AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 2004
REGISTRATION STATEMENT NO. [--------------]
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
BIO-BRIDGE SCIENCE, INC.
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(Name of Small Business Issuer in Its Charter)
Delaware 2834 20-1802936
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(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
1211 West 22nd Street, Suite 615
Oak Brook, IL 60523
630-928-0869
(Address and telephone number of principal executive
offices and principal place of business)
DR. LIANG QIAO
BIO-BRIDGE SCIENCE, INC.
1211 WEST 22ND STREET, SUITE 615
OAK BROOK, IL 60523
(Name, address and telephone number of Agent for Service)
Copy to:
Michael Donahue, Esq.
RICHARDSON & PATEL LLP
10900 Wilshire Boulevard, Suite 500
Los Angeles, California 90024
(310) 208-1182
Approximate date of proposed sale to the public: From time to time after the
effective date of this Registration Statement.
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]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Title of each class of Amount to be Proposed maximum offering Proposed maximum Amount of registration
securities to be registered Registered price per share aggregate offering price fee
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Common Stock, par value $0.001 3,657,606 $0.50 $1,828,803(1) $216.00
per share
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.
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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SECTION
8(A), MAY DETERMINE.
SUBJECT TO COMPLETION, DATED DECEMBER 30, 2004
Prospectus
BIO-BRIDGE SCIENCE, INC.
3,657,606 shares of Common Stock
This prospectus covers the resale by selling stockholders named on page
15 of up to 3,657,606 shares of our common stock, par value $0.001, which
include:
o 300,000 shares of common stock; and
o 3,357,606 shares of common stock issued pursuant to an Agreement for
the Exchange of Shares dated November 4, 2004, which was completed
on December 1, 2004.
This offering is not being underwritten. These securities will be
offered for sale by the selling stockholders identified in this prospectus in
accordance with the methods and terms described in the section of this
prospectus entitled "Plan of Distribution." The selling stockholders will sell
the shares at a price of $0.50 per share until our shares are quoted on the
Over-the-Counter Bulletin Board and a market develops, and thereafter at
prevailing market prices or privately negotiated prices.
We will not receive any of the proceeds from the sale of these shares.
We will pay all expenses, except for the brokerage expenses, fees, discounts and
commissions, which will all be paid by the selling stockholders, incurred in
connection with the offering described in this prospectus. Our common stock is
more fully described in the section of this prospectus entitled "Description of
Securities."
Our securities are not currently listed on any national securities
exchange or the Nasdaq Stock Market.
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING AT PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is __________, 2004
TABLE OF CONTENTS
Prospectus Summary........................................................... 3
Risk Factors................................................................. 6
Special Note Regarding Forward-Looking Statements............................ 14
Use of Proceeds.............................................................. 15
Determination of Offering Price.............................................. 15
Selling Stockholders ........................................................ 15
Plan of Distribution......................................................... 18
Legal Proceedings............................................................ 19
Directors, Executive Officers, Promoters and Control Persons................. 19
Security Ownership of Certain Beneficial Owners and Management............... 21
Description of Securities ................................................... 21
Interest of Named Experts and Counsel........................................ 22
Disclosure of Commission Position of Indemnification for Securities
Act Liabilities ............................................................. 22
Description of Business...................................................... 23
Glossary of Scientific Terms ................................................ 28
Management Discussion and Analysis........................................... 28
Description of Property...................................................... 31
Certain Relationships and Related Transactions............................... 31
Market For Common Equity and Related Stockholder Matters..................... 32
Executive Compensation....................................................... 34
Financial Statements ........................................................ 35
Where You Can Find More Information.......................................... 36
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. It is not complete and does not contain all of the information that
you should consider before investing in our common stock. You should read the
entire prospectus carefully, including the section entitled "Risk Factors" and
our consolidated financial statements and the related notes. In this prospectus,
we refer to Bio-Bridge Science, Inc. and our wholly owned subsidiaries,
including Bio-Bridge Science (Beijing) Co. Ltd., a Wholly-Foreign Funded
Enterprise of the People's Republic of China ("Bio-Bridge (Beijing)") and
Bio-Bridge Science Corporation, a Cayman Islands corporation ("Bio-Bridge
(Cayman)") as "we," "us," "our," "Bio-Bridge" and "the company."
OUR COMPANY
Bio-Bridge Science, Inc. is a development stage company whose
subsidiaries are focused on the commercial development of biological products
for the prevention and treatment of human infectious diseases. Bio-Bridge
Science, Inc. was incorporated in Delaware on October 26, 2004 for the purpose
of changing the corporate structure of our business. On December 1, 2004,
Bio-Bridge Science, Inc. acquired all the outstanding shares of Bio-Bridge
Science Corporation, a Cayman Islands corporation, in exchange for 29,971,590
shares of its common stock, and as a result, Bio-Bridge Science Corporation
became a wholly owned subsidiary of Bio-Bridge Science, Inc. The acquisition
will be accounted for as a reverse merger (recapitalization) with Bio-Bridge
Science Corporation deemed to be the accounting acquirer, and Bio-Bridge
Science, Inc. deemed to be the legal acquirer. Accordingly, the historical
financial information presented herein is that of Bio-Bridge Science Corporation
as adjusted to give effect to any difference in the par value of the
registrant's and the accounting acquirer's stock with an offset to capital in
excess of par value. The retained earnings of Bio-Bridge Science Corporation,
the accounting acquirer, will also be carried forward after the acquisition.
Also, Bio-Bridge Science Corporation's basis of its assets and liabilities will
be carried over in the recapitalization.
Bio-Bridge Science, Inc.'s wholly owned subsidiary Bio-Bridge Science
Corporation was incorporated in the Cayman Islands on February 11, 2002, and its
wholly owned subsidiary, Bio-Bridge Science (Beijing) Co. Ltd., was established
in the People's Republic of China ("PRC" or "China") in April 2002. These
subsidiaries were organized to continue development of, and commercialize,
HIV-PV Vaccine I, a vaccine designed to prevent and treat infection by the human
immunodeficiency virus, or HIV. The original HIV-PV Vaccine I technology was
co-developed by our chief executive officer Dr. Liang Qiao, an associate
professor at Loyola University Chicago, and is owned by Loyola University. In
June 2002, Loyola University exclusively licensed this technology to us with
respect to China (including mainland China, Taiwan, Hong Kong and Macau), Japan
and the United States. Through an agreement with Beijing Institute of Radiation
Medicine, a leading research institute for biological products in China, we are
currently conducting pre-clinical testing of HIV-PV Vaccine I, which we
anticipate will be completed by mid-March 2005. Once the pre-clinical testing is
completed, we plan to apply to China's State Food and Drug Administration for
approval to conduct clinical trials of HIV-PV Vaccine I.
Our strategy is to develop, test and obtain regulatory approval for
HIV-PV Vaccine I in China first and then in the United States and Japan. In May
2003, we acquired the right to use for fifty years approximately 2.8 acres of
land in the Tianzhu Export Processing Zone, Shunyi District, Beijing, China,
which we plan to develop into a laboratory and biomanufacturing facility in
compliance with Good Manufacturing Practices, or GMP, regulations primarily for
clinical trials of HIV-PV Vaccine I. We may also provide outsource services to
U.S. and Europe based pharmaceutical companies once this research laboratory is
completed. As of November 2004, we have received all necessary permits and
approvals and construction of the facility has commenced. To date, we have
completed the outside main body of the GMP laboratory. We estimate that the cost
of building and outfitting this facility is $3,000,000, and the construction and
installation of equipment related to the facility will be substantially
completed by June 2005. We currently have no commitments to make payments for
this construction project, except for $724,900 pursuant to a contract involving
structural and foundation work for the facility.
We have incurred significant losses since inception, and we are not
profitable. We expect to continue to incur substantial losses over at least the
next year as we complete our pre-clinical trials, apply for regulatory approvals
of clinical trials, construct our laboratory and manufacturing facility and
continue development of our technology. We do not expect to generate significant
revenue in the next twelve months. We will need to raise additional capital in
the next 12 months to meet these expenses and to continue as a going concern.
See "Plan of Operation." Our independent auditors have added an explanatory
paragraph to their report of Bio-Bridge Science Corporation (the accounting
acquirer) for the year ended December 31, 2003 stating that our net loss from
organizational and pre-operating activities, lack of revenues and dependence on
our ability to raise additional capital to continue our existence, raise
substantial doubt about our ability to continue as a going concern.
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The address of our principal executive offices is 1211 West 22nd
Street, Suite 615, Oak Brook, Illinois where our telephone number is
630-928-0869. Our China office is located at Tianzhu Export Processing Zone,
Shunyi District Beijing, China 101312. Our website is
www.bio-bridge-science.com. Information contained on our website does not
constitute part of this prospectus.
RISKS RELATED TO OUR BUSINESS
Our business is subject to a number of risks, which you should be aware
of before making an investment decision. These risks are discussed more fully in
the section of this prospectus entitled "Risk Factors."
THE OFFERING
On December 1, 2004, we completed a share exchange with Bio-Bridge
Science Corporation, a Cayman Islands corporation, in which we issued 29,971,590
shares of our common stock. For more detailed information regarding the share
exchange, see "Business--History, Reorganizations and Corporate Structure." Of
these 29,971,590 shares of our common stock, 3,357,606 shares are being
registered for resale under this prospectus.
We are registering a total of 3,657,606 shares of our common stock for
sale by the selling stockholders identified in the section of this prospectus
entitled "Selling Stockholders." The shares included in the table identifying
the selling stockholders consist of:
o 300,000 shares of common stock; and
o 3,357,606 shares of common stock issued pursuant to an Agreement for
the Exchange of Shares dated November 4, 2004, which was completed
on December 1, 2004.
Upon the effectiveness of this prospectus, we will have 30,271,590
shares of common stock outstanding, which does not include:
o 1,192,663 shares of common stock to be issued upon exercise of
options outstanding; and
o 2,000,000 shares of common stock reserved for issuance under our
2004 Stock Incentive Plan.
Of the 30,271,590 outstanding shares, 3,657,606 shares will be
freely tradable without restriction or further registration under the federal
securities laws, so long as the registration statement that contains this
prospectus is effective. Information regarding our common stock is included in
the section of this prospectus entitled "Description of Securities."
We have agreed to keep this prospectus effective until the date on
which the shares may be resold by the selling stockholders without registration
by reason of Rule 144 under the Securities Act of 1933, as amended, or any other
rule of similar effect.
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SUMMARY FINANCIAL DATA
The following historical financial information should be read in conjunction
with the audited financial statements and the notes to those statements and the
section entitled "Management's Discussion and Analysis" included elsewhere in
this prospectus. The statements of operations and comprehensive income data with
respect to the year ended December 31, 2003 and the period February 11, 2002
(inception) to December 31, 2002 and the balance sheet data at December 31, 2003
are derived from, and are qualified by reference to, the audited financial
statements included elsewhere in this prospectus. See footnote 1 below. The
historical results are not necessarily indicative of results to be expected for
any future periods.
Period February 11, Nine Months Ended September 30,
Year Ended 2002 to -------------------------------------
December 31, 2003 December 31, 2002 2004 (unaudited) 2003 (unaudited)
----------------- ----------------- ---------------- ----------------
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues, net $ -- $ -- $ -- $ --
General and administrative
expenses $ 256,553 $ 114,860 $ 345,218 $ 178,690
Research and administrative
expenses -- -- $ 46,208 --
Comprehensive Loss $ (255,664) $ (114,975) $ (391,436) $ (177,439)
Basic and diluted loss per
share $ (.01) $ (.01) $ (.01) $ (.01)
Weighted-average common
shares outstanding 26,795,715 23,086,090 29,971,590 25,662,390
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents $ 220,291 $ 455,541 $ 917,039 $ 348,485
Working capital $ 269,915 $ 455,436 $ 926,180 $ 364,551
Total assets $ 693,823 $ 460,789 $ 1,558,293 $ 567,715
Total shareholders' equity $ 689,489 $ 459,755 $ 1,518,293 $ 566,887
Total liabilities and
shareholders' deficit $ 693,823 $ 460,789 $ 1,558,293 $ 567,715
(1) On December 1, 2004, Bio-Bridge Science, Inc. acquired all the outstanding
shares of Bio-Bridge Science Corp. in exchange for 29,971,500 shares of its
common stock. The acquisition will be accounted for as a reverse merger
(recapitalization) with Bio-Bridge Science Corp. deemed to be the
accounting acquirer, and Bio-Bridge Science Inc. deemed to be the legal
acquirer. Accordingly, the historical financial information presented
herein is that of Bio-Bridge Science Corp. as adjusted to give effect to
any difference in the par value of the issuer's and the accounting
acquirer's stock with an offset to capital in excess of par value.
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RISK FACTORS
You should carefully consider the risks described below before making
an investment decision. Our business could be harmed by any of these risks. The
trading price of our common stock could decline due to any of these risks, and
you may lose all or part of your investment. In assessing these risks, you
should also refer to the other information contained in this prospectus,
including our financial statements and related notes.
RISKS RELATED TO OUR BUSINESS AND THIS OFFERING
WE HAVE A HISTORY OF LOSSES AND AN ACCUMULATED DEFICIT OF $760,843 AS OF
SEPTEMBER 30, 2004, AND WE MAY NEVER ACHIEVE PROFITABILITY.
We have yet to establish any history of profitable operations. We have
not had any revenues since our inception. We incurred a loss of $255,020 in 2003
and $114,476 for the period February 11, 2002 (inception) to December 31, 2002.
During the interim period ended September 30, 2004, we incurred operating losses
of $391,347. As a result, at September 30, 2004, we had an accumulated deficit
of $760,843. These losses have resulted principally from research and
development and general and administrative expenses. To date, we have engaged
primarily in organizational activities, research, development and pre-clinical
testing. We anticipate that we will continue to incur substantial operating
losses based on projected research and development and other operating costs for
an indefinite period of time due to the significant costs associated with the
development of our products. Our profitability will require the successful
development and commercialization of our HIV-PV Vaccine I. No assurances can be
given when or if this will occur or that we will ever be profitable.
BIO-BRIDGE SCIENCE CORP. (THE ACCOUNTING ACQUIRER) HAS RECEIVED AN OPINION OF
GOING CONCERN FROM OUR AUDITORS. IF WE DO NOT RECEIVE ADDITIONAL FUNDING, WE
WOULD HAVE TO CURTAIL OR CEASE OPERATIONS.
Our independent auditors noted in their report accompanying Bio-Bridge
Science Corp.'s (the accounting acquirer) financial statements for each of the
year ended December 31, 2003 and the period February 11, 2002 (inception) to
December 31, 2002 that we have incurred losses, generated no revenues, have been
involved in organizational and pre-operating activities since inception and that
additional capital will be necessary for the continuation of our existence. They
further stated that the uncertainty related to these conditions raised
substantial doubt about our ability to continue as a going concern. We do not
currently have sufficient capital resources to fund the completion of our
pre-clinical testing, construction of our laboratory and manufacturing facility
and application for clinical testing. Therefore, we need additional funds to
support the necessary development programs required to develop, test and obtain
regulatory approval of our HIV-PV Vaccine I and other product candidates. We
currently do not have any binding commitments for, or readily available sources
of, additional financing. It is highly likely that we will seek to raise money
through public or private sales of our securities, debt financing or short-term
loans, or a combination of the foregoing. However, additional funding may not be
available on favorable terms to us, or at all. To the extent that money is
raised through the sale of our securities, the issuance of those securities
could result in dilution to our existing shareholders. If we raise money through
debt financing, we may be required to secure the financing with all of our
business assets, which could be sold or retained by the creditor should we
default in our payment obligations. If we fail to raise sufficient funds, we
would have to curtail or cease operations.
AS A COMPANY IN THE EARLY STAGE OF DEVELOPMENT WITH AN UNPROVEN BUSINESS
STRATEGY, OUR LIMITED HISTORY OF OPERATIONS MAKES EVALUATION OF OUR BUSINESS AND
FUTURE PROSPECTS DIFFICULT.
We have had a limited operating history and are at an early stage of
development. Since the inception of our wholly owned subsidiary, Bio-Bridge
Science Corporation, a Cayman Islands corporation, in February 2002, our
activities have primarily consisted of organizational activities, securing
intellectual rights to our proprietary technology, and undertaking pre-clinical
trials of HIV-PV Vaccine I. We have not yet demonstrated any ability to
commercialize HIV-PV Vaccine I. As a result of these factors, it is difficult to
evaluate our prospects, and our future success is more uncertain than if we had
a longer or more proven history of operations.
OUR INTELLECTUAL PROPERTY RIGHTS MAY NOT PROVIDE MEANINGFUL PROTECTION FOR OUR
PRODUCTS UNDER DEVELOPMENT, WHICH COULD ENABLE THIRD PARTIES TO USE OUR
TECHNOLOGY, OR VERY SIMILAR TECHNOLOGY, AND COULD PREVENT US FROM DEVELOPING OR
MARKETING OUR PRODUCT CANDIDATES.
We rely on patent and trade secret laws to limit the ability of others
to compete with us using the same or similar technology in the U.S. and other
countries. However, as described below, these laws afford only limited
protection and may not adequately protect our rights to the extent necessary to
sustain any competitive advantage we may have. The laws of some foreign
countries do not protect proprietary rights to the same extent as the laws of
the U.S., and many companies have encountered significant problems in protecting
their proprietary rights abroad. These problems can be caused by the absence of
adequate rules and methods for defending and enforcing intellectual property
rights.
6
We will be able to protect our technology from unauthorized use by
third parties only to the extent that they are covered by valid and enforceable
patents or are effectively maintained as trade secrets. The patent positions of
companies developing drugs for pharmaceutical, biotechnology and biomedical
industries, including our patent position, generally are uncertain and involve
complex legal and factual questions, particularly as to questions concerning the
enforceability of such patents against alleged infringement. The biotechnology
patent situation outside the U.S. is even more uncertain. Changes in either the
patent laws or in interpretations of patent laws in the U.S. and other countries
may therefore diminish the value of our intellectual property. Moreover, our
patent and patent applications may not be sufficiently broad to prevent others
from practicing our technologies or from developing competing products. We also
face the risk that others may independently develop similar or alternative
technologies or design around our patented technologies.
We control through a license with Loyola University of Chicago an
issued patent and pending patent applications. However, the patent on which we
rely may be challenged and invalidated, and the patent applications may not
result in issued patents. Dr. Qiao has recently authorized minor modifications
to his patent application in the U.S. and has received a Notice of Allowance. We
intend to pay the required fee for issuance of the patent pursuant to the Notice
of Allowance.
We have taken measures to protect our proprietary information. These
measures, however, may not provide adequate protection of our trade secrets or
other proprietary information. We seek to protect our proprietary information by
entering into confidentiality agreements with employees, collaborators and
consultants. Nonetheless, employees, collaborators or consultants may still
disclose our proprietary information, and we may not be able to protect our
trade secrets in a meaningful way. If we lose employees, we may not be able to
prevent the disclosure or use of our technical knowledge or other trade secrets
by those former employees despite the existence of nondisclosure and
confidentiality agreements and other contractual restrictions to protect our
proprietary technology. In addition, others may independently develop
substantially equivalent proprietary information or techniques or otherwise gain
access to our trade secrets.
OUR RIGHTS TO THE USE OF TECHNOLOGY LICENSED TO US BY A THIRD PARTY ARE NOT
WITHIN OUR CONTROL, AND WITHOUT THIS TECHNOLOGY, OUR PRODUCTS UNDER DEVELOPMENT
MAY NOT BE SUCCESSFUL AND OUR BUSINESS PROSPECTS COULD BE HARMED.
We rely on a license to use technologies that are material to our
business. We do not own the patents that underlie this license. Our rights to
use these technologies and employ the inventions claimed in the licensed patents
are subject to the continuation of and compliance with the terms of that license
and the continued validity of these patents. Our license from Loyola University
Chicago provides us with exclusive rights within the United States, Japan and
China, including the right to enforce the patents licensed to us from this
university, but we cannot assure you that the scope of our rights under this
license will not be subject to dispute by our licensor or third parties. This
license contains due diligence obligations, as well as provisions that allow the
licensor to terminate the license upon specific conditions.
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IF WE ARE UNABLE TO COMMERCIALIZE OUR PRODUCT CANDIDATES, WE WILL NOT HAVE
REVENUES TO CONTINUE OPERATIONS.
HIV-PV Vaccine I is our main product candidate. We do not know whether
the HIV-PV Vaccine I will be effective in preventing or treating HIV
infection. Although our research has indicated that the HIV-PV Vaccine I
technology contains a pseudovirus that induces both mucosal and systemic
neutralizing antibodies that may be used to prevent and treat HIV infection,
other elements may be necessary to develop an effective vaccine. Our success
will depend primarily on the success of HIV-PV Vaccine I. In particular, we must
be able to:
o complete pre-clinical trials and obtain regulator approvals to
proceed with clinical trials of HIV-PV Vaccine I;
o establish the safety, purity, potency and efficacy of HIV-PV Vaccine
I in humans;
o obtain regulatory approvals for HIV-PV Vaccine I; and
o successfully commercialize HIV-PV Vaccine I.
If we are unable to commercialize HIV-PV Vaccine I, we do not have
other products from which to derive revenues.
WE MAY NOT BE ABLE TO OBTAIN REGULATORY APPROVAL TO MARKET OUR PRODUCT
CANDIDATES IN CHINA, THE UNITED STATES OR JAPAN ON A TIMELY BASIS, OR AT ALL, TO
COMMERCIALIZE OUR PRODUCT CANDIDATES.
Clinical testing is a long, expensive and uncertain process. If the
Chinese government approves our application for clinical testing, we cannot
assure you that the data collected from our clinical trials will be sufficient
to support approval of HIV-PV Vaccine I by the SFDA or regulatory authorities in
Japan and the United States, that the clinical trials will be completed on
schedule or, even if the clinical trials are successfully completed and on
schedule, that the SFDA or other regulatory authorities in the United States or
Japan will ultimately approve HIV-PV Vaccine I for commercial sale.
To gain SFDA regulatory approval for the sale of HIV PV Vaccine I in
China, we believe, based on SFDA'a "Green Mile" policy, that we will need to
complete the following five steps:
o pre-clinical laboratory and animal testing;
o the submission to the SFDA of an application for approval of
clinical study, which must be effective before clinical trials may
commence;
o adequate Phase I, II and III clinical studies to establish the
safety, purity and potency of the product candidate and demonstrate
how it behaves in the human body;
o obtain Drug Production Quality Control Procedure or GMP
certification;
o the submission of an application to the SFDA for Drug Registration
Document, and obtain new drug approval certificate; and
o sales for pre-production drugs in the market and phase IV clinical
study.
We estimate that the total drug approval process in China may take at
least two years from the date of the application for approval of clinical study.
However, the SFDA has substantial discretion in the drug approval process and
may require us to conduct additional pre-clinical and clinical testing or to
perform post-marketing studies. The approval process may also be delayed due to
changes in government regulation, future legislation or administrative action or
changes in SFDA policy that occur prior to or during our regulatory review.
Delays or failure to obtain regulatory approvals may:
o delay or prevent commercialization of, and our ability to derive
product revenues from, our product candidates;
o impose significant costs on us to comply with such laws and
regulations; and
o diminish any competitive advantage the we may otherwise have.
In the United States and Japan, we must receive approval from the
appropriate regulatory authorities before we can commercialize our product
candidates. We anticipate that the regulatory approval to market HIV-PV Vaccine
I in the United States and Japan will vary and may differ from that required by
the SFDA. There can be no assurance that we will avoid incurring significant
costs to comply with government regulations in the future, or that such
regulations will not have a material adverse effect on us.
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DELAY IN COMMENCEMENT AND COMPLETION OF OUR CLINICAL TRIALS COULD JEOPARDIZE OUR
ABILITY TO OBTAIN REGULATORY APPROVAL TO MARKET OUR PRODUCT CANDIDATES IN CHINA,
THE UNITED STATES AND JAPAN ON A TIMELY BASIS.
Our clinical trials could be delayed for a variety of reasons,
including:
o unforeseen safety issues;
o determination of dosing issues;
o lower-than-anticipated retention rate of volunteers in the trial;
o serious adverse events related to the vaccine;
o inability to monitor patients adequately during or after treatment;
or
o different interpretations of our pre-clinical and clinical data,
which can lead initially to inconclusive results.
Our inability to commence or complete our clinical trials in a timely
manner could jeopardize our ability to obtain regulatory approval.
THE RESULTS OF OUR CLINICAL TRIALS MAY NOT SUPPORT OUR PRODUCT CANDIDATE CLAIMS.
Even if our clinical trials are commenced and completed as planned, we
cannot be certain that their results will support our product candidate claims.
Success in pre-clinical testing and early phases of clinical trials does not
ensure that later phases of clinical trials will be successful, and we cannot be
sure that the results of later phases of clinical trials will replicate the
results of prior clinical trials and pre-clinical testing. The clinical trial
process may fail to demonstrate that our product candidates are safe for humans
and effective for indicated uses. This failure would cause us to abandon a
product candidate and may delay or prevent development of other product
candidates.
FORMATION OF OUR LABORATORY AND MANUFACTURING FACILITY IN CHINA IS NOT YET
COMPLETED, AND EVEN IF COMPLETED, WE MAY NOT BE SUCCESSFUL AT MANUFACTURING OR
SUPPLYING OUR PRODUCT CANDIDATES IN NECESSARY QUANTITIES, OR AT ALL.
In May 2003, we purchased a right to use for fifty years land located
in the Shunyi District of Beijing, China for the purpose of building and
operating a laboratory and manufacturing facility in China. In October 2004, we
commenced construction of this laboratory and manufacturing facility. However,
if:
o we are unable to raise the anticipated, or necessary, funding; or
o approval of the facility in compliance with GMP requirements is not
obtained
we will be unable to build the manufacturing facility in Beijing, China. Even if
we successfully build this laboratory and manufacturing facility, there can be
no assurance that the facility will pass domestic or foreign regulatory
approvals or be able to manufacture our product candidates in commercial
quantities, or at all, or that we will be able to manufacture our product
candidates on a cost-effective basis. There also can be no assurance that the
building of the laboratory and manufacturing facility will be completed on time
and will not be subject to cost overruns.
WE DEPEND ON KEY MANAGEMENT EMPLOYEES FOR OUR FUTURE SUCCESS. IF WE LOSE OUR KEY
MANAGEMENT EMPLOYEES, OUR ABILITY TO OBTAIN FINANCING, DEVELOP OUR PRODUCT
CANDIDATES, CONDUCT CLINICAL TRIALS OR EXECUTE OUR BUSINESS STRATEGY COULD BE
SUBSTANTIALLY HARMED AND THE VALUE OF THE STOCK YOU OWN COULD BE ADVERSELY
AFFECTED.
Our future success is substantially dependent on the efforts of our
senior management and scientific staff, particularly our chief executive
officer, Liang Qiao, M.D. and his brother, Wenhui Qiao, who is our president.
These individuals have played a critical role in developing the vaccine and
conducting pre-clinical trials, raising financing and negotiating business
development opportunities. The loss of the services of these key members of our
senior management and scientific staff may prevent us from achieving our
business objectives, and the value of the stock you own could be adversely
affected. We do not maintain key person life insurance for any of our key
personnel.
WE CURRENTLY HAVE NO MANUFACTURING FACILITY AND NO MANUFACTURING EXPERIENCE.
We currently have no manufacturing facilities and no manufacturing
experience. Pre-clinical study of the vaccine is being conducted through the
collaboration between us and Loyola University of Chicago and Beijing Institute
of Radiation Medicine, respectively. We are in the process of building a
manufacturing facility in China to produce HIV-PV Vaccine I for clinical trials
and on a commercial scale. However, there can be no assurance that we will have
adequate manufacturing capacity to produce HIV-PV Vaccine I on a commercial
scale.
WE HAVE NO EXPERIENCE IN MARKETING, SELLING OR DISTRIBUTING PRODUCTS AND NO
INTERNAL CAPABILITY TO DO SO. OUR LACK OF SALES AND MARKETING PERSONNEL AND
DISTRIBUTION RELATIONSHIPS MAY IMPAIR OUR ABILITY TO GENERATE REVENUES.
9
We have no sales, marketing or distribution capability. We do not
anticipate having the resources in the foreseeable future to allocate to the
sales and marketing of our product candidates under development. Our future
success depends, in part, on our ability to enter into and maintain such
collaborative relationships, the collaborator's strategic interest in the
products under development and such collaborator's ability to successfully
market and sell any such products. We intend to pursue collaborative
arrangements regarding the sales, marketing and distribution of our products,
however, there can be no assurance that we would be able to establish marketing
or distribution arrangements with collaborators in a timely manner or on
favorable terms, or at all.
WE FACE COMPETITION FROM SEVERAL COMPANIES WITH GREATER FINANCIAL, PERSONNEL AND
RESEARCH AND DEVELOPMENT RESOURCES THAN OURS, WHICH MAY HAVE A MATERIAL ADVERSE
EFFECT ON OUR BUSINESS.
The goal of developing an HIV vaccine is an area of interest to
competitors, and several companies with substantially greater financial,
personnel and research and development resources than ours have announced that
they are trying to develop an HIV vaccine and are planning, conducting or have
completed clinical trials. Although our research has indicated that HIV-PV
Vaccine I contains a pseudovirus that induces both mucosal and systemic
neutralizing antibodies that may be used to prevent and treat HIV infection,
other elements may be necessary to develop an effective vaccine, and several of
our competitors are working to develop vaccines that affect the immune system
differently. In addition, several of these companies are working to develop new
"drug cocktails" and other treatments that may mitigate the impact of the
disease. Even if we commence and complete our clinical trials, obtain SFDA and
other required regulatory approvals and commercialize HIV-PV Vaccine I, our
competitors may develop vaccines or treatments that are as or more effective, or
less complex or less expensive to produce, than HIV-PV Vaccine I.
ADVERSE PUBLICITY REGARDING THE SAFETY OR SIDE EFFECTS OF HIV-PV VACCINE I COULD
HARM OUR BUSINESS AND CAUSE OUR STOCK PRICE TO FALL.
There may be potential side effects or safety concerns in connection
with clinical trials of Vaccine I. If our studies or other researchers' studies
were to raise or substantiate concerns over the safety or side effects of
Vaccine I or vaccine development efforts generally, our reputation and public
support for our future clinical trials could be harmed, which would harm our
business and could cause our stock price to fall.
OUR USE OF HAZARDOUS MATERIALS, CHEMICALS AND VIRUSES REQUIRE US TO COMPLY WITH
REGULATORY REQUIREMENTS AND EXPOSES US TO POTENTIAL LIABILITIES.
Our research and development activities involve the controlled use of
hazardous materials, chemicals and viruses. We are subject to federal, state,
local and foreign laws governing the use, manufacture, storage, handling and
disposal of such materials. Although we believe that our safety procedures for
the use, manufacture, storage, handling, disposal of such materials comply with
the standards prescribed by the federal, state, local and foreign regulations,
we cannot eliminate the risk of accidental contamination or injury from these
materials. In the event of such an accident, we could be held liable for
significant damages or fines. These damages could exceed our resources and any
applicable insurance coverage. In addition, we may be required to incur
significant costs to comply with regulatory requirements in the future.
WE MAY BECOME SUBJECT TO PRODUCT LIABILITY CLAIMS AND INCUR SUBSTANTIAL
LIABILITIES, WHICH COULD REDUCE DEMAND FOR HIV-PV VACCINE I OR LIMIT
COMMERCIALIZATION OF HIV-PV VACCINE I.
We will face an inherent risk of exposure to product liability suits in
connection with HIV-PV Vaccine I, vaccines to be tested in human clinical trials
and products that may be sold commercially. We may become subject to a product
liability suit if HIV-PV Vaccine I causes injury, or if vaccinated individuals
subsequently become infected with HIV. We currently do not carry clinical trial
insurance or product liability insurance. Although we intend to obtain clinical
trial insurance prior to commencement of any clinical trials, we may not be able
to obtain insurance at a reasonable cost, if at all. Regardless of merit or
eventual outcome, product liability claims may result in decreased demand for a
vaccine, injury to our reputation, withdrawal of clinical trial volunteers and
loss of revenues.
POLITICAL OR SOCIAL FACTORS MAY DELAY OR REDUCE REVENUES BY DELAYING OR
IMPAIRING OUR ABILITY TO MARKET HIV-PV VACCINE I.
10
Products developed for use in addressing the HIV/AIDS epidemic have
been, and will continue to be, subject to competing and changing political and
social pressures. The political and social response to the HIV/AIDS epidemic has
been highly charged and unpredictable. Political or social pressures may delay
or cause resistance to bringing our product to market or limit pricing of our
product.
RISKS RELATED WITH OWNERSHIP OF OUR SECURITIES
IF A PUBLIC MARKET FOR OUR COMMON STOCK DEVELOPS, WE EXPECT TO EXPERIENCE
VOLATILITY IN THE PRICE OF OUR COMMON STOCK. THIS MAY RESULT IN SUBSTANTIAL
LOSSES TO INVESTORS IF THEY ARE UNABLE TO SELL THEIR SHARES AT OR ABOVE THEIR
PURCHASE PRICE.
If a public market for our common stock develops, we expect the market
price of our common stock to fluctuate substantially for the indefinite future
due to a number of factors, including:
o our status as a development stage company with a limited operating
history and no revenues to date, which may make risk-averse
investors more inclined to sell their shares on the market more
quickly and at greater discounts than would be the case with the
shares of a seasoned issuer in the event of negative news or lack of
progress;
o announcements of new products by us or our competitors;
o the timing and development of our products;
o general and industry-specific economic conditions;
o actual or anticipated fluctuations in our operating results;
o our capital commitments; and
o the loss of any of our key management personnel.
In addition, the financial markets have experienced extreme price and
volume fluctuations. The market prices of the securities of biotechnology
companies, particularly companies like ours without consistent revenues and
earnings, have been highly volatile and may continue to be highly volatile in
the future, some of which may be unrelated to the operating performance of
particular companies. The sale or attempted sale of a large amount of common
stock into the market may also have a significant impact on the trading price of
our common stock. Many of these factors are beyond our control and may decrease
the market price of our common stock, regardless of our operating performance.
In the past, securities class action litigation has often been brought against
companies that experience volatility in the market price of their securities.
Whether or not meritorious, litigation brought against us could result in
substantial costs, divert management's attention and resources and harm our
financial condition and results of operations.
THERE MAY NOT BE AN ACTIVE, LIQUID TRADING MARKET FOR OUR COMMON STOCK, SO YOU
MAY BE UNABLE TO LIQUIDATE YOUR SHARES IF YOU NEED MONEY.
Prior to this offering, there has been no public market for our common
stock. An active trading market for our common stock may not develop following
this offering due to a number of factors, including the fact that we are a small
company that is relatively unknown to stock analysts, stock brokers,
institutional investors and others in the investment community that generate or
influence sales volume, and that even if we came to the attention of such
persons, they tend to be risk-averse and would be reluctant to follow an
unproven company such as ours or purchase or recommend the purchase of our
shares until such time as we became more seasoned and viable. As a consequence,
there may be periods of several days or more when trading activity in our shares
is minimal or non-existent, as compared to a seasoned issuer which has a large
and steady volume of trading activity that will generally support continuous
sales. We cannot give you any assurance that an active public trading market for
our common shares will develop or be sustained. You may not be able to liquidate
your shares quickly or at the market price if trading in our common stock is not
active.
WE DO NOT ANTICIPATE PAYING ANY CASH DIVIDENDS IN THE FORESEEABLE FUTURE, WHICH
MAY REDUCE YOUR RETURN ON AN INVESTMENT IN OUR COMMON STOCK.
We plan to use all of our earnings, to the extent we have earnings, to
fund our operations. We do not plan to pay any cash dividends in the foreseeable
future. We cannot guarantee that we will, at any time, generate sufficient
surplus cash that would be available for distribution as a dividend to the
holders of our common stock. Therefore, any return on your investment would
derive from an increase in the price of our stock, which may or may not occur.
11
SUBSTANTIAL FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET MAY DEPRESS
OUR STOCK PRICE.
There are currently outstanding as of December 15, 2004, 30,271,590
shares of common stock. Upon effectiveness of this offering, approximately 12%
of our outstanding shares will be freely tradable without restriction or further
registration under the federal securities laws.
In addition, we intend to file a registration statement on Form S-8
under the Securities Act of 1933, as amended, to register approximately
2,000,000 shares of our common stock underlying options to be granted to our
officers, directors, employees and consultants. These shares, if issued in
accordance with these plans, will be eligible for immediate sale in the public
market, subject to volume limitations.
If our stockholders sell substantial amounts of common stock in the
public market, or the market perceives that such sales may occur, the market
price of our common stock could fall. The sale of a large number of shares could
impair our ability to raise needed capital by depressing the price at which we
could sell our common stock.
WE MAY RAISE ADDITIONAL CAPITAL THROUGH A SECURITIES OFFERING THAT COULD DILUTE
YOUR OWNERSHIP INTEREST AND VOTING RIGHTS.
Our certificate of incorporation currently authorizes our board of
directors to issue up to 100,000,000 shares of common stock and 5,000,000 shares
of preferred stock. As of December 15, 2004, after taking into consideration our
outstanding shares, our board of directors will be entitled to issue up to
69,728,410 additional common shares and 5,000,000 additional preferred shares.
The power of the board of directors to issue shares of common stock, preferred
stock or warrants or options to purchase shares of our stock is generally not
subject to shareholder approval.
We require substantial working capital to fund our business. If we
raise additional funds through the issuance of equity, equity-related or
convertible debt securities, these securities may have rights, preferences or
privileges senior to those of the holders of our common stock. The issuance of
additional common stock or securities convertible into common stock by our board
of directors will also have the effect of diluting the proportionate equity
interest and voting power of holders of our common stock.
OUR PRINCIPAL STOCKHOLDERS, EXECUTIVE OFFICERS AND DIRECTORS WILL CONTINUE TO
OWN A SIGNIFICANT PERCENTAGE OF OUR STOCK AFTER THE OFFERING, AND AS A RESULT,
THE TRADING PRICE FOR OUR SHARES MAY BE DEPRESSED AND THESE STOCKHOLDERS CAN
TAKE ACTIONS THAT MAY BE ADVERSE TO YOUR INTERESTS.
After the offering, our principal stockholders, executive officers and
directors will, in the aggregate, beneficially own approximately 75.8% of our
common stock. These stockholders, acting together, will have the ability to
exert substantial influence over all matters requiring approval by our
stockholders, including the election and removal of directors and any proposed
merger, consolidation or sale of all or substantially all of our assets. In
addition, they could dictate the management of our business and affairs. This
concentration of ownership could have the affect of delaying, deferring or
preventing a change in control, or impeding a merger or consolidation, takeover
or other business combination that could be favorable to you. This significant
concentration of share ownership may also adversely affect the trading price for
our common stock because investors may perceive disadvantages in owning stock in
companies with controlling stockholders.
THE PRICE OF THE COMMON STOCK OFFERED BY THE SELLING SHAREHOLDERS HAS BEEN
ARBITRARILY DETERMINED. YOU MAY NOT RELY ON THIS PRICE AS AN INDICATION OF THE
PURCHASE.
The price of the common stock offered for sale by the selling
shareholders was arbitrarily determined. The offering price bears no
relationship whatsoever to our assets, earnings, book value or other criteria of
value. Moreover, the price of our common stock may decline after the offering.
OUR INCORPORATION DOCUMENTS AND DELAWARE LAW MAY INHIBIT A TAKEOVER THAT
STOCKHOLDERS CONSIDER FAVORABLE AND COULD ALSO LIMIT THE MARKET PRICE OF YOUR
STOCK, WHICH MAY INHIBIT AN ATTEMPT BY OUR STOCKHOLDERS TO CHANGE OUR DIRECTION
OR MANAGEMENT.
Our certificate of incorporation and bylaws contain provisions that
could delay or prevent a change in control of our company. Some of these
provisions:
o authorize our board of directors to determine the rights,
preferences, privileges and restrictions granted to, or imposed
upon, the preferred stock and to fix the number of shares
constituting any series and the designation of such series without
further action by our stockholders; and
12
o prohibit cumulative voting in the election of directors, which would
otherwise allow less than a majority of stockholders to elect
director candidates.
In addition, we are governed by the provisions of Section 203 of
Delaware General Corporate Law. These provisions may prohibit large
stockholders, in particular those owning 15% or more of our outstanding voting
stock, from merging or combining with us, which may prevent or frustrate any
attempt by our stockholders to change our management or the direction in which
we are heading. These and other provisions in our amended and restated
certificate of incorporation and bylaws and under Delaware law could reduce the
price that investors might be willing to pay for shares of our common stock in
the future and result in the market price being lower than it would be without
these provisions.
WE WILL BE SUBJECT TO THE PENNY STOCK RULES ONCE OUR COMMON STOCK BECOMES
ELIGIBLE FOR TRADING. THESE RULES MAY ADVERSELY AFFECT TRADING IN OUR COMMON
STOCK.
We expect that our common stock will be a "low-priced" security under
the "penny stock" rules promulgated under the Securities Exchange Act of 1934.
In accordance with these rules, broker-dealers participating in transactions in
low-priced securities must first deliver a risk disclosure document which
describes the risks associated with such stocks, the broker-dealer's duties in
selling the stock, the customer's rights and remedies and certain market and
other information. Furthermore, the broker-dealer must make a suitability
determination approving the customer for low-priced stock transactions based on
the customer's financial situation, investment experience and objectives.
Broker-dealers must also disclose these restrictions in writing to the customer,
obtain specific written consent from the customer, and provide monthly account
statements to the customer. The effect of these restrictions will probably
decrease the willingness of broker-dealers to make a market in our common stock,
decrease liquidity of our common stock and increase transaction costs for sales
and purchases of our common stock as compared to other securities.
Stockholders should be aware that, according to Securities and Exchange
Commission Release No. 34-29093, the market for penny stocks has suffered in
recent years from patterns of fraud and abuse. Such patterns include (i) control
of the market for the security by one or a few broker-dealers that are often
related to the promoter or issuer; (ii) manipulation of prices through
prearranged matching of purchases and sales and false and misleading press
releases; (iii) boiler room practices involving high-pressure sales tactics and
unrealistic price projections by inexperienced sales persons; (iv) excessive and
undisclosed bid-ask differential and markups by selling broker-dealers; and (v)
the wholesale dumping of the same securities by promoters and broker-dealers
after prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses. Our
management is aware of the abuses that have occurred historically in the penny
stock market. Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market,
management will strive within the confines of practical limitations to prevent
the described patterns from being established with respect to our securities.
RISKS RELATING TO OUR FOREIGN OPERATIONS
OUR OPERATIONS ARE PRIMARILY LOCATED IN CHINA AND MAY BE ADVERSELY AFFECTED BY
CHANGES IN THE POLICIES OF THE CHINESE GOVERNMENT.
Our business operations may be adversely affected by the political
environment in the PRC. The PRC has operated as a socialist state since 1949 and
is controlled by the Communist Party of China. In recent years, however, the
government has introduced reforms aimed at creating a "socialist market economy"
and policies have been implemented to allow business enterprises greater
autonomy in their operations. Changes in the political leadership of the PRC may
have a significant effect on laws and policies related to the current economic
reforms program, other policies affecting business and the general political,
economic and social environment in the PRC, including the introduction of
measures to control inflation, changes in the rate or method of taxation, the
imposition of additional restrictions on currency conversion and remittances
abroad, and foreign investment. These effects could substantially impair our
business, profits or prospects in China. Moreover, economic reforms and growth
in the PRC have been more successful in certain provinces than in others, and
the continuation or increases of such disparities could affect the political or
social stability of the PRC.
13
THE CHINESE GOVERNMENT EXERTS SUBSTANTIAL INFLUENCE OVER THE MANNER IN WHICH WE
MUST CONDUCT ITS BUSINESS ACTIVITIES.
The PRC only recently has permitted greater provincial and local
economic autonomy and private economic activities. The government of the PRC has
exercised and continues to exercise substantial control over virtually every
sector of the Chinese economy through regulation and state ownership.
Accordingly, government actions in the future, including any decision not to
continue to support recent economic reforms and to return to a more centrally
planned economy or regional or local variations in the implementation of
economic policies, could have a significant effect on economic conditions in the
PRC or particular regions thereof, and could require us to divest ourselves of
any interests we then hold in Chinese properties or joint ventures. Any such
developments could have a material adverse effect on our business, operations,
financial condition and prospects.
FUTURE INFLATION IN CHINA MAY INHIBIT ECONOMIC ACTIVITY IN CHINA AND ADVERSELY
AFFECT OUR OPERATIONS.
In recent years, the Chinese economy has experienced periods of rapid
expansion and high rates of inflation which have led to the adoption by the PRC
government, from time to time, of various corrective measures designed to
restrict the availability of credit or regulate growth and contain inflation.
While inflation has moderated since 1995, high inflation may in the future cause
the PRC government to impose controls on credit and/or prices, or to take other
action, which could inhibit economic activity in China, and thereby adversely
affecting our business operations and prospects in the PRC.
WE MAY BE UNABLE TO ENFORCE OUR RIGHTS DUE TO POLICIES REGARDING THE REGULATION
OF FOREIGN INVESTMENTS IN CHINA.
The PRC's legal system is a civil law system based on written statutes
in which decided legal cases have little value as precedents, unlike the common
law system prevalent in the United States. The PRC does not have a
well-developed, consolidated body of laws governing foreign investment
enterprises. As a result, the administration of laws and regulations by
government agencies may be subject to considerable discretion and variation, and
may be subject to influence by external forces unrelated to the legal merits of
a particular matter. China's regulations and policies with respect to foreign
investments are evolving. 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. Statements regarding these
evolving policies have been conflicting and any such policies, as administered,
are likely to be subject to broad interpretation and discretion and to be
modified, perhaps on a case-by-case basis. The uncertainties regarding such
regulations and policies present risks which may affect our ability to achieve
our business objectives. We cannot assure you that we will be able to enforce
any legal rights we may have under our contracts or otherwise. Our failure to
enforce our legal rights may have a material adverse impact on our operations
and financial position, as well as our ability to compete with other companies
in our industry.
IT MAY BE DIFFICULT FOR SHAREHOLDERS TO ENFORCE ANY JUDGMENT OBTAINED IN THE
UNITED STATES AGAINST US, WHICH MAY LIMIT THE REMEDIES OTHERWISE AVAILABLE TO
OUR SHAREHOLDERS.
Substantially all of our assets are located outside the United States.
Almost all of its current operations are conducted in China. Moreover, most of
our directors and officers are nationals or residents of countries other than
the United States. All or a substantial portion of the assets of these persons
are located outside the United States. As a result, it may be difficult for
shareholders to effect service of process within the United States upon these
persons. In addition, there is uncertainty as to whether the courts of China
would recognize or enforce judgments of United States courts obtained against us
or such officers and/or directors predicated upon the civil liability provisions
of the securities law of the United States or any state thereof, or be competent
to hear original actions brought in China against us or such persons predicated
upon the securities laws of the United States or any state thereof.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including sections entitled "Prospectus Summary,"
"Risk Factors," "Management's Discussion and Analysis" and "Business," contains
forward-looking statements.
Forward-looking statements include, but are not limited to, statements
about:
o our lack of capital and whether or not we will be able to raise
capital when we need it;
o our ability to complete development of our products under
development;
o our ability to market and manufacture our future products; and
o our ability to protect our intellectual property and operate our
business without infringing upon the intellectual property rights of
others.
14
These statements relate to future events or our future financial
performance, and involve known and unknown risks, uncertainties and other
factors that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements. These risks and other factors include those listed
under "Risk Factors" and elsewhere in this prospectus. In some cases, you can
identify forward-looking statements by terminology such as "may," "expects,"
"intends," "plans," "anticipates," "believes," "potential," "continue" or the
negative of these terms or other comparable terminology. Although we believe
that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. We do not intend to update any of the forward-looking
statements after the date of this prospectus or to conform these statements to
actual results. Neither the Private Securities Litigation Reform Act of 1995 nor
Section 27A of the Securities Act of 1933 provides any protection for statements
made in this prospectus.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares by the
selling stockholders. All proceeds from the sale of the shares offered hereby
will be for the account of the selling stockholders, as described below in the
sections entitled "Selling Stockholders" and "Plan of Distribution." With the
exception of any brokerage fees and commission which are the obligation of the
selling stockholders, we are responsible for the fees, costs and expenses of
this offering which are estimated to be $100,000, inclusive of our legal and
accounting fees, printing costs and filing and other miscellaneous fees and
expenses.
DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no public market for our common
stock. The offering price has been arbitrarily determined and does not bear any
relationship to our assets, results of operations, or book value, or to any
other generally accepted criteria of valuation.
We cannot assure you that an active or orderly trading market will
develop for our common stock or that our common stock will trade in the public
markets subsequent to this offering at or above the offering price.
SELLING STOCKHOLDERS
The following table sets forth the names of the selling stockholders
who may sell their shares under this prospectus from time to time. No selling
stockholder has, or within the past three years has had, any position, office or
other material relationship with us or any of our predecessors or affiliates
other than as a result of the ownership of our securities, except for the
following selling stockholders: Isao Arimoto, our director and vice president;
Yukiko Arimoto, wife of Isao Arimoto, our director and vice president; Noriyo
Arimoto, Masayo Arimoto and Kenshi Arimoto, children of Isao Arimoto, our
director and vice president; Shyh-Jing (Philip) Chiang, our director; Toshihiro
Komoike, our director; Atsushi Komoike and Yumi Komoike, children of Toshihiro
Komoike, our director; Mingjin Yu, former director of Bio-Bridge (Cayman) and
wife of Wenhui Qiao, our director and president; and the law firm Richardson &
Patel LLP, which serves as our legal counsel. The following table also provides
certain information with respect to the selling stockholders' ownership of our
securities as of the date of this prospectus, the total number of securities
they may sell under this prospectus from time to time, and the number of
securities they will own thereafter assuming no other acquisitions or
dispositions of our securities. The selling stockholders can offer all, some or
none of their securities, thus we have no way of determining the number they
will hold after this offering. Therefore, we have prepared the table below on
the assumption that the selling stockholders will sell all shares covered by
this prospectus.
Some of the selling stockholders may distribute their shares, from time
to time, to their limited and/or general partners or managers, who may sell
shares pursuant to this prospectus. Each selling stockholder may also transfer
shares owned by him or her by gift, and upon any such transfer the donee would
have the same right of sale as the selling stockholder.
We may amend or supplement this prospectus from time to time to update
the disclosure set forth herein. None of the selling stockholders are or were
affiliated with registered broker-dealers. See our discussion entitled "Plan of
Distribution" for further information regarding the selling stockholders' method
of distribution of these shares.
15
Number of Number of Number of Percentage
NAME OF SELLING Shares Owned Shares Being Shares Owned Owned After
STOCKHOLDER Before Offering Offered After Offering Offering(1)
- ------------------------------ ------------------------- -------------------- ---------------------- --------------------
Akihiko Mori 20,000 20,000 0 *
Atsuko Nakata 5,000 1,000 4,000 *
Atsushi Komoike(2) 250,000 37,500 212,500 *
Columbia China Capital Group(3) 200,000 200,000 0 *
Eiji Kitamura 31,250 6,250 25,000 *
Emiko Mushiake 30,000 30,000 0 *
Hajime Nukii 20,000 20,000 0 *
Hajime Yamashita 20,000 20,000 0 *
Haruo Fukui 28,050 5,610 22,440 *
Hideki Matsumoto 125,000 18,750 106,250 *
Hidenori Nakatsuka 2,850 570 2,280 *
Hiroe Kigure 31,250 6,250 25,000 *
Hiroo Ichimura 75,000 11,250 63,750 *
Ichirou Makino 6,250 1,250 5,000 *
Ikuzo Yoneda 32,500 21,250 11,250 *
Isao Arimoto(4) 2,125,000 212,500 1,912,500 6.3%
Jiro Hiraiwa 14,075 2,815 11,260 *
Jun Imura 20,000 20,000 0 *
Junya Yoshino 14,000 2,800 11,200 *
Kayori Yamashita 20,000 20,000 0 *
Kazuko Maruyama 80,250 12,038 68,213 *
Kazuko Ogawa 750,000 112,500 637,500 2.1%
Kazumi Setogawa 25,000 25,000 0 *
Kazutaka Morioka 31,250 6,250 25,000 *
Kazuyuki Koda 20,000 20,000 0 *
Kenji Eikawa 180,000 180,000 0 *
Kenshi Arimoto(5) 650,000 65,000 585,000 1.9%
Kichirou Komon 31,250 6,250 25,000 *
Kimiko Yukuyoshi 20,000 20,000 0 *
Kiyoto Saisou 40,000 40,000 0 *
Ko Hamada 950,000 337,500 612,500 2.0%
Koichi Nakagawa 595,100 106,265 488,835 1.6%
Kouichi Sakata 15,625 3,125 12,500 *
Kunio Kameyoshi 20,000 20,000 0 *
Machiko Nukii 25,000 5,000 20,000 *
Masaki Maruyama 60,000 60,000 0 *
Masao Ohnishi 25,250 21,050 4,200 *
Masasue Mitsuta 25,000 3,750 21,250 *
Masayo Arimoto(6) 600,000 60,000 540,000 1.8%
Masayoshi Kubo 31,250 6,250 25,000 *
Mayumi Arimoto 250,000 25,000 225,000 *
Michiaki Matsuura 20,000 20,000 0 *
Mineo Nitami 14,175 2,835 11,340 *
Mingjin Yu(7) 850,000 85,000 765,000 2.5%
Minoru Yanai 62,500 12,500 50,000 *
Misuzu Mitsuta 20,000 20,000 0 *
Mitsue Komatsubara 20,000 20,000 0 *
Mitsuyoshi Hatasaki 80,000 80,000 0 *
Noboru Murata 25,000 3,750 21,250 *
Nobuyuki Terabayashi 28,025 5,605 22,420 *
Noriyo Arimoto(8) 600,000 60,000 540,000 1.8%
Osamu Mizutani 20,000 20,000 0 *
Reinbo Noboru Murata 20,000 20,000 0 *
Richardson & Patel LLP(9) 100,000 100,000 0 *
Rieko Kuboyama 40,000 40,000 0 *
Seiji Tago 10,000 10,000 0 *
Setsuo Kuman 40,000 40,000 0 *
Shigeyoshi Aoki 20,000 20,000 0 *
Shinichi Hibi 20,000 20,000 0 *
16
Number of Number of Number of Percentage
NAME OF SELLING Shares Owned Shares Being Shares Owned Owned After
STOCKHOLDER Before Offering Offered After Offering Offering(1)
- ------------------------------ ------------------------- -------------------- ---------------------- --------------------
Shinichi Takumi 21,000 21,000 0 *
Shiro Nobuhara 27,952 5,590 22,362 *
Shisei Yoshida 625,000 93,750 531,250 1.8%
Shisyu Hausu Co., Ltd. 20,000 20,000 0 *
Shizuko Nitanda 20,000 20,000 0 *
Shyh Jing (Philip) Chiang(10) 786,111 78,611 707,500 2.3%
Susumu Hirauchi 133,325 19,999 113,326 *
Takahiro Ogumo 40,000 40,000 0 *
Takashi Arimoto 214,350 23,153 191,198 *
Takeo Morita 20,000 20,000 0 *
Takeshi Yamashita 20,000 20,000 0 *
Takushi Arimoto 250,000 25,000 225,000 *
Tetsuya Sikata 25,000 5,000 20,000 *
Tomohiko Matsumoto 12,500 2,500 10,000 *
Tomoko Toyoda 40,000 40,000 0 *
Toshihiro Komoike(11) 750,000 112,500 637,500 2.1%
Toshimasa Nakaso 15,625 3,125 12,500 *
Toshiyuki Matsushita 20,000 20,000 0 *
Toyoko Saimu 40,000 40,000 0 *
Tsuyoshi Kurata 31,250 6,250 25,000 *
Turuko Kadowaki 12,500 1,250 11,250 *
Wataru Fujimoto 40,000 40,000 0 *
Yasuko Ishii 32,500 22,500 10,000 *
Yasunori Arimoto 250,000 25,000 225,000 *
Yasunori Kihara 20,000 20,000 0 *
Yasuo Fujiwara 13,750 2,750 11,000 *
Yasuo Suzuki 125,000 25,000 100,000 *
Yasuto Arata 20,000 20,000 0 *
Yasuyuki Kousaka 10,000 10,000 0 *
Yoko Kitazumi 250,000 37,500 212,500 *
Yoshie Arimoto 250,000 25,000 225,000 *
Yoshie Kaigawa 51,250 26,250 25,000 *
Yoshihiro Tanaka 25,000 5,000 20,000 *
Yoshiko Hori 20,000 20,000 0 *
Yoshiro Nukii 97,500 51,500 46,000 *
Yoshishige Koshio 47,952 25,590 22,362 *
Yuji Hayashi 20,000 20,000 0 *
Yukiko Arimoto(12) 1,500,000 225,000 1,275,000 4.2%
Yukio Hosoda 15,625 3,125 12,500 *
Yuko Goto 13,750 2,750 11,000 *
Yumi Komoike(13) 250,000 37,500 212,500 *
Yumiko Tsunemoto 20,000 20,000 0 *
Yutaka Asai 14,750 2,950 11,800 *
TOTAL 15,696,590 3,657,606 12,038,984
* Represents less than 1% of our common stock.
(1) Based on 30,271,590 shares issued and outstanding as of December 15, 2004.
Assumes that each selling stockholder sells all shares registered under
this prospectus. However, to our knowledge, there are no agreements,
arrangements or understandings with respect to the sale of any of our
common stock, and each selling stockholder may decide not to sell his or
her shares that are registered under this prospectus.
(2) Atsushi Komoike is the son of our director Toshihiro Komoike.
(3) The natural person with voting and investment decision power for the
selling stockholder is Mr. Tie (James) Li.
(4) Isao Arimoto is one of our directors.
(5) Kenshi Arimoto is the son of our director Isao Arimoto.
17
(6) Masayo Arimoto is the daughter of our director Isao Arimoto.
(7) Mingjin Yu is the wife of Wenhui Qiao, our director and president.
(8) Noriyo Arimoto is the daughter of our director Isao Arimoto.
(9) Richardson & Patel LLP is our legal counsel and has rendered an opinion to
us regarding the validity of the shares being offered. The natural persons
with voting and investment decision power for the selling stockholder are
Messrs. Erick Richardson and Nimish Patel.
(10) Shyh-Jing (Philip) Chiang is one of our directors.
(11) Toshihiro Komoike is one of our directors.
(12) Yukiko Arimoto is the wife of our director Isao Arimoto.
(13) Yumi Komoike is the daughter of our director Toshihiro Komoike.
PLAN OF DISTRIBUTION
This is our initial public listing. We are registering 3,657,606 shares
of our common stock for resale by the selling stockholders identified in the
section above entitled "Selling Stockholders." We will receive none of the
proceeds from the sale of these shares by the selling stockholders.
We anticipate that a market maker will apply to have our common stock
traded on the OTC Bulletin Board. Until our shares are quoted on the OTC
Bulletin Board, the selling stockholders will sell at a price of $.50 per share.
If we are successful in having our shares traded on the OTC Bulletin Board, the
selling stockholders will be able to sell the shares offered by this prospectus
in one or more transactions at prevailing market prices or privately negotiated
prices. The selling stockholders may use any one or more of the following
methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o a block trade in which the broker-dealer so engaged will attempt to
sell such shares as agent, but may position and resell a portion of
the block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by such
broker-dealer for its own account pursuant to this prospectus;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o settlement of short sales;
o broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale;
o through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise; or
o any other method permitted pursuant to applicable law.
The selling stockholders and their successors, including their
transferees, pledgees or donees or their successors-in-interest, may sell the
common shares directly to a purchaser or through underwriters, broker-dealers or
agents, who may receive compensation in the form of discounts, concessions or
commissions from the selling stockholder or the purchaser. Neither the selling
stockholders nor Bio-Bridge can presently estimate the amount of such
compensation. We know of no existing arrangements between the selling
stockholders, broker-dealers, underwriters or agents relating to the sale or
distribution of the shares.
The selling stockholders may also enter into hedging transactions, and
persons with whom they effect such transactions, including broker-dealers, may
engage in short sales of our common shares. Our selling stockholders may also
engage in short sales and short sales against the box, and in options, swaps,
derivatives and other transactions in our securities, and may sell and deliver
the shares covered by this prospectus in connection with such transactions or in
settlement of securities loans. These transactions may be entered into with
broker-dealers or other financial institutions that may resell those shares
pursuant to this prospectus (as supplemented or amended to reflect such
transaction).
18
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of section 2(11) of the Securities Act of 1933, as amended, in
connection with the sales and distributions contemplated under this prospectus,
and may have civil liability under Sections 11 and 12 of the Securities Act for
any omissions or misstatements in this prospectus and the registration statement
of which it is a part. Additionally, any profits which our selling stockholders
may receive might be deemed to be underwriting compensation under the Securities
Act. Because the selling stockholders may be deemed to be an underwriter under
Section 2(11) of the Securities Act, the selling stockholders will be subject to
the prospectus delivery requirements of the Securities Act.
The resale shares will be sold only through registered or licensed
broker-dealers if required under applicable state securities laws. In addition,
in certain states, the resale shares may not be sold unless they have been
registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is complied with.
We will bear all expenses relating to the sale of our common shares under
this prospectus, except that the selling stockholders will pay any applicable
underwriting commissions and expenses, brokerage fees and transfer taxes, as
well as the fees and disbursements of counsel to and experts for the selling
stockholders.
Any common shares offered under this prospectus that qualify for sale
pursuant to Rule 144 of the Securities Act may also be sold under Rule 144
rather than pursuant to this prospectus.
Under applicable rules and regulations under the Exchange Act of 1934,
any person engaged in the distribution of the resale shares may not
simultaneously engage in market making activities with respect to our common
stock for a period of two business days prior to the commencement of the
distribution. In addition, the selling stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of purchases and
sales of shares of our common stock by the selling stockholders or any other
person. We will make copies of this prospectus available to the selling
stockholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale.
We have agreed to keep this prospectus effective until the date on
which the shares may be resold by the selling stockholders without registration
by reason of Rule 144 under the Securities Act of 1933, as amended, or any other
rule of similar effect.
LEGAL PROCEEDINGS
We are not currently subject to either threatened or pending
litigation, actions or administrative proceedings.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table identifies our current executive officers and
directors, their respective offices and positions, and their respective dates of
election or appointment:
INITIAL ELECTION OR
NAME AGE POSITION HELD APPOINTMENT DATE
- ----------------------------------------------------------------------------------------------------------------------------------
Liang Qiao, M.D. 44 Chairman of the Board, Chief October 26, 2004
Executive Officer and Secretary
- ----------------------------------------------------------------------------------------------------------------------------------
Wenhui Qiao 35 President and Director October 26, 2004
- ----------------------------------------------------------------------------------------------------------------------------------
Chuen Huei (Kevin) Lee 34 Chief Financial Officer October 27, 2004
- ----------------------------------------------------------------------------------------------------------------------------------
Toshihiro Komoike 52 Director October 26, 2004
- ----------------------------------------------------------------------------------------------------------------------------------
Isao Arimoto 56 Vice President and Director October 26, 2004
- ----------------------------------------------------------------------------------------------------------------------------------
Shyh-Jing (Philip) Chiang 44 Director October 26, 2004
- ----------------------------------------------------------------------------------------------------------------------------------
Mr. Wenhui Qiao and Dr. Liang Qiao are brothers. There are no other
family relationships among the executive officers and directors.
Our executive officers are appointed by our board of directors and
serve at the board's discretion. There is no arrangement or understanding
between any of our directors or executive officers and any other person pursuant
to which any director or officer was or is to be selected as a director or
officer, and there is no arrangement, plan or understanding as to whether
non-management stockholders will exercise their voting rights to continue to
elect the current board of directors. There are also no arrangements, agreements
or understandings to our knowledge between non-management stockholders that may
directly or indirectly participate in or influence the management of our
affairs. None of our directors or executive officers has, during the past five
years,
19
o had any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer, either
at the time of the bankruptcy or within two years prior to that
time,
o been convicted in a criminal proceeding and none of our directors or
executive officers is subject to a pending criminal proceeding,
o been subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities, futures, commodities or banking activities, or
o been found by a court of competent jurisdiction (in a civil action),
the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or
commodities law, and the judgment has not been reversed, suspended,
or vacated.
BUSINESS EXPERIENCE
DR. LIANG QIAO is one of our co-founders and has served as our chairman
of the board of directors, chief executive officer and secretary since October
2004. Since February 2002, Dr. Qiao has served as director of our wholly owned
subsidiary Bio-Bridge (Cayman) and has served as its chief executive officer and
chairman of the board since May 2004. Since July 2000, Dr. Qiao has served as an
Associate Professor at Loyola University Chicago, Strich School of Medicine.
From May 1994 to June 2000, Dr. Qiao was an Assistant Professor at Loyola
University Chicago, Strich School of Medicine. Dr. Qiao also worked as a
research scholar at the German Cancer Research Center in Heidelberg, Germany,
where he made his discovery of mucosal immune regulation mechanisms. Dr. Qiao
received a B.M. from Henan Medical University in China and an M.D. from Lausanne
University in Switzerland.
MR. WENHUI QIAO is one of our co-founders and has served as our
president and director since October 2004. Mr. Qiao has served as director of
Bio-Bridge (Cayman) since February 2002 and its president since May 2004. From
July 1999 to December 2001, Mr. Qiao served as chief executive officer of
Dongfang Huayin Anti- Radiation Company, which was located in Henan Province,
China. From 1994 to 1998, he served as the chief representative for Henan
Province in Japan. Mr. Qiao received a B.A. in Economics from Doshisha
University in Japan.
MR. CHUEN HUEI (KEVIN) LEE, CFA, has served as our chief financial
officer since October 2004. Mr. Lee also has served as chief financial officer
of Bio-Bridge (Cayman) since May 2004. From October 2001 to June 2004, he served
as Vice President of CMV in Beijing and Shanghai, China. From February 2000 to
August 2001, Mr. Lee served as Manager of Grand Cathay Securities Corporation in
Taipei, Taiwan. From September 1998 to February 2000, he was the Manager of
American Express Bank's Taipei Branch. Mr. Lee received a B.A. from Taiwan
University and an M.B.A. from Columbia University. He is a chartered financial
analyst (CFA) charter holder.
MR. TOSHIHIRO KOMOIKE has served as our director since October 2004.
Mr. Komoike also has served as director of Bio-Bridge (Cayman) since May 2004.
From 1998 to 2004, Mr. Komoike served as Senior Manager of Sumisho Textile
Company in Japan. He received a degree in Commerce from Kansai University in
Japan.
MR. ISAO ARIMOTO is one of our co-founders and has served as our vice
president and director since October 2004. Mr. Arimoto also has served as vice
president of Bio-Bridge (Cayman) since May 2004 and its director since February
2002. Since February 1975, Mr. Arimoto has served as chief executive officer of
Chugoko-Knit Company in Japan. He has 30 years of business experience as an
entrepreneur in Japan and China.
MR. SHYH-JING (PHILIP) CHIANG is one of our co-founders and has served
as our director since October 2004. Mr. Chiang also has served as director of
Bio-Bridge (Cayman) since February 2002. Since June 2004, Mr. Chiang has served
as head of investment banking at Nomura Securities in Taipei, Taiwan. From March
2004 to May 2004, he served as chief representative of Rabobank's office in
Taipei. From June 2001 to May 2004, he was director of investment banking at ING
Baring in Taipei. Mr. Chiang served as executive vice president of Grand Cathay
Securities from August 2000 to June 2001. From September 1996 to April 2000, he
served as vice president of Credit Agricole Indosuez. Mr. Chiang received a B.A.
from Tunghai University in Taiwan and an M.B.A. from the University of Missouri.
Our board of directors currently consists of five members. Our bylaws
provide that our directors will be elected at each annual meeting of the
stockholders. Their term of office will run until the next annual meeting of the
stockholders and until their successors have been elected.
20
No individual on our board of directors possesses all of the attributes
of an audit committee financial expert and no one on our board of directors is
deemed to be an audit committee financial expert. In forming our board of
directors, we sought out individuals who would be able to guide our operations
based on their business experience, both past and present, or their education.
Mr. Lee, our Chief Financial Officer, serves as our financial expert regarding
generally accepted accounting principals and general application of such
principles in connection with the accounting for estimates and accruals,
including an understanding of internal control procedures and policies over
financial reporting, and maintains sufficient experience analyzing or evaluating
financial statements in such depth and breadth as may be required of an audit
committee financial expert. However, Mr. Lee is not an elected director of the
company. We recognize that having a person who possesses all of the attributes
of an audit committee financial expert would be a valuable addition to our board
of directors, however, we are not, at this time, able to compensate such a
person. Therefore, we may find it difficult to attract such a candidate.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding beneficial
ownership of our securities as of December 15, 2004 by (i) each person who is
known by us to own beneficially more than five percent (5%) of the outstanding
shares of each class of our voting securities, (ii) each of our directors and
executive officers, and (iii) all of our directors and executive officers as a
group. We believe that each individual or entity named has sole investment and
voting power with respect to the securities indicated as beneficially owned by
them, subject to community property laws, where applicable, except where
otherwise noted. Unless otherwise stated, their address is c/o Bio-Bridge
Science, Inc., 1211 West 22nd Street, Suite 615, Oak Brook, IL 60523. As of
December 15, 2004, there were 30,271,590 shares of common stock issued and
outstanding.
COMMON STOCK
PERCENTAGE OF
NUMBER OF SHARES OF OUTSTANDING SHARES
NAME OF DIRECTOR, OFFICER AND COMMON STOCK OF COMMON
BENEFICIAL OWNER BENEFICIALLY OWNED(1) STOCK(2)
---------------- --------------------- --------
Named Executive Officers and Directors:
Liang Qiao, M.D. 13,750,000 45.4%
Wenhui Qiao(1) 1,675,000 5.5%
Chuen Huei (Kevin) Lee --- *
Toshihiro Komoike(2) 1,250,000 4.1%
Isao Arimoto(3) 5,475,000 18.1%
Shyh-Jing (Philip) Chiang 786,111 2.6%
Five Percent Stockholders of Common Stock:
None.
All Officers and Directors as a Group (6 Persons)(1)(2)(3) 22,935,111 75.8%
* Less than one percent beneficially owned.
(1) Includes 825,000 shares owned by Wenhui Qiao individually. Also includes
850,000 shares held by Mingjin Yu, Mr. Qiao's wife. Mr. Qiao disclaims
beneficial ownership of the shares held by his wife, except to the extent of his
pecuniary interest therein.
(2) Includes 750,000 shares owned by Toshihiro Komoike individually.
Additionally includes 250,000 shares and 250,000 shares held by Atsushi Komoike
and Yumi Komoike, respectively, Mr. Komoike's children living at home. Mr.
Komoike disclaims beneficial ownership of the shares held by his children,
except to the extent of his pecuniary interest therein.
(3) Includes 2,125,000 shares owned by Isao Arimoto himself individually,
1,500,000 shares owned by Yukiko Arimoto, Mr. Arimoto's wife, 650,000 shares,
600,000 shares and 600,000 shares held by Kenshi Arimoto, Masayo Arimoto and
Noriyo Arimoto, respectively, Mr. Arimoto's children living at home. Mr. Arimoto
disclaims beneficial ownership of the shares held by his wife and children,
except to the extent of his pecuniary interest therein.
CHANGE OF CONTROL
To the knowledge of management, there are no present arrangements or
pledges of securities of our company that may result in a change in control of
the company.
DESCRIPTION OF SECURITIES
GENERAL
We are authorized to issue 100,000,000 shares of common stock, par
value $0.001 per share, and 5,000,000 shares of undesignated preferred stock,
par value $0.001 per share.
COMMON STOCK
The securities being offered by the selling stockholders are shares of
our common stock. Prior to this offering there has been no public or private
trading market for our common stock.
21
As of December 15, 2004, there were issued and outstanding 30,271,590
shares of common stock that were held of record by approximately 116
stockholders.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding preferred stock, the holders of common stock are
entitled to receive ratably any dividends that may be declared from time to time
by the board of directors out of funds legally available for that purpose. In
the event of our liquidation, dissolution or winding up, the holders of common
stock are entitled to share ratably in all assets remaining after payment of
liabilities, subject to prior distribution rights of preferred stock then
outstanding. The common stock has no preemptive or conversion rights or other
subscription rights. All outstanding shares of common stock are fully paid and
nonassessable, and the shares of common stock offered in this offering will be
fully paid and not liable for further call or assessment.
Please review our certificate of incorporation and bylaws, copies of
which have been filed with the SEC, as well as the applicable statutes of the
State of Delaware for a more complete description of the rights and liabilities
of holders of our shares.
The holders of common stock do not have cumulative voting rights, which
means that the holders of more than fifty percent of the shares of common stock
voting for election of directors may elect all the directors if they choose to
do so. In this event, the holders of the remaining shares aggregating less than
fifty percent will not be able to elect directors. Except as otherwise required
by Delaware law, all stockholder action is taken by the vote of a majority of
the issued and outstanding shares of common stock present at a meeting of
stockholders at which a quorum consisting of a majority of the issued and
outstanding shares of common stock is present in person or proxy.
PREFERRED STOCK
As of December 15, 2004, there were no issued and outstanding shares of
preferred stock. Pursuant to our certificate of incorporation, our board of
directors has the authority, without further action by the stockholders, to
issue up to 5,000,000 shares of undesignated preferred stock. Our board will
also have the authority, without the approval of the stockholders, to fix the
designations, powers, preferences, privileges and relative, participating,
optional or special rights and the qualifications, limitations or restrictions
of any preferred stock issued, including dividend rights, conversion rights,
voting rights, terms of redemption and liquidation preferences, any or all of
which may be greater than the rights of the common stock. Preferred stock could
thus be issued with terms that could delay or prevent a change in control of our
company or make removal of management more difficult. In addition, the issuance
of preferred stock may decrease the market price of the common stock and may
adversely affect the voting and other rights of the holders of common stock. We
have no plans at this time to issue any preferred stock.
INTEREST OF NAMED EXPERTS AND COUNSEL
The financial statements for Bio-Bridge Science, Inc. as of Nov. 3,
2004 and the financial statements for Bio-Bridge Science Corp for the year ended
December 31, 2003 and for the period ended February, 11, 2002 (inception ) to
Dec. 31, 2002 included in this prospectus have been audited by Weinberg &
Company, P.A., the registered independent accounting firm to the extent and for
the periods set forth in their report appearing elsewhere herein and are
included in reliance upon such report given upon the authority of that firm as
experts in auditing and accounting.
The validity of the common stock to be sold by the selling stockholders
under this prospectus will be passed upon for us by Richardson & Patel LLP.
Richardson & Patel LLP owns 100,000 shares of our common stock, which are being
registered for sale under this prospectus.
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
We have adopted provisions in our certificate of incorporation that
limit the liability of our directors for monetary damages for breach of their
fiduciary duty as directors, except for liability that cannot be eliminated
under the Delaware General Corporation Law. Delaware law provides that directors
of a company will not be personally liable for monetary damages for breach of
their fiduciary duty as directors, except for liabilities:
o for any breach of their duty of loyalty to us or our stockholders;
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
o for unlawful payment of dividend or unlawful stock repurchase or
redemption, as provided under Section 174 of the Delaware General
Corporation Law; or
o for any transaction from which the director derived an improper
personal benefit.
22
In addition, our bylaws provide for the indemnification of officers,
directors and third parties acting on our behalf, to the fullest extent
permitted by Delaware General Corporation Law, if our board of directors
authorizes the proceeding for which such person is seeking indemnification
(other than proceedings that are brought to enforce the indemnification
provisions pursuant to the bylaws).
These indemnification provisions may be sufficiently broad to permit
indemnification of the registrant's executive officers and directors for
liabilities (including reimbursement of expenses incurred) arising under the
Securities Act of 1933.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. No
pending material litigation or proceeding involving our directors, executive
officers, employees or other agents as to which indemnification is being sought
exists, and we are not aware of any pending or threatened material litigation
that may result in claims for indemnification by any of our directors or
executive officers.
DESCRIPTION OF BUSINESS
A Glossary of Scientific Terms has been included for the convenience of
our readers in order to help provide a better understanding of our business, and
begins on page 28 of this prospectus.
GENERAL
We are a development stage company whose subsidiaries are focused on
the commercial development of biological products for the prevention and
treatment of human infectious diseases. Our current business strategy focuses on
the development of vaccines against HIV through our wholly owned subsidiaries,
which were organized in 2002 to continue development of, and commercialize,
HIV-PV Vaccine I, a vaccine designed to prevent and treat infection by the human
immunodeficiency virus, or HIV. The original HIV-PV Vaccine I technology was
co-developed by Dr. Liang Qiao, an associate professor at Loyola University
Chicago and is owned by Loyola University. In June 2002, Loyola University
exclusively licensed this technology to our subsidiary Bio-Bridge Science
Corporation with respect to PRC, Japan and the United States. Pursuant to an
agreement with the Beijing Institute of Radiation Medicine, we are currently
conducting pre-clinical testing of HIV-PV Vaccine I, in mainland China which we
anticipate will be completed by mid-March 2005. Once the pre-clinical testing is
completed, we plan to apply to China's State Food and Drug Administration for
approval to conduct clinical trials of HIV-PV Vaccine I.
Our strategy is to develop, test and obtain regulatory approval for
HIV-PV Vaccine I in China first and then in the United States and Japan. In May
2003, we purchased the right to use for fifty years approximately 2.8 acres of
land in the Tianzhu Export Processing Zone, Shunyi District, Beijing, China,
which we plan to develop into a laboratory and biomanufacturing facility in
compliance with Good Manufacturing Practices, or GMP, regulations primarily for
clinical trials of HIV-PV Vaccine I. In July 2003, we engaged a contractor to
design the GMP facility. As of September 2004, we have received all necessary
permits and approvals to commence construction of the facility. We estimate that
the cost of building and outfitting this facility will be $3,000,000, and the
construction and installation of equipment related to the facility will be
substantially completed by June 2005. We currently have no commitments to make
payments for this construction project, except for $724,900 pursuant to a
contract involving structural and foundation work for the facility. To date, we
have not commenced clinical testing of this vaccine, nor has it been approved by
the China State Food and Drug Administration or any other regulatory agency.
Further, we have not received any revenues to date and, until we receive the
necessary approvals from the SFDA or a similar regulatory authority located in
Japan or the United States, we will not have any revenues.
We have incurred significant losses since inception as a result of
research and development and general and administrative expenses in support of
our operations. We expect to continue to incur substantial losses over at least
the next year as we complete our pre-clinical trials, apply for regulatory
approvals of clinical trials, construct our laboratory and biomanufacturing
facility and continue development of our technology. We will need to raise
additional capital in the next 12 months to meet these operating expenses. See
"Plan of Operation."
23
HISTORY, REORGANIZATIONS AND CORPORATE STRUCTURE OF THE COMPANY
We were incorporated in Delaware on October 26, 2004 for the purpose of
changing the corporate structure of our business. On November 4, 2004, we
initiated exchange offers to the shareholders of Bio- Bridge (Cayman). By
November 12, 2004, 100% of the shareholders of Bio-Bridge (Cayman) had tendered
their shares. Effective December 1, 2004, we issued 29,971,590 shares of our
common stock to the shareholders of Bio-Bridge (Cayman) pursuant to the
Agreement for the Exchange of Shares dated as of November 4, 2004 ("Exchange
Agreement") by and among us, Bio-Bridge (Cayman) and the shareholders of record
of Bio-Bridge (Cayman). As a result of this exchange reorganization, we became
the sole shareholder of Bio-Bridge (Cayman), and it became our wholly owned
subsidiary. The Bio-Bridge (Cayman) shareholders acquired control of our company
pursuant to the Exchange Agreement, resulting in Dr. Liang Qiao's ownership of
13,750,000 shares or approximately 45% of our company. The acquisition will be
accounted for as a reverse merger (recapitalization) with Bio-Bridge Science
Corp. deemed to be the accounting acquirer, and Bio-Bridge Science Inc. deemed
to be the legal acquirer. Accordingly, the historical financial information
presented herein is that of Bio-Bridge Science Corp. as adjusted to give effect
to any difference in the par value of the issuer's and the accounting acquirer's
stock with an offset to capital in excess of par value. The retained earnings of
Bio-Bridge Science Corp., the accounting acquirer will also be carried forward
after the acquisition. Also, Bio-Bridge Science Corp. basis of its assets and
liabilities will be carried over in the recapitalization.
Bio-Bridge (Cayman) was incorporated in the Cayman Islands on February
11, 2002 to complete development of, and commercialize, HIV-PV Vaccine I, a
vaccine designed to prevent and treat infection and disease caused by HIV, the
virus that causes AIDS. At the time of the exchange officer, Bio-Bridge
(Cayman)'s directors included Dr. Liang Qiao, Wenhui Qiao, Toshihiro Komoike,
Isao Arimoto and Shyh-Jing (Philip) Chiang. Its executive officers consisted of
Dr. Liang Qiao, chief executive officer and secretary, Wenhui Qiao, president,
Chuen Huei (Kevin) Lee, chief financial officer, and Isao Arimoto, vice
president.
Bio-Bridge (Cayman) holds a 100% interest in Bio-Bridge Science
(Beijing) Corp., a Wholly-Foreign Funded Enterprise of the People's Republic of
China (the "Bio-Bridge (Beijing)"), which was established in April 2002.
Bio-Bridge (Cayman), through its wholly owned subsidiary in Beijing, China, is
currently engaged in the development and commercialization of HIV-PV Vaccine I,
in China. Bio-Bridge (Beijing)'s executive officer is Wenhui Qiao, general
manager. Its directors include Wenhui Qiao, chairman, Dr. Liang Qiao, vice
chairman, Mingjin Yu, Isao Arimoto and Shyh- Jing (Philip) Chiang.
On April 12, 2004, Bio-Bridge (Cayman) acquired 2,240,000, or 100% of
the outstanding shares, of Aegir Ventures, Inc., a public reporting company, for
a purchase price of $40,000. As a result of this acquisition, Aegir Ventures,
Inc., a Delaware corporation, became a wholly owned subsidiary of Bio-Bridge
(Cayman). In connection with this transaction, Mingjin Yu was appointed
president, secretary, treasurer and director of Aegir Ventures, Inc. On November
26, 2004, Bio-Bridge (Cayman) sold 2,240,000 shares, representing all issued and
outstanding capital stock of Aegir Ventures, to Nakagawa Corporation, a Japan
corporation, in exchange for $40,000 payable by promissory note over two years.
In connection with the closing of this transaction on November 26, 2004, Mingjin
Yu resigned from the positions of president, secretary, treasurer and director
of Aegir Ventures, and Nakagawa Koichi was appointed to these positions.
OVERVIEW OF HIV AND AIDS IN CHINA
HIV is the virus that causes Acquired Immunodeficiency Syndrome, or
AIDS, a lethal disease characterized by the gradual deterioration of the human
immune system. HIV is transmitted by three predominant means: sexual contact;
exposure to blood from an infected person, such as sharing needles in drug use;
and transmission from infected mothers to their newborns. Although the disease
is manifested in many ways, the problem common to all patients is the
destruction of essential immune cells known as T lymphocytes, or T cells.
Destruction of these T cells by HIV makes the body particularly vulnerable to
infections and cancers that typify AIDS and ultimately cause death. Blocking HIV
infection would prevent AIDS.
It is officially estimated that China has 840,000 people infected with
HIV, and the number is growing according to a survey by the Ministry of Health
of China in 2003. According to the United Nations and other various estimates,
the number of HIV-infected population in China is around 800,000 to 1.5 million
and the number can reach 10-15 million by 2010 if no major precautionary measure
is taken. According to the Joint United Nations Programme on HIV/AIDS, or
UNAIDS, and the World Health Organization, or WHO, and their report dated 2003,
high rates of HIV prevalence has been found among injecting drug users - 35-80%
in Xinjiang and 20% in Guangdong provinces of China - while a severe HIV
epidemic has affected communities in China where unsafe blood-collection
practices occurred in the 1990s. The HIV epidemic has spread to 31 provinces,
autonomous regions and municipalities, and the number of reported HIV/AIDS cases
has increased significantly in recent years.
24
The Chinese government has taken steps to curb the HIV/AIDS epidemic,
including prioritizing AIDS drug approval and establishing a "Green Mile" policy
to expedite the drug approval process. In 2001, the PRC Ministry of Health, the
lead government agency responsible for addressing the HIV/AIDS issue, formed a
Center for Disease Control and Prevention, adopted a five-year action plan, and
increased government spending at the national and provincial levels. The funding
for safety of national blood banks has been increased through a RMB 1.5 billion
(about $181 million) government bond issue, and China's 2001 budget for HIV/AIDS
prevention and treatment increased to RMB 100 million per year (US$12 million).
As a comparison, from 1990 to 1995, annual spending by the central government on
HIV/AIDS was estimated to be around US$500,000 per year, reaching approximately
$1.8 million per year from 1996 to 2000. In 2003, the central government spent
$40 million on HIV/AIDS, and it was expected that the amount will be increased
to $56.8 million in 2004 according to Vice Minister of Ministry of Health, who
chaired a press conference on curing HIV/AIDS in China on June 29,2004.
International and domestic programs have been undertaken to help
prevent the spread of HIV in China and treat the patients infected by HIV.
Grassroots organizations have created peer-education groups, and even small
groups of independently organized college students are traveling to the
countryside to teach prevention and raise awareness of HIV. International
non-governmental organizations, foreign governments and the United Nations are
all active in China and have invested funds and expertise in addressing the HIV
epidemic. The Chinese government has expressed a willingness to work with the
international community to create policies and programs that will prevent
HIV/AIDS from spreading.
Chinese government policies currently emphasize treatment of HIV/AIDS
by locally producing more affordable antiretroviral treatments and negotiating
reduced prices for patented antiretrovirals produced by multinational
pharmaceutical companies to create "cocktail" treatments to suppress HIV. The
prices of imported and Chinese-produced medications are still well beyond the
reach of the vast majority of Chinese who have HIV. As a result, China is
encouraging HIV/AIDS research in order to develop effective HIV/AIDS vaccine and
treatment drugs. China's SFDA has given priority to domestically produced
anti-AIDS drugs during the examination and approval process, so as to expedite
public access to HIV drugs.
Progress recently has been made in treating HIV infection. Current HIV
therapies slow multiplication of the virus and delay the onset of AIDS. They do
not cure HIV infection or AIDS. Considering costs, toxicities, difficulties in
compliance with complex drug regimens and the development of resistance to these
drugs, we believe such therapies will be available only to a small fraction of
the HIV-infected population. Accordingly, we believe they will probably have a
minimal impact on the worldwide epidemic.
VACCINES
Vaccines are preventative, and as a result, they are particularly
suited to address epidemics, including the HIV/AIDS epidemic.
Vaccines prevent infection by activating the immune system to
neutralize infectious viruses. The immune system's initial response to a virus
includes the production of antibodies, which are the only human immune response
known to prevent viral infection. The antibodies bind to the virus and prevent
it from entering the cells. If a virus cannot enter a cell, it is unable to
multiply and dies within a few hours in the host. This protection against
infection is called neutralization.
Several monoclonal neutralizing antibodies isolated from HIV-infected
individuals can globally neutralize diverse strains of HIV. Administration of
the neutralizing antibodies in HIV patients resulted in reductions in viral
loads. Thus, eliciting broadly neutralizing antibodies is a major goal in HIV
vaccine development. Neutralizing antibody-based HIV vaccine can induce
neutralizing antibodies, which block the viral entry into target cells.
In addition, virus-specific cytotoxic T lymphocytes (CTLs) have been
implicated in controlling HIV infection. HIV is a spherical virus that maintains
its genetic information inside its protein core and has protein projections on
its outer coat called glycoproteins, that enable it to bind to human cells.
HIV-1 Gag protein is one of the most conserved viral proteins. Broad,
cross-clade CTL responses against conserved epitopes of Gag have been detected
in HIV-1 infected individuals. CTLs that are specific for Gag play an important
role in clearing primary viremia, or the presence of virus in the blood of a
host, and in controlling later viral replication, resulting in the slow
progression of the disease. The presence of mucosal HIV-1 specific CTL in the
cervix is associated with an absence of detectable HIV-1 infection in the
genital mucosa. Therefore, this is the rationale for the development of HIV
vaccine which can induce HIV-specific CTL responses. CTL-based HIV vaccines can
induce HIV-specific CTLs, which eliminate HIV-infected cells and control the
viral replication.
THE HIV INFECTION PROCESS AND THE ROLE OF MUCOUS MEMBRANE DURING INFECTION
HIV is transmitted both venereally, or sexually transmitted, and
hematogeneously, or transmitted directly into the bloodstream. The mucosal
surface is one of the most important portals for HIV transmission. Additionally,
lymphoid tissue has been identified as a major site of HIV replication and a
reservoir for HIV IN VIVO. There are large numbers of target cells for HIV in
the mucosal lymphoid tissue, especially the gastrointestinal tract. During the
course of an AIDS infection, the intestine is the earliest target for viral
infection and T cell loss. Thus, now it is clear that HIV infection is primarily
a disease of the mucosal immune system. Some candidate vaccines that induced
relatively strong systemic immune responses in connection with virus transmitted
hematogeneously have failed to provide adequate protection in non-human primate
models. Therefore, there is reason to believe that mucosal immunity will be
essential for designing an effective AIDS vaccine. Accordingly, we believe that
it is important for the ideal HIV vaccines to induce not only systemic but also
mucosal HIV-specific immune response to prevent the entry of HIV into the
mucosa, to inhibit HIV replication, and to clear HIV during and after
transmission. We believe that stimulating mucosal immune responses, including
neutralizing antibodies and cytotoxic T cells, will be key in the development of
an effective AIDS vaccine.
25
PRODUCTS UNDER DEVELOPMENT
HIV-PV Vaccine I for HIV/AIDS
Bio-Bridge HIV-PV Vaccine I is based on the unique papillomavirus
pseudovirus technology co-developed by Dr. Liang Qiao. The basic principle is to
package unrelated plasmids DNA, such as those encoding HIV-1 Gag, by the
papillomavirus virus-like particles (VLPs) or chimerical virus-like particles
(CVLPs) to form papillomavirus pseudoviruses.
Papillomavirus (PV) are mucosa-tropic viruses and their major
structural protein L1 can spontaneously assemble into virus-like particles
(VLPs). PV VLPs can package unrelated plasmid DNA encoding proteins of interest
to form PV pseudovirus. PV pseudoviruses are able to serve as a vector to
deliver target antigens to mucosal and systemic lymphoid tissues via oral route.
Oral immunization with PV pseudoviruses encoding HIV-1 Gag induces mucosal and
systemic Gag-specific CTL response. Three regions of the bovine papillomavirus
(BPV) L1 protein can be replaced by unrelated peptides to generate chimeric VLPs
(CVLPs). Introduced HIV gp41 neutralizing antibody epitope on gp41-PV CVLPs
induced mucosal and systemic HIV-specific neutralizing antibody response in
orally immunized mice. Thus, we use gp41-PV CVLPs presenting HIV-1 neutralizing
epitopes to package a plasmid DNA encoding HIV Gag to generate HIV-PV
pseudoviruses, which can be used as an oral vaccine to induce both mucosal and
systemic HIV-1-specific cross-subtype neutralizing antibodies and CTLs.
PRE-CLINICAL TESTING OF HIV-PV VACCINE I
We are currently conducting pre-clinical and animal testing of
Bio-Bridge HIV-PV Vaccine I, or Vaccine I, in China pursuant to an agreement
with the Beijing Institute of Radiation Medicine. We entered into an agreement
with Beijing Institute of Radiation Medicine on May 6, 2004 to conduct the
pre-clinical study of safety assessment of HIV-PV vaccine I. The safety
assessment study includes acute toxicity test, chronic toxicity test,
immunogenicity and immunological test, safety pharmacology and reproductive
toxicity test.
Beijing Institute of Radiation Medicine will also conduct
biodistribution and integration studies for HIV-PV vaccine I. Both pre-clinical
studies will be conducted in the laboratories of Beijing Institute of Radiation
Medicine. We entered into confidential agreements with them to protect our
proprietary interests. We anticipate that both studies will be finished by
mid-March 2005, prior to the submission of our application for clinical studies
to SFDA.
THE MARKET FOR HIV-PV VACCINE I
According to Datamonitor, the worldwide market for HIV/AIDS drugs is
expected to increase from nearly $8 billion in 2004 to $12 billion by 2012.
Although industrialized countries currently share a disproportion amount on
spending related to HIV/AIDS, major international organizations, including
United Nations, have and may continue to provide funds to developing countries
in order to effectively curb the spread of HIV/AIDS epidemic in these countries.
The Global Fund to Fight AIDS, Tuberculosis and Malaria was created in 2002 to
increase resources to fight three of the world's most devastating diseases, and
to direct those resources to areas of greatest need. Total spending by Global
Fund as of 2004 was $3 billion, over 50% of which was spent on fighting HIV/AIDS
in developing countries.
26
The Chinese government has increased its resources to fighting HIV/AIDS
including treatment to people living with HIV and additional resources for HIV
prevention programs targeting vulnerable groups. In 2003, the central government
spent $40 million on HIV/AIDS, and it was expected the amount will be increased
to $56.8 million in 2004. The Global Fund has also committed $56 million to
China for HIV/AIDS related programs as of November 2004, but there is no
guarantee that China will receive these funds.
We anticipate that our initial market for HIV-PV Vaccine I will be
primarily in China. To our knowledge, currently there is no effective HIV/AIDS
vaccine drug commercially available either in China or other parts of the world.
However, we estimated the size of this market to be at least $300 million per
annum, based on the current HIV/AIDS population in China and average cost of
HIV/AIDS treatment available in China, which is currently growing at more than
20% per year.
INTELLECTUAL PROPERTY
In April 2002, our wholly owned subsidiary, Bio-Bridge Science
Corporation, entered into an agreement with Loyola University Chicago for an
exclusive license of our core technology related to papillomavirus pseudovirions
as a genetic vector and vaccine. The license is royalty-bearing, covers the
countries of the U.S., Japan and PRC, and includes the right to grant
sublicenses. This exclusive license gives us rights to all uses in all fields
under the papillomavirus technology. The term of this license is perpetual or
for the maximum period of time permitted by law, unless terminated pursuant to
the terms of the license. We may terminate the license at will upon no earlier
than 45 days and no later than 30 days notice to Loyola University. If, five
years after U.S., Japan and China governments have granted permit for its use as
a drug, and Bio-Bridge has made no effort in marketing the product, then Loyola
University of Chicago may terminate this agreement. Under the license we have
the right to file patent applications and the right to initiate and control any
actions concerning any claims of infringement. Dr. Liang Qiao has applied for
patents related to the papillomavirus technology in China, Japan and the U.S.
The patent was granted in China on July 16, 2003 under patent publication number
CN 133338A for a term of 20 years. The patent applications in Japan and the U.S.
are pending. Dr. Qiao has received a Notice of Allowance from the U.S. Patent
Office, and we expect the patent to be issued once we pay the applicable fee.
Under the license agreement, Loyola owns the patents related to the
papillomavirus technology.
This license was followed by a second exclusive license agreement for
the same technology between our wholly owned subsidiary Bio-Bridge Science
Corporation and Bio-Bridge (Beijng), effective as of June, 2002. This sublicense
covers the territory of mainland China and expires in June 2012. Under the terms
of the sublicense, Bio-Bridge (Beijing) may use the technology at no charge and
has the right to file patent applications and enforce its right to the
technology.
RESEARCH AND DEVELOPMENT
As of September 30, 2004, we had a total of 6 employees dedicated to
research and development. Our research team includes biologists and doctors. We
spent approximately $46,208 during the nine months ended September 30, 2004 on
the research and development of HIV-PV Vaccine I. We also spent $394,559 on the
purchase of a land use right for fifty years of approximately 2.8 acres in
Tianzhu Export Processing Zone, Beijing, China during 2003 in order to build our
research laboratory. Currently, we have engaged Beijing Institute of Radiation
Medicine to conduct the animal testing and pre-clinical trial of the HIV-PV
Vaccine I.
LABORATORY/LAND USE
On May 28, 2003, we entered into a land use agreement with Beijing
Airport High-Tech Park Co. Ltd, or BTA, regarding the use of the 2.8 acres of
land, on which we are currently building our research laboratory to conduct the
clinical trial of HIV-PV Vaccine I. This agreement expires in 2053. We have paid
the entire land use price to BTA pursuant to the agreement. As of December 2004,
the structure of the building has been completed and the construction for the
facility is expected to be completed in the first half of 2005. When finished,
we expect that the lab will meet the GMP standard and will be eligible to
conduct the clinical trial under the current China SFDA rules. The facility is
expected to have total utilized areas of 53,753 square feet.
COMPETITION
To our knowledge, currently there is no effective HIV vaccine
commercially available to patients in the world. Once we begin our operations we
will be competing with companies such as Chiron Corp., Merck & Co., Inc.,
Aventis Pasteur, GlaxoSmithKline plc, Oxxon Pharmaccines Ltd, AlphaVax, Inc.,
Epimmune Inc. and Targeted Genetics Corp., who have announced that they are
conducting programs to develop an HIV vaccine and are planning, conducting or
have completed Phase I or Phase II clinical trials. In addition, several of
these companies and others are developing new drug therapies and other
treatments that may mitigate the impact of the disease. In February 2004, Vaxgen
announced that it failed the AIDS phase III clinical trial. These companies are
all substantially larger and more established than we are and have significantly
greater financial and other resources than we do. We do not have a significant
presence in the HIV/AIDS drugs market. We cannot guarantee you that we can
compete successfully.
GOVERNMENT REGULATION AND PROBABILITY OF AFFECTING BUSINESS
The construction of our laboratory facility in China is subject to
extensive inspection and evaluation by the respectively regulatory agencies in
China, including Beijing Tianzhu Export Processing Zone Management Commission
and Beijing Municipal Planning Commission to go ahead the Project. We also
retained the Environmental Impact Assessment Center at China Agriculture
University (the "Center" hereafter) to conduct the environmental impact
assessment of the Project as required by Chinese law. The environmental
assessments were provided with regard to the construction of the laboratory
facility as well as potential environmental hazard resulting from the production
and research efforts. The assessment confirms the Company's compliance with the
environmental regulations and was accepted by the EPA of Beijing Government.
HIV-PV Vaccine I is subject to federal regulation, principally by the
SFDA, and by state and local governments. Such regulations govern or influence,
among other things, the testing and safety requirements. The steps ordinarily
required before an HIV/AIDS drug may be approved in China include:
o pre-clinical laboratory and animal testing;
o submission to the SFDA of an application for approval of clinical
study, which must be effective before clinical trials may commence;
o adequate Phase I, II and III clinical studies to establish the
safety, purity and potency of the product candidate and demonstrate
how it behaves in the human body;
o Drug Production Quality Control Procedure or GMP certification;
o submission of an application to the SFDA for Drug Registration
Document for approval of new drug approval certificate; and
o sales for pre-production drugs in the market and phase IV clinical
study.
We estimate that the total drug approval process in China may take at
least two years from the date of the application for approval of clinical study.
However, the SFDA has substantial discretion in the drug approval process and
may require us to conduct additional pre-clinical and clinical testing or to
perform post-marketing studies.
27
SCIENTIFIC ADVISORY BOARD
Our Scientific Advisory Board provides specific expertise in areas of
research and development relevant to our business and meets with our management
personnel from time to time to discuss our present and long-term research and
development activities. Scientific Advisory Board members include:
o Gregory T. Spear, PhD, Professor, Department of Immunology and
Microbiology, Rush University. Dr. Spear is an expert in the areas
of HIV infection and its interactions with the immune system.
o Katherine L. Knight, PhD, Professor and Chairperson, Department of
Microbiology and Immunology, Stritch School of Medicine, Loyola
University Chicago. Dr. Knight is an expert in immunology.
EMPLOYEES
We currently have 22 employees, including four on our clinical staff, six on our
research and development staff, seven on our management/administration staff,
one person for regulatory and quality services and four on our manufacturing and
general affairs staff.
GLOSSARY OF SCIENTIFIC TERMS
The following terms, where used in this prospectus, have the meanings
given below:
Antigen a protein or carbohydrate substance (as a toxin or
enzyme) capable of stimulating an immune response.
Chimerical part consisting of diverse origins (e.g., a fusion
protein that consists of parts from two or more
different proteins).
Epitope molecular region on the surface of an antigen, or
protein, capable of eliciting an immune response
and of combining with the specific antibody
produced by such a response.
Gp41 human imnmunodeficiency virus type 1 transmembrane
glycoprotein.
HIV-1 the type species of lentivirus and widely
recognized as the agent of acquired
immunodeficiency syndrome (AIDS).
HIV-1 GAG Protein GAG is an acronym for group-specific antigens,
which is processed by viral protease. The HIV-l
GAG protein has the ability to direct the
formation of virus-like particles when all other
major genes are absent.
Monoclonal produced by, being, or composed of cells derived
from a single cell.
Papillomavirus any of a genus (Papillomavirus) of papovaviruses
that cause papillomas. Some cause benign
papillomas of the skin (warts). Other strains,
such as HPV 16 and HVP- 18, are linked to genital
and anal cancers. These viruses are sexually
transmitted. HPV-16 and HPV-18 are found in the
majority of squamous-cell carcinomas of the
uterine cervix.
Peptide any of various amides that are derived from two or
more amino acids by combination of the amino group
of one acid with the carboxyl group of another and
are usually obtained by partial hydrolysis of
proteins.
Plasmid an extrachromosomal ring of DNA especially of
bacteria that replicates autonomously.
Pseudovirus here it refers to a biological structure that does
not have complete parts of an intact virus, thus,
it is not infectious.
Viral loads the amount of viruses present in a given volume of
your blood.
MANAGEMENT DISCUSSION AND ANALYSIS
The following discussion of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and the notes to those statements included elsewhere in this
prospectus. In addition to the historical consolidated financial information,
the following discussion and analysis contains forward-looking statements that
involve risks and uncertainties. Our actual results may differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those set forth under "Risk Factors" and elsewhere in this
prospectus.
OVERVIEW
Bio-Bridge Science, Inc. is a development stage company whose
subsidiaries are focused on the commercial development of biological products
for the prevention and treatment of human infectious diseases. Our wholly owned
subsidiaries, Bio-Bridge Science Corporation, a Cayman Islands corporation, and
its wholly owned subsidiary, Bio-Bridge Science (Beijing) Co. Ltd., a
Wholly-Foreign Funded Enterprise of the PRC, were organized in 2002 to continue
development of, and commercialize, HIV-PV Vaccine I technology, to which we have
an exclusive license from Loyola University Chicago with respect to the
territories of China, Japan and the United States. Our license from Loyola
University covers the HIV-PV Vaccine I technology co-invented by our chief
executive officer Dr. Liang Qiao. We are currently conducting pre-clinical
testing of HIV-PV Vaccine I in Beijing, China, which we anticipate will be
completed by mid- March 2005. Once the pre-clinical testing is completed, our
subsidiary Bio-Bridge Science (Beijing) Co. Ltd. plans to apply to China's State
Food and Drug Administration for approval to conduct clinical trials of HIV-PV
Vaccine I. Bio-Bridge Science (Beijing) is also currently overseeing the
construction of our new laboratory and biomanufacturing facility in Bejing
China. We estimate that the cost of building and outfitting this facility is
$3,000,000, and the construction and installation of equipment related to the
facility will be substantially completed by June 2005. We currently have no
commitments to make payments for this construction project, except for $724,900
pursuant to a contract involving structural and foundation work for the
facility.
On December 1, 2004, Bio-Bridge Science, Inc. consummated a share
exchange pursuant to which we acquired Bio-Bridge Science Corporation, a Cayman
Islands corporation, as our wholly owned subsidiary, and the shareholders of
Bio-Bridge Science Corporation acquired 100% of our outstanding common shares.
Since the shareholders of Bio-Bridge Science Corporation acquired control of our
company, we treated the share exchange as a recapitalization for accounting
purposes, pursuant to which Bio-Bridge Science, Inc. adopted Bio-Bridge Science
Corporation's historical financial information statements as those of our
company, including periods pre-dating the acquisition. Accordingly, in reading
the following discussion of our consolidated financial condition and results of
operations, please keep in mind that, to the extent that conditions and those
results pre-date our acquisition of Bio-Bridge Science Corporation, they reflect
Bio-Bridge Science Corporation's consolidated financial condition and results of
operations. See the section of this prospectus entitled "Business--History,
Reorganizations and Corporate Structure" for further information regarding the
share exchange.
28
GOING CONCERN
The accompanying consolidated financial statements have been prepared
in conformity with accounting principles generally accepted in the United States
of America, which contemplate our continuation as a going concern. As noted
above, we are a development stage company and presently do not have any
revenues, as the pre-clinical testing of the HIV-PV Vaccine I has yet to be
completed and certain governmental approvals must be obtained before it can be
introduced to the market. As of December 31, 2003, our independent auditors have
added an explanatory paragraph to their report of Bio-Bridge Science Corporation
(the accounting acquirer) for the year ended December 31, 2003 stating that our
net loss from organizational and pre-operating activities of $255,664, lack of
revenues and dependence on our ability to raise additional capital to continue
our existence, raise substantial doubt about our ability to continue as a going
concern. Our consolidated financial statements and their explanatory notes
included as part of this prospectus do not include any adjustments that might
result from the outcome of this uncertainty.
PLAN OF OPERATION
Our primary corporate focus is on the commercial development of HIV-PV
Vaccine I through our subsidiaries. Our capital requirements, particularly as
they relate to product research and development, have been and will continue to
be significant. Our future cash requirements and the adequacy of available funds
will depend on many factors, including the pace at which we are able to obtain
regulatory approvals of HIV-PV Vaccine I, whether or not a market develops for
our products and, if a market develops, the pace at which it develops, and the
pace at which the technology involved in making our products changes.
To date, our wholly owned subsidiary, Bio-Bridge Science Corporation,
has funded its activities through private equity financings. During the next 12
months, we intend to raise capital through an offering of our securities or from
loans to continue research and development of HIV-PV Vaccine I in China as well
as complete the construction of our laboratory in China, which we estimate will
cost approximately $3 million. We currently have no commitments to make payments
for this construction project, except for $724,900 pursuant to a contract
involving structural and foundation work for the facility. We estimate that our
capital requirements for the next 12 months will be as follows:
o approximately $900,000 for our laboratory/biomanufacturing facility
inner purified environment decoration project and electricity work
project;
o approximately $800,000 to purchase advanced laboratory equipment for
our vaccine study;
o approximately $500,000 to finish Phase I clinical study an the
preparatory work; and
o approximately $800,000 for working capital and general corporate
needs.
As of September 30, 2004, our cash and cash equivalents position was
$917,039. We have no current arrangements for obtaining the additional cash and
working capital we may require, and will seek to raise it through the public or
private sales of our securities, or loans, or a combination of the foregoing. We
cannot guarantee that financing will be available to us, on acceptable terms or
at all. At this time, we are unable to determine when the HIV-PV Vaccine I will
become fully developed, manufactured and sold. We do not expect to generate any
significant revenues in the next 12 months. If we fail to obtain other
financing, either through an offering of our securities or by obtaining
additional loans, we may be unable to maintain our operations.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2004
During the nine months ended September 30, 2004 and 2003, we had no revenue. We
do not expect to have significant revenues relating to our technologies within
the next twelve months.
For the nine months ended September 30, 2004, general and administrative expense
was $345,218 as compared to $178,690 for the nine months ended September 30,
2003. The increase of $166,528 was due primarily to an increase in payroll
expenses of approximately $30,000 and an increase in consulting, legal and
financial advisory fees of around $150,000.
Net loss for the nine months ended September 30, 2004, was $391,347 as compared
to $177,439 for the nine months ended September 30, 2003. This increase in net
loss was primarily due to the factors described above.
29
THE PERIOD FEBRUARY 11, 2002 (INCEPTION) TO DECEMBER 31, 2002 AND THE YEAR ENDED
DECEMBER 31, 2003
During the year ended December 31, 2003 and the period February 11, 2002
(inception) to December 31, 2002, we had no revenue.
For the year ended December 31, 2003, general and administrative expense was
$256,553 as compared to $114,860 for the period February 11, 2002 (inception) to
December 31, 2002. The increase of $141,693 was due primarily to increase in
salary expenses associated with new hire and other start-up costs of our Beijing
subsidiary which began its operations in May, 2002.
Net loss for the year ended December 31, 2003, was $255,020 as compared to
$114,976 for the period February 11, 2002 (inception) to December 31, 2002. This
increase in net loss was attributable to the factors described above.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of
operations are based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the U.S.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses for each period. The following represents a summary of our critical
accounting policies, defined as those policies that we believe are the most
important to the portrayal of our financial condition and results of operations
and that require management's most difficult, subjective or complex judgments,
often as a result of the need to make estimates about the effects of matters
that are inherently uncertain.
Research and development expenses. Research and development expenses
are expensed as incurred.
Stock compensation costs. Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123), establishes a
fair value method of accounting for stock-based compensation plans and for
transactions in which an entity acquires goods or services from non- employees
in exchange for equity instruments. SFAS No. 123 also encourages, but does not
require companies to record compensation cost for stock-based employee
compensation. SFAS No. 123 was amended by SFAS No. 148, which now requires
companies to disclose in interim financial statements the pro forma effect on
net income (loss) and net income (loss) per common share of the estimated fair
market value of stock options or warrants issued to employees. We have chosen to
continue to account for stock-based compensation utilizing the intrinsic value
method prescribed in Accounting Principles Board Option No. 25, "Accounting for
Stock Issued to Employees", with pro forma disclosures of net income (loss) as
if the fair value method had been applied. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the fair market price of our
stock at the date of grant over the amount an employee must pay to acquire the
stock.
Impairment of long-lived assets. We account for long-lived assets in
accordance with Statement of Financial Accounting Standards No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets, or SFAS No. 144, which was
adopted on January 1, 2002. SFAS No. 144 supersedes Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long- Lived Assets To Be Disposed of, or SFAS No. 121. We regularly
evaluate our long-lived assets, including our intangible assets, for indicators
of possible impairment whenever events or changes in business circumstances
indicate that the carrying amount of the assets may not be fully recoverable. An
impairment loss would be recognized when estimated undiscounted future cash
flows expected to result from the use of an asset and its eventual disposition
are less than its carrying amount. Impairment, if any, is measured using
discounted cash flows. In the period February 11, 2002 (inception) to December
31, 2002 and 2003, we performed an evaluation of our long-lived assets and noted
no impairment.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet transactions.
NEW ACCOUNTING PRONOUNCEMENTS
In January 2003, (as revised in December 2003) The Financial Accounting
Standards Board ("FASB") issued Interpretation No. 46, "Consolidation of
Variable Interest Entities", an interpretation of Accounting Research Bulletin
("ARB") No. 51, "Consolidated Financial Statements". Interpretation No. 46
addresses consolidation by business enterprises of variable interest entities,
which have one or both of the following characteristics: (i) the equity
investment at risk is not sufficient to permit the entity to finance its
activities without additional subordinated support from other parties, which is
provided through other interest that will absorb some or all of the expected
losses of the entity; (ii) the equity investors lack one or more of the
following essential characteristics of a controlling financial interest: the
direct or indirect ability to make decisions about the entities activities
through voting rights or similar rights; or the obligation to absorb the
expected losses of the entity if they occur, which makes it possible for the
entity to finance its activities; the right to receive the expected residual
returns of the entity if they occur, which is the compensation for the risk of
absorbing the expected losses.
30
Interpretation No. 46, as revised, also requires expanded disclosures
by the primary beneficiary (as defined) of a variable interest entity and by an
enterprise that holds a significant variable interest in a variable interest
entity but is not the primary beneficiary.
Interpretation No. 46, as revised, applies to small business issuers no
later than the end of the first reporting period that ends after December 15,
2004. This effective date includes those entities to which Interpretation 46 had
previously been applied. However, prior to the required application of
Interpretation No. 46, a public entity that is a small business issuer shall
apply Interpretation 46 or this Interpretation to those entities that are
considered to be special-purpose entities no later than as of the end of the
first reporting period that ends after December 15, 2003.
Interpretation No. 46 may be applied prospectively with a
cumulative-effect adjustment as of the date on which it is first applied or by
restating previously issued financial statements for one or more years with a
cumulative-effect adjustment as of the beginning of the first year restated.
In March 2004, the U.S. Securities and Exchange Commission's Office of
the Chief Accountant and the Division of Corporate Finance released Staff
Accounting bulletin ("SAB") No. 105, "Loan Commitments Accounted for as
Derivative Instruments". This bulletin contains specific guidance on the inputs
to a valuation-recognition model to measure loan commitments accounted for at
fair value, and requires that fair- value measurement include only differences
between the guaranteed interest rate in the loan commitment and market interest
rate, excluding any expected future cash flows related to the customer
relationship or loan servicing. In addition, SAB105 requires the disclosure of
the accounting policy for loan commitments, including methods and assumptions
used to estimate the fair value of loan commitments, and any associated hedging
strategies. SAB105 is effective for derivative instruments, entered into
subsequent to March 31, 2004 and should also be applied to existing instruments
as appropriate.
The implementation of the above provisions are not expected to have a
significant effect on the Company's consolidated financial statements.
DESCRIPTION OF PROPERTY
Our corporate office is located in approximately 1,253 square feet of
leased office space in Oak Brook, Illinois. We lease this office space at a
monthly base rent of approximately $2,140 and thereafter, it is adjusted as
follows: $2,193 on September 1, 2005 and $2,245 on September 1, 2006 for the
remainder of the term. We have agreed under the terms of the lease to pay our
proportionate share, or 0.33%, of any additional expenses or taxes due to the
landlord. This lease will expire on August 31, 2007. We expect that this
property will be adequate for our needs for the lease term. We do not have any
policies with respect to investments in real estate or interests in real estate,
real estate mortgages or securities of or interests in persons primarily engaged
in real estate activities.
We have an office located in Beijing, China that is leased from one of
our directors, Wenhui Qiao, and his wife, Mingjin Yu. We entered into the lease
for this 1302.48 square feet of office space on July 1, 2004 and the lease is
for a term of one year. The rent is RMB 12,000 (approximately US$1,450) per
month.
We have purchased the right to use for fifty years land located at
Tianzhu Export Processing Zone, Shunyi District, Beijing, China 10131, where we
have commenced construction of our laboratory and manufacturing facility. This
purchase agreement was executed in May 2003 and expires in 2053. To date, we
have paid the total amount due for this land use right pursuant to the terms of
the agreement.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Described below are certain transactions or series of transactions
since inception between us and our executive officers, directors and the
beneficial owners of 5% or more of our common stock, on an as converted basis,
and certain persons affiliated with or related to these persons, including
family members, in which they had or will have a direct or indirect material
interest in an amount that exceeds $60,000 other than compensation arrangements
that are otherwise required to be described under "Executive Compensation."
SHARE EXCHANGE WITH BIO-BRIDGE (CAYMAN)
On December 1, 2004, we issued to various related parties shares of
common stock in connection with the share exchange with Bio-Bridge Science
Corp., a Cayman Islands corporation. See the section in this prospectus entitled
"Description of Business - History, Reorganization and Corporate Structure of
the Company" for a more detailed description regarding the share exchange.
31
NAME(1) NUMBER OF SHARES OF COMMON STOCK
- ------- --------------------------------
Dr. Liang Qiao 13,750,000
Wenhui Qiao 825,000
Isao Arimoto 2,125,000
Toshihiro Komoike 750,000
Shyh Jing (Philip) Chiang 786,111
(1) See "Security Ownership of Certain Beneficial Owners and Management" for
more detail on shares held by these persons.
ROYALTY AND LICENSE ARRANGEMENTS
Liang Qiao, M.D., our co-founder and chief executive officer, is one of
the two co-inventors of our core technology that was assigned to Loyola
University Chicago in April 2001. Under a license agreement with Loyola
University Chicago, our wholly owned subsidiary Bio-Bridge Science Corporation
has obtained exclusive rights to this technology for use in our future products
within the United States, Japan and PRC. This license continues perpetually or
for the maximum period of time permitted by law, unless terminated earlier by us
at will with prior notice or by Loyola University pursuant to certain conditions
under the terms of the agreement. See the section in this prospectus entitled
"Business--Intellectual Property." Pursuant to this agreement, Loyola is
entitled to receive a royalty of four percent from the net profit for all uses
of the licensed technology, including uses under sublicenses. To date, we have
not generated any revenues from the sale of any products under development, nor
any revenues from sublicenses.
Our director, Wenhui Qiao, is president of Bio-Bridge (Beijing). In
April 2002, Bio-Bridge Science Corporation, or Bio-Bridge (Cayman) signed a
sublicense agreement with Bio-Bridge (Beijing). Under the terms of the
agreement, Bio-Bridge (Cayman) granted an exclusive license to Bio-Bridge
Beijing within mainland China. The term of the license agreement is 10 years.
There are no royalty fees nor one-time costs owed to us under this agreement.
OFFICE LEASE IN BEIJING, CHINA
In July 2004, we entered into a lease agreement with one of our
directors, Wenhui Qiao, and his wife, Mingjin Yu, to lease office space for our
office located in Beijing, China. See the section in this prospectus
entitled "Description of Property."
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
At this time, our common shares are not traded on any public markets.
We currently have 30,271,590 shares of common stock issued and outstanding. We
have approximately 116 stockholders of record of our common stock.
Our board of directors has also issued options to consultants to
purchase a total of 1,392,663 shares of our common stock. The price for each
share of common stock purchased pursuant to the options is $.001.
DIVIDENDS
We have never paid any dividends on the common stock or the preferred
stock. We anticipate that any future earnings will be retained for the
development of our business and do not anticipate paying any dividends on the
common stock or the preferred stock in the foreseeable future.
2004 STOCK INCENTIVE PLAN
Our board of directors and stockholders approved our 2004 stock
incentive plan in December 2004. The 2004 stock incentive plan provides for the
grant of incentive stock options to our employees, and for the grant of
nonstatutory stock options, restricted stock, stock appreciation rights and
performance shares to our employees, directors and consultants.
We have reserved a total of 2,000,000 shares of our common stock for
issuance pursuant to the 2004 stock incentive plan. Our 2004 stock incentive
plan does not provide for automatic annual increases in the number of shares
available for issuance under the plan.
Our board of directors, or a committee of our board, administers our
2004 stock incentive plan. The board or its committee, who are referred to as
the administrator in this prospectus, has the power to determine the terms of
the awards, including the exercise price, the number of shares subject to each
such award, the exercisability of the awards and the form of consideration, if
any, payable upon exercise. The administrator also has the authority to
institute an exchange program whereby the exercise prices of outstanding awards
may be reduced or outstanding awards may be surrendered in exchange for awards
with a lower exercise price.
The administrator determines the exercise price of options granted
under our 2004 stock incentive plan, but the exercise price must not be less
than 85% of the fair market value of our common stock on the date of grant. In
the event the participant owns 10% or more of the voting power of all classes of
our stock, the exercise price must not be less than 110% of the fair market
value per share of our common stock on the date of grant. With respect to all
incentive stock options, the exercise price must at least be equal to the fair
market value of our common stock on the date of grant. The term of an incentive
stock option may not exceed 10 years, except that with respect to any
participant who owns 10% of the voting power of all classes of our outstanding
stock or the outstanding stock of any parent or subsidiary of ours, the term
must not exceed five years and the exercise price must equal at least 110% of
the fair market value on the grant date. The administrator determines the term
of all other options; however, no option will have a term in excess of 10 years
from the date of grant.
32
After termination of an employee, director or consultant, he or she may
exercise his or her option generally for a three-month period of time, or a
twelve-month period in the event of termination by death. However, an option
generally may not be exercised later than the expiration of its term.
Our 2004 stock incentive plan does not allow for the transfer of
options and only the recipient of an option may exercise an option during his or
her lifetime. However, the recipient of an option may designate one or more
beneficiaries of his or her outstanding options, which will automatically
transfer to such beneficiaries upon the participant's death. With respect to
nonstatutory stock options, a participant may assign his or her options to
immediate family members or trusts for estate planning purposes during his or
her lifetime.
Stock appreciation rights may be granted under our 2004 stock incentive
plan. Stock appreciation rights allow the recipient to receive the appreciation
in the fair market value of our common stock between the exercise date and the
date of grant. The administrator determines the terms of stock appreciation
rights, including when such rights become exercisable and whether to pay the
increased appreciation in cash or with shares of our common stock, or a
combination thereof.
Restricted stock may be granted under our 2004 stock incentive plan.
Restricted stock awards are shares of our common stock that vest in accordance
with terms and conditions established by the administrator. The administrator
will determine the number of shares of restricted stock granted to any employee.
The administrator determines the purchase price of the restricted stock, but the
purchase price must not be less than 85% of the fair market value of our common
stock on the date of issuance. In the event that the participant owns 10% or
more of the voting power of all classes of our stock, the purchase price must
not be less than 100% of the fair market value per share of our common stock on
the date of issuance. The administrator may impose whatever conditions to
vesting it determines to be appropriate. For example, the administrator may set
restrictions based on the achievement of specific performance goals. Shares of
restricted stock that do not vest are subject to our right of repurchase or
forfeiture.
Performance shares, or share rights awards, may be granted under our
2004 stock incentive plan. These shares are awards that will result in a payment
to a participant only if performance goals established by the administrator are
achieved or the awards otherwise vest, unless the administrator waives these
goals. The administrator has authority to establish organizational or individual
performance goals in its discretion, which, depending on the extent to which
they are met, will determine the number and/or the value of performance units
and performance shares to be paid out to participants.
Our 2004 stock incentive plan provides that in the event of our change
in control, outstanding options will automatically accelerate and become
exercisable, unless the successor corporation or its parent assumes or
substitutes a cash incentive program for each outstanding option, or the
administrator placed restrictions on acceleration at the time of the grant. With
respect to restricted stock or share rights awards, our repurchase rights will
automatically terminate and all the shares will fully vest upon a change of
control, unless the repurchase rights are assigned to the successor corporation
or its parent or the administrator place restrictions on acceleration of vesting
at the time of the issuance.
Our 2004 stock incentive plan will automatically terminate on November
20, 2014, unless it terminates sooner because all shares available under the
plan have been issued or all outstanding options terminate in connection with a
change of control. In addition, our board of directors has the authority to
amend the 2004 stock incentive plan provided this action does not impair the
rights of any participant.
We had no compensation plans prior to the adoption of our 2004 stock
incentive plan.
33
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION
The following executive compensation disclosure reflects all
compensation awarded to, earned by or paid to the executive officers below, for
the fiscal years ended December 31, 2003, 2002 and 2001. The following table
summarizes all compensation for fiscal years 2003, 2002 and 2001 received by our
chief executive officer and all officers who earned more than $100,000 in fiscal
year 2003.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------- ------ -------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING LTIP
NAME AND PRINCIPAL BONUS COMPENSATION STOCK OPTIONS/ PAYOUT ALL OTHER
POSITION YEAR SALARY ($) ($) ($) AWARDS ($) SARS(1) ($) COMPENSATION ($)
- ------------------------ ------- ---------------- --------- --------------- ----------- ------------ --------- ---------------------
Dr. Liang Qiao, Chief 2003 --- --- --- --- --- --- ---
Executive Officer ,
Chairman of the
Board and
Secretary(1)
2002 --- --- --- --- --- --- ---
2001 --- --- --- --- --- --- ---
Chuen Huei (Kevin) 2003 --- --- --- --- --- --- ---
Lee, Chief Executive
Officer (2)
2002 --- --- --- --- --- --- ---
2001 --- --- --- --- --- --- ---
(1) Dr. Qiao's employment with us commenced on October 26, 2004. At this time,
he does not receive a salary.
(2) Mr. Kevin Lee's annual salary of $90,000 ($30,000 of which is deferred)
commenced in July 2004. He received no salary in 2003, 2002, and 2001.
We do not have a long term incentive plan or arrangement of compensation with
any individual in the group of officers and directors.
COMPENSATION OF DIRECTORS
Directors do not currently receive compensation for their services as
directors, but we plan to reimburse them for expenses incurred in attending
board meetings.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
We are currently do not have any employment agreements with our
executive officers.
34
FINANCIAL STATEMENT
BIO-BRIDGE SCIENCE, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET AS OF NOVEMBER 3, 2004
35
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
of Bio-Bridge Science, Inc.:
We have audited the accompanying balance sheet of Bio-Bridge Science, Inc., a
Delaware Corporation (the "Company") as of November 3, 2004. The financial
statement is the responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statement is 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 audit provides a
reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly in all
material respects, the financial position of Bio-Bridge Science, Inc., a
Delaware Corporation as of November 3, 2004, in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statement has been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has just been recently formed, has a minimal
cash balance, and has not yet been successful in establishing profitable
operations. These factors raise substantial doubt about the ability of the
Company to continue as a going concern. Management's plan in regards to these
matters is also described in Note 1. This financial statement does not include
any adjustments that might result from the outcome of this uncertainty.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
November 26, 2004
F-1
Bio-Bridge Science, Inc. (A Delaware Corporation)
(A Development Stage Company)
As of November 3, 2004
ASSETS
Current Asset, Cash $100
----
TOTAL ASSETS $100
====
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liability, Loan payable, related party $100
----
TOTAL CURRENT LIABILITIES 100
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value; 5,000,000 shares
authorized, no shares issued or outstanding --
Common stock, $0.001 par value; 100,000,000 shares
authorized; no shares issued or outstanding --
Additional paid-in capital --
----
TOTAL STOCKHOLDERS' EQUITY --
----
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $100
====
The accompanying notes are an integral part of the financial statement.
F-2
Bio-Bridge Science, Inc. (A Delaware Corporation)
(A Development Stage Company)
Notes To Financial Statement
As of November 3, 2004
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Organization and Business Operations
Bio-Bridge Science, Inc. (a development stage company) ("the Company") was
incorporated in the State of Delaware on October 26, 2004 to serve as a vehicle
to effect a merger, exchange of capital stock, asset acquisition or other
business combination with a domestic or foreign private business. The Company's
fiscal year end is December 31.
The Company is a development stage enterprise as defined by Statement of
Financial Accounting Standards (SFAS) No. 7, "Accounting and Reporting by
Development Stage Enterprises." All losses accumulated since the inception of
the Company will be considered as part of the Company's development stage
activities. The Company has not commenced revenue-generating activities.
Management is focusing its activities on identifying targets for acquisition and
raising capital for acquisitions and operations (see Note 4).
B. Use of Estimates
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the dates of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
C. Fair Value of Financial Instruments
For purposes of this disclosure, the fair value of a financial instrument is the
amount at which the instrument could be exchanged in a current transaction
between willing parties other than in a forced sale or liquidation.
The carrying amounts of the Company's financial instruments, including cash and
loan payable, related party at November 3, 2003 approximates their fair values
due to the short-term nature of these instruments.
D. Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
E. Recent accounting pronouncements
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities". SFAS No. 149 amends and
clarifies under what circumstances a contract with initial investments meets the
characteristics of a derivative and when a derivative contains a financing
component. SFAS No. 149 is effective for contracts entered into or modified
after June 30, 2003. The adoption of SFAS No. 149 did not have a significant
effect on the Company's financial statement presentation or disclosures.
F-3
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46"), which clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements",
relating to consolidation of certain entities. In December 2003, the FASB issued
a revised version of FIN 46 ("FIN 46R") that replaced the original FIN 46. FIN
46R requires identification of a company's participation in variable interest
entities ("VIEs"), which are defined as entities with a level of invested equity
that is not sufficient to fund future activities to permit it to operate on a
standalone basis. For entities identified as a VIE, FIN 46R sets forth a model
to evaluate potential consolidation based on an assessment of which party to the
VIE (if any) bears a majority of the exposure to its expected losses, or stands
to gain from a majority of its expected returns. FIN 46R also sets forth certain
disclosures regarding interests in VIEs that are deemed significant, even if
consolidation is not required. The Company is not currently participating in, or
invested in any VIEs, as defined in FIN 46R. The implementation of the
provisions of FIN 46R in 2003 did not have a significant effect on the Company's
consolidated financial statement presentation or disclosures.
F. Going Concern
The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America, which contemplates continuation of the Company as a going concern. The
Company has just been recently formed, has a minimal cash balance, and has not
yet been successful in establishing profitable operations. These matters raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plan is to continue to attempt to raise additional capital until
such time the Company is able to generate sufficient operating revenue.
In view of these matters, realization of certain of the assets in the
accompanying consolidated financial statements is dependent upon continued
operation of the Company, which in turn is dependent upon the Company's ability
to meet its financial requirements, raise additional capital, and the success of
its future operations. Management believes that its ability to raise additional
capital provides the opportunity for the Company to continue as a going concern.
NOTE 2. LOAN PAYABLE, RELATED PARTY
Loan payable, related party of $100 as of November 3, 2004 represents an
unsecured, non-interest bearing advance payable to Bio-Bridge Science Corp. (see
Note 4), with no formal terms of re- payment.
NOTE 3. CAPTIAL STOCK
Common Stock
The Company is authorized to issue 100,000,000 shares of common stock, par value
$0.001 per share. As of November 3, 2004, no shares of stock have been issued.
Preferred Stock
Pursuant to the Company's certificate of incorporation, its board of directors
has the authority, without further action by the stockholders, to issue up to
5,000,000 shares of undesignated preferred stock, par value $0.001 per share. As
of November 3, 2004, no shares of stock have been issued. Our board will also
have the authority, without the approval of the stockholders, to fix the
designations, powers, preferences, privileges and relative, participating,
optional or special rights and the qualifications, limitations or restrictions
of any preferred stock issued, including dividend rights, conversion rights,
voting rights, terms of redemption and liquidation preferences, any or all of
which may be greater than the rights of the common stock. Preferred stock could
thus be issued with terms that could delay or prevent a change in control of our
company or make removal of management more difficult. In addition, the issuance
of preferred stock may decrease the market price of the common stock and may
adversely affect the voting and other rights of the holders of common stock. We
have no plans at this time to issue any preferred stock.
F-4
NOTE 4. EXCHANGE OFFER
On November 4, 2004, the Company initiated exchange offers to the shareholders
of Bio-Bridge Science Corp., a Cayman Islands corporation (the "Bio-Bridge
(Cayman)"), on record. As of November 12, 2004, 100% of the existing
shareholders of Bio-Bridge (Cayman) tendered their shares for the shares of the
Company. (See Note 5).
NOTE 5. SUBSEQUENT EVENTS (UNAUDITED)
Effective as of December 1, 2004, the Company issued 29,971,590 shares
of its common stock to the shareholders of Bio-Bridge (Cayman) pursuant to the
exchange offer and became the sole shareholder of Bio-Bridge (Cayman). As a
result of the exchange reorganization, Bio- Bridge (Cayman) shareholders
acquired control of the Company and Bio-Bridge (Cayman) became a wholly owned
subsidiary of the Company.
Bio-Bridge (Cayman) was incorporated in the Cayman Islands on February 11, 2002.
At the time of the exchange reorganization, Bio-Bridge (Cayman) held a 100%
interest in Bio-Bridge Science (Beijing) Corp., a Wholly-Foreign Funded
Enterprise of the People's Republic of China ("Bio-Bridge (Beijing)") which was
established on May 20, 2002. Bio-Bridge (Beijing) is currently engaged in the
development and commercialization of the HIV-PV vaccine, I in mainland China.
The acquisition will be accounted for as a reverse merger (recapitalization)
with Bio-Bridge Science Corp. deemed to be the accounting acquirer, and
Bio-Bridge Science Inc. deemed to be the legal acquirer. Accordingly, the
historical financial information that will be presented in subsequent financial
statements is that of Bio-Bridge Science Corp. as adjusted to give effect to any
difference in the par value of the issuer's and the accounting acquirer's stock
with an offset to capital in excess of par value. The retained earnings of
Bio-Bridge Science Corp., the accounting acquirer will also be carried forward
after the acquisition. Also, Bio-Bridge Science Corp. basis of its assets and
liabilities will be carried over in the recapitalization.
On December 1, 2004, the Company approved and adopted 2004 Stock Incentive Plan,
under which 2,000,000 shares can be issued from time to time to the Company's
management, employees and consultants.
On December 1, 2004, the Company issued to Columbia China Capital Group, Inc. an
option to purchase 1,342,675 shares of common stock at $.001 per share to be
exercised within a three-year period in consideration for future consulting
services to be provided. The options granted were granted outside the Company's
stock option plan. On December 1, 2004, 200,000 of these options were exercised.
The Company will value these options in accordance with SFRS No. 143 in
subsequent financial statements.
On December 1, 2004, the Company issued 100,000 shares of its common stock and
an option to purchase additional 50,000 shares of its common stock at $.001 per
share to Richardson & Patel, LLC in consideration for future legal services. The
Company will review the value of the shares issued, as well as the value of the
options issued in accordance with SFAS No. 143 in subsequent financial
statements.
As of December 15, 2004, there were issued and outstanding 30,271,590 shares of
common stock that were held of record by approximately 116 stockholders (See
Note 4).
F-5
BIO-BRIDGE SCIENCE CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
AND THE NINE MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED)
F-6
BIO-BRIDGE SCIENCE CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
--------
PAGE F-8 REPORT OF REGISTERED INDEPENDENT ACCOUNTING FIRM
PAGE F-9 CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2003 AND 2002, AND
AS OF SEPTEMBER 30, 2004 (UNAUDITED)
PAGE F-10 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS FOR
THE PERIOD FROM FEBRUARY 11, 2002 (INCEPTION) THROUGH DECEMBER
31, 2002, THE YEAR ENDED DECEMBER 31, 2003 AND THE NINE MONTHS
ENDED SEPTEMBER 30, 2004 AND 2003 (UNAUDITED), AND FOR THE PERIOD
FROM FEBRUARY 11, 2002 (INCEPTION) THROUGH SEPTEMBER 30, 2004
(UNAUDITED)
PAGE F-11 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR
THE PERIOD FROM FEBRUARY 11, 2002 (INCEPTION) THROUGH DECEMBER
31, 2002, THE YEAR ENDED DECEMBER 31, 2003, AND THE NINE MONTHS
ENDED SEPTEMBER 30, 2004 (UNAUDITED).
PAGE F-12 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIOD FROM
FEBRUARY 11, 2002 (INCEPTION) THROUGH DECEMBER 31, 2002, THE YEAR
ENDED DECEMBER 31, 2003, THE NINE MONTHS ENDED SEPTEMBER 30,
2004 AND 2003 (UNAUDITED), AND FOR THE PERIOD FROM FEBRUARY 11,
2002 (INCEPTION) THROUGH SEPTEMBER 30, 2004 (UNAUDITED)
PAGE F-13-
F-20 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31,
2003 AND 2002, AND AS OF SEPTEMBER 30, 2004 (UNAUDITED)
F-7
REPORT OF REGISTERED INDEPENDENT ACCOUNTING FIRM
To the Board of Directors and Shareholders of:
Bio-Bridge Science Corporation
We have audited the accompanying consolidated balance sheets of Bio-Bridge
Science Corporation and Subsidiary (the "Company") as of December 31, 2003 and
2002 and the related consolidated statements of operations and comprehensive
loss, changes in shareholders' equity and cash flows for the period from
February 11, 2002 (inception) through December 31, 2002 and for the year ended
December 31, 2003. 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated 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
audit provides 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 Bio-Bridge Science Corporation
and Subsidiary as of December 31, 2003 and 2002 and the results of their
operations and their cash flows for the period from February 11, 2002
(inception) through December 31, 2002, and for the year ended December 31, 2003
in conformity with accounting principles generally accepted in the United States
of America.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has no established source of
revenue and has incurred accumulated losses and negative operating cash flows
since inception of $369,496 and $370,581, respectively. This raises substantial
doubt about its ability to continue as a going concern. The consolidated
financial statements do not include any adjustment that might result from the
outcome of this uncertainty.
/s/ WEINBERG & COMPANY, P.A.
Boca Raton, Florida
August 23, 2004
F-8
BIO-BRIDGE SCIENCE CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31, December 31,
2004 2003 2002
----------- ----------- -----------
(unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 917,039 $ 220,291 $ 455,541
Subscriptions receivable -- 30,000 --
Other receivable 5,250 14,557 929
Prepaid expense -- 1,510 --
Land use right 7,891 7,891 --
----------- ----------- -----------
Total Current Assets 930,180 274,249 456,470
LONG-TERM INVESTMENT HELD FOR DISPOSITION 40,000 -- --
FIXED ASSETS, NET 18,761 17,305 4,319
CONSTRUCTION IN PROGRESS 196,489 23,492 --
LAND USE RIGHT, net of current portion 372,863 378,777 --
----------- ----------- -----------
TOTAL ASSETS $ 1,558,293 $ 693,823 $ 460,789
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 25,080 $ 80 $ 80
Accrued expenses 14,920 4,254 954
----------- ----------- -----------
Total current liabilities 40,000 4,334 1,034
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES -- -- --
SHAREHOLDERS' EQUITY
Common stock, $0.04 par value, 750,000,000 shares
authorized, 29,971,590, 26,795,715 and 23,086,090 shares
issued and outstanding, respectively 1,198,864 1,071,829 923,444
Additional paid-in capital 1,081,504 (11,701) (348,714)
Accumulated other comprehensive loss (1,232) (1,143) (499)
Deficit accumulated during the development stage (760,843) (369,496) (114,476)
----------- ----------- -----------
Total Shareholders' Equity 1,518,293 689,489 459,755
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,558,293 $ 693,823 $ 460,789
=========== =========== ===========
See accompanying notes to the consolidated financial statements.
F-9
BIO-BRIDGE SCIENCE CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the
Period From
For the February 11
Period From 2002
Nine Nine Months February 11, (Inception)
Months Ended For the Year 2002 Through
Ended September Ended (Inception) September
September 30 2003 December Through 30 2004
30 2004 (Unaudited) 31, 2003 December (Unaudited)
(Unaudited) 31, 2002
--------------- --------------- ---------------- ---------------- --------------
REVENUE $ -- $ -- $ -- $ -- $ --
--------- --------- --------- --------- ---------
Research and Development Costs (46,208) -- -- -- (46,208)
General and Administrative Expenses (345,218) (178,690) (256,553) (114,860) (345,218)
--------- --------- --------- --------- ---------
LOSS FROM OPERATIONS (391,426) (178,690) (256,553) (114,860) (762,839)
Other income, net 79 1,251 1,533 384 1,996
--------- --------- --------- --------- ---------
NET LOSS (391,347) (177,439) (255,020) (114,476) (760,843)
FOREIGN CURRENCY TRANSLATION LOSS (89) -- (644) (499) (1,232)
--------- --------- --------- --------- ---------
COMPREHENSIVE LOSS $(391,436) $(177,439) $(255,664) $(114,975) $(762,075)
========= ========= ========= ========= =========
Basic and Diluted Loss Per Share $ (.01) $ (.01) $ (.01) $ (.01)
========== ========== ========== ==========
Weighted Average shares outstanding,
Basic and Diluted 29,971,590 25,662,390 26,795,715 25,086,090
========== ========== ========== ==========
See accompanying notes to the consolidated financial statements.
F-10
BIO-BRIDGE SCIENCE CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Deficit
Accumulated Accumulated
Additional Other During the
Common Stock Paid-in Comprehensive Development
Shares Amount Capital Loss Stage Total
----------- ----------- ----------- ----------- ----------- -----------
Issuance of 13,750,000 shares to
founder at inception 13,750,000 $ 550,000 $ (549,450) $ -- $ -- $ 550
Issuance of 7,461,090 shares at $0.0468 7,461,090 298,444 50,736 -- -- 349,180
Issuance of 1,875,000 shares at $0.12 1,875,000 75,000 150,000 -- -- 225,000
Foreign currency translation loss -- -- -- (499) -- (499)
Net loss for the period -- -- -- -- (114,476) (114,476)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE OF DECEMBER 31, 2002 23,086,090 923,444 (348,714) (499) (114,476) 459,755
Issuance of 3,508,425 shares at $0.12 3,508,425 140,337 280,674 -- -- 421,011
Issuance of 201,200 shares at $0.32 201,200 8,048 56,339 -- -- 64,387
Foreign currency translation loss -- -- -- (644) -- (644)
Net loss for the year -- -- -- -- (255,020) (255,020)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE OF DECEMBER 31, 2003 26,795,715 1,071,829 (11,701) (1,143) (369,496) 689,489
Issuance of 434,600 shares at $0.12 434,600 17,384 34,768 -- -- 52,152
Issuance of 1,125,275 shares at $0.32 1,125,275 45,011 315,077 -- -- 360,088
Issuance of 1,616,000 shares at $0.50 1,616,000 64,640 743,360 -- -- 808,000
Foreign currency translation loss -- -- -- (89) -- (89)
Net loss for the period -- -- -- -- (391,347) (391,347)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE OF SEPTEMBER 30 2004 (UNAUDITED) 29,971,590 $ 1,198,864 $ 1,081,504 $ (1,232) $ (760,843) $ 1,518,293
=========== =========== =========== =========== =========== ===========
See accompanying notes to the consolidated financial statements.
F-11
BIO-BRIDGE SCIENCE CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the For the Period
Period From From
February 11, February 11
Nine months Nine months 2002 2002
ended ended For the Year (Inception) (Inception)
September September Ended Through Through
30 2004 30 2003 December December September 30
(unaudited) (unaudited) 31, 2003 31, 2002 2004
(unaudited)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (391,347) $ (177,439) $ (255,020) $ (114,476) (760,843)
Adjustments to reconcile net loss to net cash
used in operating activities:
Stock issued for services -- -- -- 550 550
Depreciation 2,539 1,256 2,124 83 4,746
Amortization 5,914 -- 7,891 -- 13,805
CHANGES IN OPERATING ASSETS AND
LIABILITIES
Other receivables 9,307 (14,153) (13,628) (929) (5,250)
Prepaid expenses 1,510 (1,812) (1,510) -- --
Accounts payable 25,000 -- -- 80 25,080
Accrued expenses and other payable 10,666 (205) 3,300 954 14,913
----------- ----------- ----------- ----------- -----------
Net Cash Used In Operating Activities (336,411) (192,353) (256,843) (113,738) (706,999)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (3,995) (15,109) (15,110) (4,402) (23,506)
Purchase of construction in progress (172,997) (7,471) (23,492) -- (196,477)
Purchase of land use right -- (176,692) (394,559) -- (394,559)
Acquisition of investment (40,000) -- -- -- (40,000)
----------- ----------- ----------- ----------- -----------
Net Cash Used In Investing Activities (216,992) (199,272) (433,161) (4,402) (654,542)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Subscription receivable 30,000 -- -- -- 30,000
Sale of common stock 1,220,240 284,570 455,398 574,180 2,249,812
----------- ----------- ----------- ----------- -----------
Net Cash Provided By Financing Activities 1,250,240 284,570 455,398 574,180 2,279,812
----------- ----------- ----------- ----------- -----------
Effect of exchange rate changes on cash (89) -- (644) (499) (1,232)
----------- ----------- ----------- ----------- -----------
NET INCREASE/(DECREASE) IN CASH
AND CASH EQUIVALENTS 696,748 (107,055) (235,250) 455,541 917,039
Cash and cash equivalents, beginning of period 220,291 455,541 455,541 -- --
----------- ----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 917,039 $ 348,486 $ 220,291 $ 455,541 $ 917,039
=========== =========== =========== =========== ===========
See accompanying notes to the consolidated financial statements.
F-12
BIO-BRIDGE SCIENCE CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2003 AND 2002, AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2004 (UNAUDITED)
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
Bio-Bridge Science Corporation (the "Company") is a joint-stock
corporation established in the Cayman Islands pursuant to the
Companies Law CAP.22 in the Cayman Islands on February 11, 2002.
The principal activities of the Company are the development,
production, and distribution of Human Immune deficiency Virus (HIV)
vaccine in China. On May 20, 2002, the Company established a wholly
owned subsidiary, Bio-Bridge Science (Beijing) Corp., in Beijing PRC,
to research and develop the technology of bioengineering and
biomedicine engineering. The subsidiary had no operation during the
period from its inception to September 30, 2004.
On April 12, 2004, the Company acquired Aegir Ventures Inc. ("Aegir"),
a company incorporated in Delaware. This Company had no operations
during the period from the acquisition to September 30, 2004, and was
subsequently disposed of on November 26, 2004 (See Note 8).
2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
(a) Principles of Consolidation
The consolidated financial statements include the accounts of
Bio-Bridge Science Corporation and its wholly owned subsidiary,
Bio-Bridge Science (Beijing) Corp., which operates in Beijing PRC. All
inter-company accounts and transactions have been eliminated in
consolidation.
The Company's acquisition of Aegir Ventures Inc. has been recorded at
cost, and accounted for as an investment held for disposition as it
did not operate and was disposed of subsequent to September 30, 2004
(See Note 8).
(b) Economic and Political Risks
The Company faces a number of risks and challenges as its operation is
in the Peoples Republic of China ("PRC") and its primary market is
also in the PRC.
(c) Use of Estimates
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles in the United States of
America 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 consolidated
financial statements and the reported amounts of revenues and expenses
during the reporting periods. Management makes these estimates using
the best information available at the time the estimates are made;
however actual results could differ materially from those estimates.
(d) Fixed Assets
Fixed assets are recorded at cost. Depreciation is provided over the
respective estimated useful lives of the related assets using the
straight-line method. Estimated useful lives are as follows:
Motors vehicles 5 years
Furniture and fixtures 5 years
The cost and related accumulated depreciation of assets sold or
otherwise retired are eliminated from the accounts and any gain or
loss is included in the statement of operations. The cost of
maintenance and repairs is charged to operations as incurred, whereas
significant renewals and betterments are capitalized.
(e) Land Use Right
Land use right represents the right to use and lease land in the PRC.
The cost of such acquired right has been capitalized, and is being
amortized using the straight-line method over the lease term of fifty
years. (See note 5)
F-13
BIO-BRIDGE SCIENCE CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2003 AND 2002, AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2004 (UNAUDITED)
2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(f) Construction in Progress
Construction in progress represents direct costs of construction or
acquisition and design fees incurred. Capitalization of these costs
ceases and the construction in progress is transferred to fixed assets
when substantially all the activities necessary to prepare the assets
for their intended use are completed. No depreciation is provided
until such construction is completed and the assets are ready for its
intended use. (See note 6)
(g) Long-term Assets
Long-term assets of the Company are reviewed annually as to whether
their carrying value has become impaired, pursuant to the guidelines
established in Statement of Financial Accounting Standards ("SFAS")
No. 144, "Accounting for the Impairment or Disposal of Long- Lived
Assets". The Company also re-evaluates the periods of amortization to
determine whether subsequent events and circumstances warrant revised
estimates of useful lives.
(h) Cash and Cash Equivalents
For financial reporting purpose, the Company considers all highly
liquid investments purchased with original maturity of three months or
less to be cash equivalents. The Company maintains no bank accounts in
the United States of America. All of the Company's cash on hand and
certain bank deposits are denominated in Renminbi ("RMB") and
translated at the exchange rate at the end of the period (See Note
2(j)).
(i) Fair Value of Financial Instruments
The Company's financial instruments include cash and cash equivalents,
other receivable, prepaid expenses, accounts payable, and accrued
expenses. Management has estimated that the carrying amount
approximates fair values due to their short-term nature.
(j) Foreign Currency Translation
The accompanying consolidated financial statements are presented in
United States dollars. The functional currency of the Company is the
Renminbi (RMB). The consolidated financial statements are translated
into United States dollars from RMB at year-end exchange rates as to
assets and liabilities and average exchange rates as to revenues and
expenses. Capital accounts are translated at their historical exchange
rates when the capital transactions occurred.
September 30
2004 2003 2002
------ ------ ------
Year end RMB : US$ exchange rate 8.2766 8.2767 8.2773
Average yearly RMB : US$ exchange rate 8.2770 8.2770 8.2770
The RMB is not freely convertible into foreign currency and all
foreign exchange transactions must take place through authorized
institutions. No representation is made that the RMB amounts could
have been, or could be, converted into U.S. dollars at the rates used
in translation.
(k) Income Taxes
The Company accounts for income tax using an asset and liability
approach that allows for recognition of deferred tax benefits in
future years. Under the asset and liability approach, deferred taxes
are provided for the net tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. A valuation
allowance is provided for deferred tax assets if it is more likely
than not these items will either expire before the Company is able to
realize their benefits, or that future utilization is uncertain.
F-14
2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(l) Comprehensive Income
Comprehensive income is defined to include all changes in equity
except those resulting from investments by owners and distributions to
owners. Among other disclosures, all items that are required to be
recognized under current accounting standards as components of
comprehensive income should be reported in a financial statement that
is presented with the same prominence as other financial statements.
The Company's only current component of comprehensive income is
foreign currency translation adjustment.
(m) Loss per share
Basic loss per share has been computed using the weighted average
number of common shares outstanding during the respective periods.
(n) Recent Accounting Pronouncements
In January 2003, (as revised in December 2003) The Financial
Accounting Standards Board ("FASB") issued Interpretation No. 46,
"Consolidation of Variable Interest Entities", an interpretation of
Accounting Research Bulletin ("ARB") No. 51, "Consolidated Financial
Statements". Interpretation No. 46 addresses consolidation by business
enterprises of variable interest entities, which have one or both of
the following characteristics: (i) the equity investment at risk is
not sufficient to permit the entity to finance its activities without
additional subordinated support from other parties, which is provided
through other interest that will absorb some or all of the expected
losses of the entity; (ii) the equity investors lack one or more of
the following essential characteristics of a controlling financial
interest: the direct or indirect ability to make decisions about the
entities activities through voting rights or similar rights; or the
obligation to absorb the expected losses of the entity if they occur,
which makes it possible for the entity to finance its activities; the
right to receive the expected residual returns of the entity if they
occur, which is the compensation for the risk of absorbing the
expected losses.
Interpretation No. 46, as revised, also requires expanded disclosures
by the primary beneficiary (as defined) of a variable interest entity
and by an enterprise that holds a significant variable interest in a
variable interest entity but is not the primary beneficiary.
Interpretation No. 46, as revised, applies to small business issuers no
later than the end of the first reporting period that ends after
December 15, 2004. This effective date includes those entities to which
Interpretation 46 had previously been applied. However, prior to the
required application of Interpretation No. 46, a public entity that is
a small business issuer shall apply Interpretation 46 or this
Interpretation to those entities that are considered to be special-
purpose entities no later than as of the end of the first reporting
period that ends after December 15, 2003.
Interpretation No. 46 may be applied prospectively with a
cumulative-effect adjustment as of the date on which it is first
applied or by restating previously issued financial statements for one
or more years with a cumulative-effect adjustment as of the beginning
of the first year restated.
In March 2004, the U.S. Securities and Exchange Commission's Office of
the Chief Accountant and the Division of Corporate Finance released
Staff Accounting bulletin ("SAB") No. 105, "Loan Commitments Accounted
for as Derivative Instruments". This bulletin contains specific
guidance on the inputs to a valuation-recognition model to measure loan
commitments accounted for at fair value, and requires that fair-value
measurement include only differences between the guaranteed interest
rate in the loan commitment and market interest rate, excluding any
expected future cash flows related to the customer relationship or loan
servicing. In addition, SAB105 requires the disclosure of the
accounting policy for loan commitments, including methods and
assumptions used to estimate the fair value of loan commitments, and
any associated hedging strategies. SAB105 is effective for derivative
instruments, entered into subsequent to March 31, 2004 and should also
be applied to existing instruments as appropriate.
The implementation of the above provisions are not expected to have a
significant effect on the Company's consolidated financial statements.
F-15
2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(o) Going Concern
The accompany consolidated financial statements have been prepared on
the basis that the Company will continue as a going concern which
assumes the realization of assets and settlement of liabilities is the
normal course of business. Since its inception, the Company has been
engaged in organizational and pre-operating activities. Furthermore,
the Company has generated no revenue and has incurred accumulated
losses and negative operating cash flows of $369,496 and $370,581
through December 31, 2003 and $760,843 and $706,999 through September
30, 2004 (Unaudited) respectively, since inception. Continuation of
the Company's existence is dependent upon its ability to obtain
additional capital and sustain profitable operations.
The uncertainty related to these conditions raises substantial doubt
about the Company's ability to continue as going concern. The
accompanying consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
3. INCOME TAXES
In accordance with the relevant tax laws and regulations of PRC, the
applicable corporation income tax rate for the subsidiary is 15%. The
Company is entitled to full exemption from CIT for the first two years
and a 50% reduction in CIT for the next three years, commencing from
the first profitable year after offsetting all tax losses carried
forward from the previous five years.
4. FIXED ASSETS
Fixed assets consist of the following as of December 31 2003 and 2002
and as of September 30 2004:
SEPTEMBER
30 2004 2003 2002
(UNAUDITED)
-------- -------- --------
At cost:
Motor vehicles $ 14,138 $ 14,138 $ --
Furniture and fixtures 9,368 5,374 4,402
-------- -------- --------
23,506 19,512 4,402
Less : Accumulated depreciation
Motor vehicles (3,182) (1,273) --
Furniture and fixtures (1,563) (934) (83)
-------- -------- --------
(4,745) (2,207) (83)
Fixed assets, net $ 18,761 $ 17,305 $ 4,319
======== ======== ========
Depreciation expense for the year ended December 31, 2003 and for the
period from February 11, 2002 (inception) through December 31, 2002
was $2,124 and $83, respectively.
Depreciation expense for the nine month periods ended September 30,
2004 and 2003 was $2,539 and $1,256, respectively (unaudited).
F-16
5. LAND USE RIGHT
In July 2003, the Company obtained a land use right to build up a
research factory in Beijing, PRC for an amount of $394,559. This type
of arrangement is common for the use of land in the PRC. This amount
has been capitalized and is being amortized over the land use term
of fifty years.
Amortization of the land use right was $7,891 for the year ending
December 31, 2003 and $5,914 for the nine months ended September 30,
2004 (unaudited).
The expected amortization of the Land Use Right over each of the next
five years and thereafter is summarized as follows:
Fiscal Year
-----------
Remainder of 2004 $ 1,973
2005 7,891
2006 7,891
2007 7,891
2008 7,891
2009 7,891
Thereafter 339,326
---------
Total land use rights as of
September 30, 2004 380,754
Less: Current portion 7,891
----------
Long-term portion $ 372,863
==========
6. COMMITMENTS AND CONTINGENCIES
Lease commitment
As of September 30, 2004, the Company has outstanding commitments in
respect to its non- cancelable operating lease for its office in Oak
Brook, IL, of which $6,420 is due for the remainder of 2004 and
$25,680 is due in 2005, and its office in Beijing PRC (which is leased
from Wenhui Qiao, the Company's director and president), of which
$3,711 is due for the remainder of 2004, and $5,234 is due in 2005.
Rental expense for the years ended December 31, 2003 and 2002, and for
the period from January 1, 2004 through September 30, 2004 was
$23,280, $6,041 and $13,561 (unaudited), respectively.
Construction commitment
In May 2003, the Company acquired a land use right for approximately
2.8 acres of land in the Tianzhu Export Processing Zone, Shunyi
District, Beijing, China (see Note 5), which it plans to develop into
a laboratory and biomanufacturing facility in compliance with Good
Manufacturing Practices, or GMP, regulations primarily for clinical
trials of HIV-PV Vaccine I. As of November 2004, it has received all
necessary permits and approvals and construction of the facility has
commenced. It has completed the outside main body of the GMP
laboratory. It has entered into a construction contract and has
outstanding commitments under this contract of $724,900 as of
September 30, 2004. The Company estimates that the cost of the
building and outfitting of this facility is $3,000,000, and the
construction and installation of equipment related to the facility
will be substantially completed by June 2005.
Royalty and License Arrangements
Liang Qiao, M.D., the Company's co-founder and chief executive
officer, is one of the two co-inventors of the Company's core
technology that was assigned to Loyola University Chicago in April
2001. Under an agreement with Loyola University Chicago, the Company
has obtained exclusive rights to this technology for use in its future
products within the United States, Japan and Peoples Republic of
China. The license continues perpetually or for the maximum period of
time permitted by law, unless terminated earlier under the terms of
the agreement. Pursuant to this agreement, Loyola receives a royalty
of 4% from the net profit for
F-17
6. COMMITMENTS AND CONTINGENCIES (CONT.)
all uses of the licensed technology, including uses under sublicenses.
As of September 30, 2004, the Company has not generated any revenues
from the sale of any products under development, nor any revenues from
sublicenses.
Its director, Wenhui Qiao, is President of its subsidiary Bio-Bridge
Beijing. In April 2002, Bio-Bridge Science Corporation, a Cayman
Island Corporation, signed a sublicense agreement with Bio-Bridge
Beijing. Under the terms of the agreement, it granted an exclusive
license to Bio-Bridge Beijing within mainland China. The term of the
license agreement is 10 years. There are no royalty fees nor one-time
costs owed to the Company under this agreement.
7. SHAREHOLDER'S EQUITY
On May 28, 2004, the Company completed a 25 for 1 split of its shares
of common stock to all shareholders of record as of that date. All
share and per share amounts herein have been retro-actively restated
to show the effect of the stock split as if it had occurred at the
beginning of the periods presented.
The following represents transactions involving the purchases of the
Company's common stock for cash categorized by sale price (for the
periods from date of inception to September 30, 2004):
A. Sales of stock at $0.0468 per share
o On July 15, 2002, 1,675,000 shares were issued to two
individuals for a total cash payment of $78,390.
o On July 19, 2002, 2,125,000 shares were issued for a cash
payment of $99,450.
o On June 27, 2002, 786,090 shares were issued for a cash
payment of $36,790.
o On November 8, 2002, 2,875,000 shares were issued to 9
individuals for a total cash payment of $134,550.
B. Sales of stock at $0.12 per share
o On September 6, 2002, 375,000 shares of common stock were
issued for a cash payment of $45,000.
o On November 8, 2002, 250,000 shares were issued for a cash
payment of $30,000.
o On November 12, 2002, 1,250,000 shares were issued to five
individuals for a total cash payment of $150,000.
o On July 14, 2003, 250,000 shares were issued for a cash
payment of $30,000.
o On July 28, 2003, 75,000 shares were issued for a cash
payment of $9,000.
o On July 29, 2003, 291,750 shares were issued for a cash
payment of $35,010.
o On August 7, 2003, 50,000 shares were issued to two
individuals for a total cash payment of $6,000.
o On September 2, 2003, 125,000 shares were issued for a cash
payment of $15,000.
o On September 3, 2003, 1,500,000 shares were issued for a
cash payment of $180,000.
o On September 12, 2003, 83,350 shares were issued for a cash
payment of $10,001.
o On November 5, 2003, 883,325 shares were issued to two
individuals for a total cash payment of $106,000.
o On December 31, 2003, 250,000 shares were issued for
$30,000. This amount was recorded as subscription receivable
by the Company as of December 31, 2003 and subsequently
collected on January 5, 2004.
F-18
7. SHAREHOLDER'S EQUITY (CONT.)
o On March 25, 2004, 434,600 shares were issued to three
individuals for a total cash payment of $52,152.
C. Sales of stock at $0.32 per share
o On October 20, 2003, 93,750 shares were issued to two
individuals for a total cash payment of $30,000.
o On November 5, 2003, 28,025 shares were issued for a cash
payment of $8,977.
o On November 6, 2003, 25,000 shares were issued for a cash
payment of $8,000.
o On November 12, 2003, 23,175 shares were issued to three
individuals for a total cash payment of $7,410.
o On December 18, 2003, 31,250 shares were issued for a cash
payment of $10,000.
o On January 26, 2004, 12,500 shares of common stock were
issued for a cash payment of $4,000.
o On January 30 2004, 14,750 shares were issued for a cash
payment of $4,720.
o On February 18, 2004, 31,250 shares were issued for a total
cash payment of $10,000.
o On January 5, 2004, 14,200 shares were issued for a cash
payment of $4,544.
o On March 15, 2004, 23,375 shares were issued to three
individuals for a total cash payment of $7,480.
o On March 17, 2004, 15,625 shares were issued for a cash
payment of $5,000. o On March 26, 2004, 46,875 shares were
issued to two individuals for a total cash payment of
$15,000.
o On March 31, 2004, 31,250 shares were issued for a cash
payment of $10,000.
o On April 2, 2004, 31,250 shares were issued for a cash
payment of $10,000.
o On April 6, 2004, 31,250 shares were issued for a cash
payment of $10,000.
o On April 28, 2004, 57,500 shares were issued for a cash
payment of $18,400.
o On April 30, 2004, 251,700 shares were issued to ten
individuals for a total cash payment of $80,544.
o On May 11, 2004, 50,000 shares were issued to two
individuals for a total cash payment of $16,000.
o On May 15, 2004, 13,750 shares were issued for a cash
payment of $4,400.
o On May 28, 2004, 500,000 shares were issued for a cash
payment of $160,000.
D. Sales of stock at $0.50 per share
o On May 31, 2004, 20,000 shares were issued for a cash
payment of $10,000.
o On June 1, 2004, 240,000 shares were issued to three
individuals for a total cash payment of $120,000.
o On June 4, 2004, 85,000 shares were issued to four
individuals for a total cash payment of $42,500.
o On June 5, 2004, 81,000 shares were issued to three
individuals for a total cash payment of $40,500.
F-19
7. SHAREHOLDER'S EQUITY (CONT.)
D. Sales of stock at $0.50 per share (continued)
o On June 7, 2004, 80,000 shares were issued to four
individuals for a total cash payment of $40,000.
o On June 8, 2004, 40,000 shares were issued to two
individuals for a total cash payment of $20,000.
o On June 9, 2004, 60,000 shares were issued to two
individuals for a total cash payment of $30,000.
o On June 11, 2004, 140,000 shares were issued to six
individuals for a total cash payment of $70,000.
o On June 12, 2004, 60,000 shares were issued to two
individuals for a total cash payment of $30,000.
o On June 13, 2004, 20,000 shares were issued for a cash
payment of $10,000.
o On June 14, 2004, 260,000 shares were issued to nine
individuals for a total cash payment of $130,000.
o On June 15, 2004, 530,000 shares were issued to twelve
individuals for a total cash payment of $265,000.
At inception, the Company issued 13,750,000 shares of common stock to the
Company's founder and director for services in the amount of $550. The Company's
directors held 51% of total issued and outstanding shares as of December 31,
2003 and 59% as of December 31, 2002.
The Company's directors held 45.9% of total issued and outstanding shares as of
September 30, 2004.
8. SUBSEQUENT EVENTS
On April 12 2004, the Company acquired 100% of the outstanding shares of Aegir
Ventures Inc., a public company incorporated in the State of Delaware for total
consideration of $40,000. Aegir Ventures Inc. had no assets or liabilities as of
the acquisition date. On November 26, 2004, the Company entered into a Stock
Purchase Agreement with Nakagawa Corporation, a Japan corporation ("Nakagawa"),
to sell all of the issued and outstanding shares of Aegir to Nakagawa for a
Promissory Note (the "Note"), in which Nakagawa promises to pay the order of the
Company $40,000 on or prior to November 26, 2006. The Note is non- interest
bearing. The Company has reflected this as an investment held for disposition as
of September 30, 2004 in the accompanying financial statements.
On November 12, 2004, the Company entered into a share exchange with Bio-Bridge
Science Inc. ("Delco"), a company incorporated and existing under the laws of
the State of Delaware in the USA, pursuant to a Share Exchange Agreement dated
November 4, 2004. In the exchange, Delco acquired all of the issued and
outstanding stock of the Company in exchange for the issuance of 29,971,590
shares of Common Stock in Delco. The Company thereby became a wholly-owned
subsidiary of Delco (the legal acquirer) and as a result of the share exchange,
the Company's shareholder's acquired control of Delco and became the accounting
acquirer.
F-20
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form SB-2 under
the Securities Act with respect to the common stock being offered in this
offering. This prospectus does not contain all of the information set forth in
the registration statement and the exhibits and schedules filed as part of the
registration statement. For further information with respect to us and our
common stock, we refer you to the registration statement and the exhibits and
schedules filed as a part of the registration statement. Statements contained in
this prospectus concerning the contents of any contract or any other document
are not necessarily complete. If a contract or document has been filed as an
exhibit to the registration statement, we refer you to the copy of the contract
or document that has been filed. Each statement in this prospectus relating to a
contract or document filed as an exhibit is qualified in all respects by the
filed exhibit. The reports and other information we file with the SEC can be
read and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington D.C. 20549. Copies of these materials can be obtained at prescribed
rates from the Public Reference Section of the SEC at the principal offices of
the SEC, 450 Fifth Street, N.W., Washington D.C. 20549. You may obtain
information regarding the operation of the public reference room by calling
1(800) SEC-0330. The SEC also maintains a website (http://www.sec.gov) that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC.
After this offering, we will be subject to the information and periodic
reporting requirements of the Securities Exchange Act of 1934, and we intend to
file periodic reports, proxy statements and other information with the SEC.
36
BIO-BRIDGE SCIENCE, INC.
3,657,606 SHARES
COMMON STOCK
================================================================================
PROSPECTUS
_________, 2004
================================================================================
You should rely only on the information contained in this prospectus to
make your investment decision. We have not authorized anyone to provide you with
different information. This prospectus may be used only where it is legal to
sell these securities. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front page of
this prospectus.
Until ___________, 2004, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
PART II
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a court
to award, or a corporation's board of directors to grant, indemnity to officers,
directors and other corporate agents in terms sufficiently broad to permit such
indemnification under certain circumstances and subject to certain limitations.
The registrant's certificate of incorporation includes a provision that
eliminates the personal liability of its directors for monetary damages for
breach of their fiduciary duty as directors.
In addition, the registrant's bylaws provide for the indemnification of
officers, directors and third parties acting on our behalf, to the fullest
extent permitted by Delaware General Corporation Law, if our board of directors
authorizes the proceeding for which such person is seeking indemnification
(other than proceedings that are brought to enforce the indemnification
provisions pursuant to the bylaws).
These indemnification provisions may be sufficiently broad to permit
indemnification of the registrant's executive officers and directors for
liabilities (including reimbursement of expenses incurred) arising under the
Securities Act of 1933.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemized statement of all expenses, all of which we
will pay, in connection with the registration of the common stock offered
hereby:
AMOUNT
--------------
SEC registration fee ................................ $ 216.00*
Printing fees ....................................... 10,000.00*
Legal fees .......................................... 45,000.00*
Accounting fees and expenses ........................ 34,784.00*
Miscellaneous ....................................... 10,000.00*
--------------
Total ...................................... $ 100,000.00*
*Estimates
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Since its inception on October 26, 2004, the registrant has issued and
sold the following unregistered securities:
1. On December 1, 2004, the registrant issued 29,971,590 shares of
common stock to all shareholders of Bio-Bridge Science Corp., a
Cayman Islands corporation, for an aggregate 29,971,590 shares of
Bio-Bridge Science Corp.'s outstanding shares. The transaction is
described further in "Business--History, Reorganizations and
Corporate Structure." With respect to the issuance of 13,750,000 of
these shares to the registrant's chief executive officer, Dr. Liang
Qiao, the issuance to Dr. Qiao was in reliance upon the exemption
from registration set forth in section 4(2) of the Securities Act of
1933, as amended, (the "Act"). The 13,750,000 shares were issued to
Dr.Qiao who qualified as an "accredited investor," as that term is
defined in the Act. The following conditions were all met with
respect to the issuance of the 13,750,000 shares to Dr. Qiao: (1)
the registrant did not advertise this issuance in any public medium
or forum, (2) the registrant did not solicit any investors with
respect to this issuance, (3) the registrant did not publicize any
portion of the purchase or sale of the shares issued, (4) none of
the shares issued were offered in conjunction with any public
offering, and (5) neither the registrant nor the investor paid any
fees to any finder or broker-dealer in conjunction with this
issuance. With respect to the remainder of the shares, or 16,221,590
II-1
shares, issued in the transaction to the shareholders of Bio-Bridge
Science Corp., the transaction was in reliance upon the exemption
from registration set forth in Regulation S under the Act. The
remainder of the shares were issued to investors who resided outside
the U.S. and were not a "U.S. person", as defined in Regulation S
under the Act, nor did they acquire the shares for the account or
benefit of a U.S. Person. The following conditions were all met with
respect to the remainder of the shares issued in the transaction:
(1) the investors acknowledged that the shares have not been
registered under the Act and that they may not be offered, sold or
transferred, except in compliance with the Act and other applicable
laws or an exemption therefrom, (2) the investor is sufficiently
aware of the registrant's business affairs and financial condition
to reach an informed decision to acquire the registrant's shares,
and (3) neither the registrant nor the investor paid any fees to any
finder or broker-dealer in conjunction with this issuance.
2. On December 1, 2004, we issued 100,000 shares of common stock and an
option to purchase 50,000 shares of common stock at an exercise
price of $0.001 per share for a term of 36 months to Richardson &
Patel LLP, an unaffiliated entity, as payment for future legal
services. This transaction was in reliance upon the exemption from
registration set forth in Section 4(2) of the Act. The shares were
issued to an entity that represented its intention to acquire the
securities for investment only and not with a view to or for sale in
connection with any distribution thereof. The following conditions
were all met with respect to this transaction: (1) the registrant
did not advertise this issuance in any public medium or forum, (2)
the registrant did not solicit any investors with respect to this
issuance, (3) the registrant did not publicize any portion of the
purchase or sale of the shares issued, (4) none of the shares issued
were offered in conjunction with any public offering, and (5)
neither the registrant nor the investor paid any fees to any finder
or broker-dealer in conjunction with this issuance.
3. On December 1, 2004, we issued an option to purchase 1,342,663
shares of common stock to Columbia China Capital Group, Inc., an
unaffiliated entity, as payment for future financial consulting
services. The term of this option is 36 months from the date of
issuance and the exercise price is $0.001 per share. On December 1,
2004, Columbia China Capital Group exercised 200,000 shares
underlying this option. This transaction was in reliance upon the
exemption from registration set forth in Section 4(2) of the Act.
The shares were issued to an entity that represented its intention
to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof. The
following conditions were all met with respect to this transaction:
(1) the registrant did not advertise this issuance in any public
medium or forum, (2) the registrant did not solicit any investors
with respect to this issuance, (3) the registrant did not publicize
any portion of the purchase or sale of the shares issued, (4) none
of the shares issued were offered in conjunction with any public
offering, and (5) neither the registrant nor the investor paid any
fees to any finder or broker-dealer in conjunction with this
issuance.
ITEM 27. EXHIBITS.
2.1 Agreement for the exchange of shares by and among the registrant,
Bio-Bridge Science Corporation and the shareholders of record of
Bio-Bridge Science Corporation, dated November 4, 2004
3.1(i) Certificate of incorporation of the registrant, as currently in effect
3.1(ii) Bylaws of the registrant, as currently in effect
5.1* Opinion of Richardson & Patel LLP
10.1 Exclusive License Agreement between Bio-Bridge Science Corporation and
Loyola University Chicago, dated April 22, 2004
10.2 Exclusive Sub-license Agreement between Beijing Bio-Bridge Science
Corporation and Beijing Bio-Bridge Science Corporation, dated June 20,
2002
10.3 2004 stock incentive plan
10.4 Lease between Bio-Bridge Science Corporation and SFERS Real Estate K
Limited Partnership, dated July 30, 2004
21.1 List of subsidiaries
23.1 Consent of Weinberg & Company, P.A.
23.2 Consent of Richardson & Patel LLP (See Exhibit 5.1)
24.1 Power of attorney (see page II-4 of this registration statement)
II-2
- ---------
* To be filed by amendment.
ITEM 28. UNDERTAKINGS.
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 to:
i. Include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
ii. Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement. Notwithstanding
the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities
offered would not exceed that which was registered) any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
iii. Include any additional or changed material information on the
plan of distribution.
2. For determining liability under the Securities Act of 1933, treat each
post-effective amendment as a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
3. File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of offering.
4. For purposes of determining any liability under the Securities Act,
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 registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act as part of this registration statement as of the time
it was declared effective.
5. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons under
the foregoing provisions or otherwise, we have been advised that in the opinion
of the SEC such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. If a claim for indemnification
against such liabilities (other than our payment of expenses incurred or paid by
any of our directors, officers or controlling persons 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, we will,
unless in the opinion of our counsel the matter has been settled by a
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by us is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-3
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, in the City of Oak
Brook, State of Illinois on December 30, 2004.
BIO-BRIDGE SCIENCE, INC.
By: /s/ Liang Qiao
----------------------------------
Dr. Liang Qiao
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints, jointly and severally, Dr. Liang
Qiao, Mr. Wenhui Qiao and Mr. Kevin Lee, and each of them, as his or her
attorney-in-fact, with full power of substitution, for him or her in any and all
capacities, to sign any and all amendments, including post-effective amendments,
to this Registration Statement, and any and all registration statements related
to the offering covered by this Registration Statement and filed under the
Securities Act of 1933, as amended, and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming our signatures as they may be signed
by his said attorney to any and all amendments to said registration statement.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
Name Title Date
/s/ Liang Qiao Chief Executive Officer, Secretary and December 30, 2004
- -------------------------------- Chairman of the Board (Principal
Liang Qiao, M.D. Executive Officer)
/s/ Chuen Huei (Kevin) Lee Chief Financial Officer (Principal December 30, 2004
- -------------------------------- Financial and Accounting Officer)
Chuen Huei (Kevin) Lee
/s/ Wenhui Qiao President and Director December 30, 2004
- --------------------------------
Wenhui Qiao
/s/ Shyh-Jing (Philip) Chiang Director December 30, 2004
- --------------------------------
Shyh-Jing (Philip) Chiang
/s/ Isao Arimoto Vice President and Director December 30, 2004
- --------------------------------
Isao Arimoto
/s/ Toshihiro Komoike Director December 30, 2004
- --------------------------------
Toshihiro Komoike
II-4