As filed with the Securities and Exchange Commission on ____________, 2002
Registration No. 333______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------
SINO PHARMACEUTICALS CORPORATION
(Exact name of Registrant as specified in its charter)
Wyoming 86-0972559
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
Unit 152
11782 River Road
Richmond, British Columbia V6X1Z7, Canada
(604) 303-9180
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
---------------
Mahmoud S. Aziz
Sino Pharmaceuticals Corporation
Unit 152
11782 River Road
Richmond, British Columbia V6X1Z7, Canada
(604) 303-9180
(Name, address, including zip code, and telephone
number, including area code, of agent for service
of service)
---------------
With copies to:
Christian J. Hoffmann, III
Quarles & Brady Streich Lang, LLP
2 North Central Avenue
Phoenix, Arizona 85004-2391
(602) 229-5200
---------------
Approximate date of commencement of proposed sale of the securities to public:
From time to time after the Registration Statement becomes effective as
determined by market conditions and the needs of the Selling Shareholders. If
any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
---------------
CALCULATION OF REGISTRATION FEE
- ---------------------------- --------------------- --------------------------- ---------------------------- ------------------
Title of Each Class of Amount to be Proposed Maximum Offering Proposed Maximum Aggregate Amount of
Security to be Registered Registered Price (1) Offering Price (1) Registration Fee
- ---------------------------- --------------------- --------------------------- ---------------------------- ------------------
Common Stock, $.001 par 750,000 shares $.90 $675,000 $62.00
value (1)
- ---------------------------- --------------------- --------------------------- ---------------------------- ------------------
(1) Estimated for purpose of calculating registration fee.
1
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended (the "Securities Act") or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
2
SINO PHARMACEUTICALs CORPORATION
750,000 Shares of Common Stock
This Prospectus covers the sale of 750,000 shares (the "Shares") of
Common Stock, $.001 par value (the "Common Stock"), of Sino Pharmaceuticals
Corporation., a Wyoming corporation (the "Company"), offered by certain selling
shareholders (the "Selling Shareholders"). The Shares of the Selling
Shareholders were acquired as follows: (i) 250,000 Shares issued to the original
shareholders of the Company and (ii) 500,000 Shares issued to the shareholders
of Sino Pharmaceutical Corporation, a Nevada corporation ("SPC"), in connection
with the Company's acquisition of SPC. The Company will not receive any of the
proceeds from the sale of any of the Shares registered in this offering. See
"Selling Shareholders."
The Selling Shareholders may offer the Shares from time to time in one
or more transactions in any public market that develops, if any, at market
prices prevailing at the time of the sale, at prices relating to such prevailing
market prices, or at negotiated prices, without payment of any underwriting
discounts or commissions except for usual or customary selling commissions paid
to brokers or dealers. The Company's Common Stock is not currently listed or
quoted on any market or quotation medium or system. See "Plan of Distribution."
---------------
The Securities offered hereby involve a high degree of risk. See "Risk
Factors and Investment Considerations" on page ____ for a discussion of certain
risks related to an investment in the Shares.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is February ____, 2002
1
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C., and at the Commission's regional offices
at 500 West Madison Street, Suite 1400, and Chicago, Illinois 60661. Copies of
such material can also be obtained at prescribed rates from the Public Reference
section of the Commission at its principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549 upon payment of the prescribed fees. The Commission also
maintains a Web site that contains reports proxy and information statements and
other materials that are filed through the Commission's Electronic Data
Gathering, Analysis, and Retrieval system. This Web site can be accessed at
http://www.sec.gov.
This Prospectus constitutes a part of a Registration Statement on Form
SB-2 (together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the Commission under the Securities Act of
1933, as amended (the "Securities Act"). As permitted by the rules and
regulations of the Commission, this Prospectus omits certain information
contained in the Registration Statement, and reference is made to the
Registration Statement and related exhibits for further information with respect
to the Company and the securities offered hereby. Any statements contained
herein concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed. Each such statement is qualified in its entirety by such
reference.
INCORPORATION BY REFERENCE
The Company hereby undertakes to provide without charge to each person,
including a beneficial owner, to whom a Prospectus is delivered upon written or
oral request of each person, a copy of any document incorporated herein by
reference, (not including exhibits to the document that have been incorporated
herein by reference unless such exhibits are specifically incorporated by
reference in the document which this Prospectus incorporates). Requests should
be directed to: President, Sino Pharmaceuticals Corporation, Unit 152, 11782
River Road Richmond, British Columbia V6X1Z7, Canada; telephone (604) 303-9180.
2
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
more detailed information and financial statements appearing elsewhere in and
incorporated by reference into this Prospectus. The shares offered hereby are
speculative and involve a high degree of risk. Each prospective investor should
carefully review the entire Prospectus, the financial statements and all
exhibits and documents referred to therein. See "Risk Factors."
The Company
Unless the context requires otherwise, all references to "we," "our,"
or "us" or the "Company" are to Sino Pharmaceuticals Corporation, originally
incorporated in the State of Wyoming in 1997 and its subsidiary, Sino
Pharmaceuticals Corporation, a Nevada corporation ("SPC").
On October 12, 2001 we entered into a Stock Purchase Agreement, which
was subsequently amended by an Amended and Restated Stock Purchase Agreement,
dated as of January 28, 2002 (the "Agreement"), with SPC and its shareholders to
acquire all of the issued and outstanding capital stock of SPC (the
"Acquisition"). As a result of the Acquisition, we issued to each shareholder of
SPC nine and three-quarters (9.75) shares of our Common Stock for each share of
SPC Common Stock that the shareholder owned, for a total of 9,750,000 shares.
Prior to the Acquisition we effected a one for four reverse stock split, and
thus had 250,000 shares of our $.001 par value Common Stock outstanding before
we issued the additional shares in connection with the Acquisition.
On December 28, 2001, we filed Articles of Amendment to amend and
restate our Articles of Incorporation to change our name from Unimann, Inc. to
Sino Pharmaceuticals Corporation.
Summary of Our Business
Our wholly owned subsidiary, SPC, was formed in Nevada in May 2001 and
acquired a 70% ownership interest in Qingdao Haier Pharmaceutical Co., Ltd.
("Qingdao Haier" or "QHP") in that month. Qingdao Haier was formed on November
24, 1994 as a wholly owned subsidiary of The Haier Group, one of the largest
business conglomerates in China with revenues exceeding U.S. $5 billion in 2000.
QHP is the sole business of SPC and, therefore, unless the context otherwise
indicates, references to our business are to the business of QHP that we own and
operate through SPC.
We manufacture both therapeutic pharmaceuticals and Chinese
nutraceuticals, which essentially are herbal supplements. We manufacture and
distribute eleven products in China and we are seeking regulatory approval from
the Chinese State Drug Authority ("SDA") for five new products. In addition, we
have six new pharmaceutical and nutraceutical products that are currently in our
late stage development pipeline. Our pharmaceutical products are designed to
treat and prevent osteoporosis, chronic gastritis, diabetes and cancer. Our
nutraceutical products are designed to boost immunity and treat and prevent
premenstrual syndrome, liver disease and insomnia, among other items. All of our
drugs are marketed under the "Haier" brand name. Our customers are located
throughout all the provinces of China. We market our products through our retail
sales and distribution network in hospitals, pharmacies and supermarkets.
Since our incorporation in 1997 and until the Acquisition, we had not
engaged in any operations other than organizational matters. We were formed
specifically to be a "blank check" or "clean public shell" corporation for the
purpose of either merging with or acquiring an operating company with operating
3
history assets. We were an inactive publicly registered shell corporation and
had no significant assets or operations until we acquired SPC. We have not been
involved in any litigation nor have we had any regulatory problems or business
failures. We are not traded on any public market and have never paid dividends.
As of December 31, 2001 we had 25 shareholders of record.
We maintain our principal executive offices at Unit 152, 11782 River
Road, Richmond, British Columbia V6X1Z7, Canada and our telephone number is
(604) 303-9180.
4
Summary of the Offering
Securities Offered........................................ 750,000 shares of Common Stock, $.001 par value
Capital Stock Outstanding
Common Stock outstanding prior to and after
Offering............................................. 10,000,000 shares (1)
Proposed OTC Bulletin Board Symbol........................ Common Stock: "SINO"
Use of Proceeds........................................... The Company will not receive any proceeds from the
sale of the Shares by the Selling Shareholders. See
"Use of Proceeds."
Plan of Distribution...................................... The Shares offered hereby may be sold from time to
time by certain Selling Shareholders. These Shares
may be offered from time to time in one or more
transactions on the OTC Bulletin Board or any public
market on which the Company's Common Stock trades at
market prices prevailing at the time of the sale, at
prices related to such prevailing market prices, or
at negotiated prices.
The Company is paying all of the expenses in
connection with the preparation of this Prospectus
and the related Registration Statement, estimated at
$35,000. See "Selling Shareholders" and "Plan of
Distribution."
Risk Factors.............................................. This offering involves a high degree of risk. See
"Risk Factors and Investment Considerations."
- --------------------
(1) Indicates shares of Common Stock outstanding at December 31, 2001.
5
Summary Financial Data
The following table summarizes certain selected financial data and
unaudited data of the Company and is qualified in its entirety by the more
detailed financial statements contained elsewhere in this Prospectus. The
summary financial information contained in the following table is derived from
and should be read in conjunction with the financial statements of the Company
and the notes thereto appearing elsewhere in this Prospectus. The pro forma
consolidated statement of operations data and the pro forma consolidated balance
sheet data give effect to the acquisition of SPC. The pro forma consolidated
statement of operations data give effect to such events as if they had occurred
as of the first day of the periods presented and the pro forma consolidated
balance sheet data are presented as if such events had occurred on the balance
sheet date. See "Business" and The Company's Consolidated Financial Statements.
Sino Pharmaceutical Corporation
(in thousands, except per share date)
Year Ended Nine Months Ended
December 31, September 30,
--------------------------------------- ----------------------------
1999 2000 2000 2001
------------------ --------------- -------------------- ----------
(Unaudited)
Statement of Pro Pro
Operation Data: Actual Forma(1) Actual Forma(1)
- --------------- --------------------- ----------------- --------------------- -------------
Net sales $ -- $ 7,615 $ -- $ 5,921
Cost of sales -- 1,768 -- 1,179
Operating expenses 3 8,846 19 4,918
Operating income (loss) (3) 1 (19) (196)
Other income (expense) -- (64) -- --
Minority Interest -- 14 -- 35
Income taxes -- (35) -- --
Net (loss) attributable
to common stockholders (3) (81) (19) (161)
Basic & Diluted
(loss) per share $ -- $ (0.01) $ (0.02) $ (0.02)
Weighted average number of
shares outstanding 1,000,000 10,000,000 1,000,000 10,000,000
(in thousands)
Nine Months Ended
September 30, 2001
(Unaudited)
Balance Sheet Data: Actual Pro Forma(1)
- ---------------------------- -----------------
Working capital $ (18) $ (18)
Total assets -- 9,000
Short-term debt -- 9,000
Long-term debt -- --
Total stockholders' equity $ (18) (18)
- --------------------
(1) The pro forma figures for the year ended December 31, 2000 include
the operating results of SPC for its fiscal year ended December 31, 2000 and the
operating results of the Company for its fiscal year ended December 31, 2000.
6
RISK FACTORS AND INVESTMENT CONSIDERATIONS
Investment in us involves a number of risks. In addition to the risks
and investment considerations discussed elsewhere in this Prospectus the
following factors should be carefully considered by anyone purchasing the
securities offered by this Prospectus.
Risks of the Company
Risks Relating to our Business
No History of Profitable Operations
On a pro forma basis, for the nine months ended September 30, 2001, and
year ended December 31, 2000, we had revenues of approximately
$5,921,000 and $7,615,000, respectively, and losses of $161,000 and
$81,000, respectively. Due to our plans to develop and market
additional products and expand our customer base, it anticipates that
we will have further operating losses for the immediate future.
Need for Additional Capital
to Complete QHP Acquisition
SPC executed promissory notes in the total principal amount of $9.0
million to acquire QHP. Such notes were due in November 2001, but the
holders agreed to an extension of the maturity date of the notes to
April 30, 2002. We must raise additional capital in order to pay the
notes in full before such date or we will forfeit our ownership
interest in QHP. In such case, we would not have any significant assets
and our current shareholders will have suffered significant dilution of
their ownership interest in us. A principal reason for SPC and its
shareholders entering into the Acquisition transaction with us is that
they believe it will assist in raising such capital to retire the SPC
notes. We intend to make a private placement of our debt and/or equity
securities to raise the required capital. There can be no assurance we
will be able to raise the capital needed or raise it on terms and
conditions acceptable to us. If we are successful in raising the
capital, there can be no assurance that our shareholders will not
suffer significant dilution of their ownership interest in us.
Need for Additional Capital For
Operations
We estimate that an additional $1.0 million over the next 12 months
will be necessary in order to finance our business, assuming that we
receive a $4.4 million equity contribution from Haier, as required in
connection with SPC's purchase of its interest in QHP. Haier will not
make such capital contribution until SPC pays the note that it issued
to Haier. Because we currently do not have sufficient revenues to
support our activities, we will be required to raise additional capital
to fund our operations and finance our product research and
development. Before its acquisition by SPC, QHP relied primarily on
capital contributions and loans from Haier to meet its operational and
capital requirements. Any equity financing that we make to fund QHP's
activities after the Acquisition could result in dilution to our
then-existing stockholders. Debt financing will result in interest
expense, and if convertible into equity, could also dilute
then-existing stockholders. If we were unable to obtain financing in
the amounts required and on terms deemed acceptable, our business and
future success may be adversely affected.
7
Option to Purchase Haier's Interest
in QHP
Haier owns the remaining 30% of QHP. We have an oral understanding that
we may purchase this interest; however, the price and terms are subject
further negotiations. There can be no assurance that we will be able to
acquire this minority interest or can acquire it on terms and
conditions acceptable to us. In such case, Haier will remain a minority
owner of QHP.
Risks of Doing Business
in China
The potential risks of political, social or economic instability in the
People's Republic of China could adversely affect our ability to carry
on or expand our business in China.
Virtually all of our business is conducted in China. Consequently, an
investment in our Common Stock may be adversely affected by the
political, social and economic environment in China. Under its current
leadership, China had been pursuing economic reform policies, including
the encouragement of private economic activity and greater economic
decentralization. There can be no assurance, however, that the Chinese
government will continue to pursue such policies, that such policies
will be successful if pursued, or that such policies will not be
significantly altered from time to time. Our business and prospects are
dependent upon agreements and regulatory approval with various entities
controlled by Chinese governmental instrumentalities. Our operations
and prospects would be materially and adversely affected by the failure
of such governmental entities to grant necessary approvals or honor
existing contracts, and, if breached, it might be difficult to enforce
these contracts in China. In addition, the legal system of China
relating to foreign investments is new and continually evolving, and
currently there can be no certainty as to the application of its laws
and regulations in particular instances.
Our business plan assumes that if we can broaden our array of
pharmaceutical and nutraceutical products and increase our market
penetration in China, we will achieve profitable operating results. In
order to achieve the demand for our products, we must educate the
Chinese medical community and consumers about the uses of its products
and we must study export market opportunities. No assurance can be
given that we will develop a sufficient array of products or that the
products will gain broad enough acceptance in the Chinese market place
to permit us to achieve profitable operations. Further, we may be
limited in our ability to sell our products outside of China due to
competitive, regulatory and other barriers and patent rights held by
our competitors in some other countries.
Patent Protection
Three of our products are protected by patents in China. There can be
no assurance our current or future production of our patented
pharmaceutical products will not be the subject of a patent
8
infringement action in the future asserted by patent holders or that
our competitors will take political steps to prevent us from producing
them in China. Further, none of our neutraceutical products are
protected by patents. A key to our future success is our ability to
produce our pharmaceutical and nutraceuticals at lower costs than our
competitors. Although we currently utilize our modern manufacturing
facility to produce our pharmaceuticals and neutraceuticals at low
costs, we will be competing against other low cost producers, including
Kunming Pharmaceutical Company and Shanghai Pharmaceutical Company.
There can be no assurance that we will be able to produce our
pharmaceuticals and nutraceuticals at lower costs than our competitors.
No Employment Agreements
We have no employment agreements with any of our employees, including
our key employees. Employment agreements are not generally used in
China and historically there has not been much movement of employees
between employers. We will rely on this cultural tradition and will not
seek employment agreements with our key employees. The loss of these
key employees would adversely impact our performance.
The market in which we operate is
intensely competitive and actions by
our competitors could harm our
business
We must compete with other pharmaceutical companies, many of whom are
larger, better capitalized, better connected with and more experienced.
Barriers to entry in the pharmaceutical and nutraceutical industry are
moderate and increased competition could occur. As we seek to market
our current and new products, we will face a greater number of
competitors, many of whom will be in well-established markets we seek
to penetrate. Accordingly, we may not be able to successfully compete
against them or any future competitors. Moreover, competitors may be
able to respond more quickly to take advantage of new or changing
opportunities, technologies and customer preferences and requirements.
They also may be able to undertake more extensive promotional
activities and offer more attractive rates and other terms to
borrowers, gaining a competitive advantage over us.
We may have difficulty
managing future expansion
Our future success will be highly dependent upon our ability to
successfully manage our operations. If our products are successful, we
will need to expand very quickly to meet demand. Our future operating
results will depend, in part, on the ability of our management and
other key employees to implement a system for operations, financial
control, and information management, and to recruit, train, and manage
our employee base.
Our ability to manage and support our growth effectively will be
substantially dependent on our ability to implement adequate financial
and management controls, reporting systems, and other procedures and
hire sufficient additional financial, accounting, administrative, and
management personnel. There can be no assurance that we will be able to
identify, attract, and retain experienced personnel. There can be no
9
assurance that we will be able to achieve or manage our growth
successfully or to implement and maintain adequate financial and
management controls and procedures, and any inability to do so would
have a material adverse effect on our business, results of operations
and financial condition.
Risks Relating to the Acquisition
and The Company Seeking to
trade Publicly
The consideration paid to the former
SPC shareholders was determined
after negotiation and may not reflect
any recognized criteria of value
The number of shares of our Common Stock that we issued in the
Acquisition may not have reflected the actual value of our stock and
may bear no relationship to the assets, book value, earnings, net
worth, or any other recognized criteria of value. Consequently, the
consideration offered to SPC was determined arbitrarily and solely by
the SPC shareholders and us. In establishing the offering price, our
management considered such matters as SPC's operating results, assets,
business, financial resources and the general condition of the
securities markets. The exchange ratio of the Acquisition should not,
however, be considered an indication of actual value of SPC or us.
Neither we nor SPC obtained a fairness opinion in connection with the
Acquisition.
Certain anti-takeover features of our
articles of incorporation and bylaws
and Wyoming law may have the effect
of discourage potential acquisition
proposals
Certain provisions of our Articles of Incorporation and Bylaws, along
with certain provisions of Wyoming Business Corporation Act, could
discourage potential acquisition proposals and could delay or prevent a
change in control. Such provisions could diminish the opportunities for
a shareholder to participate in tender offers, including tender offers
at a price above the then current market value of our Common Stock.
Such provisions also may inhibit fluctuations in the market price of
our Common Stock that could result from takeover attempts.
There is no market for your shares
and you may not be able to sell them
There has been no trading market for our Common Stock. There is no
assurance that a trading market will ever exist. The Securities and
Exchange Commission ("SEC") is hostile to reverse shell acquisitions
such as our acquisition of SPC. There is no assurance the registration
statement we file under the Securities Act of 1933, as amended (the
"Securities Act") will be declared effective by the SEC.
If our registration statement is declared effective, we intend to apply
for the inclusion of our Common Stock on the OTC Bulletin Board. We do
not meet the qualifications for NASDAQ or the other national exchanges.
Although we will be applying to list our Common Stock on the OTC
Bulletin Board, there can be no assurance that our application for
inclusion will be granted and there can be no assurance that an active
market will develop for our Common Stock. There can be no assurance
that our registration statement of which this Prospectus is a part will
10
be declared effective by the SEC and, even if it is declared effective,
that any broker will be interested in trading our stock. Therefore, it
may be difficult to sell your shares if you desire or need to sell. You
may have no more liquidity in your stock even if we are successful in
registering our stock under the Securities Act and then qualifying it
for trading on the OTC Bulletin Board.
* We do not know if and how our Common Stock will trade. Even if
we are successful getting our Common Stock qualified for
trading the OTC Bulletin Board, market price of our Common
Stock may fluctuate significantly due to a number of factors,
some of which may be beyond our control, including:
* the potential absence of securities analysts covering us and
distributing research and recommendations about us;
* the liquidity of our Common Stock will be low because only
2.5% of our shares will be in the hands of non-affiliates and
such shares are not eligible for sale under exemptions from
registration under the Securities Act of 1933;
* changes in earnings estimates by securities analysts who might
follow us or our ability to meet those estimates;
* the operating results and stock price performance of other
comparable companies;
* low trading volume because so much of our stock is closely
held;
* overall stock market fluctuations; and
* economic conditions generally and in the pharmaceutical
industry in particular.
Any of these factors could have a significant and adverse impact on the
market price of our Common Stock. In addition, the stock market in
general has experienced extreme volatility and rapid decline that has
often been unrelated or disproportionate to the operating performance
of particular companies. These broad market fluctuations may adversely
affect the trading price of our Common Stock, regardless of our actual
operating performance.
Risks Relating to Offering
Possible Depressive Effect on
Price of Securities Eligible for
Future Sale
Our officers and directors own an aggregate of 8,277,750 shares of
Common Market Stock. Such shares are "restricted securities," as that
term is defined in Rule 144 promulgated under the Securities Act, and
may be sold only in compliance with Rule 144, pursuant to registration
under the Securities Act or pursuant to an exemption from such
registration. Generally, under Rule 144, each person holding restricted
11
securities for a period of one year, two years in the case of directors
and officers, may, every three months, sell in ordinary brokerage
transactions or to market makers an amount of shares up to (and
including) the greater of 1% of a company's then outstanding Common
Stock or the average weekly trading volume for the four weeks prior to
the proposed sale. None of such restricted securities were eligible for
sale under Rule 144 as of January 28, 2002. Sales of substantial
amounts of Common Stock by our shareholders under Rule 144 or
otherwise, or even the potential for such sales, could have a
depressive effect on the market price of the shares of our Common Stock
and could impair our ability to raise capital through the sale of our
equity securities. See "Description of Securities," "Security Ownership
of Certain Beneficial Owners and Management" and "Plan of Placement."
Possible Issuance of Options May Dilute
Interest of Stockholders
We have reserved 1,000,000 shares of our Common Stock for issuance
under our 2001 Stock Option Plan. As of December 31, 2001, none of the
options available under this Plan had been granted. To the extent that
stock options are granted and exercised, dilution to the interests of
our stockholders may occur. Moreover, the terms upon which we will be
able to obtain additional equity capital may be adversely affected
since the holders of the outstanding options can be expected to
exercise them at a time when we would, in all likelihood, be able to
obtain any needed capital on terms more favorable to us than those
provided in such outstanding options. See "Management -- Stock Option
Plan."
Issuance of Securities Senior to
Common Stock Could Dilute Voting Power
and Equity and Could Create
Preferences Over Stockholders
Our Articles of Incorporation authorize the issuance of up to
10,000,000 shares of preferred stock ("Preferred Stock"). As of
December 31, 2001, our Board of Directors had not designated or issued
any shares of Preferred Stock. Shares of Preferred Stock may be issued
by our Board of Directors from time to time in one or more series, for
such consideration and with such relative rights and preferences as the
Board of Directors may determine. Any shares of Preferred Stock that
may be issued in the future could be given voting and conversion rights
that could dilute the voting power and equity of holders of shares of
Common Stock, and have preferences over shares of our Common Stock with
respect to dividends and in liquidation.
Lack of Dividends
Holders of Common Stock are entitled to receive such dividends as may
be declared by our board of directors. To date, we have paid no cash
dividends on our shares of Common Stock and we do not expect to pay
cash dividends on our Common Stock in the near term. We intend to
retain future earnings, if any, to provide funds for operations of our
business. Investors who anticipate the need for dividends from
investments should refrain from purchasing the Common Stock offered by
this Prospectus.
12
DETERMINATION OF OFFERING PRICE
This Prospectus may be used from time to time by the Selling
Shareholders and the Holders who offer the Common Stock registered under the
Registration Statement of which this Prospectus is a part. We anticipate that
the Common Stock sold by the Selling Shareholders will be sold from time to time
in transactions (which may include block transactions) on the OTC Bulletin Board
or other public market at the then prevailing prices.
MARKET FOR THE SHARES AND RELATED STOCKHOLDER MATTERS
Our Common Stock is not listed or quoted at the present time, and there
is no public market for our Common Stock. There can be no assurance that a
public market for our Common Stock will ever develop. We intent to qualify our
Common Stock for trading on the OTC Bulletin Board or other public market after
the Registration Statement, of which this Prospectus is a part, becomes
effective.
The number of beneficial holders of our Common Stock of the Company as
of the close of business on January 28, 2002 was approximately 32.
Dividend Policy
Holders of Common Stock are entitled to receive such dividends as may
be declared by our Board of Directors. We have not declared or paid cash
dividends on our Common Stock and we do not anticipate that we will pay such
dividends in the foreseeable future. Rather, we intend to apply any earnings to
the expansion and development of our business. Any payment of future dividends
on our Common Stock and the amount of any dividends will be determined by our
Board of Directors and will depend, among other factors, upon our earnings,
financial condition and cash requirements, and any other factors the Board of
Directors may deem relevant.
USE OF PROCEEDS
We will not receive any proceeds from this offering. All proceeds from
the sale of the Shares by this Prospectus will go to the Selling Shareholders.
13
SELECTED COMBINED FINANCIAL DATA
The following table contains certain selected financial data of the
Company and is qualified by the more detailed financial statements, including
the pro forma consolidated financial statements, and the notes thereto included
elsewhere in this Prospectus. The financial data for the years ended December
31, 1999 and 2000 have been derived from the Company's financial statements,
which statements have been audited by Robison, Hill & Co., independent public
accountants, and are included elsewhere in this Prospectus. The financial data
for the nine months ended September 30, 2000 and September 30, 2002 have been
derived from the Company's unaudited financial statements which, in the opinion
of the Company, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of results of operations of such
periods.
The pro forma consolidated statement of operations data for the year
ended December 31, 2000 and for the nine months ended September 30, 2001 and the
pro forma consolidated balance sheet at September 30, 2001 have been derived
from the unaudited pro forma consolidated financial statements of the Company
and SPC, which give effect to the acquisition of SPC. The pro forma consolidated
statement of operations data give effect to such events as if they occurred as
of the first day of the periods presented and the pro forma consolidated balance
sheet data give effect to such events as if they had occurred on September 30,
2001. The Company has neither declared nor paid any cash dividends on its
outstanding Common Stock. See "Business."
The actual pro forma results for the nine months ended September 30,
2001 are not necessarily indicative of the results that may be expected for any
subsequent interim period or for the full year. This data should be read in
conjunction with the Company's financial statements (including the pro forma
consolidated financial statements) and the Notes thereto included elsewhere in
this Prospectus and "Management's Discussion and Analysis of Financial
Conditions and Result of Operations."
Sino Pharmaceutical Corporation
(in thousands, except per share date)
Year Ended Nine Months Ended
December 31, September 30,
--------------------------------------- ----------------------------
1999 2000 2000 2001
------------------ --------------- -------------------- ----------
(Unaudited)
Statement of Pro Pro
Operation Data: Actual Forma(1) Actual Forma(1)
- --------------- --------------------- ----------------- --------------------- -------------
Net sales $ -- $ 7,615 $ -- $ 5,921
Cost of sales -- 1,768 -- 1,179
Operating expenses 3 8,846 19 4,918
Operating income (loss) (3) 1 (19) (196)
Other income (expense) -- (64) -- --
Minority Interest -- 14 -- 35
Income taxes -- (35) -- --
Net (loss) attributable
to common stockholders (3) (81) (19) (161)
Basic & Diluted
(loss) per share $ -- $ (0.01) $ (0.02) $ (0.02)
Weighted average number of
shares outstanding 1,000,000 10,000,000 1,000,000 10,000,000
14
(in thousands)
Nine Months Ended
September 30, 2001
(Unaudited)
Balance Sheet Data: Actual Pro Forma(1)
- ---------------------------- -----------------
Working capital $ (18) $ (18)
Total assets -- 9,000
Short-term debt -- 9,000
Long-term debt -- --
Total stockholders' equity $ (18) (18)
- --------------------
(1) The pro forma figures for the year ended December 31, 2000 include the
operating results of SPC for its fiscal year ended December 31, 2000 and
the operating results of the Company for its fiscal year ended December 31,
2000.
15
MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
The following statement is made pursuant to the safe harbor provision
for forward-looking statements described in the Private Securities Litigation
Reform Act of 1995. Sino Pharmaceuticals Corporation and its subsidiary (the
"Company") may make certain statements in this Prospectus, including, without
limitation statements that contain the words "believes," "anticipates,"
"estimates," "expects," and words of similar import, constitute "forward-looking
statements." Forward-looking statements may relate to our future growth and
profitability; the anticipated trends in our industry; our competitive strengths
and business strategies; and our intent to increase our presence, scope and
market penetration in China through our business plan. Further, forward-looking
statements are based on our current expectations and are subject to a number of
risks, uncertainties and assumptions relating to our operations, financial
condition and results of operations. For a discussion of factors that may affect
the outcome projected in such statements, see "Risk Factors and Investment
Considerations." If any of these risks or uncertainties materialize, or if any
of the underlying assumptions prove incorrect, actual results could differ
materially from results expressed or implied in any of our forward-looking
statements. We do not undertake any obligation to revise these forward-looking
statements to reflect events or circumstances arising after the date of this
Prospectus.
Acquisition
On January 28, 2002 we acquired SPC. As a result of the Acquisition, we
issued nine and three-quarters (9.75) shares of our Common Stock for each share
of SPC Common Stock that the shareholder owned, for a total of 9,750,000 shares.
We effected a one for four reverse stock split, and thus had 250,000 shares of
our Common Stock outstanding prior to the Acquisition. As a result of the
Acquisition the business of SPC became our business. On December 28, 2001, we
filed Articles of Amendment to amend and restate our Articles of Incorporation
to change our name from Unimann, Inc. to Sino Pharmaceuticals Corporation to
reflect our new business.
Our wholly owned subsidiary, SPC, was formed in Nevada in May 2001 and
acquired a 70% ownership interest in Qingdao Haier Pharmaceutical Co., Ltd.
("Qingdao Haier" or "QHP") in that month. Qingdao Haier was formed on November
24, 1994 as a wholly owned subsidiary of The Haier Group, one of the largest
business conglomerates in China with revenues exceeding U.S. $5 billion in 2000.
QHP is the sole business of SPC and, therefore, unless the context otherwise
indicates, references to our business are to the business of QHP that SPC owns
and operates.
We manufacture both therapeutic pharmaceuticals and Chinese
nutraceuticals, which essentially are herbal supplements. We manufacture and
distribute fourteen products in China and recently obtained regulatory approval
from the Chinese State Drug Authority ("SDA") for four new products. Our
pharmaceutical products are designed to treat and prevent osteoporosis, chronic
gastritis, diabetes and cancer. Our nutraceutical products are designed to boost
immunity and treat and prevent premenstrual syndrome, liver disease and
insomnia, among other items. All of our drugs are marketed under the "Haier"
brand name in hospitals, pharmacies and supermarkets throughout all of the
provinces in China.
Before our acquisition of SPC we were an inactive publicly registered
shell corporation and had no significant assets or operations.
Management Discussion and Analysis of Financial Condition and Results of
Operation
The following discussion should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this Prospectus.
The following discussion contains forward-looking statements, including, but not
16
limited to, statements concerning our plans, anticipated expenditures, the need
for additional capital and other events and circumstances described in terms of
our expectations and intentions. You are urged to review the information set
forth under the captions below and under "Risk Factors and Other Investment
Considerations" in this Prospectus for factors that may cause actual events or
results to differ materially from those discussed below.
Results and Plan of Operation. On a pro forma basis, for the year ended
December 31, 2000 we had revenues of $7,615,000 and a loss of $81,000 and for
the nine months ended September 30, 2001 we had revenues of $5,921,000 and a
loss of $161,000. All of our revenues were derived from QHP. Our revenues for
the first nine months of fiscal 2001 increased over those in 2000 due to
increased product offerings and marketing efforts. Our loss for this period grew
due to higher marketing and general and administrative expenses necessary to
increase the size of our business Since its formation in 1994, QHP has received
capital contributions and advances from its parent, The Haier Group, to
implement its business plan. Because QHP was a wholly owned subsidiary and it
was in the development stage for much of this period, it has historically not
operated on a profitable basis.
We believe that with the addition of its management team and the
implementation of a new business plan, we can grow the pharmaceutical and
nutraceutical business. We plan, with sufficient capital, to increase our
revenue base by increasing the promotion of our products with a larger sales
force and greater marketing efforts and emphasizing new product development.
Further, we are in the process of implementing a reduction in our staff to shift
the business focus from a traditional Chinese full employment model to a
profit-oriented business model. With an increase in revenues and margins through
higher production and more intense and efficient utilization of our
manufacturing facilities and personnel, we believe we can achieve profitable
operations. However, no assurances can be offered in this regard.
Liquidity and Capital Resources. We will require approximately $10.0
million in debt or equity capital to retire the $9.0 million principal amount
notes it issued to purchase QHP and to provide working capital to implement our
business plan. We obtained an extension of the maturity date of this
indebtedness to April 30, 2002. Upon payment of the notes, Haier is obligated to
contribute $4.4 million in working capital. We believe that this amount plus our
own $1.0 million working capital infusion from our planned financing will be
sufficient to execute our business plan for the next 24 months. We have no
commitments to raise such capital, but we have undertaken discussions with prior
debt/equity-convectional investment bankers and other financing sources. We can
offer no assurance that we will be able to raise the required capital or raise
it on terms and conditions acceptable to us. If we are unable to raise such
capital and fail to pay the notes when due, we may have to return the capital
stock in QHP that we purchased to Haier.
Inflation and Seasonality. Inflation has not been a significant factor
in our operations. Our business is not seasonal in nature.
17
BUSINESS
Summary of Our Business
Our wholly owned subsidiary, SPC, was formed in Nevada in May 2001 and
acquired a 70% ownership interest in Qingdao Haier Pharmaceutical Co., Ltd.
("Qingdao Haier" or "QHP") in that month. Qingdao Haier was formed on November
24, 1994 as a wholly owned subsidiary of The Haier Group, one of the largest
business conglomerates in China with revenues exceeding U.S. $5 billion in 2000.
As a result of the acquisition of QHP, our business is now the business of SPC.
QHP is the sole business of SPC and, therefore, unless the context otherwise
indicates, references to our business are to the business of QHP that SPC owns
and operates.
We manufacture both therapeutic pharmaceuticals and Chinese nutraceuticals,
which essentially are herbal supplements. We manufacture and distribute fourteen
products in China and recently obtained regulatory approval from the Chinese
State Drug Authority ("SDA") for four new products. In addition, we have three
new products targeting osteoporosis that are currently in our late stage
development pipeline where we are seeking regulatory approval from the SDA. Our
pharmaceutical products are designed to treat and prevent osteoporosis, chronic
gastritis, diabetes and cancer. Our four nutraceutical products are designed to
boost immunity and treat and prevent premenstrual syndrome, liver disease and
insomnia. Our three new products in the regulatory pipeline are designed to
treat and prevent osteoporosis on a pharmaceutical and nutraceutical level. All
of our drugs are marketed under the "Haier" brand name throughout all of the
provinces in China in hospitals, pharmacies and supermarkets.
Our Strategy
Our strategy is to reposition our business to take advantage of what we
perceive to be three long-term growth areas:
* pharmaceuticals;
* nutraceuticals; and
* given sufficient capital, biotechnology.
Pharmaceuticals
According to the SDA, we have the second largest pharmaceutical
distribution system in China, the largest being that of China North
Pharmaceutical Corporation ("China North"), which is owned by the Chinese
government. More than 95% of the pharmaceutical industry is state owned and
managed and we believe that this industry is characterized by inefficiency, low
productivity, mismanagement and low innovation. We believe that this provides an
opportunity for future growth as we reposition our business to concentrate on
more product offerings and greater market penetration.
We are currently positioned as a patented drug manufacturer with a
research and development base. Given sufficient capital and the ability to
market our pharmaceuticals and nutraceuticals to achieve a profitable level of
operations, we plan to become a comprehensive pharmaceutical manufacturer,
incorporating the research and development, patented drug, generic drug and
contract drug manufacturing models.
The life cycle of a drug begins at research and development based
companies ("R&D companies") whose mission it is to develop the drug, guide it
through the regulatory approval process and ultimately obtain a patent. After
the drug's sales growth levels off, a second group enters, the patented drug
manufacturers, who either obtain a license to produce the drug or acquire
exclusive rights from the R&D company to produce the drug. The R&D company will
18
then generally reinvest part or all of the proceeds of the sale in new research
and development, its core competency. After the patent on a drug expires,
production is open to any company that obtains regulatory approval. At this
point the generic manufacturers enter the market, which usually causes profit
margins to decline. The final group of companies in the pharmaceutical arena are
the contract manufacturers, which serve all of the foregoing groups as well as
retail groups.
The firm of Warburg, Dillon Reed estimates that in the next five years,
in the United States alone, patent protected prescription drugs with annual
sales of approximately $30 billion will lose their protected patent status. We
plan to position ourselves to manufacture and introduce these drugs into the
Chinese market on a generic basis and also to enter into licensing/royalty
agreements with multi-national pharmaceutical firms to manufacture and introduce
patented protected fourth and fifth generation prescription drugs into the
Chinese market.
We also plan to reposition ourselves as a leading supplier to the
rapidly growing over-the-counter ("OTC") drug market. These non-prescription
drugs are backed by what we believe to be favorable government policies and
potential for increased consumer consumption. We believe the Chinese market is
one of the fastest growing OTC drug market in the world and expect it to be the
world's single largest OTC drug market in the next decade. We estimate that
sales of OTC drugs were only approximately 10% of the nation's drug sales in
2000. As the disposable income for the Chinese increases and their health-care
awareness improves, we anticipate that they will buy more medicines to combat
common ailments. In addition, changes in China's health-care system are forcing
patients away from hospitals toward purchasing more OTC drugs.
Nutraceuticals
The nutraceutical industry, which includes western dietary supplements
and vitamins, is very young in China, but has undergone significant growth in
the recent years. The demand has been met principally from importing finished
nutraceuticals from North America, Europe and Australia. We intend to capitalize
on this growing market by substituting our products for imports and
manufacturing and introducing innovative nutraceutical products into the Chinese
market. There are several trends that we intend to take advantage of in
implementing our business plan: the increasing number of Chinese are traveling
abroad and becoming educated outside of China; the population's increasing
awareness of western health trends and information through more contact with
western media; and the movement from traditional Chinese medicine to western
complimentary medicine.
Biotechnology
Eastern Asia has traditionally placed a heavy emphasis on engineering
and physical sciences rather than biology. In recent years, however, public
funding has increased in life sciences research, and particularly in genomics.
The Chinese government has identified genomic research as a funding priority and
a new crop of genomic start-ups has sprung up as a result of increased access to
venture capital and an influx of foreign investment and expertise from western
companies that are eager to forge joint ventures with Chinese partners and
exploit the country's genetic resources. The Chinese government has recently
launched several major initiatives in human genomics in Shanghai and Beijing,
with budgets totaling over U.S. $30 million over a three-year period. In
addition, China has approximately 30 laboratories operated by non-government
controlled entities involved in human genome research.
Given sufficient capital, we intend to establish a biotechnology
research and development unit to employ Chinese scientific researchers, develop
new biopharmaceuticals and, in collaboration with the two government genome
centers and the other laboratories, commercialize on the functional aspects of
their research. In this effort we will be able to conduct biotechnology research
at a relatively low cost compared to the United States and will have the benefit
of a distinct and diverse genetic pool in China.
19
Our Products
The following is a summary of pharmaceuticals and nutraceuticals that
we are selling, plan to sell, are seeking approval from the SDA to begin selling
or are in the development stage. All of our pharmaceuticals are third generation
products. Our Gainuozhen and Borui pharmaceutical products accounted for
approximately 18% and 22%, respectively, of our 2001 sales. Our Caili and Caile
No. 2 nutraceutical products each accounted for approximately 15% of our 2001
sales. We sell our prescription pharmaceuticals in hospitals, pharmacies and/or
drug stores. We sell our OTC pharmaceutical products in pharmacies, drugstores
and supermarkets and our nutraceutical products in drugstores and supermarkets.
Pharmaceutical Products that we are now selling
- ----------------------- --------------------- ------------------------------------------------------------------------
Product Application Description
- ----------------------- --------------------- ------------------------------------------------------------------------
Gainuozhen(1) Osteoporosis This product is an active metabolite of Vitamin D3, which promotes the
(known as absorption of calcium into the bones. We are the only manufacturer of
alfacalcidol in North this product in China; however, the six-year production and marketing
America) protection that the Chinese government grants has expired. Nonetheless,
this product has considerable brand recognition in China.
- ----------------------- --------------------- ------------------------------------------------------------------------
Danguixiang(1) Chronic gastritis It is a traditional Chinese medicine ("TCM") based pharmaceutical. We
and irritable bowel have product protection in China on this product for approximately
syndrome ("IBS") another 20 years.
- ----------------------- --------------------- ------------------------------------------------------------------------
Sangzhi(1) Diabetes A TCM-based pharmaceutical for the treatment for hyperglycemia and for the
treatment and maintenance of non-insulin dependent diabetes.
- ----------------------- --------------------- ------------------------------------------------------------------------
Borui(2) Anti-Cancer It was the first oral, anti-neoplastic drug for the treatment of
(known as etoposide various types of cancers. The oral delivery system allows the patient
in North America) to be ambulatory.
- ----------------------- --------------------- ------------------------------------------------------------------------
Haitong(2) Cholesterol This is a proprietary anti-thrombotic and anti-hyper lipidemia
pharmaceutical for treatment of hypercholesterolemia (high
cholesterol). The product, known as propylene glycol mannuronate
sulphate ("PGMS") is an alternative to the class of statin drugs
marketed in North America and Europe.
- ----------------------- --------------------- ------------------------------------------------------------------------
Tianruite(3) Analgesic/Anti- It is a broad spectrum analgesic sold for the treatment of cold and flu
pyuretic symptoms.
- ----------------------- --------------------- ------------------------------------------------------------------------
- -----
(1) Available by prescription and OTC
(2) Available by prescription only
(3) Available by OTC only
20
Nutraceutical Products that we are now selling
- ----------------------- --------------------- -----------------------------------------------------------------------
Product Application Description
- ----------------------- --------------------- -----------------------------------------------------------------------
Caili Immunity This is a standardized herbal TCM liquid tonic that helps to
boost immunity and provide immunomodulating benefits. We
market it as a health tonic for overall health maintenance.
- ----------------------- --------------------- -----------------------------------------------------------------------
Caili No. 2 PMS/menopause This is a standardized herbal TCM liquid tonic for women used to
moderate premenstrual ("PMS") and menopausal symptoms in women. It
is a natural hormone modulator.
- ----------------------- --------------------- -----------------------------------------------------------------------
Hailite Liver Disease It is a TCM-based product for the treatment of liver disease and
hepatoxicity
- ----------------------- --------------------- -----------------------------------------------------------------------
Shenankong Diabetes This is a TCM-based nutraceutical that is marketed for
hyperglycemia (high blood pressure) and for the regulation of
blood sugar.
- ----------------------- --------------------- -----------------------------------------------------------------------
Baoankang Immunity This is a TCM-based nutraceutical that is an immuno-regulator and
immuno-modulator.
- ----------------------- --------------------- -----------------------------------------------------------------------
F.O.S. Solution Constipation This is a proprietary nutraceutical for relief of constipation that
was recently approved by SDA. We plan to begin selling it in
mid-2002.
- ----------------------- --------------------- -----------------------------------------------------------------------
Pharmaceutical Products for which we are seeking SDA approval
- ----------------------- ----------------------- ---------------------------------------------------------------------
Product Application Description
- ----------------------- ----------------------- ---------------------------------------------------------------------
1, 25 (OH) 2AD3 Osteoporosis This product is a prescription pharmaceutical drug
that is the (sold in North final active metabolite of
vitamin D3, which promotes the America and Europe as
absorption of calcium into the bone and contributes
to the increase Calcitrol) in bone density. If SDA
approves, we will be the first and only
manufacturer of this product in China and will have
six years of production and marketing protection.
- ----------------------- ----------------------- ---------------------------------------------------------------------
Caili Insomnia It is a TCM-based prescription pharmaceutical. If
approved, this product will have six years of production and
marketing protection in China.
- ----------------------- ----------------------- ---------------------------------------------------------------------
Hailite Hepatitis B&C and This is a prescription pharmaceutical
product. If approved, it Liver Disease will have six
years of production and market protection in China.
- ----------------------- ----------------------- ---------------------------------------------------------------------
21
Neutraceutical Product for which we are seeking SDA approval
- ----------------------- ----------------------- ---------------------------------------------------------------------
F.M.B. for Children Multi-vitamin This is a proprietary vitamin/mineral/herbal dietary supplement for
supplement children for the promotion of growth and brain development. We
have an exclusive 20-year license from the American
Institute for Bio-Social and Medical Research for the Chinese
market.
- ----------------------- ----------------------- ---------------------------------------------------------------------
Products in the Development Pipeline
- ----------------------- ----------------------- ---------------------------------------------------------------------
Product Application Description
- ----------------------- ----------------------- ---------------------------------------------------------------------
Ubiquinone Heart Function This is a chemically synthesized co-enzyme chemical that regulates
(known as coenzyme heart muscle function and prevents heart cell oxidation. The
Q10 in N. America and product is used in cosmetics and as a nutritional supplement
Europe) worldwide. A Japanese pharmaceutical company holds an international
patent on the product. We are synthesizing the product by
utilizing another production process and do not believe that
it infringes on the current patent. We intend to apply for
an international patent. The total sales of co-enzyme Q10 in
North America in 2001 were approximately US $1.2 billion.
We intend to sell the product as a pharmaceutical and
nutraceutical in China and export it as a nutraceutical to
North America/Europe if we obtain SDA approval.
- ----------------------- ----------------------- ---------------------------------------------------------------------
Lipidex Cholesterol This is a proprietary, patentable nutraceutical product we are
formulating for lowering of blood cholesterol and tri-glycerides.
- ----------------------- ----------------------- ---------------------------------------------------------------------
Ipsacol IBS This is a proprietary nutraceutical for the treatment of IBS.
- ----------------------- ----------------------- ---------------------------------------------------------------------
Hematonic Iron Supplement It is a proprietary nutraceutical iron tonic for the promotion of
children's growth and for iron supplementation in women. We
intend to seek a patent on this product.
- ----------------------- ----------------------- ---------------------------------------------------------------------
Multivitamin Jelly Vitamin Supplement This is a proprietary children's one-a-day multivitamin in jelly Bean
bean format.
- ----------------------- ----------------------- ---------------------------------------------------------------------
Children's Calcium Calcium Supplement It is a proprietary children's calcium for bone growth and calcium
Chewable supplementation.
- ----------------------- ----------------------- ---------------------------------------------------------------------
Research and Development -- Pharmaceutical and Nutraceutical Products
We have developed all of our pharmaceutical and nutraceutical products
internally. Given sufficient capital, we plan to expand our research and
development capabilities.
22
Production Facilities
According to the SDA, we own and operate one of the most modern
pharmaceutical factories in China. It is a good manufacturing practices ("GMP")
factory certified by the SDA. Our facilities are certified and licensed to
manufacture the full range of pharmaceuticals, including tablets, hard capsules,
soft gel capsules, granules and oral solutions. All of our products are
manufactured at our facilities and are fully licensed for sale throughout China
and for export overseas. However, in order to export our products into other
countries, our products would have to be registered in such countries, which we
have not done. Our production capabilities include an extraction workshop that
can:
* perform extractions of water or ethanol, produce 21.6 million
bottles of oral solutions of various sizes per year, and
produce soft gel capsules at the rate of 42 million per year;
* produce solid preparations, including 10.8 million packets of
granules per year of various sizes, and produce 130 million
capsules per year; and
* produce 250 million capsules or tablets per year.
Our factory is running at approximately 25% capacity. It can produce
all of our pharmaceuticals and nutraceuticals now approved by the SDA or in the
pipeline for review by the SDA for the immediate future.
Distribution
We believes that we have one of the largest and most developed
pharmaceutical sales and distribution networks in China, comprising 4,120 retail
outlets and 105 hospitals. We believe that this network is second only to
China's largest pharmaceutical company, the state-owned North China
Pharmaceutical Corporation ("NCPC"). Of the retail outlets, which include
private and state owned pharmacy chains, supermarket chains, independent private
and state-owned pharmacies, hospital retail pharmacies, over 3,300 are run
without our sales personnel or employees. In addition to the retail sales force
and distribution network, we also have a sales force of 200 that calls on
approximately 105 hospitals throughout China. Our hospital customers purchase
the pharmaceuticals under China's centrally planned national medical insurance
system. Our largest group of hospital customers are in Qingdao, Wuhan and
Sijiazhuang provinces. Our largest concentration of retail outlets are in
Suzhou, Sichuan, Beijing, Qingdao and Wuxi provinces.
Suppliers
Our main supplier of pharmaceutical raw materials and ingredients is
Qingdao No. 3 Pharmaceutical Plant, based in Qingdao, China. We purchase herbs
for our nutraceuticals from local collective farms in Shandong Province.
23
Customers
Our customers are located throughout all of the provinces of China. We
market to these customers through our retail sales and distribution network in
hospitals and pharmacies. We use a team of detail personnel to educate doctors
and pharmacists on the benefits of our products. We also use direct consumer
marketing through newspaper advertisements and in-store point of sale materials
and on-site promotions.
Employees
We employ approximately 219 full-time staff, including 34 in
production, 32 in technical and research and development, 10 in administration,
140 in sales and marketing and 13 in shipping and warehousing. We also employ
approximately 1,000 part-time sales and distribution employees in China.
Competition
We believe that the Chinese pharmaceutical industry is a highly
regulated, inefficient, low productivity manufacturing industry characterized by
little innovation. The industry principally produces traditional Chinese
medicines and second and third generation western prescription and
over-the-counter (OTC) pharmaceuticals that are predominantly generic (or off
patent) and, to a lesser extent, patented medicines. The industry lacks current,
or fourth generation, pharmaceuticals production, both patented and generic,
such as those being manufactured and marketed by the multinational
pharmaceutical companies in North America, Europe and even India.
The condition of the industry is principally the result of years of
state ownership and high subsidization. The state-owned and operated entities
are centrally planned and directed organizations under the socialist system.
This has resulted in regionalization of both production and sales, complacency
through assured regional market share in a large, captive and protected market,
and the lack of research and development innovation as a result of centrally
planned and directed production dictates.
In recent years, as a consequence of China's continuing evolution to a
more capitalist oriented market economy, its pharmaceutical industry has
undergone some positive measure of reform, leading to deregulation,
consolidation, closure of facilities, privatization and decreasing subsidization
of the industry that has resulted in marginal increases in efficiency,
productivity and innovation.
While China has many pharmaceutical factories, most of these factories
are small-to-medium sized, regional, state-owned enterprises. According to the
SDA, there are only twelve large, state-owned pharmaceutical enterprises that
have a national exposure and distribution system similar to ours. Most of these
are dedicated to the production of second and third generation, generic
pharmaceuticals and traditional Chinese medicines. There are relatively few
neutraceutical producers in China and most neutraceuticals are imported. We
believe that few of these have the ubiquitous, established brand recognition and
consumer confidence that the "Haier" brand does. China also has sixteen
foreign-owned and Sino-foreign joint venture pharmaceutical enterprises that
market third and fourth generation pharmaceuticals.
For a country with the size and population base of China, the existence
of very few large, national, state owned pharmaceutical factories, coupled with
sixteen multinational pharmaceutical factories, does not lend itself to a highly
competitive industry and market environment in the patented pharmaceutical and
nutraceutical area. Further, we believe that the ongoing and continued closure
24
of aging, non-complying and debt ridden, regional, state owned pharmaceutical
enterprises and the merging and consolidation of existing state owned
pharmaceutical enterprises, coupled with the recently imposed restriction on
issuance of new pharmaceutical production licenses, should further lessen the
competitive environment.
Regulation and Taxation
All Sino-foreign joint ventures, such as QHP, are governed by the "Law
of the People's Republic of China on Chinese-Foreign Equity Joint Ventures,"
which contain provisions on protecting the legal rights of foreign investors.
Enterprises of this category have the characteristics that all the parties
participating in the joint venture offer investment in it, jointly operate it,
share the risks of it in accordance with their proportions of investment and are
jointly held responsible for the profits and losses of it. The corporate form of
the Sino-foreign joint-ventures is the limited liability company with the board
of directors being the supreme body of power.
The establishment of Sino-foreign pharmaceutical joint-venture
enterprises requires special approval and license by the SDA, which restricts
the number of licenses granted to Sino-foreign pharmaceutical joint-venture
enterprises. In fact, under the most recent SDA guidelines, no further licenses
shall be issued for new pharmaceutical factories in China.
According to Chinese law, all pharmaceutical enterprises are governed,
according to the Drug Administration Law of the People's Republic of China,
under the sole auspices of the SDA.
All pharmaceutical enterprises are approved and registered by the SDA
and all pharmaceutical enterprises are issued a "License of Pharmaceutical
Enterprise" and a "Certificate of Inspection" to legally operate in China. Under
the China Foreign Joint Venture Law, QHP, as a joint venture, has a two-year tax
holiday commencing from the date that it first declares a net profit.
Thereafter, QHP will have a tax rate of 28%.
Intellectual Property
We hold patents issued by the Chinese government on three of our
pharmaceutical products: Gainuozhen, Sangzhi and Borui. The patent protection on
these in China extends from 2002 to 2008.
Property
We own and conduct our operations from a three-story, 42,545 square
foot office complex and a two-story, 132,305 square foot pharmaceutical factory
complex. These facilities are located on a 340,000 square foot parcel of land to
which we have a right of use from the People's Republic of China in the city of
Qingdao in Shandong Province, China.
Acquisition of Qingdao Haier Pharmaceutical Co., Ltd.
On May 30, 2001, SPC entered into a Share Ownership Purchase & Transfer
Agreement (the "Transfer Agreement") with Haier and Brave Lion (HK) Co., Ltd.
("Brave Lion"). QHP was wholly owned by Haier and Brave Lion, with Haier owning
a 75% interest and Brave Lion owning a 25% interest. Brave Lion is owned by an
affiliate of Haier. Under the Transfer Agreement SPC, purchased 70% of the
shares of Common Stock of QHP from Haier and Brave Lion for $9.0 million. SPC
issued two promissory notes in payment of the purchase price, one in the amount
of $8,260,700 to Haier and one in the amount of $739,300 to Brave Lion. These
notes were issued May 30, 2001 and were initially due November 30, 2001. SPC did
not make a payment on either of the notes by such date, and the maturity dates
of the notes were extended by action of the Board of Directors of QHP to April
30, 2002, and bear interest at a rate of 12% per annum.
25
A precondition to SPC's obligations under the Transfer Agreement was
that QHP have $7,650,000 in paid in capital on May 30, 2001. In addition, Haier
committed to make an additional investment of $4,440,000 on or before July 29,
2001 or the payment of the notes issued by QHP, whichever was later. Haier has
agreed to pay this amount concurrently with SPC's payment of its note to Haier.
Upon the investment by Haier of $4,440,000 in QHP, the ownership of QHP will be:
SPC - 70%; Haier - 20%; and Brave Lion - 10%.
The Chinese Government approved the transfer of the 70% ownership
interest in QHP on July 10, 2001, so that SPC is now the record owner of the QHP
shares. However, if we do not raise sufficient capital to enable SPC to pay the
notes by May 31, 2002 we will forfeit our ownership interest in QHP. The
Transfer Agreement provides for a Board of Directors of QHP of six members.
Under the Transfer Agreement, we will elect four of the directors, and Haier and
Brave Lion each will select one. We appoint the Chairman of the Board of
Directors, while Haier and Brave Lion jointly elect the Vice-Chairman. We also
have the right to appoint the general manager and financial manager of QHP. We
have an oral understanding with Haier that we may purchase the remaining 30% of
QHP in the future on terms acceptable to the parties. We can make no assurance
that we will in fact be able to make such purchase. Further, for various
reasons, some of which are political in nature, we may not want to make such
purchase.
Doing Business In China
Our business is conducted in the People's Republic of China ("PRC" or
"China") and is subject to the political, social and economic environment in
China. China is controlled by the Communist Party of China. Under its current
leadership, China has been pursuing economic reform policies, including the
encouragement of private economic activity and greater economic
decentralization. However, the Chinese central government has exercised and
continues to exercise substantial control over virtually every sector of the
Chinese economy. Accordingly, the Chinese government actions in the future,
including any decision not to continue to support current economic reform
programs and to return to a more centrally planned economy, or regional or local
variations in the implementation of economic reform policies, could have a
significant effect on economic conditions in China or in its particular regions.
Economic development may be further limited by the imposition of austerity
measures intended to reduce inflation, the inadequate development or maintenance
of infrastructure or the unavailability of adequate power and water supplies,
transportation, raw materials and parts, or a deterioration of the general
political, economic or social environment in the PRC, any of which would have a
material adverse effect on our business, financial condition and results of
operations. Moreover, economic reforms and growth in China have been more
successful in certain provinces than others, and the continuation or increase of
such disparities could affect the political or social stability of China.
If we were required to move our manufacturing operations outside of
China, our potential profitability, competitiveness and market position could be
materially jeopardized, and there could be no assurance that we could continue
our operations. Our business and prospects are dependent upon agreements with
various entities controlled by Chinese governmental instrumentalities. The
failure of such entities to honor these contracts, or the inability to enforce
these contracts in China could adversely affect our business operations. There
can be no assurance that assets and business operations in China will not be
nationalized, which could result in the total loss of our investment in China.
The legal system of China relating to foreign investments is relatively
new and continues to evolve, thus creating uncertainty as to the application of
its laws and regulations in particular instances. Definitive regulations and
policies with respect to such matters as the permissible percentage of foreign
investment and permissible rates of equity returns have not yet been published.
26
Furthermore, statements regarding these evolving policies have been conflicting.
These policies are in many cases subject to interpretation, the discretion of
officials, and continue to be modified, perhaps on a case-by-case basis. As the
legal system in China develops with respect to these new types of enterprises,
foreign investors may be adversely affected by new laws, changes to existing
laws, or interpretations of the laws, and the preemption of provincial or local
laws by national laws. In circumstances where adequate laws exist, it may not be
possible to obtain timely and equitable enforcement of them.
Legal Proceedings
We are not subject to any pending litigation, legal proceedings or
claims.
27
MANAGEMENT
Executive Officers and Directors
The following table sets forth the names, positions and ages of our
directors and executive officers. Our directors were elected by the unanimous
written consent of our shareholders in lieu of a meeting. Our directors are
typically elected at each annual meeting and serve for one year and until their
successors are elected and qualify. Officers are elected by our Board of
Directors and their terms of office are at the discretion of our Board.
Name of Director/Officer Age Position(s) With Company
- ------------------------ --- ------------------------
Mahmoud S. Aziz 44 Chairman of the Board and President
Jianfang Jin 48 Secretary and Director
Yunhua Jin, Ph.D. 72 Director
Zahir Popat 48 Treasurer and Director
Manjit Mundie 38 Director
Mahmoud S. Aziz
Mr. Aziz has served as our Chairman of the Board and President since
January 28, 2002 and has served as Chairman of the Board, President and
Secretary of SPC since its inception in 2001. Since 1983, Mr. Aziz has
been the Chairman and CEO of The Fazio Group of companies, which are
involved in manufacturing, international trade, shipping and
transportation, biotechnology, and pharmaceuticals, warehousing and
distribution, real estate construction and development, ship-building,
banking and financial investments. He will devote such amount of time
as he deems sufficient to manage our business. Mr. Aziz is the
principal shareholder of the Fazio Group. He has a biochemistry degree
from Simon Fraser University, Canada.
Jianfang Jin
Mr. Jin has served as our Vice President, Secretary, and a director
since January 28, 2002 and has been Vice President and Treasurer of SPC
since its inception in 2001. Since May 1997, Mr. Jin has served as the
President of the American Evans Group Corporation, a holding
corporation with various interests in China. Since June 1997, he has
served as General Manager and a consultant of Beijing Evans Information
and Consulting Co., Ltd., a China-based management, investment and
marketing consulting company. From July 1994 to January 1997, he served
as CEO of Fanlen Software System (Beijing) Co., Ltd., a software design
and development company. Mr. Jin has a bachelors degree in economics
from Nankai University in China, a masters degrees in accounting from
the University of Indianapolis and a masters degree in agricultural
economics from Purdue University.
Yunhua Jin
Dr. Jin has served as our director since January 28, 2002. Since 1998,
she has been the State Outstanding Senior Expert of China, which is a
28
senior scientific advisor to the Chinese government. Also since 1998
she has been a senior advisor to the Director General of the SDA. From
1986 to 1998 she was the Executive Vice Chairman of the Committee on
Technology for the State Pharmaceutical Administration of China. Dr.
Jin served as the Expert Advisor to the United Nations Industrial
Development Organization for the Chinese Government in the area of
preventative medicines from 1983 to 1987. Ms. Yunhua received her
Bachelor of Science degree in Pharmacy from Shanghai Medical College,
and her Masters of Science and Ph.D. in pharmaceutical chemistry from
Purdue University. She is the mother of Jianfang Jin.
Zahir Popat
Mr. Popat has been our Treasurer and a director since January 28, 2002.
He was the President and CEO of La Roche Remedies, Inc. from 1999 to
February, 2002, when he resigned to join us on a full-time basis. From
1986 through 1998, Mr. Popat represented Apotax, Inc., a
privately-owned Canadian generic manufacturer in its Middle East
operations. Mr. Popat earned a Bachelors degree in Science and Pharmacy
from the University of British Columbia.
Executive Compensation
For the year ended December 31, 2000, and for the nine months ended
September 30, 2001, Mr. Aziz, our Chairman of the Board and President, Mr. Jin,
our Secretary, and Mr. Popat, our Treasurer, have not received any compensation
or stock options.
Director Compensation
Directors currently receive no cash compensation for their services in
that capacity. Reasonable out-of-pocket expenses may be reimbursed to directors
in connection with attendance at meetings.
Stock Option Grants
Summary of the 2001 Stock Option Plan
Our board of directors adopted the 2001 Stock Option Plan (the "Plan")
on October 31, 2001 and our shareholders approved the Plan effective December
27, 2001. The Plan authorizes us to issue 1,000,000 pre-reverse stock split
shares of Common Stock for issuance upon exercise of options. The Plan
authorizes us to grant to our key employees (i) incentive stock options to
purchase shares of Common Stock and (ii) non-qualified stock options to purchase
shares of Common Stock. We have not granted any options under the Plan.
Objectives
The objective of the Plan is to provide incentives to our key employees
and directors to achieve financial results aimed at increasing
shareholder value and attracting talented individuals to the Company.
Persons eligible to be granted incentive stock options under the Plan
will be those employees whose performance, in the judgment of the
compensation committee of our board of directors, can have significant
effect on our success.
29
Oversight
The compensation committee of our board of directors will administer
the Plan by making recommendations to the board or determinations
regarding the persons to whom options should be granted and the amount,
terms, conditions and restrictions of the awards. It also has the
authority to interpret the provisions of the Plan and to establish and
amend rules for its administration subject to the Plan's limitations.
The compensation committee is comprised of non-employee directors as
required by Rule 16b-3 of the Securities and Exchange Act of 1934, as
amended.
Types of grants
The Plan allows for the grant of both incentive stock options and
incentive stock options. The Plan does not specify what portion of the
awards may be in the form of incentive stock options or non-statutory
options. Incentive stock options awarded our to employees are qualified
stock options under the Internal Revenue Code.
Statutory conditions on stock options
Incentive stock options granted under the Plan must have an exercise
price at least equal to 100% of the fair market value of the Common
Stock as of the date of grant. Incentive stock options granted to any
person who owns, immediately after the grant, stock possessing more
than 10% of the combined voting power of all classes of our stock, or
of any parent or subsidiary corporation, must have an exercise price at
least equal to 110% of the fair market value of the Common Stock on the
date of grant.
- - Exercise price
Non-statutory stock options may have exercise prices as determined by
the compensation committee of our board of directors.
- - Dollar limit
The aggregate fair market value, determined as of the time an incentive
stock option is granted, of the Common Stock with respect to which
incentive stock options are exercisable by an employee for the first
time during any calendar year cannot exceed $100,000. However, there is
no aggregate dollar limitation on the amount of non-statutory stock
options that may be exercisable for the first time during any calendar
year.
- - Expiration date
Any option granted under the Plan will expire at the time fixed by the
compensation committee, which cannot be more than ten years after the
date it is granted or, in the case of any person who owns more than 10%
of the combined voting power of all classes of our stock or of any
subsidiary corporation, not more than five years after the date of
grant.
- - Exerciseability
The compensation committee may also specify when all or part of an
option becomes exercisable, but in the absence of such specification,
the option will ordinarily be exercisable in whole or part at any time
during its term. However, the compensation committee may accelerate the
exerciseability of any option at its discretion.
- - Assignability
30
Options granted under the Plan are not assignable. Incentive stock
options may be exercised only while the optionee is employed by us or
within twelve months after termination by reason of death or
disabilities or within three months after termination for any other
reason.
Payment upon exercise of options
Payment of the exercise price for any option may be in cash, by
withheld shares which, upon exercise, have a fair market value at the
time the option is exercised equal to the option price (plus applicable
withholding tax) or in the form of shares of our Common Stock.
Tax consequences of options
An employee or director will not recognize income on the awarding of
incentive stock options and nonstatutory options under the Plan.
An optionee will recognize ordinary income as the result of the
exercise of a nonstatutory stock option in the amount of the excess of
the fair market value of the stock on the day of exercise over the
option exercise price.
An employee will not recognize income on the exercise of an incentive
stock option, unless the option exercise price is paid with stock
acquired on the exercise of an incentive stock option and the following
holding period for such stock has not been satisfied. The employee will
recognize long-term capital gain or loss on a sale of the shares
acquired on exercise, provided the shares acquired are not sold or
otherwise disposed of before the earlier of: (i) two years from the
date of award of the option or (ii) one year from the date of exercise.
If the shares are not held for the required period of time, the
employee will recognize ordinary income to the extent the fair market
value of the stock at the time the option is exercised exceeds the
option price, but limited to the gain recognized on sale. The balance
of any such gain will be a short-term capital gain. Exercise of an
option with previously owned stock is not a taxable disposition of such
stock. An employee generally must include in alternative minimum
taxable income the amount by which the price he paid for an incentive
stock option is exceeded by the option's fair market value at the time
his rights to the stock are freely transferable or are not subject to a
substantial risk of forfeiture.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are none to report.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Wyoming Business Corporation Act permits the inclusion in the
articles of incorporation, provisions limiting or eliminating the personal
monetary liability of directors to a corporation or its shareholders by reason
of their conduct as directors. The Wyoming Business Corporation Law limits or
eliminates the liability of a director of a corporation for monetary damages for
31
any action taken or not taken as a director in all instances except (i)
instances where a director receives financial benefits to which he is not
entitled; (ii) any intentional infliction of harm on the corporation or its
shareholders; (iii) the making of unlawful distributions; and (iv) intentional
violations of criminal law.
The Articles of Incorporation of the Company allow for the elimination
of personal monetary liability on the part of a director to the fullest extent
permitted by Wyoming law. Under a provision in the Articles, a shareholder is
able to prosecute an action against a director for monetary damages for any
action taken, or any failure to take any action, as a director, except for the
amount of financial benefit received by a director for which he is not entitled,
an intentional infliction of harm on the corporation or shareholders, a
violation of Section 17-16-833 of the Wyoming Business Corporation Law or an
intentional violation of criminal law. Such provision does not apply to any act
or omission occurring prior to the effective date of such provision. In
addition, such provision applies only to claims against the director arising out
of his role as a director and not, if he is also an officer, his role as an
officer or in any other capacity or to his responsibilities under any other law,
such as the federal securities laws.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
32
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of January 28, 2002, the number and
percentage of outstanding shares of Common Stock beneficially owned by (a) each
person known by us to beneficially own more than 5% of such stock, (b) each of
our directors, (c) each of our officers, and (d) all our directors and executive
officers as a group.
Name and Address of Shares Percent of
Beneficial Owner Beneficially Owned Common Stock
---------------- ------------------ ------------
Mahmoud S. Aziz(1) 6,080,480 60.8
Jianfang Jin(1) 1,297,257 13.0
Yunhua Jin(1) 200,002 2.0
Zahir Popat(1) 600,005 6.0
Manjit Mundie(1) 100,006 1.0
Ruth Jean Janay(1) 497,250 5.0
Shabnam Aziz(1) 975,000 9.8
All officers and directors as a group 8,277,750 82.3
(5 persons)
(1) The shareholder listed has sole voting and investment powers with respect
to the shares indicated. The addresses of all of these shareholders is Unit
152-11782 River Road, Richmond, British Columbia V6X 1Z7 Canada.
33
SELLING SHAREHOLDERS
The following table provides certain information with respect to the
Common Stock owned by the Selling Shareholders who are entitled to use this
Prospectus. The information in the table is as of the date of this Prospectus.
Except as described below, no Selling Shareholder has had a material
relationship with the Company within the past three years other than as a result
of the ownership of Common Stock.
Name and Address of Selling Shareholder Shares Owned(1) Shares Available Percent Owned After
for Sale Under Completion of the
this Prospectus(3) Offering (1)
- ----------------------------------------- ----------------- -------------------- -------------------------
David Adams 2,000 2,000 *
6556 E. Calle Herculo
Tucson, AZ 85711
Frank Anjakos 2,000 2,000 *
1971 N. Lindenwood Dr.
Tucson, AZ 85712
Shabnam Aziz(2) 975,000 350,000 *
Gerald Bowlin 2,000 2,000 *
1 East River Road, #720
Tucson, AZ 85704
Robert C. Daly 2,000 2,000 *
6250 Kelly Lynn Ct
Waxhaw, NC 28173
Brian Delfs 2,000 2,000 *
5162 E. Citrus St.
Tucson, AZ 85712
James Delfs 2,000 2,000 *
3730 N. Tucson Blvd.
Tucson, AZ 85716
Eric Evans 2,000 2,000 *
305 N. Hidalgo
Alhambra, CA 91801
Andrew Gerrish 2,000 2,000 *
2231 N. Norris
Tucson, AZ 85719
Audra Guthery 2,000 2,000 *
4810 E. Seneca
Tucson, Az 85712
David Hack 2,000 2,000 *
232 W. Smoot Dr.
Tucson, AZ 85705
Daniel L. Hodges 200,000 200,000 *
5505 N. Indian Trail
Tucson, AZ 85759
Matthew Hodges 2,000 2,000 *
1529 N. Desmond
Tucson, AZ 85712
Ruth Jean Janay2 497,250 150,000 *
34
Name and Address of Selling Shareholder Shares Owned(1) Shares Available Percent Owned After
for Sale Under Completion of the
this Prospectus(3) Offering (1)
- ----------------------------------------- ----------------- -------------------- -------------------------
Scott Krause 2,000 2,000 *
9160 E. Walnut Tree Dr.
Tucson, AZ 85749
Michael McKendrick
3015 N. Wentworth Rd.
Tucson, AZ 85749 2,000 2,000 *
John R. Ogden 2,000 2,000 *
5765 N. Paseo Otono
Tucson, AZ 85715
Ron Olson 2,000 2,000 *
9969 E. Paseo San Ardo
Tucson, AZ 85747
Mark Polifka 2,000 2,000 *
1132 Mohawk
Topanga, CA 90290
Michael Rhyner 2,000 2,000 *
9737 E. Mount Pleasant
Tucson, AZ 85749
Monica Romero 2,000 2,000 *
2528 W. Criswell Ct.
Tucson, AZ 85745
Melissa Saucedo 2,000 2,000 *
7019 W. Avondale
Tucson, AZ 85743
Howard Smith 2,000 2,000 *
4050 N. Hiddencove Pl.
Tucson, AZ 85749
John Sylvester 2,000 2,000 *
10222 E. Sylvester Rd.
Hereford, AZ 85615
Roger Tamietti 2,000 2,000 *
HC 70 Box 4254
Sahuarita, AZ 85629
Raymond Willey 2,000 2,000 *
1192 Joseph Ct.
Ripton, CA 95366
Jennifer Worden 2,000 2,000 *
9055 E. Catlina Hwy, No. 5206
Tucson, AZ 85749
Roger Wright 2,000 2,000 *
5294 W. Peridot St.
Tucson, AZ 85741
- ----------------------
(1) Percentages and share ownership numbers are based on the assumption that
all such Shares will be sold by the Selling Shareholder. Excludes
additional shares of Common Stock which the Selling Shareholder may acquire
from time to time subsequent to the date of this Prospectus.
35
(2) Address is c/o Unit 152 - 11782 River Road, Richmond, British Columbia
V6X1Z7 Canada.
(3) All Selling Shareholders, except Shabnam Aziz and Ruth Jean Janay, have
agreed not to sell more than 5% of the shares they own every 30 days
without first obtaining the written consent of the Company.
36
PLAN OF DISTRIBUTION
We are registering the Shares covered by this prospectus for the
Selling Shareholders. As used in this prospectus, "Selling Shareholders"
includes the pledgees, donees, transferees or others who may later hold the
Selling Shareholders' interests. We will pay the costs and fees of registering
the Shares, but the Selling Shareholders will pay any brokerage commissions,
discounts or other expenses relating to the sale of the Shares.
The Selling Shareholders may sell the Shares in the over-the-counter
market or otherwise, at market prices prevailing at the time of sale, at prices
related to the prevailing market prices, or at negotiated prices. In addition,
the Selling Shareholders may sell some or all of their Shares through:
- a block trade in which a broker-dealer may resell a portion of
the block, as principal, in order to facilitate the
transaction;
- purchases by a broker-dealer, as principal, and resale by the
broker-dealer for its account; or
- ordinary brokerage transactions and transactions in which a
broker solicits purchasers.
When selling the Shares, the Selling Shareholders, may enter into
hedging transactions. For example, the Selling Shareholders may:
- enter into transactions involving short sales of the Shares by
broker-dealers;
- sell Shares short themselves and redeliver such Shares to close out
their short positions;
- enter into option or other types of transactions that require the
Selling Shareholder to deliver Shares to a broker-dealer, who will then resell
or transfer the Shares under this Prospectus; or
- loan or pledge the common shares to a broker-dealer, who may sell the
loaned shares or, in the event of default, sell the pledged shares.
The Selling Shareholders may negotiate and pay broker-dealers
commissions, discounts or concessions for their services. Broker-dealers engaged
by the Selling Shareholders may allow other broker-dealers to participate in
resales. However, the Selling Shareholders and any broker-dealers involved in
the sale or resale of the Shares may qualify as "underwriters" within the
meaning of the Section 2(a)(11) of the Securities Act. In addition, the
broker-dealers' commissions, discounts or concession may qualify as
underwriters' compensation under the Securities Act. If the Selling Shareholders
qualify as "underwriters," they will be subject to the prospectus delivery
requirements of Section 5(b)(2) of the Securities Act. We have informed the
Selling Shareholders that the anti-manipulative provisions of Regulation M
promulgated under the Securities Exchange Act of 1934 may apply to their sales
in the market.
In addition to selling their Shares under this prospectus, the Selling
Shareholders may:
- agree to indemnify any broker-dealer or agent against certain
liabilities related to the selling of the common shares, including liabilities
arising under the Securities Act;
37
- transfer their Shares in other ways not involving market makers or
established trading markets, including directly by gift, distribution, or other
transfer; or
- sell their Shares under Rule 144 of the Securities Act rather than
under this Prospectus, if the transaction meets the requirements of Rule 144.
38
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue 100,000,000 shares of Common Stock,
$.001 par value per share, of which 10,000,000 shares are issued and outstanding
at the date of this Prospectus.
Holders of the Common Stock are entitled to one vote for each share
owned for all matters to be voted on by the shareholders. As required under
Wyoming law, there is [cumulative voting in] the election of directors.
Accordingly, each shareholder is entitled to vote the number of shares owned by
him for as many persons as there are directors to be elected, or to cumulate his
votes by giving one candidate as many votes as the number of such directors
multiplied by the number of his shares, or by distributing votes on the same
principle among any number of candidates. Holders of Common Stock are entitled
to receive such dividends as may be declared from time to time by the Board of
Directors out of funds legally available therefor and, in the event of
liquidation, dissolution or winding up of the Company, to share ratably in all
assets remaining after payment of liabilities. The holders of Common Stock have
no preemptive or conversion rights. The holders of Common Stock are not subject
to further calls or assessments. There are no redemption or sinking fund
provisions applicable to the Common Stock. The rights of the holders of the
Common Stock are subject to any rights that may be fixed for holders of
preferred stock, when and if any preferred stock is issued. The Common Stock
currently outstanding is, and the Common Stock offered by the Company hereby
will, when issued, be validly issued, fully paid and nonassessable.
The Board of Directors consists of five Directors. The term of office
of each Director expires at each annual meeting of shareholders or until his or
her successor is qualified and elected.
Preferred Stock
The Company is authorized to issue 10,000,000 shares of preferred
stock, $.001 par value per share, of which no shares were issued as of January
31, 2002. The authorized preferred stock may, without action by the shareholders
of the Company, be issued by the Board of Directors from time to time in one or
more series for such consideration and with such relative rights, privileges and
preferences as the Board may determine. Accordingly, the Board has the power to
fix the dividend rate and to establish the provisions, if any, relating to
voting rights, redemption rate, sinking fund, liquidation, preferences and
conversion rights for any series of preferred stock issued in the future. It is
not possible to state the actual effect of the authorization of additional
preferred stock upon the rights of holders of the Common Stock until the Board
determines the specific rights of the holders of any additional series of
preferred stock. The Board's authority to issue preferred stock provides a
convenient vehicle in connection with possible acquisitions and other corporate
purposes.
Dividend Rights. No cash dividend may be declared and paid or set apart
for payment upon the Common Stock until any past dividend or cumulative accrued
dividends on any outstanding series of preferred stock, including any preferred
stock with preferential dividend rights, has been fully paid or declared and set
apart for payment and until any sinking fund obligation for redemption of any
other series of preferred stock shall have been fully paid or declared and set
apart for payment. The holders of any series of preferred stock may share
ratably with the holders of any other series of preferred stock subsequently
issued by the Company in any dividends declared by the Company.
As a Wyoming corporation, the Company is permitted to declare and pay
dividends only to the extent that, after giving effect to the distribution,
39
either (i) it will be able to pay its debts as they become due in the usual
course of business, or (ii) its total assets exceed the sum of liabilities plus
the amount that would be needed if the Company were to be dissolved at the time
of the distribution, to satisfy preferential rights on dissolution of
shareholders whose preferential rights are superior to those receiving the
distribution. Any dividends not paid will accrue. No interest will be paid on
any accrued but unpaid dividends. The ability to pay dividends will, in addition
to the ability of the Company to generate net income, be dictated by the amount
of its annual net income from year to year. See "Dividends."
Voting Rights. The affirmative vote of the holders of a majority of the
outstanding shares of all series of preferred stock voting as a class, is
required in order to authorize any amendment to the Company's Articles of
Incorporation or bylaws which would affect adversely the holders of the
preferred stock outstanding or to authorize any additional class of stock equal
to, senior to, or ranking prior to the outstanding preferred stock with respect
to dividends or distributions of assets on liquidation. Voting separately, is
required to amend the Articles of Incorporation, bylaws or the resolution
establishing the terms of either of such classes so as to affect adversely their
rights, powers or preferences, with each class considered separately, including,
without limitation, any action that would (i) increase or decrease their par
value; (ii) effect an exchange, reclassification or cancellation of all or part
of either series; (iii) effect an exchange, or create a right of exchange, of
all or any part of the shares of another class into shares of either series;
(iv) change shares of either series into the same or a different number of
shares, either with or without par value, of the same class or another class or
classes; or (v) cancel or otherwise affect dividends on either series which have
accrued but have not been declared.
Transfer Agent
Company's transfer agent is Halladay Stock Transfer located in
Scottsdale, Arizona.
LEGAL MATTERS
The legality of the securities offered hereby has been passed upon for
the Company by Quarles & Brady Streich Lang, LLP, Phoenix, Arizona.
EXPERTS
The Consolidated Financial Statements and Related Financial Statement
Schedules incorporated in this Prospectus have been audited by Robison, Hill &
Co., independent auditors, as stated in their reports, and have been included in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
40
No dealer, salesman or any other person has been authorized to give any
information or to make any representation not contained in this Prospectus in
connection with the offer made by this Prospectus. If given or made, such
information or representation must not be relied upon as having been authorized
by the Company. This Prospectus does not constitute an offer of any securities
other than the registered securities to which it relates or an offer to any
person in any jurisdiction in which such an offer would be unlawful. Neither
delivery of this Prospectus nor any sale made hereunder shall under any
circumstances create an implication that information contained herein is correct
as of any time subsequent to the date of this Prospectus.
- ---------------
TABLE OF CONTENTS
Page
Available Information....................
Incorporation by Reference...............
Prospectus Summary.......................
Risk Factors.............................
Use of Proceeds..........................
Determination of Offering Price..........
Market for Common Equity and
Related Stockholder Matters..............
Selling Shareholders.....................
Plan of Distribution.....................
Management's Discussion and
Analysis.................................
Management...............................
Certain Relationships and Related
Transactions.............................
Limitation of Liability and
Indemnification Matters..................
Security Ownership of Certain
Beneficial Owners and
Management...............................
Description of Securities................
Legal Matters............................
Experts..................................
SINO PHARMACEUTICALS
CORPORATION
750,000 Shares
$.001 par value
PROSPECTUS
February ____, 2002
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 24. Indemnification of Directors and Officers.
ARTICLE 13 of the Amended and Restated Articles of Incorporation of the
Registrant provides as follows
To the fullest extent permitted by Wyoming law, the Corporation shall
indemnify and pay the expenses of any person who is or was made, or threatened
to be made, a party to an action or proceeding (whether civil, criminal,
administrative or investigative) by reason of the fact that such person is or
was a director, officer, employee, trustee or agent of or for the Corporation or
is or was serving at the request or with the prior approval of the Corporation
as a director, officer, employee, trustee or agent of another Corporation, trust
or enterprise, against any liability asserted against such person and incurred
by such person in any capacity arising out of that persons status as such,
whether or not the Corporation would have the power to indemnify that person
against such liability under the provisions of the Bylaws of the Corporation.
Further, the Corporation will pay the expenses of such persons as they are
incurred in advance of the final disposition of the action or proceeding, upon
the receipt of an undertaking by or on behalf of such person to repay the amount
if it is ultimately determined by a court of competent jurisdiction that such
person is not entitled to be indemnified by the Corporation.
ARTICLE VI of the Bylaws of the Registrant provide as follows:
Section 1. General. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. Derivative Actions. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
Section 3. Indemnification in Certain Cases. To the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Sections 1 and 2 of this Article VI, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
Section 4. Procedure. Any indemnification under Sections 1 and 2 of
this Article VI (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
such Sections 1 and 2. Such determination shall be made (a) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (b) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (c) by the
stockholders.
Section 5. Advances for Expenses. Expenses incurred by a director,
officer, employee, or agent of the Corporation in defending a civil or criminal
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to repay
such amount if it shall be ultimately determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article VI.
Section 6. Rights Not-Exclusive. The indemnification and advancement of
expenses provided by or granted pursuant to, the other Sections of this Article
VI shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any law, by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
Section 7. Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article VI.
Section 8. Definition of Corporation. For the purposes of this Article
VI, references to the "Corporation" include, in addition to the resulting
corporation, all constituent corporations (including any constituent of a
constituent) absorbed in consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees and agents so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Article VI with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
Section 9. Other Definitions. For purposes of this Article VI,
references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee
or agent of the Corporation which imposes duties on, or involves services by,
such director, officer, employee, or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article VI.
Section 10. Continuation of Rights. The indemnification and advancement
of expenses provided by, or granted pursuant to this Article VI shall continue
as to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such
person. No amendment to or repeal of this Article VI shall apply to or have any
effect on, the rights of any director, officer, employee or agent under this
Article VI which rights come into existence by virtue of acts or omissions of
such director, officer, employee or agent occurring prior to such amendment or
repeal.
Section 17-16-202 of the Wyoming Business Corporation Law allows a
corporation to eliminate the personal liability of directors of a corporation to
the corporation or its stockholders for monetary damages for any action taken,
or any failure to take any action, as a director, except for the amount of
financial benefit received by a director for which he is not entitled, an
intentional infliction of harm on the corporation or shareholders, a violation
of 17-16-833 or an intentional violation of criminal law.
Section 17-16-850, et seq. of the Wyoming Business Corporation Law
provides that a corporation has the power to indemnify a director, officer,
employee or agent of the corporation and certain other persons serving at the
request of the corporation in related capacities against amounts paid and
expenses incurred in connection with an action or proceeding to which he is or
is threatened to be made a party by reason of such position, if such person
shall have acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, and, in any criminal
proceeding, if such person had no reasonable cause to believe his conduct was
unlawful; provided that, in the case of actions brought by or in the right of
the corporation, no indemnification shall be made with respect to any matter as
to which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the adjudicating court determines that such
indemnification is proper under the circumstances.
The Registrant has included in its Articles of Incorporation a
provision limiting director liability in accordance with the statute.
Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated costs and expenses of the
Company in connection with the offering described in the Registration Statement.
Securities and Exchange Commission Registration Fee $ 62
Legal Fees and Expenses 25,000
Accounting Fees and Expenses 7,500
Other Expenses 2,500
-----
Total Expenses $35,062
Item 26. Recent Sales of Unregistered Securities.
None.
Item 27. Exhibits
Exhibit Description Reference
Number
-------------- ------------------------------------------------------------------------------- --------------
2.1 Stock Purchase Agreement among Registrant, Sino Pharmaceuticals Corporation, (1)
a Nevada corporation, and its shareholders
3.1 Amended and Restated Articles of Incorporation of Registrant, dated (1)
December 27, 2001
3.2 Amended and Restated By-laws of Registrant (1)
4.1 Form of Common Stock Certificate *
5.1 Opinion of Quarles & Brady Streich Lang, LLP as to the legality of securities *
being registered (includes consent)
10.1 2001 Stock Option Plan (1)
10.2 Share Ownership Purchase & Transfer Agreement relating to Quingdao Haier (1)
Pharmaceuticals Co., Ltd. between the Haier Group, Sino Pharmaceuticals
Corporation and Brave Lion (HK) Co., Ltd., dated May 30, 2001
10.3 Promissory Note issued by Sino Pharmaceuticals Corporation to Quingdao Haier (1)
Pharmaceuticals Co., Ltd., dated May 30, 2001, in the principal amount of
$8,260,700.00
10.4 Promissory Note issued by Sino Pharmaceuticals Corporation to Brave Lion (HK) (1)
Co., Ltd. in the principal amount of $739,300.00, dated May 30, 2001
21.1 List of Subsidiaries of the Registrant (1)
23.1 Consent of Robison, Hill & Co. *
23.2 Consent of Quarles & Brady Streich Lang, LLP (see 5.1) *
- ----------
* Filed herewith
(1) Filed with Current Report on Form 8-K, dated January 28, 2002.
Item 28. Undertakings
(a) Rule 415 Offering. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement;
(2) For determining any liability under the Securities Act of 1933
(the "Securities Act"), to treat each such post-effective
amendment as a new registration statement of the securities
offered, and the offering of the securities at the time to be
the initial bona fide offering.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(e) Request for acceleration of effective date:
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the small business
issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the small business issuer will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(f) Reliance on Rule 430A:
(1) For determining any liability under the Securities Act, to
treat the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the
issuer under Rule 424(b)(I), or (4) or 497(h) under the
Securities Act as part of this registration statement as of
the time the Commission declared it effective.
(2) For determining any liability under the Securities Act, to
treat each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities
offering in the registration statement, and that offering of
the securities at that time as the initial bona fide offering
of those securities.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Richmond, British Columbia, Canada on February 14 ,
2002.
SINO PHARMACEUTICALS CORPORATION, a
Wyoming corporation
/s/ Mahmoud S. Aziz
-----------------------------------
Mahmoud S. Aziz, Chairman of the
Board and President
(Chief Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signature and Title Date
/s/ Mahmoud S. Aziz February 14, 2002
- ---------------------------------------------------------------
Mahmoud S. Aziz, Chairman of the Board, President, Principal
Executive Officer and Director
/s/ Jianfang Jin February 14, 2002
- ---------------------------------------------------------------
Jianfang Jin, Secretary and Director
/s/ Yunhua Jin, Ph.D. February 14, 2002
- ---------------------------------------------------------------
Yunhua Jin, Ph.D., Director
/s/ Zahir Popat February 14, 2002
- ---------------------------------------------------------------
Zahir Popat, Treasurer, Principal Financial Officer and
Director
/s/ Manjit Mundie February 14, 2002
- ---------------------------------------------------------------
Manjit Mundie, Director
S-1
INDEPENDENT AUDITOR'S REPORT
Unimann, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheets of Unimann, Inc. (a
development stage company) as of September 30, 2001 and 2000, and the related
statements of operations and cash flows for the two years ended September 30,
2001, and the statement of stockholders' equity for the period from September
12, 1997 (inception) to September 30, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America., Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Unimann, Inc. (a
development stage company) as of September 30, 2001 and 2000, and the results of
its operations and its cash flows for the two years ended September 30, 2001 in
conformity with generally accepted accounting principles.
Respectfully submitted
/S/ ROBISON, HILL & CO.
Certified Public Accountants
Salt Lake City, Utah
November 16, 2001
F - 1
UNIMANN, INC.
(A Development Stage Company)
BALANCE SHEETS
September 30,
-------------------------------
2001 2000
-------------- ---------------
Assets: $ - $ -
============== ===============
Liabilities - Accounts Payable $ 17,664 $ 511
-------------- ---------------
Stockholders' Equity:
Common Stock, Par value $.001
Authorized 100,000,000 shares,
Issued 1,000,000 shares at September 30,
2001 and 2000 1,000 1,000
Paid-In Capital 5,072 2,824
Retained Deficit (1,075) (1,075)
Deficit Accumulated During the
Development Stage (22,661) (3,260)
-------------- ---------------
Total Stockholders' Equity (17,664) (511)
-------------- ---------------
Total Liabilities and
Stockholders' Equity $ - $ -
============== ===============
The accompanying notes are an integral part of these financial
statements.
F - 2
UNIMANN, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Cumulative
since
October 20,
1999
inception
For the year ended of
September 30, development
------------------------------
2001 2000 stage
-------------- -------------- ---------------
Revenues: $ - $ - $ -
Expenses: 19,401 3,260 22,661
-------------- -------------- ---------------
Net Loss $ (19,401) $ (3,260) $ (22,661)
-------------- -------------- ---------------
Basic & Diluted loss per share $ - $ -
============== ==============
The accompanying notes are an integral part of these financial
statements.
F - 3
UNIMANN, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM SEPTEMBER 12, 1997 (INCEPTION) TO SEPTEMBER 30, 2001
Deficit
Accumulated
Since
October 20,
1999
Inception of
Common Stock Paid-In Retained Development
Shares Par Value Capital Deficit Stage
------------ ----------- --------- ----------- -------------
Balance at September 12, 1997
(inception) - $ - $ - $ - $ -
Net Loss - - - (1,025) -
------------ ----------- --------- ----------- -------------
Balance at September 30, 1997 - - - (1,025) -
November 4, 1997 Issuance of
Stock for Services and payment
of Accounts Payable 1,000,000 1,000 - - -
Net Loss - - - (25) -
------------ ----------- --------- ----------- -------------
Balance at September 30, 1998 1,000,000 1,000 - (1,050) -
Capital contributed by shareholder - - 75 - -
Net Loss - - - (25) -
------------ ----------- --------- ----------- -------------
Balance at September 30, 1999 1,000,000 1,000 75 (1,075) -
Capital contributed by shareholder - - 2,749 - -
Net Loss - - - -
------------ ----------- --------- ----------- -------------
Balance at September 30, 2000 1,000,000 1,000 2,824 (1,075) (3,260)
Capital contributed by shareholder - - 2,248 - -
Net Loss - - - - (19,401)
------------ ----------- --------- ----------- -------------
Balance at September 30, 2001 1,000,000 $ 1,000 $ 5,072 $ (1,075) $ (22,661)
============ =========== ========= =========== =============
The accompanying notes are an integral part of these financial
statements.
F - 4
UNIMANN, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Cumulative
Since
October 20,
1999
Inception
For the years ended of
September 30, Development
---------------------
2001 2000 Stage
---------- ---------- --------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss $ (19,401)$ (3,260)$ (22,661)
Increase (Decrease) in Accounts Payable 17,153 511 17,664
---------- ---------- --------------
Net Cash Used in operating activities (2,248) (2,749) (4,997)
---------- ---------- --------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net cash provided by
investing activities - - -
---------- ---------- --------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Capital contributed by shareholder 2,248 2,749 4,997
---------- ---------- --------------
Net Cash Provided by
Financing Activities 2,248 2,749 4,997
---------- ---------- --------------
Net (Decrease) Increase in
Cash and Cash Equivalents - - -
Cash and Cash Equivalents
at Beginning of Period - - -
---------- ---------- --------------
Cash and Cash Equivalents
at End of Period $ - $ - $ -
========== ========== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ - $ -
Franchise and income taxes $ 50 $ 25 $ 75
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES: None
The accompanying notes are an integral part of these financial
statements.
F - 5
UNIMANN, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies for Unimann, Inc. is presented to
assist in understanding the Company's financial statements. The accounting
policies conform to generally accepted accounting principles and have been
consistently applied in the preparation of the financial statements.
Organization and Basis of Presentation
The Company was incorporated under the laws of the State of Wyoming on
September 12, 1997. The Company ceased all operating activities during the
period from September 12, 1997 to October 20, 1999 and was considered dormant.
Since October 20, 1999, the Company is in the development stage, and has not
commenced planned principal operations.
Nature of Business
The Company has no products or services as of September 30, 2001. The
Company was organized as a vehicle to seek merger or acquisition candidates. The
Company intends to acquire interests in various business opportunities, which in
the opinion of management will provide a profit to the Company.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles required management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of
credit risk such as foreign exchange contracts, options contracts or other
foreign hedging arrangements.
F - 6
UNIMANN, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Loss per Share
The reconciliations of the numerators and denominators of the basic loss
per share computations are as follows:
Per-Share
Income Shares Amount
------ ------ ------
(Numerator) (Denominator)
For the year ended September 30, 2001
Basic Loss per Share
Loss to common shareholders $ (19,401) 1,000,000 $ (0.02)
=============== =============== ==============
For the year ended September 30, 2000
Basic Loss per Share
Loss to common shareholders $ (3,260) 1,000,000 $ -
=============== =============== ==============
The effect of outstanding common stock equivalents would be
anti-dilutive for September 30, 2001 and 2000 and are thus not considered.
NOTE 2 - INCOME TAXES
As of September 30, 2001, the Company had a net operating loss
carryforward for income tax reporting purposes of approximately $23,000 that may
be offset against future taxable income through 2021. Current tax laws limit the
amount of loss available to be offset against future taxable income when a
substantial change in ownership occurs. Therefore, the amount available to
offset future taxable income may be limited. No tax benefit has been reported in
the financial statements, because the Company believes there is a 50% or greater
chance the carryforwards will expire unused. Accordingly, the potential tax
benefits of the loss carryforwards are offset by a valuation allowance of the
same amount.
F - 7
UNIMANN, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
(Continued)
NOTE 3 - DEVELOPMENT STAGE COMPANY
The Company has not begun principal operations and as is common with a
development stage company, the Company has had recurring losses during its
development stage.
NOTE 4 - COMMITMENTS
As of September 30, 2001 all activities of the Company have been
conducted by corporate officers from either their homes or business offices.
Currently, there are no outstanding debts owed by the company for the use of
these facilities and there are no commitments for future use of the facilities.
NOTE 5 - STOCK SPLIT
On October 20, 1999 the Board of Directors authorized 1,000 to 1 stock
split, changed the authorized number of shares to 100,000,000 shares and the par
value to $.001 for the Company's common stock. As a result of the split, 999,000
shares were issued. All references in the accompanying financial statements to
the number of common shares and per-share amounts for 1999 and 1998 have been
restated to reflect the stock split.
F - 8
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
Sino Pharmaceuticals Corporation
We have audited the accompanying consolidated balance sheet of Sino
Pharmaceuticals Corporation as of May 25, 2001, and the related consolidated
statements of operations and cash flows for the period ended May 25, 2001, and
the statement of stockholders' equity for the period from May 25, 2001
(inception) to May 25, 2001. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Sino
Pharmaceuticals Corporation as of May 25, 2001, and the results of its
operations and its cash flows for the period ended May 25, 2001 in conformity
with generally accepted accounting principles.
Respectfully submitted
/S/ ROBISON, HILL & CO.
Certified Public Accountants
Salt Lake City, Utah
July 3, 2001
F - 9
SINO PHARMACEUTICALS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, May 25,
2001 2001
-------------- ---------------
Assets:
Investment in Haier Pharmaceuticals Co., Ltd. $ 8,989,809 $ -
============== ===============
Liabilities - Notes Payable $ 9,000,000 $ -
-------------- ---------------
Stockholders' Equity:
Common Stock, Par value $.001
Authorized 100,000,000 shares,
-0- Shares Issued at May 25, 2001 1,000 1,000
Paid-In Capital 60,444 9,000
Retained Deficit (71,635) (10,000)
-------------- ---------------
Total Stockholders' Equity (10,191) -
-------------- ---------------
Total Liabilities and
Stockholders' Equity $ 8,989,809 $ -
============== ===============
The accompanying notes are an integral part of these financial
statements.
F - 10
SINO PHARMACEUTICALS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the For the
period ended period ended
September 30, May 25,
2001 2001
-------------- --------------
Revenues $ 1,842,068 $ -
Cost of revenues 366,748 -
-------------- --------------
Gross margin 1,475,320 -
Expenses:
Sales and marketing 1,092,418 -
General and administrative 389,991 10,000
Interest, net 64,546 -
-------------- --------------
Net Loss $ (71,635) $ (10,000)
============== ==============
Basic & Diluted loss per share $ (0.07) $ (0.01)
============== ==============
The accompanying notes are an integral part of these financial
statements.
F - 11
SINO PHARMACEUTICALS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM MAY 25, 2001 (INCEPTION) TO SEPTEMBER 30, 2001
(UNAUDITED)
Common Stock Paid-In Retained
Shares Par Value Capital Deficit
------------ ---------------------- -------------
Balance at May 25, 2001 (inception) 1,000,000 $ 1,000$ 9,000 $ -
Capital contributed by shareholder 51,444
Net Loss - - - (71,635)
------------ ---------------------- -------------
Balance at September 30, 2001
(unaudited) 1,000,000 $1,000$ 60,444 $ (71,635)
============ ====================== =============
The accompanying notes are an integral part of these financial
statements.
F - 12
SINO PHARMACEUTICALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the For the
period period
ended ended
September 30, May 25,
2001 2001
-------------- --------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss $ (71,635) $ (10,000)
Loss from investment in joint venture 10,191 -
-------------- --------------
Net Cash Used in operating activities (61,444) (10,000)
-------------- --------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Investment in Haier Pharmaceuticals., Ltd. (9,000,000) -
-------------- --------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Issuance of notes payable 9,000,000 -
Issuance of Common Stock 10,000 10,000
Capital contributed by shareholder 51,444 -
-------------- --------------
Net Cash Provided by
Financing Activities 9,061,444 10,000
-------------- --------------
Net (Decrease) Increase in
Cash and Cash Equivalents - -
Cash and Cash Equivalents
at Beginning of Period - -
-------------- --------------
Cash and Cash Equivalents
at End of Period $ - $ -
============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ -
Franchise and income taxes $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES: None
The accompanying notes are an integral part of these financial
statements.
F - 13
SINO PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED MAY 25, 2001 AND SEPTEMBER 30, 2001
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies for Sino Pharmaceuticals Corporation
is presented to assist in understanding the Company's financial statements.
Haier Pharmaceutical Co., Ltd. ("Haier")(a subsidiary of the Company) is
required to maintain its statutory accounts in accordance with the Accounting
Regulation of the People's Republic of China ("PRC") for Enterprises with
Foreign Investment. Such regulations differ in certain respects from Generally
Accepted Accounting Principles ("GAAP"). Consequently, certain adjustments were
made to the statutory accounts of Haier to conform to GAAP. The financial
statements of the Company were prepared in conformity with GAAP as if those
standards had been consistently applied throughout the year.
Interim Reporting
The unaudited financial statements as of September 30, 2001 and for the
period May 25, 2001 (inception) to September 30, 2001 reflect, in the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to fairly state the financial position and results of operations for
the period ending September 30, 2001. Operating results for interim periods are
not necessarily indicative of the results which can be expected for full years.
Organization and Basis of Presentation
The Company was incorporated under the laws of the State of Nevada on
May 25, 2001.
The Company's principal executive office is in Richmond, B.C. Canada
with offices in Quindao, China and Kirkland, USA.
Nature of Business
The principal activities of the Company are the production and sale of
medicine.
Consolidation
The accompanying consolidated financial statements include the accounts
of Sino Pharmaceuticals Corporation. and its 50% or more owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated. Joint
venture operations are accounted for under the equity method of accounting.
On May 30, 2001 the Company acquired a 70% interest in Haier
Pharmaceutical Co., Ltd. Haier is a sino-foreign equity joint venture enterprise
registered in the PRC. Haier was established
F - 14
SINO PHARMACEUTICALS CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIODS ENDED MAY 25, 2001 AND SEPTEMBER 30, 2001
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
on October 14, 1994, upon the issue of its business license, with an operating
period of fifteen years. The operating period, which will expire on November 23,
2009, can be extended upon mutual agreement of the joint venture partners.
Translation of Foreign Currency
All balance sheet accounts of foreign operations are translated into
U.S. dollars at the year- end rate of exchange and statement of operations items
are translated at the weighted average exchange rates for the year. The
resulting translation adjustments are made directly to a separate component of
the stockholders' equity. Certain foreign activities are considered to be an
extension of the U.S. operations, and the gain or loss resulting from
re-measuring these transactions into U.S. dollars is included in income. Gains
or losses from other foreign currency transactions, such as those resulting from
the settlement of foreign receivables or payables, are included in the
statements of operations.
Haier maintains its books and accounting records in RMB. Transactions in
other currencies are converted into RMB at the exchange rates prevailing at the
dates of the transactions. Monetary assets and liabilities denominated in other
currencies at the balance sheet date are converted into RMB at the exchange
rates prevailing at that date. Exchange differences other than those capitalized
are included in the statement of operations.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles required management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F - 15
SINO PHARMACEUTICALS CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIODS ENDED MAY 25, 2001 AND SEPTEMBER 30, 2001
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Loss per Share
The reconciliations of the numerators and denominators of the basic loss
per share computations are as follows:
Per-Share
Income Shares Amount
------ ------ ------
(Numerator) (Denominator)
(Unaudited)
For the period ended September 30, 2001
---------------------------------------
Basic Loss per Share
Loss to common shareholders $ (71,635) 1,000,000 $ (0.07)
=============== =============== ==============
The effect of outstanding common stock equivalents would be
anti-dilutive for September 30, 2001 and are thus not considered.
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of
credit risk such as foreign exchange contracts, options contracts or other
foreign hedging arrangements.
Revenue Recognition
Revenue is generated on the sale of medicines and is recognized when
significant risks and rewards of ownership of goods have been transferred.
Warranty
The Company offers a 1-2 year warranty on its products and accrues the
estimated warranty costs when sales are recorded.
NOTE 2 - COMMITMENTS
As of September 30, 2001 all activities of the Company have been
conducted by corporate officers from either their homes or business offices.
Currently, there are no outstanding debts owed by the company for the use of
these facilities and there are no commitments for future use of the facilities.
F - 16
SINO PHARMACEUTICALS CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIODS ENDED MAY 25, 2001 AND SEPTEMBER 30, 2001
(Continued)
NOTE 3 - INCOME TAXES
As of September 30, 2001, the Company had a net operating loss
carryforward for income tax reporting purposes of approximately $61,000 that may
be offset against future taxable income through 2021. Current tax laws limit the
amount of loss available to be offset against future taxable income when a
substantial change in ownership occurs. Therefore, the amount available to
offset future taxable income may be limited. No tax benefit has been reported in
the financial statements, because the Company believes there is a 50% or greater
chance the carryforwards will expire unused. Accordingly, the potential tax
benefits of the loss carryforwards are offset by a valuation allowance of the
same amount.
The Company's foreign operations are subject to value added tax ("VAT"),
which is charged on the selling price at a general rate of 17%. An input credit
is available whereby input VAT previously paid on purchases of semi-finished
products or raw materials can bve used to offset the output VAT on sales to
determine the net VAT payable.
NOTE 4 - ACQUISITION
On May 30, 2001, the Company entered into a Share Ownership Purchase and
Transfer Agreement with Haier Pharmaceutical Co. Ltd. ("Haier") whereby the
Company acquired 70% of the share ownership of Haier by issuing promissory notes
in the amount of $9,000,000. The $9,000,000 is due and payable on May 31, 2002.
F - 17
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On May 30, 2001, Sino Pharmaceuticals Corporation ("SPC") and Qingdao
Haier Pharmaceutical Co., Ltd. ("Haier") executed the Share Ownership Purchase
and Transfer Agreement that provides for the Purchase by SPC of 70% of the share
ownership of Haier. See "The Purchase." The following unaudited pro forma
condensed combined financial statements are based on the September 30, 2001
historical financial statements of SPC and the September 30, 2001 and December
31, 2000 historical financial statements of Haier contained elsewhere herein,
giving effect to the transaction under the purchase method of accounting, with
SPC treated as the acquiring entity for financial reporting purposes.
During October 2001 Sino Pharmaceuticals Corporation and Unimann, Inc.
(a development stage company) ("Unimann") executed the Stock Purchase Agreement
that provides for the Acquisition of SPC by Unimann. See "The Plan of
Acquisition". The following unaudited pro forma condensed combined financial
statements are based on the September 30, 2001 and 2000 historical financial
statements of SPC and Unimann contained elsewhere herein, giving effect to the
transaction under the purchase method of accounting, with SPC treated as the
acquiring entity for financial reporting purposes.
The unaudited pro forma condensed combined balance sheet presenting the
financial position of the Surviving Corporation assumes the purchase occurred as
of September 30, 2001 and 2000. The unaudited pro forma condensed combined
statement of operations presents the results of operations of the Surviving
Corporation, assuming the acquisition was completed on January 1, 2001 and 2000.
The unaudited pro forma condensed combined financial statements have
been prepared by management of SPC, Haier, and Unimann based on the financial
statements included elsewhere herein. The pro forma adjustments include certain
assumptions and preliminary estimates as discussed in the accompanying notes and
are subject to change. These pro forma statements may not be indicative of the
results that actually would have occurred if the combination had been in effect
on the dates indicated or which may be obtained in the future. These pro forma
financial statements should be read in conjunction with the accompanying notes
and the historical financial information of SPC, Haier, and Unimann (including
the notes thereto) included in this Form. See "FINANCIAL STATEMENTS."
F - 18
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 2001
Haier Sino Pro Forma
Pharmaceutical Pharmaceutical Unimann Pro Forma Combined
Company Corp. Inc. Adjustments Balance
---------------- ---------------- --------------- -------------- --------------
ASSETS
Current Assets $ 7,163,531 $ - $ - $ (7,163,531)A$ -
Fixed Assets (net) 4,411,412 - - (4,411,412)A -
Investment in Joint Venture - - - 9,000,000 B 9,000,000
Intangible and Other Assets (net) 2,151,718 - - (2,151,718)A -
---------------- ---------------- --------------- -------------- --------------
Total Assets $ 13,726,661 $ $ - $ - (4,726,661) $ 9,000,000
================ ================ =============== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $ 7,175,377 $ $ - 17,664 (7,175,377)A$ 17,664
Short-term Notes Payable - - - 9,000,000 C 9,000,000
---------------- ---------------- --------------- -------------- --------------
Total Liabilities 7,175,377 - 17,664 9,000,000 9,017,664
---------------- ---------------- --------------- -------------- --------------
Stockholders' Equity:
Common Stock - 1,000 1,000 (750)D
8,750 E 10,000
Additional Paid in Capital 7,560,000 60,444 5,072 (7,560,000)A
(8,000)E 57,516
Capital Translation Adjustment 19,584 - - (19,584)A -
Accumulated Deficit (1,028,300) (61,444) (1,075) 1,028,300 A (62,519)
Deficit Accumulated During the
Development Stage - - (22,661) - (22,661)
---------------- ---------------- --------------- -------------- --------------
Total Stockholders' Equity (Deficit) 6,551,284 - (17,664) (6,551,284) (17,664)
---------------- ---------------- --------------- -------------- --------------
Total Liabilities and Stockholders' Equity $ 13,726,661 $ $ - $ - 2,448,716 $ 9,000,000
================ ================ =============== ============== ==============
See accompanying notes to unaudited pro forma condensed combined financial
statements.
F - 19
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
Haier Sino Pro Forma
Pharmaceutical Pharmaceutical Unimann Pro Forma Combined
Company Corp. Inc. Adjustments Balance
---------------- ---------------- --------------- -------------- --------------
Revenues:
Sales $ 5,920,931 $ - $ - (1,776,279)A$ 4,144,652
Cost of Sales 1,178,833 - - (353,650)A 825,183
---------------- ---------------- --------------- -------------- --------------
Gross Margin 4,742,098 - - (1,422,629) 3,319,469
Operating Expenses:
Sales and Marketing 3,511,344 - - (1,053,403)A 2,457,941
General & Administrative 1,138,050 61,444 19,401 (341,415)A 877,480
Other Expenses 207,470 - - (62,241)A 145,229
---------------- ---------------- --------------- -------------- --------------
Net Income (Loss) from Operations $ (114,766)$ (61,444)$ (19,401) $ 34,430 $ (161,181)
================ ================ =============== ============== ==============
Weighted average shares outstanding 1,000,000 1,000,000 8,000,000 10,000,000
Loss per share $ (0.07) $ (0.02) $ (0.02)
================ =============== ==============
See accompanying notes to unaudited pro forma condensed combined
financial statements.
F - 20
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
Haier Sino Pro Forma
Pharmaceutical Pharmaceutical Unimann Pro Forma Combined
Company Corp. Inc. Adjustments Balance
---------------- ---------------- --------------- -------------- --------------
Revenues:
Sales $ 7,614,914 $ - $ - $ (2,284,474)A$ 5,330,440
Cost of Sales 1,767,989 - - (530,397)A 1,237,592
---------------- ---------------- --------------- -------------- --------------
Gross Profit 5,846,925 - - (1,754,077) 4,092,848
Operating Expenses:
General & Administrative 5,755,576 1,000 3,260 (1,726,673)A 4,033,163
Other Expenses 87,977 - - (26,393)A 61,584
---------------- ---------------- --------------- -------------- --------------
Net Income (Loss) from Operations 3,372 (1,000) (3,260) (1,011) (1,899)
Other Income (Expense):
Interest Expense (324,660) - - 97,398 A (227,262)
Other, net 261,381 - - (78,414)A 182,967
---------------- ---------------- --------------- -------------- --------------
Net Income (Loss) before Taxes (59,907) (1,000) (3,260) 17,973 (46,194)
Provision for Income Tax (49,740) - - 14,922 A (34,818)
---------------- ---------------- --------------- -------------- --------------
Net Income (Loss) $ (109,647)$ (1,000)$ (3,260) $ 32,895 $ (81,012)
================ ================ =============== ============== ==============
Weighted average shares outstanding 1,000,000 1,000,000 8,000,000 10,000,000
Loss per share $ - $ - $ (0.01)
================ =============== ==============
See accompanying notes to unaudited pro forma condensed combined
financial statements.
F - 21
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
(1) General
In the May 30, 2001 Share Ownership Purchase and Transfer Agreement, Haier
transfered to SPC 70% of the share ownership in exchange for a promissory note
of $9,000,000. This promissory note is due for payment on May 31, 2002. The
purchase has been recorded as an investment in a joint venture using the equity
method of accounting.
In the proposed transaction Unimann will acquire all of the issued and
outstanding capital stock of SPC resulting in SPC becoming a wholly-owned
subsidiary of Unimann. Concurrently with the acquisition the name of the Company
will be changed to Sino Pharmaceuticals Corporation. On the effective date of
the Acquisition, which is expected to be in December of 2001 each shareholder of
SPC will receive 9.75 shares of newly issued common stock of Unimann for each
share of SPC's common stock they own. Unimann will issue an aggregate of
9,750,000 shares of its common stock to the SPC shareholders as part of the
Acquisition.
(2) Fiscal Year
Unimann has a fiscal year end of September while SPC operates on a calendar year
end. The proforma financials of Unimann have been adjusted to reflect a calendar
year.
(3) Pro Forma Adjustments
The adjustments to the accompanying unaudited pro forma condensed
combined balance sheets are described below:
(A) Remove assets and liabilities of Haier joint venture.
(B) Record investment in Haier using equity method of accounting for the
joint venture.
(C) Record promissory notes from SPC for purchase of 70% of Haier.
(D) Record pre merger 1 for 4 reverse split.
(E) Record issuance of 9,750,000 shares for acquisition of SPC and
elimination of intercompany investment.
The adjustments to the accompanying unaudited pro forma condensed
combined statements of operations are described below:
(A) Reduce income and expenses by 30% (minority interest).
F - 22