case of
a "change in control" of our company, as defined in the Plan.
AMENDMENT AND TERMINATION. Our board of directors may amend, alter,
suspend, discontinue or terminate the Plan or the Committee's authority to grant
awards without further stockholder approval, except stockholder approval must be
obtained for any amendment or alteration if such approval is required by
sections 422 or 424 of the Code or any other applicable law, or deemed necessary
or advisable by our board of directors. Thus, stockholder approval may not
necessarily be required for every amendment to the Plan which might increase the
cost of the Plan or alter the eligibility of persons to receive awards. However,
the board of directors and the Committee may not, without the written consent of
the Plan participant affected thereby, terminate or suspend the Plan in any
manner materially adverse to the Plan participant's rights or benefits under an
outstanding award, or amend the Plan participant's award in any manner
materially adverse to the Plan participant. Unless earlier terminated by our
board of directors, the Plan will terminate at the close of business on the day
before the 10th anniversary of its effective date.
SIMPLIFIED EMPLOYEE PENSION PLAN
Effective December 1, 2004, Bionovo, Inc. adopted a Simplified Employee
Pension Plan where Bionovo, on a discretionary basis, can contribute up to the
lesser of $40,000 or 25% of an eligible participant's salary up to an annual
maximum in accordance with Internal Revenue Service Regulations. The plan covers
all employees of Bionovo with certain participation requirements, however
Bionovo is not required to make any contributions in a given year. Bionovo made
a $52,000 contribution for the year ended December 31, 2004.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective upon the merger with Bionovo on April 6, 2005, we purchased
and subsequently cancelled 19,975,000 and 1,065,000 shares of our common stock
from Mary E. Ross and Gary Lewis, each a former director and officer, in
exchange for our agreement to sell to Ms. Ross our historical business prior to
the merger. Ms. Ross' acquisition of our prior business occurred on April 6,
2005.
As of April 6, 2005, Mary Ross forgave amounts owed to her by us. The
amounts were comprised of a promissory note dated December 31, 2004 in the face
amount of $130,382, bearing interest at the rate of 7% per annum which was due
and payable on May 31, 2006, and for additional sums representing expenses paid
by her on our behalf in the sum of $7,800.
As of April 6, 2005, Gary Lewis forgave amounts owed to him by us. The
amounts were comprised of a series of promissory notes which were aggregated
into a single note dated December 31, 2004 in the face amount of $41,152,
bearing interest at the date of 7% per annum which was due and payable on May
31, 2006.
ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES
Immediately prior to our reverse merger transaction with Bionovo,
Bionovo completed a private offering of its securities. The Bionovo offering
consisted of 100 Units (with an over-allotment of 20 Units) at a purchase price
of $100,000 per Unit, where each Unit was comprised of 200,000 shares of Bionovo
common stock, and five year warrants to purchase 25,000 shares of Bionovo common
stock at
31
an exercise price of $0.75 per share and 25,000 shares of Bionovo common stock
at an exercise price of $1.00 per share. In the Bionovo private offering,
Bionovo sold a total of 80.955 Units for total gross proceeds of $8,095,500. In
the reverse merger, the shares of Bionovo common stock issued in the Bionovo
private offering were converted along with other then outstanding shares of
Bionovo common stock, on a one-for-one basis, into shares of our common stock.
Also in the reverse merger, the Bionovo warrants issued in the Bionovo private
offering became warrants to purchase an equal number of shares of our common
stock. Following the reverse merger transaction, we conducted a private offering
of securities on terms similar to the foregoing Bionovo private offering.
On May 5, 2005, we completed a private offering of Units at $100,000
per Unit, where each Unit was comprised of 200,000 shares of our common stock,
and five year warrants to purchase 25,000 shares of our common stock at an
exercise price of $0.75 per share and 25,000 shares of our common stock at $1.00
per share. The aggregate number of Units offered in the our private offering was
39.045 Units ($3,904,500), of which 21.35 Units were sold on May 5, 2005 for
total gross proceeds of $2,135,000. The aggregate number and type of securities
issued in the private offering, excluding securities issued to the placement
agents for the offering, was 4,270,000 shares of our common stock and warrants
to purchase 533,750 shares of our common stock at an exercise price of $0.75 per
share and warrants to purchase 533,750 shares of our common stock at an exercise
price of $1.00 per share. Placement agents in our private offering received an
aggregate cash payment equal to 10% of the gross proceeds of the offering, or
$213,500, and five year warrants to purchase 427,000 shares of our common stock
at an exercise price of $0.50 per share.
The above private offerings were made solely to "accredited investors,"
as that term is defined in Regulation D under the Securities Act of 1933. Each
investor in the private offerings submitted a subscription agreement and
investor questionnaire in which the investor made certain representations and
warranties as to their status as an "accredited investor." The shares of common
stock and warrants issued in the private offerings were not registered under the
Securities Act of 1933, or the securities laws of any state, and were offered
and sold in reliance on the exemption from registration afforded by Section 4(2)
and Regulation D (Rule 506) under the Securities Act of 1933 and corresponding
provisions of state securities laws, which exempts transactions by an issuer not
involving any public offering. No form of general solicitation or general
advertising was used to offer or sell the above securities, and each certificate
representing shares of common stock and each warrant sold in the private
offerings contains a legend to the effect that the securities represented by
such instruments are restricted and may not be resold without registration under
the Securities Act of 1933 or an exemption from that Act.
Under the terms of the above private offerings, we have agreed to file
a "resale" registration statement with the SEC on or before July 5, 2005
covering our shares of common stock issued, or issuable pursuant to the exercise
of the warrants issued, to investors in the private offerings. We will use our
best efforts to have such "resale" registration statement declared effective by
the SEC as soon as possible and, in any event, within 180 days (or 210 days if
the registration statement is reviewed by the SEC) after April 6, 2005. If the
registration statement is not filed or is, for any reason, not declared
effective within the foregoing time periods, we will be obligated to pay
liquidated damages to the investors in the private offerings. Liquidated
damages, if any, will be paid in cash in an amount equal to 1% of the investor's
paid subscription amount for the first 30 days (or part thereof) after the
relevant date (i.e., filing date or effective date), and for any subsequent
30-day period (or part thereof), thereafter. We will be obligated to maintain
the effectiveness of the "resale" registration statement until the date when all
securities registered under the registration statement (i) have been sold
pursuant to the registration statement or an exemption from the registration
requirements of the Securities Act of 1933 or (ii) may be sold without any
volume or other restrictions pursuant to Rule 144(k) under the Securities Act of
1933.
32
DESCRIPTION OF SECURITIES
COMMON STOCK. Holders of shares of our common stock are entitled to
dividends as and when declared by our board of directors from funds legally
available therefor, and upon our liquidation, dissolution or winding-up are
entitled to share ratably in all assets remaining after payment of liabilities.
We have not paid any dividends and do not anticipate paying any dividends on our
common stock in the foreseeable future. It is our present policy to retain
earnings, if any, for use in the development of our business. The holders of
shares of our Common Stock do not have preemptive rights, are entitled to one
vote for each share of Common Stock held of record by them, and do not have the
right to cumulate their votes for election of directors.
WARRANTS. The warrants issued in our private offering and those
Bionovo warrants issued in Bionovo's private offering that became warrants to
purchase our common stock in the reverse merger, grant holders the right to
purchase shares of our common stock at an exercise price of $0.75 and $1.00 per
share, as applicable, and are exercisable for five years. Commencing upon the
date the SEC declares effective a registration statement covering the resale of
the shares of our common stock underlying the such warrants, we shall have the
right to call on 15 days notice unexercised warrants for cancellation in whole
or in part if the closing bid price of our common stock equals or exceeds
$0.9375 (for the warrants with an exercise price of $0.75 per share) and $1.25
(for the warrants with an exercise price of $1.00 per share) for a specified
period of time and during such period the average trading volume of the shares
of our common stock equals or exceeds 100,000. The warrants contain customary
anti-dilution provisions.
OTHER BIONOVO WARRANTS. In addition to the above warrants, we have
outstanding warrants issued in a bridge financing completed by Bionovo in
September 2004, to purchase up to 556,123 shares of our common stock at a
current exercise price of $0.539416667 per share. The warrants are subject to
anti-dilution adjustments, as well as a "purchase price reset provision" where
certain issuances of common stock or securities which may be converted into or
exercised for our common stock at a per share price less than the exercise price
of the warrants, would cause such exercise price to be adjusted to the lower per
share price. The warrants may be exercised until the fifth anniversary of the
reverse merger transaction with Bionovo.
We also have outstanding warrants issued to the placement agent in
Bionovo's September 2004 bridge financing to purchase up to 132,421 shares of
our common stock at an exercise price of $0.359583333. The warrants are subject
to anti-dilution adjustments and are exercisable until September 30, 2009.
We also have outstanding five year warrants to purchase up to 2,136,100
shares of our common stock at an exercise price of $0.50 per share and warrants
to purchase up to 1,979,630 shares of our common stock at an exercise price of
$0.01 per share. These warrants were issued to placement agents and advisors in
Bionovo's private offering and our reverse merger transaction on April 6, 2005,
and our private offering on May 5, 2005. The warrants are subject to
anti-dilution adjustments.
CERTAIN REGISTRATION RIGHTS. In addition to the registration rights
described above with respect to shares of our common stock issued or issuable in
connection with the above-described private offerings, we have granted
registration rights with respect to our shares of common stock into which
previously outstanding convertible notes were converted and into which the other
warrants described above may be exercised. Filing of the registration statement
is required to be made not later than 90 days following the Reverse Merger. If
the registration statement is not declared effective within 120 days after the
merger, we will be required to pay each such holder an amount equal to one
percent per 30-day period of the purchase price paid by such holder for the
convertible notes.
33
TRADING INFORMATION
Our common stock is currently quoted on the OTC Bulletin Board under
the trading symbol LTUP.OB. As soon as practicable, and assuming we satisfy all
necessary initial listing requirements, we intend to list our common stock for
trading on the American Stock Exchange or Nasdaq SmallCap Market, although we
cannot be certain that this application will be approved.
The transfer agent for our common stock is Interwest Transfer Co.,
Inc., P.O. Box 17136, 1981 East 4800 South, Salt Lake City, Utah 84117,
telephone: 801-272-9294.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. In accordance with
Item 9.01(a), our audited financial statements for the fiscal years ended
December 31, 2004 and 2003 will be filed by an amendment to this Current Report
on Form 8-K as soon as practicable, but in no event later than 71 days after
this Report on Form 8-K is required to be filed.
(b) PRO FORMA FINANCIAL INFORMATION. In accordance with Item 9.01(b),
our pro forma financial statements will be filed by an amendment to this Current
Report on Form 8-K as soon as practicable, but in no event later than 71 days
after this Report on Form 8-K is required to be filed.
(c) EXHIBITS.
The exhibits listed in the following Exhibit Index are filed as part of
this Report.
EXHIBIT NO. DESCRIPTION
----------- -----------
2.1 Agreement of Merger and Plan of Reorganization, dated as of
April 6, 2005, among Lighten Up Enterprises International,
Inc., LTUP Acquisition Corp. and Bionovo, Inc.
(incorporated herein by reference from Exhibit 2.1 to the
Registrant's Form 8-K filed with the SEC on April 8, 2005)
3.1(i) Articles of Incorporation of the Registrant (incorporated
herein by reference from Exhibit 3.1(i) to the Registrant's
Form 10-SB filed with the SEC on November 7, 2002)
3.1(ii) Restated and Amended Articles of Incorporation of the
Registrant (incorporated herein by reference from Exhibit
3.1(ii) to the Registrant's Form 10-SB filed with the SEC
on November 7, 2002)
3.1(iii) Certificate of Amendment to Restated and Amended Articles
of Incorporation of the Registrant (incorporated herein by
reference from Exhibit 3.1(iii) to the Registrant's Form
10-SB filed with the SEC on November 7, 2002)
3.2 By-laws of the Registrant (incorporated herein by reference
from Exhibit 3.2 to the Registrant's Form 10-SB filed with
the SEC on November 7, 2002)
4.1 Form of Private Placement Warrant (incorporated herein by
reference from Exhibit 4.1 to the Registrant's Form 8-K
filed with the SEC on May 11, 2005)
34
10.1 Form of Private Placement Subscription Agreement
(incorporated herein by reference from Exhibit 10.1 to the
Registrant's Form 8-K filed with the SEC on May 11, 2005)
10.2 Form of Private Placement Investor Questionnaire
(incorporated herein by reference from Exhibit 10.2 to the
Registrant's Form 8-K filed with the SEC on May 11, 2005)
10.3 Form of Private Placement Registration Rights Agreement
(incorporated herein by reference from Exhibit 10.3 to the
Registrant's Form 8-K filed with the SEC on May 11, 2005)
10.4 Form of Private Placement Acknowledgement and Amendment
(incorporated herein by reference from Exhibit 10.4 to the
Registrant's Form 8-K filed with the SEC on May 11, 2005)
10.5 Registration Rights Agreement, dated September 30, 2004
10.6 Stock Incentive Plan, as amended (incorporated herein by
reference from Exhibit 5 to the Registrant's Schedule 14C
filed with the SEC on June 3, 2005)
10.7 Employment Agreement, dated July 1, 2004, between Bionovo,
Inc. and Isaac Cohen
10.8 Assignment and Assumption Agreement, dated April 6, 2005,
among Registrant, Bionovo, Inc. and Isaac Cohen regarding
Employment Agreement
10.9 Employment Agreement, dated July 1, 2004, between Bionovo,
Inc. and Mary Tagliaferri
10.10 Assignment and Assumption Agreement, dated April 6, 2005,
among the Registrant, Bionovo, Inc. and Mary Tagliaferri
regarding Employment Agreement
10.11 Licensing and Technology Transfer Agreement, dated November
6, 2003, between Bionovo, Inc. and United Biotech
Corporation (certain terms of this agreement have been
omitted and are subject to a request for confidential
treatment with the SEC) (to be filed by amendment)
21.1 Subsidiaries of Registrant
35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: June 3, 2005 LIGHTEN UP ENTERPRISES INTERNATIONAL, INC.
By: /s/ Isaac Cohen
--------------------------------------------
Isaac Cohen
Chief Executive Officer and President
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
10.5 Registration Rights Agreement, dated September 30, 2004
10.7 Employment Agreement, dated July 1, 2004, between Bionovo,
Inc. and Isaac Cohen.
10.8 Assignment and Assumption Agreement, dated April 6, 2005,
among Registrant, Bionovo, Inc. and Isaac Cohen regarding
Employment Agreement
10.9 Employment Agreement, dated July 1, 2004, between Bionovo,
Inc. and Mary Tagliaferri
10.10 Assignment and Assumption Agreement, dated April 6, 2005,
among the Registrant, Bionovo, Inc. and Mary Tagliaferri
regarding Employment Agreement
21.1 Subsidiaries of Registrant