UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 20 - F
(MARK ONE)
[_] REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE
SECURITIES EXCHANGE ACT OF 1934
or
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended OCTOBER 31, 2004
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or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from or
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COMMISSION FILE NUMBER: 333-101771
GUARDIAN BIOTECHNOLOGIES INC.
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(Exact name of registrant as specified in its charter)
Federally incorporated in Canada
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(Jurisdiction of incorporation or organization)
4450, 110 Gymnasium Place
Saskatoon, Saskatchewan, Canada S7N 0W9
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(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common shares
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(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:
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(Title of Class)
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.
Common shares outstanding: April 30, 2005: 12,607,500
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Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1) [X] Yes [_] No
(2) [X] Yes [_] No
Indicate by check mark which financial statement item the registrant has
selected to follow.
[_] Item 17 [X] Item 18
PART I
1
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
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Not applicable
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
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Not Applicable
ITEM 3. KEY INFORMATION
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A. SELECTED FINANCIAL DATA
The selected financial and other data set forth below should be read in
conjunction with the audited financial statements of Guardian Biotechnologies
Inc. as of October 31, 2004, 2003 and 2002 including the notes thereto, and
"Item 5 - Operating and Financial Review and Prospects" included in this annual
report. The selected financial data set forth below for the fiscal years ended
October 31, 2004 and 2003 and period ended October 31 2002 are derived from the
audited financial statements of Guardian, which have been audited by independent
chartered accountants D & H Group LLP as to 2004 and 2003 and Pannell Kerr
Forster as to 2002. Our financial statements are compiled in Canadian dollars,
expressed in US dollars, and presented in accordance with accounting principles
generally accepted in the United States.
STATEMENT OF OPERATIONS (in U.S. dollars)
Select information
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Years ended October 31, 2004 and 2003 and from inception on
August 15, 2002 to October 31, 2002
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Year ended Year ended Period ended
2004 2003 2002
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Sales $ 0 $ 0 $ 0
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Operating expenses 342,141 541,150 98,207
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Operating loss (342,141) (541,150) (98,207)
Research grant 70,829 45,002 0
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Net loss (271,312) (496,148) (98,207)
Other comprehensive income
(loss) 11,501 28,704 (1,672)
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Comprehensive loss $ (259,811) $ (467,444) $ (99,879)
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Weighted average number of
common shares 12,607,500 8,449, 041 3,831,169
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Basic and diluted loss per
common share $ (0.02) $ (0.06) $ (0.03)
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2
BALANCE SHEETS (in U.S. dollars) as of October 31, 2004, 2003 and 2002
Select information
2004 2003 2002
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Cash and cash equivalents $ 14,014 $ 174,895 $ 259,186
Accounts receivable -trade 0 11,623 0
Other 0 1,248 0
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Total current assets 14,014 187,766 259,186
Property, plant and equipment - net 57,711 63,957 0
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Total Assets $ 71,725 $ 251,723 $ 259,186
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Accounts payable and accrued liabilities $ 50,911 $ 21,922 $ 40,496
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Due to director 50,824 0 0
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Shareholders' equity (deficit) (30,010) 229,801 218,690
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Total Liabilities and Shareholders' Equity $ 71,725 $ 251,723 $ 259,186
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EXCHANGE RATE INFORMATION
The following table sets forth, for the periods and dates indicated, certain
information concerning the noon buying rate of a US dollar in Canadian dollars.
No representation is made that the Canadian dollar or US dollar amounts referred
to herein could have been or could be converted into US dollars or Canadian
dollars, as the case may be, at any particular rate, or at all.
AVERAGE RATE(1) YEAR END HIGH LOW
1998 1.4721 1.5432 1.5770 1.4005
1999 1.4948 1.4720 1.5557 1.4512
2000 1.4771 1.5273 1.5311 1.4350
2001 1.5411 1.5905 1.5905 1.4933
2002 1.5718 1.5610 1.6128 1.5108
2003 1.4379 1.3195 1.5903 1.3043
2004 1.3152 1.2180 1.3721 1.2180
April, 2005 1.2585
(1) The average of the noon buying rates on the last date of each month
(or a portion thereof) during the period.
B. CAPITALIZATION AND INDEBTEDNESS
Not applicable
C. REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable
D. RISK FACTORS
THERE ARE SIGNIFICANT RISKS ASSOCIATED WITH AN INVESTMENT IN OUR COMMON STOCK.
BEFORE MAKING A DECISION CONCERNING THE PURCHASE OF OUR SECURITIES, YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING FACTORS AND OTHER INFORMATION IN THIS ANNUAL
REPORT WHEN YOU EVALUATE OUR BUSINESS. THE POTENTIAL SUCCESS OF OUR BUSINESS
MODEL MUST BE CONSIDERED IN LIGHT OF OUR STATUS AS A DEVELOPMENT STAGE COMPANY.
BUSINESS RISKS
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3
WE MAY BE UNABLE TO CONTINUE AS A GOING CONCERN WHICH COULD RESULT IN A LOSS FOR
OUR INVESTORS
We may never become profitable. If we do achieve profitability at some point in
the future, we cannot be certain that we will remain profitable or that profits
will increase in the future. For further discussion, see the section of this
prospectus entitled "Management's discussion and analysis or plan of operation"
below.
WE REQUIRE ADDITIONAL FUNDING SINCE WE EXPECT A NEGATIVE OPERATING CASH FLOW
OVER THE NEXT 12 MONTHS
We expect to experience negative operating cash flow for the foreseeable future
as a result of significant upfront expenses needed to develop proprietary
therapeutic proteins for medical and veterinary use. Accordingly, we will need
to raise additional funds in the short-term in order to fund our business plan.
We will need to raise the funds by offering and selling equity securities or
convertible debt securities, which will cause the percentage of ownership of our
shareholders to be reduced. The securities issued to raise funds may have
rights, preferences or privileges that are senior to those of the holders of our
other securities, including our common stock. We do not have any contractual
restrictions limiting our ability to incur debt. Any significant indebtedness,
however, could restrict our ability to fully implement our business plan. If we
are unable to repay the debt, we could be forced to cease operating. For further
discussion, see "Liquidity and capital resources" in the section of this
prospectus entitled "Management's discussion and analysis or plan of operation"
below.
CHANGES OR INTERRUPTIONS TO OUR ARRANGEMENTS WITH SUPPLIERS MAY DECREASE OUR
PROFITABILITY OR DESTROY OUR BUSINESS
Serving as a market distributor of laboratory instruments, products and supplies
for Toylab Inc. is intended to be our initial business. In the case that Toylab
fails to meet delivery, quality and technology requirements of the customer, we
would be exposed to the risk of being held responsible for customers' claims and
could suffer a possible loss of revenue or higher than anticipated costs, which
could seriously harm our operating results and ability to attract new business
and retain existing business. We are also subject to the risk that Toylab may
cease providing their specialized products or may choose not to upgrade their
products and thereby diminish the quality of the products we are able to
deliver. If we are unable to find a replacement manufacturer, those products may
be permanently unavailable. Any of these events could increase our costs and
harm our ability to deliver products on time and to compete.
WE MAY NOT ACHIEVE THE CUSTOMER BASE NECESSARY TO BECOME OR REMAIN PROFITABLE,
WHICH DECREASES THE VALUE OF OUR STOCK
The laboratory supply industry is highly competitive. Most of our competitors
have significantly greater financial, technical, product development and
marketing resources than us. Our primary competitors for customers include
Prodigene, Inc. with respect to molecular farming, <GENX> International Inc.,
VWR-Canlab, Fisher Scientific and Labequip Ltd. with respect to sale of
laboratory supplies. Many of our competitors have substantial installed customer
bases and the ability to fund significant production and marketing efforts.
There can be no assurance that future competition will not have a material
adverse effect on our results of operations, financial condition or business.
For further discussion, see "competition" under the section of this prospectus
entitled "Description of business" below.
THE LOSS OF ANY OF OUR KEY PERSONNEL MAY AFFECT OUR ABILITY TO IMPLEMENT OUR
BUSINESS PLAN AND CAUSE OUR STOCK TO DECLINE IN VALUE
We are dependent on key employees to implement our business plan, and the loss
of any of them may have a negative affect on our ability to timely and
successfully implement our business plan. We have an employment agreement with
Sun Lee, CEO and president and with James Macpherson, director and general
manager. We have not obtained key man insurance with respect to such persons.
The key persons are Dr's. Sun Lee and James Macpherson.
GOVERNMENT REGULATION OF THE BIOTECHNICAL INDUSTRY AND GENETIC MODIFICATIONS MAY
NEGATIVELY AFFECT OUR ABILITY TO PROVIDE THE MARKETPLACE WITH OUR PRODUCTS AND
SERVICES
The laws and regulations applicable to genetically modified species (gmo)
directly affect us because our products and services are dependent on the
biotechnical industry. These laws and regulations are still
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evolving and unclear and have the potential of affecting our business. We are
not aware of any current or pending laws that will have a substantial negative
impact on our ability to carry out our business plan.
INVESTMENT RISKS
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OUR COMMON STOCK HAS NO PRIOR MARKET AND PRICES MAY DECLINE
The value and transferability of our common stock is currently affected by the
fact that there is no market for the stock. No assurance can be given that a
market for our common stock will develop or that it will be listed on the NASD's
over-the-counter bulletin board.
OUR ISSUANCE OF ADDITIONAL SHARES MAY HAVE THE EFFECT OF DILUTING THE INTEREST
OF SHAREHOLDERS; OUR COMMON STOCK SHAREHOLDERS DO NOT HAVE PREEMPTIVE RIGHTS
Any additional issuances of common stock by us from our authorized but unissued
shares may have the effect of diluting the percentage interest of existing
shareholders. Out of our 100,000,000 authorized common shares, 87,392,500 or
approximately 87.4%, remain unissued. The board of directors has the power to
issue such shares without shareholder approval. We fully intend to issue
additional common shares in order to raise capital to fund our business
operations and to meet our growth objectives.
SHAREHOLDERS MAY HAVE LITTLE CONTROL OVER DECISION MAKING DUE TO CONCENTRATION
OF OWNERSHIP IN THE HANDS OF MANAGEMENT AND DIRECTORS
Our executive officers, directors and one principal shareholder own or exercise
full or partial control over 73.18% of our outstanding common stock. As a
result, other investors in our common stock may not have much influence on
corporate decision making. In addition, the concentration of control over our
common stock in the executive officers, directors and principal shareholder
could prevent a change in control of the Company.
WE DO NOT ANTICIPATE PAYING DIVIDENDS TO COMMON STOCKHOLDERS IN THE FORESEEABLE
FUTURE, WHICH MAKES INVESTMENT IN OUR STOCK SPECULATIVE OR RISKY
We have not paid dividends on our common stock and do not anticipate paying
dividends on our common stock in the foreseeable future. The board of directors
has sole authority to declare dividends payable to our stockholders. The fact
that we have not and do not plan to pay dividends indicates that we must use all
of our funds generated by operations for reinvestment in our business
activities. Investors also must evaluate an investment in our Company solely on
the basis of anticipated capital gains.
LIMITED LIABILITY OF OUR EXECUTIVE OFFICERS AND DIRECTORS MAY DISCOURAGE
SHAREHOLDERS FROM BRINGING A LAWSUIT AGAINST THEM
Our Articles of Incorporation and Bylaws contain provisions that limit the
liability of directors for monetary damages and provide for indemnification of
officers and directors. These provisions may discourage shareholders from
bringing a lawsuit against officers and directors for breaches of fiduciary duty
and may also reduce the likelihood of derivative litigation against officers and
directors even though such action, if successful, might otherwise have benefited
the shareholders. In addition, a shareholder's investment in our Company may be
adversely affected to the extent that costs of settlement and damage awards
against officers or directors are paid by us pursuant to the indemnification
provisions of the Articles of Incorporation. The impact on a shareholder's
investment in terms of the cost of defending a lawsuit may deter the shareholder
from bringing suit against any of our officers or directors. We have been
advised that the SEC takes the position that these article and bylaw provisions
do not affect the liability of any director under applicable federal and state
securities laws.
POSSIBILITY OF MISLEADING INFORMATION PROVIDED TO INVESTORS COULD LEAD TO
DAMAGES AGAINST THE COMPANY
The Company improperly stated that its parent company, Nexgen Biotechnologies
Inc., had received United States Food and Drug Administration (US FDA) approvals
for certain of its products which the Company intended to resell and to use for
its GMO screening service. In
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fact, Nexgen Biotechnologies Inc. did not have FDA approvals but was relying on
certificates of analysis and validation prepared by laboratories certified by
the FDA.
ITEM 4. INFORMATION ON THE COMPANY
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A. HISTORY AND DEVELOPMENT OF THE COMPANY
Guardian Biotechnologies Inc. (Guardian) is a Canadian corporation formed
federally on August 15, 2002. Nexgen Biotechnologies Inc. (Nexgen) is a 55.5%
shareholder and parent company of Guardian. Sun Lee, PhD, is a director, officer
and 10.5% shareholder of Guardian and is a director, officer and shareholder of
Nexgen. Guardian and Nexgen have agreements in place to define the business
relationship and responsibilities between the two companies and summarized as
follows: 1. Guardian expects to utilize proprietary molecular farming technology
developed by Nexgen to develop advanced protein products. Nexgen intends to
transfer to Guardian its synthetic gene design, a host system technology using
vegetables such as cucumbers and oriental melons, access to ten proprietary
genetic on/off switches (promoters) and access to Nexgen's Asian and European
markets.
B. BUSINESS OVERVIEW
Guardian Biotechnologies Inc. is a development stage company engaged in the
field of molecular farming to harvest useful proteins for cosmetics, industry
and other uses. The Company intends to become a leader in the development of
proprietary therapeutic proteins for medical, veterinary and diagnostic use. The
Company intends to become a leader in the production of industrial and cosmetic
enzymes. These derived proteins will be formed through the use of plants as the
production system within the biotechnology arena referred to as molecular
farming. Guardian has recruited recognized leaders in scientific research who
will aid the Company in its research goals by participating on the advisory
board of scientific directors for the Company. The Company expects to develop
relations with North American pharmaceutical, cosmetic and other industrial
partners to distribute medical, cosmetic and industrial enzymes to a variety of
commercial markets. The Company hopes to utilize a host plant that has no
relation to food crops in America, thus achieving a unique status of product
that will be uncontaminated and less regulated. This is expected to be a
competitive advantage in achieving a dominant position in the fledgling
molecular farming industry.
Short term revenue streams are expected to be generated from the sales of lab
equipment and supplies.
Guardian is the Canadian subsidiary of Nexgen Biotechnologies Inc which is a
Korean Biotech company that is active in the area of Molecular Farming with a
dedicated focus on developing and mass-producing recombinant proteins used in
pharmaceuticals, industrial enzymes and cosmeceuticals. Alongside with its
molecular farming business, Nexgen is developing a position in the GMO detection
kit market against international and local competitors. The Company
commercialized its GMO detection kits in mid 2000 and established a 'Korea GMO
Detection Center'. The center provides not only qualitative determination
services but also provides quantitative determination services of GM foods to
institutions, government and businesses. The GMO Detection Kit was awarded a
Korea Millennium Product 2000 by the Ministry of Commerce, Industry and Energy.
The Company's main business, molecular farming involves producing useful
proteins for cosmetics, industrial process, and edible vaccines for oral
vaccination. Its principal research institute was opened in February 2000.
Nexgen cooperates with a number of research and educational institutes in Korea,
and also holds international ties with major scientific institutes, such as
National Research Council/Plant Biotechnology Institutes ("NRC/PBI") of Canada.
Nexgen was designated as a bio-venture company by the Korean Government. Nexgen
has generated modest revenues to date but has not as yet become profitable and
is operating on shareholder investments to pursue its business plan.
A brief history of Nexgen Biotechnologies, Inc. follows:
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1999 Nov. 4 Incorporated
2000 Apr. 21 Registered as a venture company
(Small and Medium Business Administration, Article 2000142271-0542)
2000 May. 23 First Korean company to develop and distribute GMO Detection Kit
2000 Jun. 26 GMO Detection Kit: Certificates by Korea Research Institute of
Bioscience and Biotechnology
2000 Jul. 3 GMO Detection Kit: Certificates by Korea Food Research Institutes
2001 Feb. 12 Accredited ISO 9001 for GMO Kit
2001 Mar. 05 First Korean company to develop and distribute GMO Diagnosis Kit
2001 Mar. 22 GMO Detection Kit is finalized
2001 Sep. 26 First Korean company to be accredited with ISO 9001 for GMO Search
Engine
To date, the Company has generated $nil revenues from the sale of its products.
Nexgen was the first company in Korea to begin to develop the second generation
of plant biotechnology. Nexgen aims to produce highly valuable proteins for
medicine, agriculture, and industry. Nexgen's proficiency expands to the fields
of molecular farming of useful proteins for cosmetics and industrial process,
edible human vaccine for oral vaccination, phytoremediation for the cleaning of
contaminated environments, and the development of transgenic plants. Nexgen has
several alliances with domestic and foreign companies that include
pharmaceutical (Green Cross Pharmaceuticals), cosmetic (Coreana Cosmetic Co.)
and animal feed (Dodram Feed Inc.). Guardian will have access to alliances
provided through Nexgen.
With Guardian in Canada, there is a potential for increased investment in
biotechnology, because overall, funds for knowledge-based technologies have
become accessible with the growth of the public and private equity markets. In
addition, federal and provincial governments are offering strategic funding
through programs, such as the federal government's new Technology Partnerships
Canada program, which offers financial support for innovative technologies at
the near-market stage of development. Guardian intends to apply for funding
although there can be no assurance that our applications will be successful.
Guardian intends to lead in the development of proprietary therapeutic proteins
for medical and veterinary use and in the production of industrial and cosmetic
enzymes. These proteins will be made through the use of plants as the production
system within the biotechnology arena now referred to as Molecular Farming.
OUR SERVICES
LAB EQUIPMENT
Guardian is the North American distributor of laboratory instruments, products
and supplies manufactured in Korea by Toylab Inc. These products are
complementary to the scientific endeavours of the Company and, while providing
profits, the sale of lab equipment simultaneously engenders strong links to the
scientific community. The sales from Toylab will generate short-term revenues
for Guardian that will enhance its yearly operational budget and bring a return
on investment to shareholders. A contractual arrangement has been negotiated
between the Company and Toylab. The Company has now entered into a distribution
agreement with Diamed Lab Supplies to conduct direct sales of Toylab equipment
and this material is now listed in the Diamed catalogue and on their web-site.
Further, Bio/Can is also distributing Guardians products as well. Sales from
Toylab are expected to grow slowly over the next year as the scientific
community is generally slow to accept new products due to brand loyalty. Once
customers become more familiar with our products sales are expected to grow.
GMO* DETECTION KITS
Guardian no longer has any plans to develop a fee for service program, which
would have focused on screening genetically modified species and their crop
products. This program could not be established due
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to lack of suitable equipment and trained personnel to conduct the work.
Additionally there is not a large enough market in Canada to be economically
viable.
GMO is the acronym for "genetically modified organisms".
MOLECULAR FARMING
In a practice known as molecular farming, scientists raise crops in a controlled
environment. The crops are used to derive proteins which have medical and
industrial applications. Recent advances allow scientists to utilize low cost
production methods to modify plants for the creation of specialized proteins
that can be used in beneficial applications in medicine and industry. These
advances make possible the production of important value-added products.
Plants can now be used for the large-scale manufacture of proteins of commercial
value, such as enzymes, peptides of medicinal and pharmaceutical value, and
vaccines for human health care and veterinary purposes.
The Company will work towards being a leader in the large-scale production and
the proprietary isolation and recovery of therapeutic proteins and industrial
and cosmetic enzymes.
Guardian's approach is unique in that it will use non-traditional food crops in
its molecular farming programs. The primary production platform that has been
developed is a member of the cucumber family known as the 'oriental melon'. This
species has no sexually compatible wild relatives in North America or commercial
melon production that could contaminate it. Guardian will make use of oriental
melons and cucumbers, which are routinely grown under glass and are not
available for cross contamination of food crops. This unique contamination-free
status gives Guardian an edge compared to other protein farming companies
utilizing corn, potatoes and traditional crops.
Due to its isolation from standard North American crops, this unique production
platform has many commercial and regulatory advantages that allow Guardian to be
in the position of avoiding or reducing issues that surround the use of North
American crop plants in molecular farming. The Company has the goal of achieving
large-scale production of these valuable proteins and capturing a primary
position in this industry.
The Company also has plans to use E.coli and Saccromyces cerivisiae (yeast)
systems to produce proteins as well as using the plant based system. The
advantage of these systems is that they are already in use as production
platforms to produce therapeutic and industrial enzymes and allow for faster
access of new therapeutic proteins into the market place.
Business Strategy
Traditionally, research and development in leading edge technologies can require
years before maturation returns revenues to a company. The common strategy for
past biotechnology companies has been to rely upon investor funding and delay
the introduction of new products or services until later in the development of
the company. In order to circumvent the long wait for a return on investment,
Guardian has a plan to begin sales of complementary products that will generate
profits for the Company in the short term. There is a Memorandum Of
Understanding in place between the Company and Nexgen to work together to
jointly develop new technologies and products.
The business strategy for Guardian will be two-staged in that it will consist of
two components:
1) Long term: Guardian will invest capital and resources into molecular farming
for the development of valuable proteins. Concurrent with this will be the
formation of strategic alliances with North American pharmaceutical,
neutraceutical, cosmetic and animal industry partners with Guardian to
facilitate the manufacture, marketing and distribution of these protein products
within Canada and the United States. The association with the parent company,
Nexgen, will enable Guardian to access Asian and European markets. As well,
Guardian will provide North American market penetration for products developed
by Nexgen.
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2) Short-term: To deal with immediate cash flow, Guardian is functioning as a
distributor of scientific instruments, products and supplies manufactured in
Korea by Toylab Inc. It is the goal of Guardian to be self-sufficient within two
years and to focus the majority of any capital investment on long-term molecular
farming programs.
INDUSTRY OVERVIEW
The global market size of the biotechnology industry was US$20 billion in 2000.
By 2005, it is expected to reach US $95 billion and by 2010, US $190 billion*.
There are 1,457 biotechnology companies in the United States, of which 342 are
publicly held. Market capitalization, the total value of publicly traded biotech
companies at market prices, was US$224 billion as of early May 2002*. The
biotechnology industry has more than tripled in size since 1992, with revenues
increasing from US$8 billion in 1992 toUS$27.6 billion in 2001* *(Ernst and
Young LLP and Bioworld).
Canada is a world leader in biotechnology. Annual sales total more than $2
Billion and the number of biotechnology companies in Canada is over
361(Statistics Canada). More than 75% are small but rapidly growing companies
with 50 or fewer employees. One quarter of the companies are publicly traded.
The Health and Agriculture sectors together account for more than 75% of the
overall biotech revenues.
Despite the many advances that have been made and the products that have become
a commercial reality, only a modest fraction of the potential of biotechnology
has been realized to date. The international effort focused on biotechnology
continues to expand as products of research assume prominent positions in the
international market place.
Source: Ernst & Young LLP, annual biotechnology industry reports, 1993-002.
Financial data based primarily on fiscal-year financial statements of publicly
traded companies.
MARKETING AND SALES
Assuming negotiations with its parent company continue to be successful,
Guardian will develop three tiers of customers for its products. The strength of
long standing strategic relationships with the parent company, Nexgen, and the
NRC (the acronym for the National Research Council which is operated by the
Canadian government) will assist in marketing efforts and the establishment of a
strong industry reputation. Nexgen was the first company in Korea to develop the
second generation of plant biotechnology and has an established history in the
field of molecular farming of advanced proteins. Guardian will function closely
with Nexgen in order to share the workload, to increase productivity, to take
advantage of each company's strengths, and to increase the speed of new product
development. Sharing of the workload will prevent costly research and facility
duplication for both Guardian and Nexgen. Guardian derives benefit and
positioning from industry relationships that have been established by its parent
company. Additional alliances include the National Research Council of Canada
and the FARR Technology Group, in Ontario, Canada as well as the Vaccine and
Infectious Disease Organization (VIDO) in Saskatoon, Canada, and the Western
College of Veterinary Medicine also located in Saskatoon, Canada.
Alliances and licensing will be the key marketing operatives for molecular
farming products. The customers will be larger pharmaceutical, industrial,
agricultural and cosmetic companies that will receive licenses from Guardian to
use its products.
Industry contacts coupled with direct mail, attendance at trade shows and
general advertising will develop clients for Toylab sales. Customers for these
products are the numerous labs on campuses, in secondary schools and in
independent scientific corporations.
COMPETITION
Currently, Prodigene is the number one player in the field of molecular farming.
They have several patents. However, there are 800 types of proteins and many
kinds of host systems that can be used to produce them. Guardian, with its
parent partner, Nexgen, and the technologies already developed by that company,
proposes to utilize a host system that has no relation to crops in America, thus
achieving a unique status of product that will be uncontaminated and less
regulated. This is the powerful competitive
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advantage that Guardian offers to its investors. With proper management and the
ongoing R&D planned by the company, Guardian has the potential for being a
significant factor in the molecular farming industry.
EMPLOYEES
We currently employ two full-time employees. The Company currently has a
combined General Manager/Senior Scientist and one (1) technician. The Company
plans to hire additional staff of a research scientist and a commerce graduate
to get its staffing to 4 full-time employees. We expect our labour relations to
be good. None of our employees are covered by a collective bargaining agreement.
GOVERNMENT REGULATION
In 1993, the Organization of Economic Cooperation and Development published the
first general principles to govern the production and commercialization of
transgenic plants. Essentially these rules regulate how risk assessment should
be conducted and documented. Ironically, these rules do not necessarily apply to
the transgenic trait but rather to the host plant system. Changes to the plant
that make it more "weedy" are the major concern in that the new plant (termed a
PNT, or Plant with a Novel Trait) may be able to outgrow other plants in its
environment and become a new weed.
The Canadian Food Inspection Agency (CFIA) is the agency responsible for
regulating the release of "plants with novel traits". These regulations deal
primarily with the unconfined release of new plant varieties in the environment.
In 2002 the CFIA issued its "additional guidelines for plants used for plant
molecular farming". These regulations essentially regulate process rather than
deal with the safety of unconfined release of molecular farming plants into the
environment. In other words, Canada does not yet have in place specific
regulations regarding molecular farming and the products derived from this
industry. This is problematic for molecular farming companies since it provides
uncertainty as to how companies should proceed with development and ultimately
scale up of their products. The establishment of regulations soon would provide
companies with a solid frame work from which to organize their research and
development efforts in such a way as to ensure the products will be acceptable
and pass Government regulations.
In Canada the industry is critically aware of the concern, both public and
scientific, over the use of traditional crop plants for molecular farming. Most
companies are imposing self-regulated guidelines to develop new host plant
platforms for molecular farming to ensure a safe food supply chain. The industry
is anticipating regulations that will prevent the use of traditional food crop
plants for molecular farming and is making efforts now to comply with the
expected regulations in the future.
Guardian is also committed to using non-food plants for the final production of
any of its products and is focused on using oriental melon as well as other
plants currently under investigation to ensure the safety of Canadian food
production and not cause trade issues for Canadian food producers by not risking
accidental food contamination.
As a result of a recently held workshop on molecular farming the CFIA has
proposed draft amendments to Regulatory Directive 2000-07 to accommodate
confined research trials of PNTs for pharmaceutical production. It is important
to note that the CFIA and other regulatory agencies intend to modify existing
regulations and not to try formulating a new set of regulations for molecular
farming.
The commercial release of plants for larger scale molecular farming activities
is not expected for several years. The CFIA has not yet disclosed any
information concerning how such activities may be regulated.
The regulatory situation in the USA is somewhat more advanced and some larger
scale trials have been completed. A few companies have begun commercial
production of novel products from plants and have achieved a regulatory status
that allows production on commercial scale. The oversight of
biotechnology-derived plants rests with the USDA's Animal and Plant Health
Inspection Service, (APHIS), the Food and Drug Administration, (FDA) and the
Environmental Protection Agency (EPA) An APHIS document that describes the terms
and conditions imposed on confined trials of plants tested in 2002, (barley,
corn, rice, sugarcane, tobacco and tobacco mosaic virus) has been published.
10
As described in the Federal Register, (vol 67, No 149, Aug 2, 2002) an expansion
of biotechnology-based crops is anticipated and up-dated field testing
requirements and early food safety assessments for new proteins to be produced
by plants are suggested. Any new proposals would be implemented through the
coordinated activities of the FDA, USDA, and EPA and be based on the following
principles:
1. The level of confinement under which a field test of a biotechnology-
derived plant is conducted should be consistent with the level of environmental,
human and animal health risk associated with the introduced protein and trait.
2. If a trait or protein presents an unacceptable risk or the risks cannot be
determined adequately, field test confinement requirements would be rigorous to
restrict out-crossing and commingling of seed and the occurrence at any level of
biotechnology-derived genes and gene products from these field tests would be
prohibited in commercial seed, commodities, and processed food and feed.
3. Even if a trait or protein does not present an unacceptable risk to the
environment or public health, field test requirements should still minimize the
occurrence of out-crossing and commingling of seed from these field tests, but
intermittent, low levels of biotechnology-derived genes and gene products from
such field tests could be found acceptable based on data and information
indicating the newly introduced traits and proteins meet the applicable
regulatory standards.
In our opinion, our planned molecular farming will conform to restrictions
currently in place and reasonably anticipated.
C. ORGANIZATIONAL STRUCTURE
Guardian was federally incorporated on August 15, 2002 under the Canada Business
Corporation Act as a privately owned company that operates from its corporate
headquarters located in Saskatoon, Saskatchewan, Canada. Guardian is a Canadian
affiliate of the Korean based company Nexgen Biotechnologies, Inc. (Nexgen) that
was founded in 1999 by Dr. Sun Lee, who also founded and is president and
director of the Company.
Nexgen Biotechnologies Inc. (Nexgen) is a 55.5% shareholder and parent company
of Guardian. Sun Lee, PhD, is a director, officer and 10.5% shareholder of
Guardian and is a director, officer and shareholder of Nexgen. Guardian and
Nexgen have put an agreement in place to define the business relationship and
responsibilities between the two companies.
D. PROPERTY, PLANTS AND EQUIPMENT
The Company rents on a month to month basis its current principal executive
offices and technical facilities located at IPW-110 Gymnasium Place, Saskatoon,
Saskatchewan, Canada for Cdn$4,800.00 per month. There is no security deposit.
We are renting our present facilities within the newly developed Industrial
Partnership Wing (IPW) of the National Research Council Canada, Plant
Biotechnology Institute (NRC/PBI).
The office facilities are leased from the property owners. We do not carry
tenants insurance for office contents but intend to carry insurance of
Cdn$2,000,000 comprehensive general liability once our lab is in place.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
- ------------------------------------------------------
The following discussion and analysis is based on, and should be read in
conjunction with, the Company's audited financial statements, including the
notes thereto and other financial information appearing elsewhere herein. The
audited financial statements have been prepared using US dollars and are
presented in accordance with accounting principles generally accepted in the
United States.
A. OPERATING RESULTS
11
YEAR COMPARISONS BETWEEN 2004 AND 2003
For the year ended October 31, 2004, the Company achieved sales revenues of $
nil compared with sales revenues of $nil for the year ended October 31, 2003.
The Company's operating loss decreased from $496,148 in 2003 to a loss of
$271,312 in 2004. Such decrease in the operating loss was due primarily to costs
incurred in organizing the Company to become a reporting issuer of $282,056 for
2003 - $nil for 2004). Research expenses remained relatively constant ($146,105
for 2004 - $169,263 for 2003). In the same period, working capital decreased
from $165,844 in 2003 to a working capital deficiency of $(87,721) in 2004. As
of the year ended October 31, 2004, the Company had an accumulated stockholders'
deficiency of $(30,010). The current year's contribution to the deficit was
financed in part by loans from a director and by delaying payment of trade
accounts payable.
B. LIQUIDITY AND CAPITAL RESOURCES
Our initial sources of liquidity are expected to be existing cash, sales from
Toylab, research grants from Government Organizations and from Venture
Capitalists. Since we have no operating history, we must first rely on equity
and/or debt financing to launch our business. We will need additional funding in
order to produce and distribute our products that are under development. There
can be no assurances that financing, whether debt or equity, will be available
to us in the amounts required at any particular time or for any particular
period, or if available, that it can be obtained on satisfactory terms. We have
made no arrangements with our officers, directors or affiliates to provide
liquidity to us.
We anticipate that we will need to raise additional capital within the next 12
months in order to continue implementing our business plan and commence full
operations. We will need to raise the funds through debt or equity financing or
a combination of both. To the extent that additional capital is raised through
the sale of equity or equity-related securities, the issuance of such securities
is likely to result in dilution to our shareholders. There can be no assurance
that sources of capital will be available to us on acceptable terms, or at all.
If we are unable to raise additional capital, we may not be able to continue as
a going concern, and might have to reorganize under bankruptcy laws, liquidate
or enter into a business combination. We have not presently identified any
probable business combination. If adequate funds are not available within the
next 12 months, we may be required to significantly curtail our operations.
We anticipate the receipt of $238,000 from AgWest in loan proceeds, and up to
$135,000 in grant funds from government agencies , which will provide sufficient
working capital for the next twelve months. It is the intention of the Company's
president to advance any working capital shortfall over the next eighteen months
to the Company as additional loans up to $150,000
C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
RESEARCH AND DEVELOPMENT
It is the goal of the Company to continually make enhancements and improvements
to its products. Costs incurred to make routine enhancements or improvements,
design changes to existing products and trouble shooting in production is
excluded from research and development expenses.
PROPRIETARY TECHNOLOGY
INTELLECTUAL PROPERTY
Guardian currently holds no patents and has not as yet applied for any patents
and holds no other registered proprietary knowledge or assets. The Company has
filed a provisional US Patent application entitled "Oral Vaccine for Poultry
Against Eimeria Parasites", application # 60/608,370.
The Company has proprietary plant transformation technology and host plant
systems to facilitate product development in conjunction with its parent
company, Nexgen. Currently, assuming satisfactory completion of negotiations
with Nexgen, Nexgen's proprietary technology will be shared with the Company.
Much of the proprietary technology available to the Company has been developed
by the parent company, Nexgen, and will ultimately benefit the operations of
Guardian.
Guardian Biotechnologies Inc. is developing a portfolio of components which
includes its own proprietary technology and appropriate licenses from other
research institutions or Universities. Guardian
12
intends to become a significant factor in the development of proprietary
therapeutic proteins for medical and veterinary use. The Company also intends to
become a significant factor in the production of industrial and cosmetic
enzymes. These proteins will be made through the use of plants as the production
system within the biotechnology arena now referred to as Molecular Farming for
which the Company has applied for patent protection. There can be no assurance
that any patents will be granted
D. TREND INFORMATION
The operations of the Company have been significantly affected, and may continue
to be affected for the foreseeable future, by the general unstable economic
conditions in Korea and in the Asia Pacific region. The curtailed economic
activity in the traditional markets for Nexgen resulted in a significant decline
in that Company's sales, production and inventory. The Company is actively
seeking to expand its sales into new markets, principally the United States.
E. OFF-BALANCE SHEET ARRANGEMENTS
Not applicable
F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
PAYMENTS DUE (BY PERIOD)
------------------------------------------------------------------
less than more than
CONTRACTUAL OBLIGATIONS Total one year 1-3 years 3-5 years 5 years
- --------------------------------------------------------------------------------------------------------
Long-term debt obligations $ nil $ nil $ nil - -
- --------------------------------------------------------------------------------------------------------
Debentures $ nil $ nil $ nil - -
- --------------------------------------------------------------------------------------------------------
Long-term accounts payable $ nil $ nil $ nil - -
- --------------------------------------------------------------------------------------------------------
Retirement and severance indemnities $ nil $ nil $ nil - -
- --------------------------------------------------------------------------------------------------------
G. SAFE HARBOR
FORWARD LOOKING STATEMENTS
This annual report contains forward-looking statements. We intend to identify
forward-looking statements in this prospectus using words such as "anticipates",
"will", "believes", "plans", "expects", "future", "intends" or similar
expressions. These statements are based on our beliefs as well as assumptions we
made using information currently available to us. Because these statements
reflect our current views concerning future events, these statements involve
risks, uncertainties and assumptions. Actual future results may differ
significantly from the results discussed in the forward-looking statements.
Some, but not all, of the factors that may cause these differences include those
discussed in the Risk Factors section. You should not place undue reliance on
these forward-looking statements.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
- ----------------------------------------------------
A. DIRECTORS AND SENIOR MANAGEMENT
The following table sets forth the name, age, and position of each Director and
Executive Officer of Guardian Biotechnologies Inc.
- --------------------------------------------------------------
NAME AGE POSITION
- --------------------------------------------------------------
Sun Lee, PhD 46 President, Treasurer and Director
- --------------------------------------------------------------
James MacPherson, PhD 45 Secretary and Director
- --------------------------------------------------------------
Paul Arneson, PhD 53 Director
- --------------------------------------------------------------
Hyun Cho Chung, Ph D 45 Director
- --------------------------------------------------------------
Dr. Sun Lee represented the first Board of Directors of the Company and was
appointed to the Board of Directors on August 15, 2002. Officers will hold their
positions at the pleasure of the Board of Directors, absent any employment
agreement.
There are no arrangements or understandings between the directors and officers
of Guardian Biotechnologies Inc. and any other person pursuant to which any
director or officer was or is to be selected as a director or officer. In
addition, there are no agreements or understandings for the officers or
13
directors to resign at the request of another person and the above-named
officers and directors are not acting on behalf of nor acting at the direction
of any other person.
The following summary outlines the professional background of the directors,
executive officers and significant employees over the past five years.
SUN LEE, PHD, PRESIDENT, TREASURER AND A DIRECTOR
Dr. Lee brings extensive research experience in the field of molecular farming.
His past positions include Director of the Plant Biotechnology Institute at
Dongbu Chemical Co., assistant research officer at Canada National Research
Council. Dr. Lee has written several theses on plant biotechnology: Genetic
transformation of broccoli; Genetic transformation of B.oleracea varieties;
Genetic transformation of recalcitrant genotypes of B.napus; Speed
transformation of Brassicas; and Development of plant promoters from Brassicas.
Dr. Lee is currently a director, officer and shareholder of Nexgen
Biotechnologies, Inc., the Company's parent company.
Dr. Lee functions as the Chief Executive Officer and the Chief Financial Officer
of Guardian Biotechnologies Inc.
JAMES MACPHERSON, PHD, GENERAL MANAGER, SECRETARY AND A DIRECTOR
Dr. MacPherson has two patents for plant cell transformation and has published
many articles on molecular cloning and related subjects. He has worked as
research manager and senior scientist at Performance Plants Inc. In his capacity
as a consultant to Nexgen Biotechnologies, Inc. (parent company of Guardian
Biotechnologies Inc.) he was a facilitator for the new biotechnology company
(Guardian Biotechnologies Inc.). Past experience includes positions as a
research associate at the Plant Biotechnology Institute, National Research
Council of Canada, and he was the recipient of two outstanding achievement
awards from the National Research Council. Dr. MacPherson is also a member of
the science advisory council for the Saskatchewan Institute of Applied Science
and Technology.
PAUL ARNISON, PHD, SCIENTIFIC ADVISOR AND A DIRECTOR
Dr. Arnison holds approximately 175 publications to his name and is a leader in
plant biotechnology and business development strategies. He is currently
President of Botanical Alternatives Inc., dedicated to the production of
environmentally responsible pest control agents. Past positions include general
manager of FARR Biotechnology Group in Ontario and general manager of Paladin
Hybrids Inc. also in Ontario. Dr. Arnison has held various industry positions
with government granting agencies, plant breeding, hybrid systems development
and novel hybridization systems. Additionally, he has extensive experience with
intellectual property issues and technology assessment.
HYUN CHO CHUNG, PD.D., DIRECTOR
After receiving his B.Sc. in Korea, Dr. Chung moved to Canada to complete his
M.Sc. and eventually his PhD in Oral Biology. In 1995 Dr. Chung joined the
Faculty of Pharmaceutical Sciences at the University of British Columbia as a
Research Scientist. At the same time he was a research for the Canadian Cystic
Fibrosis Research Foundation. Currently Dr. Chung is the Owner of a Natural
Health Clinic in Burnaby and an Advisor to the HOC Health Centre in Coquitlam,
British Columbia. He also Lectures at the Royal City International College in
New Westminster, British Columbia.
B. COMPENSATION
EXECUTIVE COMPENSATION
We paid an aggregate amount of compensation during fiscal 2004 to our directors
and officers as a group equal to $36,960 (2003-$116,193; 2002 - $nil). The
amount of retirement and severance benefits accrued for our executive officers
and directors in 2004, 2003 and 2002 was $nil. There were no pension, retirement
or other similar benefits set aside for our executive officers and directors in
2004, 2003 or 2002.
STOCK OPTION PLAN
Under our Articles of Incorporation, we may grant options for the purchase of
our shares to certain qualified officers and employees. There are no stock
options or warrants or other securities convertible
14
into Guardian Biotechnologies Inc. common stock outstanding as at October 31,
2004. We may file a registration statement on Form S-8 after the effective date
hereof that would permit and facilitate the offering of options to acquire
shares of common stock of the Company by employees, directors and consultants at
prices per share at variance with any market quotations at the time. There were
no warrants or other securities convertible into Guardian Biotechnologies Inc.
common stock outstanding as of October 31, 2004.
COMPENSATION OF DIRECTORS
Directors and directors who are also employees of the Company receive no extra
compensation for their service on the Board of Directors of the Company.
Other All
Annual Other
Year Salary Bonus Compensation Compensation
Name & Principal Position ($) ($) ($)
- -----------------------------------------------------------------------------------------------------------------
Compensation Compensation Compensation Compensation Compensation
------------ ------------- ------------- ------------- ------------
- -----------------------------------------------------------------------------------------------------------------
Sun Lee (Director, President, Treasurer) 2002 Nil Nil Nil Nil
-----------------------------------------------------------------------
2003 58,097 Nil Nil Nil
-----------------------------------------------------------------------
2004 Nil Nil Nil
- -----------------------------------------------------------------------------------------------------------------
James Macpherson (Director, Secretary) 2002 2,118 Nil Nil Nil
-----------------------------------------------------------------------
2003 34,905 Nil Nil Nil
-----------------------------------------------------------------------
2004 36,960 Nil Nil
- -----------------------------------------------------------------------------------------------------------------
Paul Arnison (Director) 2002 Nil Nil Nil Nil
-----------------------------------------------------------------------
2003 Nil Nil Nil Nil
-----------------------------------------------------------------------
2004 Nil Nil Nil
- -----------------------------------------------------------------------------------------------------------------
C. BOARD PRACTICES
The board of directors has the ultimate responsibility for the administration of
the affairs of GUARDIAN. Our amended articles of Incorporation, as currently in
effect, provide for a board of directors of not less than three directors and
not more than ten directors. Under our amended Articles of Incorporation, all
directors serve a three year term but may be replaced at the ordinary general
meeting of shareholders convened with respect to the last fiscal year. It is
expected that all current directors will continue to serve after this offering.
The directors are elected at a general meeting of shareholders by a majority of
vote of the shareholders present or represented by proxy, subject to quorum
requirements of at least one-quarter of all issued and outstanding shares having
voting rights. The board currently acts as the Company's audit committee.
INDEPENDENT AUDITOR
Our amended Articles of Incorporation provide for the appointment by the
shareholders of the Company of an independent auditor. The independent auditor's
term expires at the close of the ordinary general meeting of shareholders
convened with respect to the last fiscal year from the date of acceptance by the
independent auditor. Currently, D&H Group LLP are our independent auditors.
INDEPENDENT DIRECTOR
Mr. Paul Arnison, PhD serves on the board as an independent director. We have
appointed an additional director, Dr. Hyun Cho Chung.
D. EMPLOYEES
EMPLOYMENT CONTRACTS WITH EMPLOYEES AND OFFICERS
The Company has entered into employment contracts, with its current employees.
The Company has 2 (two) employees in the following areas:
General Manager and Senior Scientist (one person)
Technician (one person)
15
E. SHARE OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of the common stock of the Company as of October 31, 2003 of: (a) each
of the Company's directors and officers, and (b) all directors and officers of
the Company, as a group:
- ------------------------------------------------------------------------------
SHARES PERCENTAGE OF
NAME OWNED SHARES OWNED
- ------------------------------------------------------------------------------
Sun Lee - President, Treasurer and a Director 1,317,500 10.5%
- ------------------------------------------------------------------------------
Nexgen Biotechnologies, Inc. (1) 7,000,000 55.5%
- ------------------------------------------------------------------------------
James Macpherson, Secretary and Director 10,000 0.0001%
- ------------------------------------------------------------------------------
Paul Arnison, Director 0 0.00%
- ------------------------------------------------------------------------------
Hyun Cho Chung, Director 0 0.00%
- ------------------------------------------------------------------------------
All Executive Officer and Directors as a Group 1,327,500 10.53%
- ------------------------------------------------------------------------------
(1) Sun Lee is President and a major shareholder of Nexgen Biotechnologies, Inc.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. MAJOR SHAREHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our shares as of October 31, 2004 by each person known to us to own
beneficially more than five percent (5%) of our shares
- --------------------------------------------------------------------
Name and address Amount of Stock Percentage
Beneficially Owned of Class
- --------------------------------------------------------------------
Penn Capital Canada Ltd. 650,000 7.93
- --------------------------------------------------------------------
World Cup Finance Ltd. 550,000 6.71
- --------------------------------------------------------------------
Song Do Chung 500,000 6.10
- --------------------------------------------------------------------
Mi Kyung Youn 500,000 6.10
- --------------------------------------------------------------------
Sun Lee 1,317,500 10.5
- --------------------------------------------------------------------
Nexgen Biotechnologies, Inc. 7,000,000 55.5
- --------------------------------------------------------------------
There has been no change in these shareholdings during the past three years. All
shares are shares of common stock and all have equal rights.
There are no arrangements known to the Company the operation of which would at a
subsequent date result in a change in control of the Company.
B. RELATED PARTY TRANSACTIONS
There is no known relationship between any of the Directors and Officers of the
Company with major clients or provider of essential products and technology. Sun
Lee, a director and president of the Company, is also the president and a major
shareholder of Nexgen Biotechnologies, Inc., a majority shareholder of the
Company.
In the event conflicts do arise the Company will attempt to resolve any such
conflicts of interest in favour of the Company. The officers and directors of
the Company are accountable to the Company and its shareholders as fiduciaries,
which require that such officers and directors exercise good faith and integrity
in handling the Company's affairs. A shareholder may be able to institute legal
action on behalf of the Company on or behalf of that shareholder and all other
similarly situated shareholders to recover damages or for other relief in cases
of the resolution of conflicts in any manner prejudicial to the Company.
C. INTERESTS OF EXPERTS AND COUNSEL
Not applicable
ITEM 8. FINANCIAL INFORMATION
A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
16
See "Item 18- Financial Statements"
B. SIGNIFICANT CHANGES
There has been no significant change since the October 31, 2004 financial
statements.
ITEM 9. THE OFFER AND LISTING
Not Applicable
ITEM 10. ADDITIONAL INFORMATION
A. SHARE CAPITAL
B. MEMORANDUM AND ARTICLES OF ASSOCIATION
C. MATERIAL CONTRACTS
None
D. EXCHANGE CONTROLS
General
E. TAXATION
The Company falls under Canadian taxation laws. Currently the Company has not
had taxable income due to significant losses for tax purposes.
A. DIVIDENDS AND PAYING AGENTS
Not Applicable
G. STATEMENT BY EXPERTS
Not Applicable
H. DOCUMENTS ON DISPLAY
Not Applicable
I. SUBSIDIARY INFORMATION
See Item 18. Notes to Financial Statements
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------
MARKET RISK DISCLOSURE
We are subject to market risk exposures due to fluctuations in exchange rates
and interest rates. Changes in the foreign exchange rate between the CDN$ and
the US$ may affect us due to the effect of such changes on any shareholder
distributions to the shareholders using US$ as a main currency. Guardian
denominates its financial statements in the United States dollars but conducts
its daily affairs in Canadian dollars. We are not currently carrying significant
amounts of short term or long-term debt. Upward fluctuations in interest rates
increase the cost of additional debt and the interest cost of outstanding
floating rate borrowings.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
- ----------------------------------------------------------------
Not applicable.
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
- ---------------------------------------------------------
The Company is not currently in default, arrears or delinquent with respect to
any of its debt obligations or other responsibilities.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
- -----------------------------------------------------------------------------
PROCEEDS
- --------
17
Not Applicable
ITEM 15. CONTROLS AND PROCEDURES
- ---------------------------------
Based on their evaluation as of a date within 90 days of the filing date of this
Annual Report on Form 20-F, the principal executive officers and directors of
the Company have concluded that the disclosure controls and procedures of the
Company as defined in Sec.Sec.240.13a-15(c) and 240.15d-15(c) of the Securities
Exchange Act of 1934 (the Exchange Act) are effective to ensure that information
required to be disclosed by the Company in reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in Securities and Exchange Commission's rules and
forms.
There were no significant changes in internal controls or in other factors of
the Company that could significantly affect these controls subsequent to the
date of their evaluation and up to the filing date of this Annual Report on Form
20-F. There were no significant deficiencies or material weaknesses, and
therefore no corrective actions were taken or may occur and not be detected.
ITEM 16. RESERVED
- ------------------
Not Applicable
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
- ------------------------------------------
The Company does not yet have an audit committee financial expert. The Company
is in the formative stage and has focused its requirements on biotech experts
for its board of directors. The Company intends to appoint a financial expert
once commercial operations commence.
ITEM 16B. CODE OF ETHICS
- ------------------------
The Company does not have in place a written code of ethics that applies to its
executive, financial or accounting officers or to persons performing similar
functions. The Company is dependent upon its president to lead by example and
has faith in his ability to do so. Once the Company becomes more diverse in its
operations and where required by regulation, it intends to implement a code of
ethics for its officers. The Company does not plan to grant any waiver,
including an implicit waiver, from a provision of the code of business conduct
and ethics to any person.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
- ------------------------------------------------
(a)Audit Fees
During the last two fiscal years, the Company paid $32,112.44 for professional
services rendered by the principal accountant for the audit of the Company's
annual financial statements or services normally provided in connection with
statutory and regulatory filings for those fiscal years.
(b)Audit-Related Fees
During the last two fiscal years, the Company paid $3,078.56 for professional
services rendered by the principal accountant for the audit of the Company's
annual financial statements or services normally provided in connection with
statutory and regulatory filings for those fiscal years that are not reported
under (a).
(c)Tax Fees
During the last two fiscal years, the Company paid $nil for professional
services rendered by the principal accountant for tax compliance, tax advice and
tax planning.
(d)All Other Fees
During the last two fiscal years, the Company paid $nil for professional
services rendered by the principal accountant for services other than those
described under (a) through (c).
(e) The Company's board of directors is currently acting as the audit committee.
The board approves all of the services provided by the principal accountants.
(f)Percentage of work performed by persons other than the principal accountant's
full-time, permanent employees: 0%
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
- --------------------------------------------------------------------
Not Applicable
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
- --------------------------------------------------------------------------------
18
During the year ended October 31, 2003, Nexgen Biotechnologies Inc. acquired an
additional 2,000,000 shares of the Company for $200,000.00 ($0.10 per share).
Nexgen is the parent company of Guardian and purchased the shares in a private
transaction. The Company has no publicly announced plans or programs for the
issuance or sale of its shares.
PART III
- --------
ITEM 17. FINANCIAL STATEMENTS
- ------------------------------
Not Applicable
ITEM 18. FINANCIAL STATEMENTS
- ------------------------------
AUDITOR'S REPORTS
REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS
TO THE BOARD OF DIRECTORS
OF GUARDIAN BIOTECHNOLOGIES INC.
(A Development Stage Company)
We have audited the balance sheet of Guardian Biotechnologies Inc. (A
Development Stage Company) as at October 31, 2002 and the statement of
operations, the statement of cash flows and the statement of shareholders'
equity for the period from incorporation on August 15, 2002 to October 31, 2002.
These financial statements are the responsibilities of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the financial statements
are free of the 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 audit provides a
reasonable basis for out opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at October 31, 2002 and the
results of operations and its cash flows for the period referred to above in
conformity with accounting principles generally accepted in the United States of
America.
These financial statements have been prepared assuming the Company will continue
as going concern. As discussed in note 1 to the financial statements, the
Company has had no operations and has no established source of revenue and needs
additional financing in order to complete its business plan. This raises
substantial doubt about the ability to continue as a going concern. These
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Pannell Kerr Forster
Chartered Accountants
Vancouver, Canada
November 28, 2002
19
[GRAPHIC OMITTED]
AUDITORS' REPORT
To the Stockholders of
Guardian Biotechnologies Inc.
We have audited the balance sheets of Guardian Biotechnologies Inc. (A
Development Stage Company) as at October 31, 2004 and 2003 and the statements of
loss and comprehensive income, stockholders' equity and cash flow for the years
then ended and for the period from inception on August 15, 2002 to October 31,
2004. 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 Canadian generally accepted auditing
standards and the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform an audit to
obtain reasonable assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at October 31, 2004 and 2003
and the results of its operations and cash flow for the years and period then
ended in accordance with United States generally accepted accounting principles.
The financial statements as at October 31, 2002, and for the period from
inception on August 15, 2002 to October 31, 2002, were reported on by other
auditors who expressed an opinion without reservation on those statements in
their report dated November 28, 2002.
"D&H GROUP LLP"
Vancouver, B.C., Canada
April 27, 2005 CHARTERED ACCOUNTANTS
D&H GROUP LLP
A Partnership of Corporations
A Member of BHD Association with affiliated offices across Canada and
Internationally
10th Floor, 1333 West Broadway, Vancouver, B.C. V6H 4C1 [_] www.dhgroup.ca
[_] F (604) 731-9923 [_] T (604) 731-5881
20
[GRAPHIC OMITTED]
COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA - U.S. REPORTING DIFFERENCE
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by conditions and events that cast substantial doubt on
the Company's ability to continue as a going concern, such as those described in
Note 1 to the financial statements. Our report to the stockholders dated April
27, 2005 is expressed in accordance with Canadian reporting standards which do
not permit a reference to such events and conditions in the auditors' report
when these are adequately disclosed in the financial statements.
"D&H GROUP LLP"
Vancouver, B.C., Canada
April 27, 2005 CHARTERED ACCOUNTANTS
D&H GROUP LLP
A Partnership of Corporations
A Member of BHD Association with affiliated offices across Canada and
Internationally
10th Floor, 1333 West Broadway, Vancouver, B.C. V6H 4C1 www.dhgroup.ca
F (604) 731-9923 T (604) 731-5881
21
GUARDIAN BIOTECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(EXPRESSED IN U.S. DOLLARS)
- --------------------------------------------------------------------------------------------
October 31,
----------------------------
2004 2003
------------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 14,014 $ 174,895
Amounts receivable (Note 3) - 11,623
Due from related party - 1,248
------------- -------------
14,014 187,766
PROPERTY AND EQUIPMENT (Note 4) 57,711 63,957
------------- -------------
$ 71,725 $ 251,723
============= =============
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 50,911 $ 21,922
Due to director (Note 7) 50,824 -
------------- -------------
101,735 21,922
------------- -------------
COMMITMENT (Note 6)
STOCKHOLDERS' EQUITY
COMMON STOCK (Note 5) - Authorized
100,000,000 shares; no par value; issued and outstanding:
12,607,500 (2003 - 12,607,500) 797,124 797,124
DEFICIT ACCUMULATED DURING
THE DEVELOPMENT STAGE (865,667) (594,355)
ACCUMULATED OTHER COMPREHENSIVE INCOME 38,533 27,032
------------- -------------
(30,010) 229,801
------------- -------------
$ 71,725 $ 251,723
============= =============
GOING CONCERN (Note 1)
See accompanying notes to the financial statements
APPROVED BY THE BOARD DIRECTOR DIRECTOR
---------------- ------------ ------------
22
GUARDIAN BIOTECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(EXPRESSED IN U.S. DOLLARS)
- ---------------------------------------------------------------------------------------------------
Cumulative
Period from from
inception inception
August 15, August 15,
2002 to 2002 to
Year ended October 31, October 31, October 31,
2004 2003 2002 2004
------------- ------------- ------------- -------------
EXPENSES
Salaries and benefits $ 59,402 $ 34,905 $ 2,118 $ 96,425
Depreciation of property and equipmen 10,466 5,307 15,773
Consulting (Note 7) 36,960 282,056 92,253 411,269
Office 8,346 8,748 527 17,621
Research 146,105 169,263 315,368
Rent (Note 6) 44,943 19,649 460 65,052
Travel 14,198 9,667 946 24,811
Professional fees 21,721 13,288 1,903 36,912
Foreign exchange loss (gain) - (1,733) - (1,733)
------------- ------------- ------------- -------------
342,141 541,150 98,207 981,498
------------- ------------- ------------- -------------
LOSS BEFORE OTHER INCOME (342,141) (541,150) (98,207) (981,498)
OTHER INCOME
Research grant 70,829 45,002 - 115,831
------------- ------------- ------------- -------------
NET INCOME (LOSS) FOR THE PERIOD (496,148) (271,312) (98,207) (865,667)
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation 11,501 28,704 (1,672) 38,533
------------- ------------- ------------- -------------
COMPREHENSIVE INCOME(LOSS) $ (259,811) $ (467,444) $ (99,879) $ (827,134)
============= ============= ============= =============
EARNINGS (LOSS) PER COMMON SHARE -
BASIC AND DILUTED $ (0.02) $ (0.06) $ (0.03)
============= ============= =============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 12,607,500 8,449,041 3,831,169
============= ============= =============
See accompanying notes to the financial statements
23
GUARDIAN BIOTECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
(EXPRESSED IN U.S. DOLLARS)
- ----------------------------------------------------------------------------------------------
Deficit Accumulated
accumulated other
Common stock during the comprehensive
------------------------------ development income
Shares Amount stage (loss)
-------------- -------------- --------------- ---------------
Inception, August 15, 2002 $ $ - $ - $ -
Common shares issued
for cash 7,000,000 318,569 - -
Foreign currency translation - - - (1,672)
Net (loss) for the period - - (98,207) -
-------------- -------------- --------------- ---------------
Balance at,
October 31, 2002 7,000,000 318,569 (98,207) (1,672)
Common shares issued to
settle accounts payable 1,200,000 38,555 - -
Common shares issued for
cash 4,407,500 440,000 - -
Foreign currency translation - - - 28,704
Net (loss) for the year - - (496,148) -
-------------- -------------- --------------- ---------------
Balance at
October 31, 2003 12,607,500 797,124 (594,355) 27,032
Foreign currency translation - - - 11,501
Net (loss) for the year - - (271,312) -
-------------- -------------- --------------- ---------------
Balance at
October 31, 2004 12,607,500 $ 797,124 $ (865,667) $ 38,533
============== ============== =============== ===============
See accompanying notes to the financial statements
24
GUARDIAN BIOTECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOW
(EXPRESSED IN U.S. DOLLARS)
- -------------------------------------------------------------------------------------------------------------
Cumulative
Period from from
inception on inception on
August 15, August 15,
2002 to 2002 to
Year ended October 31, October 31, October 31,
2004 2003 2002 2004
------------- ------------- -------------- --------------
CASH FLOW USED IN OPERATING ACTIVITIES
Net (loss) $ (271,312) $ (496,148) $ (98,207) $ (865,667)
Adjustments to reconcile net cash (used) in
operating activities
Depreciation of property and equipment 10,466 5,307 - 15,773
Accounts payable settled for common shares - 38,555 - 38,555
(Increase) Decrease in
Amounts receivable 11,623 (11,623) - -
Due from related party 1,248 (1,248) - -
Increase (decrease) in
Accounts payable and accrued liabilities 28,989 (18,574) 40,496 50,911
------------- ------------- -------------- --------------
(218,986) (483,731) (57,711) (760,428)
------------- ------------- -------------- --------------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of equipment (4,220) (69,264) - (73,484)
------------- ------------- -------------- --------------
CASH FLOW FROM FINANCING ACTIVITIES
Due to a director 50,824 - - 50,824
Issue of common shares for cash - 440,000 318,569 758,569
------------- ------------- -------------- --------------
50,824 440,000 318,569 809,393
------------- ------------- -------------- --------------
INCREASE (DECREASE) IN CASH (172,382) (112,995) 260,858 (24,519)
EFFECT OF FOREIGN CURRENCY
TRANSLATION 11,501 28,704 (1,672) 38,533
CASH AND CASH EQUIVALENTS,
beginning of period 174,895 259,186 - -
------------- ------------- -------------- --------------
CASH AND CASH EQUIVALENTS, end of period $ 14,014 $ 174,895 $ 259,186 $ 14,014
============= ============= ============== ==============
CASH AND CASH EQUIVALENTS is comprised of:
Cash $ 1,714 $ 163,527 $ 259,186
Term deposit 12,300 11,368 -
------------- ------------- --------------
$ 14,014 $ 174,895 $ 259,186
============= ============= ==============
See Note 10.
See accompanying notes to the financial statements
25
GUARDIAN BIOTECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
OCTOBER 31, 2004 AND 2003
(EXPRESSED IN U.S. DOLLARS)
- --------------------------------------------------------------------------------
1. GOING CONCERN
Guardian Biotechnologies Inc. (the "Company") was incorporated under the Canada
Business Corporations Act on August 15, 2002 and is registered under The
Business Corporation Act (Saskatchewan).
The Company's planned principal business operations are conducted in Canada and
will include the development, and commercial exploitation, of therapeutic
proteins for medical and veterinary use and for use in the production of
industrial and cosmetic enzymes. The Company plans to distribute laboratory
equipment; plastic consumable laboratory supplies and testing kits for use with
genetically modified organisms. To date the Company has devoted substantially
all of its efforts to developing a business plan and raising capital. The
Company has not yet generated revenue from its planned principal business
operations. As of October 31, 2004 the Company is considered a development
stage company as defined by Statement of Financial Accounting Standards No. 7
("SFAS No. 7").
The accompanying financial statements have been prepared on the basis of
accounting principles applicable to a going concern, which contemplates the
realization of assets and extinguishment of liabilities in the normal course of
business. At October 31, 2004, the Company has incurred losses during the
period from inception to October 31, 2004 of $ 827,134.
The company requires financing to fund its future operations and will attempt to
meet its ongoing liabilities as they fall due through the sale of equity
securities and/or debt financing. There can be no assurance that the Company
will be able to raise the necessary financing to continue in operation or meet
its liabilities as they fall due or be successful in achieving profitability
from its planned principle operations. Should the Company be unable to realize
the carrying value of its assets or discharge its liabilities in the normal
course of business, the Company may not be able to remain in operation and the
net realizable value of its assets may be materially less than the amounts
recorded on the balance sheet.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements are in accordance with United States generally
accepted accounting principles ("US GAAP"). Significant accounting principles
utilized in the preparation of the financial statements are summarized below:
Basis of presentation
The preparation of financial statements in conformity with US GAAP requires
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 reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Revenue recognition
The Company will recognize revenue when persuasive evidence of an arrangement
exists, delivery has occurred, the sales price to the customer is fixed or
determinable and when collectability is reasonably assured.
Cash equivalents
For purposes of reporting cash flows, the Company considers as cash equivalents
all highly liquid investments with a maturity of three months or less at the
time of purchase.
26
Guardian Biotechnologies Inc.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
October 31, 2004 and 2003
(Expressed in U.S. Dollars)
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Property and equipment
Property and equipment is initially recorded at cost. Expenditures incurred for
replacement and betterment of property and equipment are capitalized when
incurred. Maintenance and repairs are charged to expense as incurred.
Depreciation is provided over the estimated useful lives of the property and
equipment using the straight-line method at the following annual rates:
Laboratory equipment - 10 years
Computer hardware - 3 years
Office furniture - 5 years
Impairment of long-lived assets
The Company has adopted Statement of Financial Accounting Standard ("SFAS") No.
144 "Accounting for the Impairment or Disposal of Long-Lived Assets" which
requires that long-lived assets to be held and used be assessed for impairment
whenever events or changes in circumstances indicated that the carrying amount
of an asset may not be recoverable. SFAS No. 144 established a single accounting
model for long-lived assets to be disposed of by sale.
Research and development
All research and development costs are expensed when incurred.
Stock-based compensation
In October 1995, the Financial Accounting Standards Board ("FASB") issued No.
123 "Accounting for Stock-Based Compensation", effective for fiscal years
beginning after December 15, 1995. SFAS 123 encourages a fair value method of
accounting for employee stock-based compensation and requires entities to adopt
that method of accounting for its awards of stock-based compensation to
non-employees. SFAS 123 allows an entity to continue to recognize employee
stock-based compensation using the intrinsic value method as described in
Accounting Pronouncement Bulletin Opinion No. 25 "Accounting for Stock Issued to
Employees" ("APB 25"). The Company has elected to account for employee
stock-based compensation as prescribed under APB 25. The Company has not issued
any stock-based compensation as of October 31, 2004.
Foreign currency translation
The Company's functional currency is the Canadian dollar and its books and
records are maintained in Canadian dollars. Transactions denominated in
currencies other than the Canadian dollar are accounted for in Canadian dollars
using the exchange rate in effect at the time. Foreign currency gains and
losses are included in earnings. These financial statements are presented in
United States ("US") dollars. Assets and liabilities are translated at the rate
of exchange in effect at the balance sheet date. Revenues and expenses are
translated at the exchange rates in effect at the time the transactions
occurred, which is approximated by the use of a weighted average rate of
exchange for the periods presented. Foreign currency translation gains and
losses are included as an element of other comprehensive income in the statement
of loss and comprehensive loss and in the stockholders' equity section of the
balance sheet.
Earnings (loss) per share
Earnings (loss) per share is computed based on the weighted average number of
common shares outstanding during each period. Convertible equity instruments,
such as convertible preferred shares, stock options and stock purchase warrants
would not be considered in the calculation of earnings (loss) per share as their
inclusion would be anti-dilutive.
27
GUARDIAN BIOTECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
OCTOBER 31, 2004 AND 2003
(EXPRESSED IN U.S. DOLLARS)
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Income taxes
The Company follows SFAS No. 109 "Accounting for Income Taxes". SFAS No. 109
requires recognition of deferred income tax liabilities and deferred income tax
assets for the expected future income tax consequences of events that have been
included in the financial statements or income tax returns. Under this method,
deferred income tax liabilities and deferred income tax assets are determined
based on the difference between the financial statement and income tax basis of
assets and liabilities using enacted income tax rates in effect for the year in
which the differences are expected to reverse.
3. AMOUNTS RECEIVABLE
2004 2003
------ -------
Recoverable Canadian federal excise tax $ - $ 9,369
Other - 2,254
------ -------
$ - $11,623
====== =======
4. PROPERTY AND EQUIPMENT
2004 2003
----------------------------------------- -------------
Accumulated
Cost depreciation Net Net
------------ ------------- ------------ -------------
Laboratory equipment $ 58,722 $ 8,597 $ 50,125 $ 51,777
Computer hardware 12,312 6,435 5,877 9,981
Office furniture 2,450 741 1,709 2,199
------------ ------------- ------------ -------------
$ 73,484 $ 15,773 $ 57,711 $ 63,957
============ ============= ============ =============
5. COMMON STOCK
During the period from inception on August 15, 2002 to October 31, 2002 the
Company issued:
- 2,000,000 common shares for cash of $ 1,269 ($0.0006 per share) in
September 2002 to the founder of the Company at inception, and
- 5,000,000 common shares for cash of $ 317,300 ($0.06 per share) in
September 2002. These issuances were made to a director and to a corporation
controlled by a director.
During the year ended October 31, 2003 the Company issued:
- 1,200,000 common shares to settle accounts payable of $ 38,555 ($0.03 per
share) in November 2002, and
- 4,407,500 common shares for cash of $440,000 ($0.10 per share) in July
2003, including 2,000,000 common shares issued to a corporation controlled by a
director and 10,000 common shares issued to a director.
No common shares were issued during the year ended October 31, 2004
28
GUARDIAN BIOTECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
OCTOBER 31, 2004 AND 2003
(EXPRESSED IN U.S. DOLLARS)
- --------------------------------------------------------------------------------
6. COMMITMENT
The Company leases its premises under an operating lease that expires during the
fiscal year ending October 31, 2007. The Company is obligated to make the
following minimum rental payments under its operating lease in each of the
fiscal years ending:
October 31, 2005 $ 38,355
October 31, 2006 38,355
October 31, 2007 38,355
---------
$ 115,065
=========
7. RELATED PARTY TRANSACTIONS
During the year ended October 31, 2004 the Company paid $36,960 (2003 -
$116,193: 2002 - $ Nil) to a director for consulting fees.
A director has advanced $50,824, with out fixed terms of repayment and without
interest.
8. FINANCIAL INSTRUMENTS
Credit risk
Cash, amounts receivable and the amount due from related party expose the
Company to credit risk. The Company minimizes its exposure to credit risk by
transacting with parties that are believed to be credit worthy. The Company
maintains cash accounts at one Canadian chartered bank, thereby minimizing
exposure for deposits in excess of federally insured amounts. The Company
believes credit risk associated with cash is remote.
Fair value
The fair value of cash, amounts receivable, the amounts due from related party,
due to a director and accounts payable and accrued liabilities is approximated
by their book values due to their short terms to maturity.
9. INCOME TAXES
At October 31, 2004 the Company had non-capital losses for Canadian income tax
purposes of approximately $865,000 that may reduce future taxable income through
to 2011. The loss carryforwards are subject to review by the Canada Revenue
Agency.
The Company has fully reserved the $250,000 potential income tax benefit of the
loss carryforwards by a valuation allowance of the same amount, as there is no
reasonable assurance the benefit will be realized. Of the total potential
income tax benefit, $77,000 is attributable to 2004.
There are no significant temporary differences at October 31, 2004.
29
GUARDIAN BIOTECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
OCTOBER 31, 2004 AND 2003
(EXPRESSED IN U.S. DOLLARS)
- --------------------------------------------------------------------------------
10. SUPPLEMENTAL CASH FLOW INFORMATION
The Company conducted non-cash transactions as follows:
2004 2003
--------- ---------
Operating activities
Settlement of accounts payable and accrued
liabilities by issue of common shares $ - $(38,555)
Financial activities
Common shares issued to settle accounts
payable and accrued liabilities - 38,555
--------- ---------
$ - $ -
========= =========
The Company has paid no interest or income taxes.
ITEM 19. EXHIBITS
None
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing
on Form 20-F and that it has duly caused and authorized the undersigned to sign
this annual report on its behalf.
Guardian Biotechnologies Inc.
By: /s/ Sun Lee
-----------
Name: Sun Lee
Title : President, director
Date: May 5, 2005
------------