UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
x
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE
ACT
OF 1934
For
the
quarterly period ended: September 30, 2008
or
o
TRANSITION
REPORT PURSUANT TO SECTION 13 0R 15(D) OF THE SECURITIES
EXCHANGE
ACT
OF 1934
For
the
transition period from _______ to _______
Commission
File Number: 000-51497
BIO-BRIDGE
SCIENCE, INC.
(Exact
name of small business issuer as specified in its charter)
Delaware
|
|
20-1802936
|
(State
or Other jurisdiction of
|
|
(IRS
Employer
|
incorporation
or organization)
|
|
Identification
No.)
|
|
|
|
1211
West 22nd Street, Suite 615
|
|
|
Oak
Brook, Illinois
|
|
60523
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
630-928-0869
(Issuer's
telephone number including area code)
Check
whether the issuer (1) has filed all reports required to be filed by Section
13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90
days: Yes
x
No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer
o
|
Accelerated
filer
o
|
|
|
Non-accelerated
filer
o
(Do not check if a smaller reporting company)
|
Smaller
reporting company
x
|
Indicate
by check mark whether the registrant is a shell company:
Yes
o
No
x
State
the
number of shares outstanding of each of the issuer's classes of common stock,
as
of the latest practicable date.
Common
Stock Outstanding as of September 30, 2008: 34,587,676 shares
Bio-Bridge
Science, Inc.
(A
development stage company)
Index
to
Form 10-Q
|
|
|
|
Page
|
|
|
Financial
Statements
|
|
1
|
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets as of September 30, 2008 (unaudited)
and
December 31, 2007
|
|
1
|
|
|
|
|
|
|
|
Unaudited
Condensed Consolidated Statements of Operations for the three and
nine month periods ended September 30, 2008 and 2007 and for the
period
from February 11, 2002 (inception) through September 30,
2008
|
|
3
|
|
|
|
|
|
|
|
Unaudited
Condensed Consolidated Statements of Changes in Shareholders' Equity
for
the period from February 11, 2002 (inception) through September 30,
2008
|
|
4
|
|
|
|
|
|
|
|
Unaudited
Condensed Consolidated Statements of Cash Flows for the nine month
periods
ended September 30, 2008 and 2007 and for the period from February
11,
2002 (inception) through September 30, 2008
|
|
10
|
|
|
|
|
|
|
|
Notes
to Unaudited Condensed Consolidated Financial Statements
|
|
12
|
|
|
|
|
|
Item
2.
|
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operation
|
|
27
|
|
|
|
|
|
Item
3.
|
|
Quantitative
and Qualitative Disclosure About Market Risk
|
|
35
|
|
|
|
|
|
Item
4.
|
|
Controls
and Procedures
|
|
35
|
|
|
|
|
|
Part
II
|
|
Other
Information
|
|
35
|
|
|
|
|
|
Item
1.
|
|
Legal
Proceedings
|
|
35
|
|
|
|
|
|
Item
1A.
|
|
Risk
Factors
|
|
35
|
|
|
|
|
|
Item
2.
|
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
|
35
|
|
|
|
|
|
Item
3.
|
|
Defaults
Upon Senior Securities
|
|
36
|
|
|
|
|
|
Item
4.
|
|
Submission
of Matters to a Vote of Security Holders
|
|
36
|
|
|
|
|
|
Item
5.
|
|
Other
Information
|
|
36
|
|
|
|
|
|
Item
6.
|
|
Exhibits
|
|
36
|
|
|
|
|
|
|
|
SIGNATURES
|
|
37
|
Item
1.
Financial Statements
BIO-BRIDGE
SCIENCE INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
September
30
|
|
December
31
|
|
|
|
2008
|
|
2007
|
|
|
|
(Unaudited)
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
909,671
|
|
$
|
104,372
|
|
Prepaid
expenses and other current assets
|
|
|
82,452
|
|
|
28,662
|
|
Accounts
receivable
|
|
|
196,025
|
|
|
-
|
|
Trading
securities, at fair value
|
|
|
148,043
|
|
|
1,509,916
|
|
Inventories
|
|
|
749,908
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
2,086,099
|
|
|
1,642,950
|
|
|
|
|
|
|
|
|
|
Fixed
assets,
net
of accumulated depreciation of $108,637 and $46,712, respectively
|
|
|
233,244
|
|
|
65,774
|
|
Construction
in progress
|
|
|
2,405,900
|
|
|
1,814,291
|
|
Land
use right,
net
of accumulated amortization of $100,578 and $80,471, respectively
|
|
|
378,376
|
|
|
366,597
|
|
Goodwill
|
|
|
229,248
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Total
Long-term Assets
|
|
|
3,246,768
|
|
|
2,246,662
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
5,332,867
|
|
$
|
3,889,612
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
Accounts
Payable
|
|
$
|
324,683
|
|
$
|
-
|
|
Accrued
expenses and other payables
|
|
|
158,958
|
|
|
121,270
|
|
Due
to related party
|
|
|
51,953
|
|
|
-
|
|
Payable
to contractors
|
|
|
184,195
|
|
|
124,017
|
|
Total
Current Liabilities
|
|
|
719,789
|
|
|
245,287
|
|
|
|
|
|
|
|
|
|
MINORITY
INTEREST
|
|
|
489,327
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value, 5,000,000 shares authorized, 4,000,000 shares
issued and outstanding
|
|
|
4,000
|
|
|
4,000
|
|
Common
stock, $0.001 par value, 100,000,000 shares authorized,
34,
587,676 and 34,357,676 shares issued and outstanding,
respectively
|
|
|
34,588
|
|
|
34,358
|
|
Additional
paid-in capital
|
|
|
12,560,388
|
|
|
10,349,611
|
|
Continued
Preferred
stock dividend, payable in common shares
|
|
|
47,000
|
|
|
137,000
|
|
Subscription
receivable
|
|
|
(3,174,110
|
)
|
|
(20
|
)
|
Stock
to be issued, 6,071,610 and 50,000 shares, respectively
|
|
|
4,852,155
|
|
|
50
|
|
Accumulated
other comprehensive income
|
|
|
375,815
|
|
|
221,358
|
|
Deficit
accumulated during the development stage
|
|
|
(10,576,085
|
)
|
|
(7,102,032
|
)
|
|
|
|
|
|
|
|
|
Total
Shareholders’ Equity
|
|
|
4,123,751
|
|
|
3,644,325
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
$
|
5,332,867
|
|
$
|
3,889,612
|
|
See
accompanying notes to the condensed consolidated financial
statements.
BIO-BRIDGE
SCIENCE INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
UNAUDITED
CONDENSED CONSOLIDATED
STATEMENT
OF OPERATIONS
FOR
THE THREE AND NINE MONTHS ENDED
SEPTEMBER
30, 2008
AND
FOR THE PERIOD FROM FEBRUARY 11, 2002
(INCEPTION) THROUGH SEPTEMBER 30, 2008
|
|
Three
Months Ended September 30, 2008
|
|
Three
Months Ended September 30, 2007
|
|
Nine
Months Ended September 30, 2008
|
|
Nine
Months Ended September 30, 2007
|
|
For
The Period From February 11, 2002 (Inception) Through September 30,
2008
|
|
REVENUE
|
|
$
|
113,314
|
|
$
|
1,694
|
|
$
|
120,741
|
|
$
|
2,384
|
|
$
|
125,488
|
|
COST
OF GOODS SOLD
|
|
|
(89,348
|
)
|
|
(950
|
)
|
|
(92,196
|
)
|
|
(1,355
|
)
|
|
(95,004
|
)
|
GROSS
PROFIT
|
|
|
23,966
|
|
|
744
|
|
|
28,545
|
|
|
1,029
|
|
|
30,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development cost
|
|
|
(19,885
|
)
|
|
(21,476
|
)
|
|
(76,264
|
)
|
|
(103,816
|
)
|
|
(548,605
|
)
|
Selling
and distribution expenses
|
|
|
(22,499
|
)
|
|
(8,640
|
)
|
|
(56,109
|
)
|
|
(24,952
|
)
|
|
(144,390
|
)
|
General
and administrative expenses
|
|
|
(2,658,966
|
)
|
|
(203,878
|
)
|
|
(3,103,364
|
)
|
|
(922,570
|
)
|
|
(7,805,852
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS
|
|
|
(2,677,384
|
)
|
|
(233,250
|
)
|
|
(3,207,192
|
)
|
|
(1,050,309
|
)
|
|
(8,468,363
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
(expense) income
|
|
|
(798
|
)
|
|
1,328
|
|
|
(2,443
|
)
|
|
5,128
|
|
|
14,546
|
|
Unrealized
loss on trading securities
|
|
|
(45,632
|
)
|
|
(119,504
|
)
|
|
(117,013
|
)
|
|
(227,930
|
)
|
|
(489,205
|
)
|
Income
on sale of trading securities
|
|
|
-
|
|
|
-
|
|
|
55,150
|
|
|
-
|
|
|
52,332
|
|
Dividend
income
|
|
|
4,961
|
|
|
38,801
|
|
|
64,611
|
|
|
86,803
|
|
|
192,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
BEFORE MINORITY INTEREST
|
|
|
(2,718,853
|
)
|
|
(312,625
|
)
|
|
(3,206,887
|
)
|
|
(1,186,308
|
)
|
|
(8,698,599
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MINORITY
INTEREST IN LOSS
|
|
|
2,834
|
|
|
-
|
|
|
2,834
|
|
|
-
|
|
|
2,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
|
(2,716,019
|
)
|
|
(312,625
|
)
|
|
(3,204,053
|
)
|
|
(1,186,308
|
)
|
|
(8,695,765
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEEMED
PREFERRED STOCK DIVIDEND
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,293,320
|
)
|
|
(1,293,320
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PREFERRED
STOCK DIVIDEND
|
|
|
(90,000
|
)
|
|
(90,000
|
)
|
|
(270,000
|
)
|
|
(227,000
|
)
|
|
(587,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS
|
|
$
|
(2,806,019
|
)
|
$
|
(402,625
|
)
|
$
|
(3,474,053
|
)
|
$
|
(2,706,628
|
)
|
$
|
(10,576,085
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
PER SHARE, attributable to common shareholders, basic and
diluted
|
|
$
|
(0.07
|
)
|
$
|
(0.01
|
)
|
$
|
(0.09
|
)
|
$
|
(0.08
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE SHARES OUTSTANDING, basic and diluted
|
|
|
40,429,285
|
|
|
34,177,176
|
|
|
37,100,185
|
|
|
33,874,655
|
|
|
|
|
See
accompanying notes to the condensed consolidated financial
statements.
BIO-BRIDGE
SCIENCE INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN
SHAREHOLDERS’ EQUITY FOR THE PERIOD FROM FEBRUARY 11, 2002
(INCEPTION)
THROUGH SEPTEMBER 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Shares
|
|
|
|
Additional
Paid-in
Capital
|
|
Deferred
Compensation
|
|
Common
Stock
To
be Issued
|
|
Accumulated
Other Comprehensive Income (Loss)
|
|
Deficit
Accumulated During the Development Stage
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of 13,750,000 shares at $0.00004
|
|
|
13,750,000
|
|
$
|
13,750
|
|
$
|
(13,200
|
)
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of 7,461,090 shares at $0.0468
|
|
|
7,461,090
|
|
|
7,461
|
|
|
341,719
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
349,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of 1,875,000 shares at $0.12
|
|
|
1,875,000
|
|
|
1,875
|
|
|
223,125
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
225,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(499
|
)
|
|
-
|
|
|
(499
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(114,476
|
)
|
|
(114,476
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE
DECEMBER 31, 2002
|
|
|
23,086,090
|
|
|
23,086
|
|
|
551,644
|
|
|
-
|
|
|
-
|
|
|
(499
|
)
|
|
(114,476
|
)
|
|
459,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of 3,508,425 shares at $0.12
|
|
|
3,508,425
|
|
|
3,509
|
|
|
417,502
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
421,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of 201,200 shares at $0.32
|
|
|
201,200
|
|
|
201
|
|
|
64,186
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
64,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(644
|
)
|
|
-
|
|
|
(644
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(255,020
|
)
|
|
(255,020
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE
DECEMBER 31, 2003
|
|
|
26,795,715
|
|
|
26,796
|
|
|
1,033,332
|
|
|
-
|
|
|
-
|
|
|
(1,143
|
)
|
|
(369,496
|
)
|
|
689,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of 434,600 shares at $0.12
|
|
|
434,600
|
|
|
435
|
|
|
51,715
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
52,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of 1,125,275 shares at $0.32
|
|
|
1,125,275
|
|
|
1,125
|
|
|
358,961
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
360,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of 1,616,000 shares at $0.50
|
|
|
1,616,000
|
|
|
1,616
|
|
|
806,382
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
807,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
market value of Stock options granted for services
|
|
|
-
|
|
|
-
|
|
|
695,052
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
695,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of shares issued for services
|
|
|
100,000
|
|
|
100
|
|
|
49,900
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of options
|
|
|
200,000
|
|
|
200
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
consulting expenses
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(390,890
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(390,890
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(457
|
)
|
|
-
|
|
|
(457
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(944,437
|
)
|
|
(944,437
|
)
|
BALANCE
DECEMBER 31, 2004
|
|
|
30,271,590
|
|
$
|
30,272
|
|
$
|
2,995,342
|
|
$
|
(390,890
|
)
|
$
|
-
|
|
$
|
(1,600
|
)
|
$
|
(1,313,933
|
)
|
$
|
1,319,191
|
|
BIO-BRIDGE
SCIENCE INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN
SHAREHOLDERS’ EQUITY FOR THE PERIOD FROM FEBRUARY 11, 2002
(INCEPTION)
THROUGH SEPTEMBER 30,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Shares
|
|
|
|
Additional
Paid-in
Capital
|
|
|
|
Common
Stock
To
be Issued
|
|
Accumulated
Other Comprehensive Income (Loss)
|
|
Deficit
Accumulated During the Development Stage
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE
DECEMBER 31, 2004
|
|
|
30,271,590
|
|
$
|
30,272
|
|
$
|
2,995,342
|
|
$
|
(390,890
|
)
|
$
|
-
|
|
$
|
(1,600
|
)
|
$
|
(1,313,933
|
)
|
$
|
1,319,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of 2,179,947 shares at $0.50
|
|
|
2,179,947
|
|
|
2,180
|
|
|
1,087,794
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,089,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options issued for services
|
|
|
-
|
|
|
-
|
|
|
34,935
|
|
|
(34,935
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options granted to employees and officers
|
|
|
-
|
|
|
-
|
|
|
680,604
|
|
|
(680,604
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of deferred compensation expenses
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
458,127
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
458,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return
of options
|
|
|
-
|
|
|
-
|
|
|
(139,604
|
)
|
|
139,604
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of options
|
|
|
-
|
|
|
-
|
|
|
(328
|
)
|
|
-
|
|
|
328
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
26,882
|
|
|
-
|
|
|
26,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,253,093
|
)
|
|
(1,253,093
|
)
|
BALANCE
DECEMBER 31, 2005
|
|
|
32,451,537
|
|
$
|
32,452
|
|
$
|
4,658,743
|
|
$
|
(508,698
|
)
|
$
|
328
|
|
$
|
25,282
|
|
|
(2,567,026
|
)
|
$
|
1,641,081
|
|
(Continued)
BIO-BRIDGE
SCIENCE INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN
SHAREHOLDERS’ EQUITY FOR THE PERIOD FROM FEBRUARY 11, 2002
(INCEPTION)
THROUGH SEPTEMBER 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Shares
|
|
|
|
Additional
Paid-in
Capital
|
|
Deferred
Compensation
|
|
Common
Stock
To
be
Issued
|
|
Accumulated
Other
Comprehensive
Income
(Loss)
|
|
Subscription
Receivable
|
|
Deficit
Accumulated
During
the
Development
Stage
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE
DECEMBER 31, 2005
|
|
|
32,451,537
|
|
$
|
32,452
|
|
$
|
4,658,743
|
|
$
|
(508,698
|
)
|
$
|
328
|
|
$
|
25,282
|
|
$
|
-
|
|
$
|
(2,567,026
|
)
|
$
|
1,641,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification
of deferred compensation balance to
additional-paid-in-capital
|
|
|
-
|
|
|
-
|
|
|
(508,698
|
)
|
|
508,698
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares for previously exercised stock option
|
|
|
328,116
|
|
|
328
|
|
|
-
|
|
|
-
|
|
|
(328
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
of shares at $0.75 to $1.2 per share for cash, net of issuance
costs
|
|
|
540,348
|
|
|
540
|
|
|
872,637
|
|
|
-
|
|
|
240
|
|
|
-
|
|
|
(25,091
|
)
|
|
-
|
|
|
848,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensatory
shares issued to consultant
|
|
|
122,000
|
|
|
122
|
|
|
223,773
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
223,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
stock options
|
|
|
-
|
|
|
-
|
|
|
174,670
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
174,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consultant
stock option
|
|
|
-
|
|
|
-
|
|
|
48,277
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
48,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of options
|
|
|
50,000
|
|
|
50
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
55,121
|
|
|
-
|
|
|
-
|
|
|
55,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss 1/1/06 to 12/31/06
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,323,894
|
)
|
|
(1,324,364
|
)
|
BALANCE
DECEMBER 31, 2006
|
|
|
33,492,001
|
|
$
|
33,492
|
|
$
|
5,469,402
|
|
$
|
-
|
|
$
|
240
|
|
$
|
80,403
|
|
$
|
(25,091
|
)
|
$
|
(3,890,920
|
)
|
$
|
1,667,526
|
|
BIO-BRIDGE
SCIENCE INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN
SHAREHOLDERS’ EQUITY FOR THE PERIOD FROM FEBRUARY 11, 2002
(INCEPTION)
THROUGH SEPTEMBER 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Shares
|
|
|
|
Preferred
Shares
|
|
|
|
Preferred
stock dividend payable in common share
|
|
Additional
Paid-in Capital
|
|
Common
Stock To Be Issued
|
|
Accumulated
Other Comprehensive Income (Loss)
|
|
Subscriptions
Receivable
|
|
Deficit
Accumulated
During
the Development Stage
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE
DECEMBER 31, 2006
|
|
|
33,492,001
|
|
$
|
33,492
|
|
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
5,469,402
|
|
$
|
240
|
|
$
|
80,403
|
|
$
|
(25,091
|
)
|
$
|
(3,890,920
|
)
|
$
|
1,667,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock at $0.75 per share for cash, net of issuance
costs
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
22,470
|
|
|
30
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
22,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of preferred shares at $0.75 per share for cash, net of issuance
costs
|
|
|
-
|
|
|
-
|
|
|
4,000,000
|
|
|
4,000
|
|
|
-
|
|
|
2,996,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
3,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed
dividend related to beneficial conversion feature of convertible
preferred
stock
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,293,320
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,293,320
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual
of preferred stock dividend
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
317,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(317,000
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment
of preferred stock dividend
|
|
|
180,000
|
|
|
180
|
|
|
-
|
|
|
-
|
|
|
(180,000
|
)
|
|
179,820
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensatory
shares issued to consultant
|
|
|
30,000
|
|
|
30
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
67,694
|
|
|
20
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
67,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
stock options
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
173,715
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
173,715
|
|
BIO-BRIDGE
SCIENCE INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN
SHAREHOLDERS’ EQUITY FOR THE PERIOD FROM FEBRUARY 11, 2002
(INCEPTION)
THROUGH SEPTEMBER 30,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consultant
stock option
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
147,190
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
147,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares for previously exercised stock option
|
|
|
240,000
|
|
|
240
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(240
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from previously issued stock
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
25,071
|
|
|
-
|
|
|
25,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of options
|
|
|
415,675
|
|
|
416
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
140,955
|
|
|
-
|
|
|
-
|
|
|
140,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,600,792
|
)
|
|
(1,600,792
|
)
|
BALANCE
DECEMBER 31, 2007
|
|
|
34,357,676
|
|
$
|
34,358
|
|
|
4,000,000
|
|
$
|
4,000
|
|
$
|
137,000
|
|
$
|
10,349,611
|
|
$
|
50
|
|
$
|
221,358
|
|
$
|
(20
|
)
|
$
|
(7,102,032
|
)
|
$
|
3,644,325
|
|
(Continued)
B
IO-BRIDGE
SCIENCE INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN
SHAREHOLDERS’ EQUITY FOR THE PERIOD FROM FEBRUARY 11, 2002
(INCEPTION)
THROUGH SEPTEMBER 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Shares
|
|
Stock
Amount
|
|
Preferred
Shares
|
|
Stock
Amount
|
|
Preferred
stock dividend payable in common share
|
|
Additional
paid-in capital
|
|
Accumulated
other comprehensive income (loss)
|
|
Common
stock to be issued
|
|
Subscription
receivable
|
|
Deficit
accumulated during the development stage
|
|
Total
|
|
BALANCE
DECEMBER 31, 2007
|
|
|
34,357,676
|
|
$
|
34,358
|
|
|
4,000,000
|
|
$
|
4,000
|
|
|
137,000
|
|
$
|
10,349,611
|
|
$
|
221,358
|
|
$
|
50
|
|
$
|
(20
|
)
|
$
|
(7,102,032
|
)
|
$
|
3,644,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of 393,334 shares of common stock at $0.75 per share for cash, to
be
issued
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
295,000
|
|
|
(210,090
|
)
|
|
-
|
|
|
84,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of 5,448,276 shares of common stock at $0.725 per share for cash,
to be
issued
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
3,950,000
|
|
|
(2,964,000
|
)
|
|
-
|
|
|
986,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
based compensation to directors
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
339,655
|
|
|
-
|
|
|
-
|
|
|
339,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of warrants issued to directors
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,903,586
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,903,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of vested
employee
stock options
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
127,371
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
127,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of stock issued for services
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
87,500
|
|
|
-
|
|
|
-
|
|
|
87,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual
of preferred stock dividend
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
270,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(270,000
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment
of preferred
stock
dividend
|
|
|
180,000
|
|
|
180
|
|
|
-
|
|
|
-
|
|
|
(360,000
|
)
|
|
179,820
|
|
|
-
|
|
|
180,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares
|
|
|
50,000
|
|
|
50
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(50
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation gain
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
154,457
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
154,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,204,053
|
)
|
|
(3,204,053
|
)
|
BALANCE
SEPTEMBER 30, 2008
|
|
|
34,587,676
|
|
$
|
34,588
|
|
|
4,000,000
|
|
$
|
4,000
|
|
$
|
47,000
|
|
$
|
12,560,388
|
|
$
|
375,815
|
|
$
|
4,852,155
|
|
$
|
(3,174,110
|
)
|
$
|
(10,576,085
|
)
|
$
|
4,123,751
|
|
See
accompanying notes to the condensed consolidated financial
statements.
BIO-BRIDGE
SCIENCE INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008
AND
FOR THE PERIOD FROM FEBRUARY 11, 2002(INCEPTION)
THROUGH
SEPTEMBER 30, 2008
|
|
For
Nine Months Ended September 30, 2008
|
|
For
Nine Months Ended September 30, 2007
|
|
For
the Period From February 11, 2002 (Inception) Through September 30,
2008
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(3,204,053
|
)
|
$
|
(1,186,308
|
)
|
$
|
(8,695,765
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Depreciation
|
|
|
20,712
|
|
|
14,249
|
|
|
64,906
|
|
Amortization
of land use right
|
|
|
13,874
|
|
|
12,790
|
|
|
87,197
|
|
Non
cash stock compensation expense
|
|
|
2,458,112
|
|
|
344,707
|
|
|
4,105,893
|
|
Write
off for notes receivable
|
|
|
-
|
|
|
-
|
|
|
40,000
|
|
Unrealized
loss on trading securities
|
|
|
117,013
|
|
|
227,930
|
|
|
489,205
|
|
Income
on sale of trading securities
|
|
|
(55,150
|
)
|
|
-
|
|
|
(52,332
|
)
|
Loss
on sale of investment
|
|
|
-
|
|
|
-
|
|
|
2,107
|
|
Minority
interests' share of net income
|
|
|
2,833
|
|
|
-
|
|
|
2,833
|
|
Change
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(63,840
|
)
|
|
-
|
|
|
(63,840
|
)
|
Inventories
|
|
|
(43,699
|
)
|
|
-
|
|
|
(43,699
|
)
|
Prepaid
expense and other assets
|
|
|
(10,809
|
)
|
|
(3,455
|
)
|
|
(39,069
|
)
|
Accounts
payable
|
|
|
53,572
|
|
|
-
|
|
|
53,572
|
|
Payable
to contractors
|
|
|
-
|
|
|
(353,973
|
)
|
|
124,018
|
|
Accrued
expenses and other payable
|
|
|
(26,235
|
)
|
|
(4,295
|
)
|
|
94,635
|
|
Net
Cash Used In Operating Activities
|
|
|
(737,670
|
)
|
|
(948,355
|
)
|
|
(3,830,339
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Purchase
of land use right
|
|
|
-
|
|
|
-
|
|
|
(394,559
|
)
|
Increase
in construction in progress
|
|
|
(435,364
|
)
|
|
(16,984
|
)
|
|
(2,133,300
|
)
|
Purchase
of fixed assets
|
|
|
(2,323
|
)
|
|
(1,890
|
)
|
|
(108,563
|
)
|
Purchase
of investment
|
|
|
|
|
|
-
|
|
|
(40,000
|
)
|
Purchase
of trading securities
|
|
|
-
|
|
|
(1,897,184
|
)
|
|
(1,984,924
|
)
|
Proceeds
from sale of trading securities
|
|
|
1,300,010
|
|
|
-
|
|
|
1,400,008
|
|
Purchase
of business, net of cash acquired
|
|
|
(393,940
|
)
|
|
-
|
|
|
(393,940
|
)
|
Net
Cash Provided By (Used In) Investing Activities
|
|
|
468,383
|
|
|
(1,916,058
|
)
|
|
(3,655,278
|
)
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Proceeds
from issuance of common stock
|
|
|
1,070,910
|
|
|
47,571
|
|
|
5,336,816
|
|
Proceeds
from issuance of preferred stock
|
|
|
-
|
|
|
3,000,000
|
|
|
3,000,000
|
|
Proceeds
from issuance of previously issued stocks
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Proceeds
from exercise of stock option
|
|
|
-
|
|
|
416
|
|
|
994
|
|
Advances
from director
|
|
|
28,078
|
|
|
(18,885
|
)
|
|
28,078
|
|
Net
Cash Provided By Financing Activities
|
|
|
1,098,988
|
|
|
3,029,102
|
|
|
8,365,888
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
829,701
|
|
|
164,689
|
|
|
880,271
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
(24,402
|
)
|
|
(4,053
|
)
|
|
29,400
|
|
Cash
and cash equivalents, beginning of period
|
|
|
104,372
|
|
|
149,613
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS,
END
OF PERIOD
|
|
$
|
909,671
|
|
$
|
310,249
|
|
$
|
909,671
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information
|
|
|
|
|
|
|
|
|
|
|
Interest
Paid
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Income
taxes Paid
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
non-cash investing and financing activities
|
|
|
|
|
|
|
|
|
|
|
Deemed
dividend related to beneficial conversion feature of convertible
preferred
stock
|
|
$
|
-
|
|
$
|
1,293,320
|
|
$
|
1,293,000
|
|
Accrual
of preferred stock dividend
|
|
$
|
270,000
|
|
$
|
227,000
|
|
$
|
587,000
|
|
See
accompanying notes to the condensed consolidated financial
statements.
BIO-BRIDGE
SCIENCE, INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
AS OF SEPTEMBER 30, 2008
NOTE
1 - BASIS OF PRESENTATION
The
accompanying unaudited condensed consolidated financial statements of Bio Bridge
Science Inc. (the "Company") have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and pursuant to the requirements for reporting on Form
10-Q and Regulation S-K for scaled disclosures for smaller reporting companies.
Accordingly, they do not include all the information and footnotes required
by
accounting principles generally accepted in United States of America for
complete financial statements. However, such information reflects all
adjustments (consisting solely of normal recurring adjustments), which are,
in
the opinion of management, necessary for the fair presentation of the
consolidated financial position and the consolidated results of operations.
Results shown for interim periods are not necessarily indicative of the results
to be obtained for a full fiscal year.
The
condensed consolidated balance sheet information as of December 31, 2007 was
derived from the audited consolidated financial statements included in the
Company's Annual Report on Form 10-KSB filed with the SEC on March 31, 2008.
These interim financial statements should be read in conjunction with that
report.
NOTE
2 - ORGANIZATION AND PRINCIPAL ACTIVITIES
Bio-Bridge
Science, Inc. (a development stage company) ("the Company") was incorporated
in
the State of Delaware on October 26, 2004. 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 generated few revenues.
The Company's fiscal year end is December 31.
On
December 1, 2004, the Company acquired all of the outstanding shares of
Bio-Bridge Science Corporation ("BBSC"), a Cayman Islands corporation, in
exchange for 29,971,590 shares of its common stock, and as a result, BBSC became
a wholly owned subsidiary of Bio-Bridge Science, Inc. The acquisition was
accounted for as a reverse merger (recapitalization) with BBSC deemed to be
the
accounting acquirer, and the Company the legal acquirer. Accordingly, the
historical financial information presented in the financial statements is that
of BBSC as adjusted to give effect to any difference in the par value of the
issuer’s and the accounting acquirer stock with an offset to capital in excess
of par value. The basis of the assets, liabilities and retained earnings of
BBSC, the accounting acquirer, have been carried over in the
recapitalization.
BBSC
was
incorporated in the Cayman Islands on February 11, 2002. At the time of the
exchange, BBSC held a 100% interest in Bio-Bridge Science (Beijing) Corp. ("BBS
Beijing"), a wholly-foreign funded enterprise of the People's Republic of China
("PRC") which was established on May 20, 2002. BBS Beijing is currently engaged
in the development and commercialization of several vaccine candidates, such
as
HIV-PV vaccine I, cervical cancer vaccine, colon cancer vaccine, in mainland
China.
On
July
31, 2008, the Company acquired 51 percent of the outstanding capital interest
of
Huhhot
Xinheng Baide Biotechnology Co., Ltd. (“XHBD”, see Note 4)
.
XHBD
was
incorporated
on May 17, 2006 under the laws of the People’s Republic of China (“PRC”) as a
limited company, which is similar to a limited liability company. XHBD is
located in the city of Huhhot in Inner Mongolia of the PRC. The primary
operations of the Company are the manufacture and distribution of bovine serum
products, which is used in research, the production of pharmaceuticals, and
production of veterinary medicines. The results of XHBD are included in the
accompanying
condensed
consolidated financial statements from August 1, 2008.
History
of losses and negative cash flows
Since
its
inception, the Company has been engaged in organizational and pre-operating
activities. The Company has generated some revenues and has incurred accumulated
losses and negative operating cash flows of $8,695,765 and $3,830,339,
respectively, from February 11, 2002 (inception) through September 30, 2008.
We
incurred a net loss of $3,204,053 for the nine months ended September 30,
2008. On February 12, 2007, the Company raised $3,000,000 in a private placement
in the form of a sale of shares of Series A convertible preferred stock and
warrants to purchase common stock. On July 2, 2008 and July 9, 2008, the Company
entered into common stock and warrant purchase agreements in which the Company
will receive a total of $3,950,000. Our capital requirements for the next 12
months, as they relate to further development and clinical studies relating
to
our product candidates have been and will continue to be significant. As of
September 30, 2008, we have funded our operations through equity offerings
in
the form of private placements whereby we raised an aggregate $8,365,888 since
inception.
Based
on
our current operating plan, we believe that we have sufficient cash and cash
equivalents to last approximately through April 2010. We will need to obtain
additional financing in addition to the funds already raised through the sale
of
equity securities to fund our cash needs and continue our operations beyond
April 2010. Additional financing, whether through public or private equity
or
debt financing, arrangements with stockholders or other sources to fund
operations, may not be available, or if available, may be on terms unacceptable
to us. Our ability to maintain sufficient liquidity is dependent on our ability
to raise additional capital. If we issue additional equity securities to raise
funds, the ownership percentage of our existing stockholders would be reduced.
New investors may demand rights, preferences or privileges senior to those
of
existing holders of our common stock. Debt incurred by us would be senior to
equity in the ability of debt holders to make claims on our assets. The terms
of
any debt issued could impose restrictions on our operations. If adequate funds
are not available to satisfy either medium or long-term capital requirements,
our operations and liquidity could be materially adversely affected and we
could
be forced to cut back our operations.
NOTE
3 - SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of
Bio-Bridge Science Inc. and our wholly owned subsidiaries, Bio-Bridge Science
Corp., Bio-Bridge Science (Beijing) Corp, Bio-Bridge Science Holding Co. and
Bio
Bridge Science (HK), Co. and our 51% owned subsidiary Huhhot Xinheng Baide
Biotechnology Co. Ltd (“XHBD”). Intercompany accounts and transactions have been
eliminated in consolidation.
Economic
and Political Risks
The
Company faces a number of risks and challenges since its operation is in PRC
and
its primary market is in the PRC. We have operations in China where we are
currently engaged in pre-clinical testing of our vaccine candidates and other
related activities. 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.
Use
of
Estimates
The
preparation of 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 disclosure of contingent assets and liabilities at the date
of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Management makes these estimates using the best
information available and the best judgment at the time the estimates are made,
however actual results could differ materially from those
estimates.
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.
Cash of the Bio-Bridge Science (Beijing) Corporation, a subsidiary of the
Company, is held in accounts at financial institutions, which are located in
the
PRC. The Company and subsidiaries have not experienced any losses in such
accounts and do not believe that cash is exposed to any significant credit
risk.
All of BBS Beijing’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.
Trade
Receivables
Trade
receivables are recorded at the carrying amount which approximates net
realizable value.
The
Company uses the allowance method to account for uncollectible trade receivable
balances. Under the allowance method, if needed, an estimate of uncollectible
customer balances is made based upon specific account balances that are
considered uncollectible. Factors used to establish an allowance include the
credit quality of the customer and whether the balance is significant.
Inventories
Inventories
are stated at the lower of cost or market. Cost is determined principally on
a
first-in-first-out average cost basis.
Plant
and
Equipment
Plant
and
equipment are carried at cost less accumulated depreciation and amortization.
Depreciation is provided over their estimated useful lives, using the
straight-line method. Estimated useful lives are as follows:
Asset
category
|
|
Useful
Life
|
|
Machinery
|
|
|
8
years
|
|
Motor
vehicles
|
|
|
8
years
|
|
Leasehold
improvements
|
|
|
4
years
|
|
Office
equipment
|
|
|
3
years
|
|
Leasehold
improvements are amortized over the shorter of their estimated useful life
or
the life of the building lease.
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 income. The cost of maintenance and repairs is charged to income as incurred,
whereas significant renewals and betterments are capitalized.
Trading
Securities
The
Company accounts for trading securities using the guidance of SFAS No. 115,
“Accounting for Certain Investments in Debt and Equity Securities”. The
Company’s investment in trading securities is comprised of its investment in a
Van Kampen unit investment fund.
Trading
securities are reported at fair value, with any changes in fair value during
a
period recorded as a charge or credit to net income (loss). Gains or losses
realized upon sale of all securities are recognized at the time of sale. Cash
received in excess of cumulative dividends is considered a return of
principal.
Financial
Assets and Liabilities Measured at Fair Value
Effective
January 1, 2008, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 157, Fair Value Measurements. This Statement defines fair value
for certain financial and nonfinancial assets and liabilities that are recorded
at fair value, establishes a framework for measuring fair value, and expands
disclosures about fair value measurements. This guidance applies to other
accounting pronouncements that require or permit fair value measurements. On
February 12, 2008, the FASB finalized FASB Staff Position (FSP) No. 157-2,
Effective Date of FASB Statement No. 157. This Staff Position delays the
effective date of SFAS No. 157 for nonfinancial assets and liabilities to
fiscal years beginning after November 15, 2008 and interim periods within those
fiscal years, except for those items that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least annually).
The
adoption of SFAS No. 157 had no effect on the Company’s consolidated
financial position or results of operations.
SFAS
No. 157 establishes a fair value hierarchy that prioritizes the inputs used
to measure fair value into three broad levels, considering the relative
reliability of the inputs. The fair value hierarchy assigns the highest priority
to quoted prices in active markets for identical assets or liabilities
(Level 1) and the lowest priority to unobservable inputs (Level 3). A
financial instrument's categorization within the fair value hierarchy is based
upon the lowest level of an input to the valuation that is significant to the
fair value measurement. The three levels of inputs within the fair value
hierarchy are defined as follows:
Level
1
uses quoted prices (unadjusted) in active markets for identical assets or
liabilities that the reporting entity has the ability to access at the
measurement date.
Level 2
uses inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly or indirectly.
Level 3
uses unobservable inputs for the asset or liability. Valuation is modeled using
significant inputs that are unobservable in the market. These unobservable
inputs reflect the Company's own estimates of assumptions that market
participants would use in pricing the asset or liability.
At
September 30, 2008, the Company’s financial assets and liabilities that were
measured at fair value include its investment in trading securities which have
a
cost of $259,270, a gross unrealized loss of $111,227 and a fair value of
$148,043. The Company estimates the fair value of its trading securities based
on unadjusted quoted prices in active markets of identical assets. In accordance
with SFAS No. 157, this is a Level 1 valuation.
Foreign
Currency Translation
The
Company’s financial information is presented in US dollars. The functional
currency Renminbi (RMB) of the Company is translated into United States dollars
from RMB at quarter / year-end exchange rates as to assets and liabilities
and
average exchange rates as to revenues and expenses. Capital accounts are
translated at their historical exchange rates when the capital transactions
occurred.
|
|
|
As
of and for the
nine
months ended
September
30,
2008
|
|
|
As
of and for the
nine
months ended
September
30,
2007
|
|
Period
end RMB : US$ exchange rate
|
|
|
6.8183
|
|
|
|
7.5108
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
period RMB : US$ exchange rate
|
|
|
7.0615
|
|
|
|
7.6598
|
|
|
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 US
dollars at the rates used in translation.
Income
Taxes
The
Company accounts for income tax using the liability method that allows for
recognition of deferred tax benefits in future years. Under the liability
method, 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.
Comprehensive
Income
Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. The Company’s current
components of comprehensive income consist of foreign currency translation
adjustments:
|
|
Nine
months ended
September
30,
|
|
|
|
2008
|
|
2007
|
|
Net
loss
|
|
$
|
(3,204,053
|
)
|
$
|
(1,186,308
|
)
|
Foreign
currency translation gain
|
|
|
154,457
|
|
|
79,168
|
|
Comprehensive
loss
|
|
$
|
(3,049,596
|
)
|
$
|
(1,107,140
|
)
|
Loss
Per
Share
Basic
loss per share has been computed using the weighted average number of common
shares outstanding and has issuable during the period. Diluted loss per share
is
computed based on the weighted average number of common shares and all common
equivalent shares outstanding during the period in which they are dilutive.
Common equivalent shares consist of shares issuable upon the exercise of stock
options or warrants. As of September 30, 2008 common stock equivalents composed
of options convertible into 2,297,000 shares of the Company's common stock
and
warrants convertible into 8,864,943 shares of the Company's common stock. For
the three and nine month periods ended September 30, 2008 and 2007, common
equivalent shares have been excluded from the calculation of loss per share
as
their effect is anti-dilutive.
Stock-Based
Compensation
The
Company periodically issues stock options and warrants to employees and
non-employees in capital raising transactions, for services and for financing
costs. The Company adopted SFAS No. 123R effective January 1, 2006, and is
using
the modified prospective method in which compensation cost is recognized
beginning with the effective date (a) based on the requirements of SFAS No.
123R
for all share-based payments granted after the effective date and (b) based
on
the requirements of SFAS No. 123R for all awards granted to employees prior
to
the effective date of SFAS No. 123R that remain unvested on the effective date.
The Company accounts for stock option and warrant grants issued and vesting
to
non-employees in accordance with EITF No. 96-18: “Accounting for Equity
Instruments that are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services” and EITF No. 00-18 “Accounting
Recognition for Certain Transactions involving Equity Instruments Granted to
Other Than Employees” whereas the value of the stock compensation is based upon
the measurement date as determined at either a) the date at which a performance
commitment is reached, or b) at the date at which the necessary performance
to
earn the equity instruments is complete.
Recent
Accounting Pronouncements
In
December 2007, the FASB issued FASB Statement No. 141 (R), “Business
Combinations” (FAS 141R), which establishes accounting principles and disclosure
requirements for all transactions in which a company obtains control over
another business. Statement 141R applies prospectively to business combinations
for which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. Earlier adoption
is
prohibited.
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51”. SFAS No. 160
establishes accounting and reporting standards that require that the ownership
interests in subsidiaries held by parties other than the parent be clearly
identified, labeled, and presented in the consolidated statement of financial
position within equity, but separate from the parent’s equity; the amount of
consolidated net income attributable to the parent and to the noncontrolling
interest be clearly identified and presented on the face of the consolidated
statement of income; and changes in a parent’s ownership interest while the
parent retains its controlling financial interest in its subsidiary be accounted
for consistently. SFAS No. 160 also requires that any retained noncontrolling
equity investment in the former subsidiary be initially measured at fair value
when a subsidiary is deconsolidated. SFAS No. 160 also sets forth the disclosure
requirements to identify and distinguish between the interests of the parent
and
the interests of the noncontrolling owners. SFAS No. 160 applies to all entities
that prepare consolidated financial statements, except not-for-profit
organizations, but will affect only those entities that have an outstanding
noncontrolling interest in one or more subsidiaries or that deconsolidate a
subsidiary. SFAS No. 160 is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December 15, 2008. Earlier
adoption is prohibited. SFAS No. 160 must be applied prospectively as of the
beginning of the fiscal year in which it is initially applied, except for the
presentation and disclosure requirements. The presentation and disclosure
requirements are applied retrospectively for all periods presented. The Company
will be reclassifying minority interest to shareholder’s equity in 2009.
In
March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No. 133,”
(SFAS No.161). SFAS No.161 requires enhanced disclosures about an entity’s
derivative and hedging activities, including (i) how and why an entity uses
derivative instruments, (ii) how derivative instruments and related hedged
items are accounted for under SFAS No. 133, and (iii) how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows. This standard becomes effective for
financial statements issued for fiscal years and interim periods beginning
after
November 15, 2008. Earlier adoption of SFAS 161 and, separately, comparative
disclosures for earlier periods at initial adoption are encouraged. As SFAS
No.161 only requires enhanced disclosures, this standard will have no impact
on
the Financial Statements
The
Company has not determined whether the adoption of SFAS No. 141R will have
a
material impact on its results of operations and financial condition.
The
Company does not believe that the adoption
of
SFAS
No. 160 or
SFAS
No.
161 will have a material effect on the Company’s consolidated results of
operations, financial position, or cash flows.
NOTE
4 - ACQUISITION OF
HUHHOT
XINHENG BAIDE BIOTECHNOLOGY CO., LTD. (“XHBD”)
On
July
31, 2008, the Company acquired 51 percent of the outstanding capital interest
of
Huhhot
Xinheng Baide Biotechnology Co., Ltd. (“XHBD”)
.
XHBD is
located in the city of Huhhot in Inner Mongolia of the PRC and is organized
under the laws of the PRC. XHBD
manufactures
and distributes bovine serum products, which is used in research, the production
of pharmaceuticals, and production of veterinary medicines. The Company
purchased 51 percent of the outstanding capital interest of XHBD in exchange
for
cash of $881,058 (RMB 6,000,000).
The
acquisition has been accounted for as a purchase in accordance with SFAS No.
141
Business
Combinations
.
As
such, the results of XHBD's operations have been included in the consolidated
financial statements since August 1, 2008. The components of the purchase price
and the allocation of the purchase price are as follows:
Purchase
price allocation
|
|
|
|
Current
assets, including cash of $487,118
|
|
$
|
1,387,117
|
|
Property
and equipment
|
|
|
165,299
|
|
Goodwill
|
|
|
229,248
|
|
Current
liabilities
|
|
|
(410,085
|
)
|
|
|
|
1,371,579
|
|
Historical
cost of 49% minority interest
|
|
|
(490,521
|
)
|
Net
purchase price
|
|
$
|
881,058
|
|
Allocation
of the purchase price may change based on final valuation analysis.
In
preparing the valuation, the Company consulted with independent valuation
experts.
Goodwill
represents the excess of the purchase price of XHBD over the fair value of
the
identifiable assets acquired and liabilities assumed. The Company accounts
for
minority interest using a historical basis.
The
following unaudited pro forma operating data shown below presents the results
of
operations for the nine months ended September 30, 2008 and 2007, as if the
acquisition of XHBD had occurred on the last day of the immediately preceding
fiscal period. Accordingly, transaction costs related to the acquisition are
not
included in the loss from operations shown below. The pro forma results are
not
necessarily indicative of the financial results that might have occurred had
the
acquisition actually taken place on the respective dates, or of future results
of operations.
|
|
For
the
three
months Ended
September
30,
|
|
For
the
three
months Ended
September
30,
|
|
For
the
nine
months Ended
September
30,
|
|
For
the
nine
months Ended
September
30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
Net
sales
|
|
|
113,314
|
|
|
146,415
|
|
|
343,137
|
|
|
161,417
|
|
Net
loss
|
|
$
|
(2,733,156
|
)
|
$
|
(1,244,383
|
)
|
$
|
(3,283,197
|
)
|
$
|
(1,241,944
|
)
|
Net
loss per share-basic and diluted
|
|
$
|
(0.07
|
)
|
$
|
(0.04
|
)
|
$
|
(0.09
|
)
|
$
|
(0.04
|
)
|
Weighted
average shares outstanding-basic and diluted
|
|
|
40,429,285
|
|
|
34,177,176
|
|
|
37,100,185
|
|
|
33,874,655
|
|
In
addition, China Diamond, an entity controlled by Mr. Trevor Roy, a director
of
the Company, purchased 14 percent of XHBD on April 30, 2008.
NOTE
5 - INVENTORIES
Inventories
as of September 30, 2008 consist of the following:
|
|
September
30, 2008
|
|
|
|
(
unaudited)
|
|
Raw
materials
|
|
$
|
130,529
|
|
Finished
goods
|
|
|
619,379
|
|
|
|
|
|
|
Total
inventories
|
|
$
|
749,908
|
|
NOTE
6 - INCOME TAXES
Corporation
Income Tax ("CIT")
Significant
components of the Company's deferred income tax assets at September 30, 2008
and
December 31, 2007:
|
|
September
31, 2008
(unaudited)
|
|
December
31,
2007
|
|
Deferred
income tax asset:
|
|
|
|
|
|
Net
operating loss carried forward
|
|
$
|
237,339
|
|
$
|
184,553
|
|
Valuation
allowance
|
|
|
(237,339
|
)
|
|
(184,553
|
)
|
Total
deferred tax assets
|
|
|
|
|
|
|
|
The
Company files income tax returns in the U.S. federal jurisdiction and various
states. The Company is subject to U.S. federal or state income tax examinations
by tax authorities for years after 2002. During the periods open to examination,
the Company has net operating loss and tax credit carry forwards for U.S.
federal and state tax purposes that have attributes from closed periods. Since
these NOLs and tax credit carry forwards may be utilized
in future periods, they remain subject to examination.
The
Company files tax returns in jurisdictions of the PRC.
From
January 1 2008, the PRC implemented a new CIT rate, in which local and foreign
enterprises are subject to CIT of 25%, unless the enterprise is a high tech
enterprise.
These
returns are subject to audit by the taxing authorities. The Company believes
it
files all returns properly.
The
Company is not a U.S. taxpayer. Effective January 1, 2007, the Company
adopted Financial Accounting Standards Board Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes (“FIN 48”) — an interpretation of
FASB Statement No. 109, Accounting for Income Taxes.” The Interpretation
addresses the determination of whether tax benefits claimed or expected to
be
claimed on a tax return should be recorded in the financial statements. Under
FIN 48, we may recognize the tax benefit from an uncertain tax position only
if
it is more likely than not that the tax position will be sustained on
examination by the taxing authorities, based on the technical merits of the
position. The tax benefits recognized in the financial statements from such
a
position should be measured based on the largest benefit that has a greater
than
fifty percent likelihood of being realized upon ultimate settlement. FIN 48
also
provides guidance on de-recognition, classification, interest and penalties
on
income taxes, accounting in interim periods and requires increased disclosures.
As of June 30, 2008, the Company does not have a liability for unrecognized
tax
uncertainties.
Value
added tax ("VAT")
In
accordance with the relevant tax laws in the PRC, XHBD is levied at 6%
on the invoiced value of sales and is payable by the consumer. The Company
is
required to remit the VAT collected to the tax authority, but may deduct
therefore the VAT it has paid on eligible purchases.
NOTE 7
- SHAREHOLDER'S EQUITY
Preferred
Stock
On
December 31, 2006, the Company amended its certificate of incorporation to
provide for 5,000,000 shares of Series A 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. The
Company's board also has 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.
Issuance
of 4,000,000 preferred shares at $ 0.75 per share for total consideration of
$3,000,000
On
January 30, 2007, the Company entered into a Securities Purchase Agreement
with
three individuals, whereby the Company agreed to sell 4,000,000 shares of Series
A Convertible Preferred Stock and warrants to purchase 3,000,000 shares of
common stock at $1.00 per share. On February 12, 2007, the preferred stock
and
warrants were issued for $0.75 per unit, or $3,000,000 in
aggregate.
The
preferred stock earns dividends at a rate of 12% annually; dividends are paid
in
common shares of the Company valued at $1.00 per share, semiannually in arrears.
The preferred stock dividend is cumulative and non-participating. The preferred
stock has a liquidation preference of $0.75 per share and no voting rights.
The
preferred shares contain certain anti-dilution protection. The warrants are
exercisable through January 30, 2010 into 3,000,000 shares of the Company’s
common stock for $1.00 per share.
At
the
holder’s option, the preferred stock is convertible into the Company’s common
stock on a one-for-one basis anytime up to January 30, 2010. The conversion
price is initially set at $0.75 per share, subject to reset adjustments, but
in
no event can the reset conversion price drop below $0.50 per share. At the
Company’s option, the preferred stock will be convertible into the
Company’s common stock (at the conversion price initially set at $0.75 per
share) when the average closing price of the common stock for any 20 consecutive
trading days is at least $2.00. On January 30, 2010, the Company shall have
the
right to convert all the preferred stock then outstanding into shares of common
stock.
The
$3,000,000 proceeds were allocated to the preferred stock and warrants based
on
their relative fair values. The Company determined the fair value of the
warrants to be $693,177 using a Black-Scholes option pricing model with the
following assumptions: expected volatility of 50%, a risk-free interest rate
of
3.40%, an expected term of 3 years, and 0% dividend yield. The Company
determined the warrants are properly classified as an equity instrument and
no
value was recorded for the warrants as any value assigned would result in an
increase and decrease to additional-paid-in-capital in the same amount. The
conversion terms of the preferred stock resulted in a beneficial conversion
feature valued at $1,293,320. The Company recorded a charge to retained earnings
for $1,293,320 representing a deemed dividend to the preferred stockholders
with
the offset recorded in additional paid in capital.
Certain
registration payment arrangements were included with a private placement of
the
Company’s preferred stock. Among these, the Company was required to file a
registration statement within 60 days of the February 12, 2007 closing of the
private placement. The Company has not recorded any liability related to these
registration rights because the Company and preferred shareholders agreed
there would be no monetary damages if the Company did not meet its obligations
under the registration rights agreement.
Two
investors in the Series A preferred stock private placement were appointed
as
directors of the Company in March 2007.
Common
stock
Issuance
of common stock for cash
The
following represents transactions involving the purchases of the Company's
common stock for cash categorized by period (for the period from February 11,
2002 (inception) to September 30, 2008):
Issuance
of common stock during 2002
Issuance
of 13,750,000 shares at inception at $0.00004 per share for total consideration
of $550
Issuance
of 7,461,090 shares at $0.0468 per share for total consideration of
$349,180
Issuance
of 1,875,000 shares at $0.12 per share for total consideration of
$225,000
Issuance
of common stock during 2003
Issuance
of 3,508,425 shares at $0.12 per share for total consideration of
$421,011
Issuance
of 201,200 shares at $0.32 per share for total consideration of
$64,387
Issuance
of common stock during 2004
Issuance
of 434,600 shares at $0.12 per share for total consideration of
$52,150
Issuance
of 1,125,275 shares at $0.32 per share for total consideration of
$360,086
Issuance
of 1,616,000 shares at $0.50 per share for total consideration of
$807,998
Issuance
of common stock during 2005
Issuance
of 2,179,947 shares at $0.50 per share for total consideration of
$1,089,974
Issuance
of common stock during 2006
Issuance
of 540,348 shares at $1.20 per share for total consideration of
$648,417
Sale
of
100,000 shares at $1.20 per share for total consideration of $120,000 for shares
issued in 2007.
Sale
of
140,000 shares at $0.75 per share for total consideration of $105,000 for shares
issued in 2007.
Issuance
of common stock during 2007
Sale
of
30,000 shares at $0.75 per share for total consideration of
$22,500.
Issuance
of common stock in 2008
Sale
of
26,666 shares at $0.75 per share for total consideration of
$20,000.
Sale
of
366,667 investment units with a unit price at $0.75 for a total consideration
of
$275,000. Each unit includes one share of common stock, a three-year warrant
to
purchase one-half share of common stock at $0.75 and a five-year warrant to
purchase one-half share of common stock at $1.20 (an aggregate of 366,667
warrants). Two directors of the Company each purchased 20,000 investment
units in the offering. The fair value of the warrants acquired by the two
directors resulted in compensation expense of $11,507 (see Note 8). At September
30, 2008, $64,910 of the total consideration of $275,000 had been received
and the balance of $210,090 is included in subscription
receivable.
On
July
2, 2008, the Company entered into a securities purchase agreement with NFR
International Pty Limited and China Diamond Limited (collectively, “NFR/China
Diamond”), two companies controlled by Mr. Trevor Roy, a member of our Board of
Directors. NFR/ China Diamond agreed to purchase a total of 3,448,276 investment
units from us at $0.725 per unit. Each unit consists of one share of common
stock, a four-year warrant to purchase one-half share of common stock at $0.725
and a five-year warrant to purchase one-half share of common stock at $1.10.
The
total investment by NFR/China Diamond totals $2,500,000, of which $125,000
was
paid on July 2, 2008, with the balance due in ten monthly installments through
May 1, 2009. As of September 30, 2008, we had received $600,000 from NFR and
China Diamond. The fair value of the warrants acquired by NFR/China Diamond
resulted in compensation expense of $1,179,310 (see Note 8). In addition,
$189,655 of stock compensation was recognized for the difference between the
fair value of the units based on the closing price of the Company’s common stock
on the date the agreement was signed and the purchase price of the units.
On
July
9, 2008, the Company entered into a securities purchase agreement with Cheung
Hin Shun Anthony, a member of our Board Directors, in which Mr. Cheung agreed
to
purchase a total of 2,000,000 investment units from us at $0.725 per unit.
Each
unit consists of one share of common stock, a four-year warrant to purchase
one-half share of common stock at $0.725 and a five-year warrant to purchase
one-half share of common stock at $1.10. The total investment by Mr. Cheung
totals $1,450,000, of which $120,000 was received on July 9, 2008, and the
balance will be paid in ten monthly installments through May 31, 2009. As of
September 30, 2008, we had received $386,000 from Mr. Cheung. The fair value
of
the warrants acquired by Mr. Cheung resulted in compensation expense of $712,800
(see Note 8). In addition, $150,000 of stock compensation was recognized for
the
difference between the fair value of the units based on the closing price of
the
Company’s common stock on the date the agreement was signed and the purchase
price of the units.
Issuance
of common stock for services
On
December 1, 2004, the Company issued 100,000 shares of its common stock to
Richardson & Patel, LLC in consideration for legal services. The fair value
of 100,000 shares was determined to be $50,000, based on the closing price
of
the shares when granted, and was recorded as legal expense in 2004.
On
February 9, 2006, the Company agreed to issue CEOcast, Inc. 72,000 shares of
common stock for investor relations services. 36,000 shares of common stock
were
granted on February 9, 2006 and an additional 36,000 shares were granted on
May
9, 2006. The fair value of the 72,000 shares was determined to be $140,400
based
on the closing price of the Company’s common stock on the dates the shares were
granted, and was recorded as consulting expense in 2006.
On
March
6, 2006, the Company agreed to issue CH Capital LLC 50,000 shares for financial
consulting services. 25,000 shares were granted on March 6, 2006 and an
additional 25,000 shares were granted on September 6, 2006. The fair value
of
the 50,000 shares was determined to be $101,250 based on the closing price
of
the Company’s common stock on the date the shares were granted. The Company
amortized $83,506 of expense in 2006 and $17,744 in 2007.
On
March
23, 2007, the Company granted three directors 10,000 shares each of restricted
common stock for one year of board service. The fair value of 30,000 shares
was
determined to be $30,000, based on the closing price of the shares when granted,
and was recorded as compensation cost when the shares were granted.
On
July
1, 2007, the Company granted two scientific board advisors 10,000 shares each
of
restricted common stock for one year of scientific board service. The fair
value
of 20,000 shares was determined to be $20,000, based on the closing price of
the
shares when granted, and was recorded as compensation cost when the shares
were
granted.
On
July
1, 2008, the Company agreed to issue CH Capital LLC 50,000 shares of restricted
common stock for investor relations services. The fair value of the 50,000
shares was determined to be $87,500 based on the closing price of the Company’s
common stock on the date the agreement was signed. The Company recorded $87,500
as consulting expense when the shares were granted.
NOTE
8 - STOCK OPTION AND WARRANTS
On
December 1, 2004, the Company’s shareholders approved the 2004 Stock Incentive
Plan. The 2004 Stock Incentive Plan provides for the grant of incentive stock
options to our employees, and for the grant of non-statutory stock options,
restricted stock, stock appreciation rights and performance shares to our
employees, directors and consultants. The Company has reserved a total of
2,000,000 shares of its common stock for issuance pursuant to the 2004 Stock
Incentive Plan. The 2004 Stock Incentive Plan does not provide for automatic
annual increases in the number of shares available for issuance under the plan.
As of September 30, 2008, 1,877,000 options had been granted under this
plan.
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 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, which 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.
Issuance
of stock options
In
2004,
the Company issued to Columbia China Capital Group, Inc. (“Columbia China”) 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 financial consulting
services to be provided over a two-year period. The fair value of the options
was $670,098 at the date of grant, which was determined by the Black-Scholes
valuation method using the following assumptions: no expected dividend yield;
risk-free interest rates of 3.4%; expected life of 3 years; and estimated
volatility of 85% based on recent history of the stock price in the industry.
The Company revalued the fair value of the options at the end of each reporting
period in accordance with EITF 96-18 and determined there was no significant
change to the initial valuation. The Company amortized the value of the options
over the two- year term of the service agreement. Amortization was $279,208
in
2004 and $251,287 in 2005. On December 1, 2004 and October 17, 2005, 200,000
and
300,000 options, respectively, were exercised. On October 18, 2005, Columbia
China forfeited 350,000 options. The unamortized balance of deferred
compensation of $139,604 was reclassified into additional paid-in capital in
2005. On January 9, 2006 and March 2, 2007, Columbia China forfeited a total
of
97,000 additional options. In February 2007, Columbia China exercised 395,675
options and no longer owns any options.
On
December 1, 2004, the Company issued 100,000 shares of its common stock and
an
option to purchase an additional 50,000 shares of its common stock at $0.001
per
share to Richardson & Patel, LLC in consideration for past legal services.
The shares issued were valued at $50,000, their fair value at the date of
issuance. The options granted were valued at $24,954 at the date of grant,
which
was determined by the Black-Scholes valuation method, using the following
assumptions: no expected dividend yield; risk-free interest rates of 3.4%;
expected lives of 3 years; and estimated volatility of 85 percent based on
recent history of the stock price in the industry. The value of the options
$24,954 was reflected as a consulting expense in 2004.
On
July
1, 2005, the Company issued to two individual consultants an option to purchase
20,000 shares of common stock at $.001 per share to be exercised within a
three-year period in consideration for scientific advisory service to be
provided over a one-year period, and all of these shares were exercised at
the
time when they were granted. The options granted were valued at $9,982 at the
date of grant, which was determined by the Black-Scholes valuation method,
using
the following assumptions: no expected dividend yield; risk-free interest rates
of 3.4%; expected lives of 3 years; and estimated volatility of 70 percent
based
on recent history of the stock price in the industry. The Company revalued
the
fair value of the options at the end of each reporting period in accordance
with
EITF 96-18 and determined there was no significant change to the initial
valuation. The value of the options issued was reflected as deferred
compensation and is being amortized over the one- year term of the service
agreement. The consulting expense had been completely amortized in 2005 and
2006.
On
October 14, 2005, the Company issued to Mr. Liang Qiao, MD, the Company's chief
executive officer, an option to purchase 600,000 shares of common stock at
$0.55
per share to be exercised with a ten-year (10) period. The options granted
were
valued at $157,770 at the date of grant, which was determined by the
Black-Scholes valuation method, using the following assumptions: no expected
dividend yield; risk-free interest rates of 3.4%; expected lives of four years;
and estimated volatility of 70 percent based on recent history of the stock
price in the industry. The value of the options will be amortized over the
three
year vesting period. For quarter ended September 30, 2008, $13,150 has been
amortized and included in the accompanying statement of operations.
On
October 14, 2005, the Company issued to 25 employees options to purchase
1,345,000 shares of common stock at $0.5 per share to be exercised with a
ten-year (10) period. The options granted were valued at $369,045 at the date
of
grant, which was determined by the Black-Scholes valuation method, using the
following assumptions: no expected dividend yield; risk-free interest rates
of
3.4%; expected lives of 4 years; and estimated volatility of 70 percent based
on
recent history of the stock price in the industry. The value of the options
will
be amortized over the three year vesting period. For quarter ended September
30,
2008, $29,155 has been amortized and included in the accompanying consolidated
statement of operations.
On
November 2, 2005, the Company issued to Mr. Wenhui Qiao (the Company's director
and president) and Mr. Chuen Huei (Kevin) Lee (the Company's CFO) an option
to
purchase 300,000 shares of common stock at $0.001 per share. The options granted
were valued at $149,738 at the date of grant, which was determined by the
Black-Scholes valuation method, using the following assumptions: no expected
dividend yield; risk-free interest rates of 3.4%; expected lives of 4 years;
and
estimated volatility of 70 percent based on recent history of the stock price
in
the industry. The value of the stock options of $149,738 was reflected as
consulting expense in 2005.
On
November 2, 2005, the Company issued to Adam Friedman Associates, LLC, the
Company's investor relations consultant, an option to purchase 50,000 shares
of
common stock at $0.001 per share to be exercised within a one-year period in
consideration for financial consulting service to be provided over a one-year
period. The options were exercised in the second quarter of 2006 The options
granted were valued at $24,952 at the date of grant, which was determined by
the
Black-Scholes valuation method, using the following assumptions: no expected
dividend yield; risk-free interest rates of 3.4%; expected lives of 1.5 years;
and estimated volatility of 70 percent based on recent history of the stock
price in the industry. The value of the options was amortized over the one-
year
term of the service agreement.
On
November 2, 2005, the Company issued to Ms. Ma Suifang, the Company's financial
consultant, an option to purchase 8,116 shares of common stock at $.001 per
share. The options granted were valued at $4,051 at the date of grant, which
was
determined by the Black-Scholes valuation method, using the following
assumptions: no expected dividend yield; risk-free interest rates of 3.4%;
expected lives of 3 years; and estimated volatility of 70 percent based on
recent history of the stock price in the industry. The value of the stock
options of $4,051 was reflected as consulting expense in 2005.
On
July
1, 2006, the Company issued options to two consultants to purchase 10,000 shares
of common stock, individually. The fair value of the options was $44,982 at
the
date of grant, which was determined by the Black-Scholes valuation method,
using
the following assumptions: no expected dividend yield; risk-free interest rates
of 3.4%; expected lives of 3 years; and estimated volatility of 49 percent
based
on recent history of the stock price in the industry. For the years ended
December 31, 2007 and 2006, $22,491 and $22,491 was amortized and included
as
consulting expense respectively.
On
April
1, 2007, the Company granted Mr. Larry E. Henneman, Jr. an option to purchase
20,000 shares of commons stock for legal services in connection with our patent
application in the United States. The exercise price is $0.001 and the
expiration date is five years from the grant date. The fair value of the options
was $20,783 at the date of grant, which was determined using the Black-Scholes
valuation method, using the following assumptions: no expected dividend yield;
a
risk-free interest rate of 3.4%; an expected life of 5 years; and an estimated
volatility of 52 percent based on recent history of the stock price in the
industry. The total of $20,783 was charged to consulting expense at the date
the
options were granted.
On
April
1, 2007, the Company granted Seven Star International Corp. an option to
purchase 100,000 shares of common stock for 2 years of consulting service.
The
exercise price is $0.001 and the expiration date is five years from the grant
date. The fair value of the options was $103,916 at the date of grant, which
was
determined by the Black-Scholes valuation method, using the following
assumptions: no expected dividend yield; risk-free interest rates of 3.4%;
expected lives of 5 years; and estimated volatility of 52 percent based on
recent history of the stock price in the industry. The total of $103,916 was
charged to consulting expense at the date the options were granted.
The
following table summarizes the stock option activity under the plan and outside-
the- plan issuances:
|
|
|
Options
Granted
|
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
Outstanding
at January 1, 2008
|
|
|
2,317,000
|
|
$
|
0.42
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
0
|
|
|
0
|
|
Exercised
|
|
|
0
|
|
$
|
0
|
|
Withdrawn
|
|
|
(20,000
|
)
|
$
|
0.001
|
|
|
|
|
|
|
|
|
|
Outstanding
at September 30, 2008
|
|
|
2,297,000
|
|
$
|
0.42
|
|
|
|
|
|
|
|
|
|
Exercisable
at September 30, 2008
|
|
|
2,297,000
|
|
$
|
0.42
|
|
The
following table summarizes information about stock options outstanding as of
September 30, 2008:
|
|
Options
Outstanding
|
|
Options
Exercisable
|
|
Range
of Exercise
Prices
|
|
Number
of Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Life
(in years)
|
|
Number
of Shares
|
|
Weighted
Average Exercise Price
|
|
$0.001
to $0.55
|
|
|
2,297,000
|
|
$
|
0.42
|
|
|
7.08
|
|
|
2,297,000
|
|
$
|
0.42
|
|
|
|
|
2,297,000
|
|
|
|
|
|
|
|
|
2,297,000
|
|
|
|
|
The
aggregate intrinsic value of the 2,297,000 options outstanding and 2,297,000
options exercisable as of September 30, 2008 was $6,615,360. The aggregate
intrinsic value for the options is calculated as the difference between the
price of the underlying awards and quoted price of the Company's common shares
for the options that were in-the-money as of September 30,
2008.
A
summary
of the status of nonvested shares as of September 30, 2008 are as
follows:
|
|
Number
of
Shares
|
|
Nonvested
at January 1, 2008
|
|
|
473,750
|
|
Granted
|
|
|
—
|
|
Vested
|
|
|
(470,416)
|
)
|
Withdrawn
|
|
|
(3,334
|
)
|
Nonvested
at September 30, 2008
|
|
|
0
|
|
The
total
deferred compensation expense for the outstanding value of unvested stock
options had been amortized as of September 30, 2008.
Common
stock warrants
In
November 2006, the Company issued a warrant to purchase 50,000 shares of common
stock at $1.20 per share with a term of three years to an investor who purchased
33,333 shares of common stock in 2006 at $0.75 per share. The Company determined
the warrants are properly classified as an equity instrument and no value was
recorded for the warrants as any value assigned would result in an increase
and
decrease to additional-paid-in-capital in the same amount.
On
January 30, 2007, the Company issued warrants to purchase 3,000,000 shares
of
common stock at $1.00 per share with a term of three years to three individuals
who also agreed to purchase 4,000,000 shares of Series A Convertible Preferred
Stock at $0.75 per share (see discussion above). The Company determined
the warrants are properly classified as an equity instrument and no value was
recorded for the warrants as any value assigned would result in an increase
and
decrease to additional-paid-in-capital in the same amount.
On
June
4, 2008 and June 18, 2008, the Company issued two series of warrants to
four investors to purchase 183,334 shares of common stock at $0.75 per share
with a term of three years and to purchase 183,333 shares of common stock at
$1.20 per share with a term of four years (366,667 warrants in the aggregate).
Warrants to purchase 40,000 shares of common stock were acquired by two of
our
directors (see Note 7). We recorded the fair value of the warrants acquired
by
the two directors as compensation costs. The fair value of three-year warrant
and five-year warrant issued to our directors was $5,898 and $5,610,
respectively, at the grant date, which was determined using the Black-Scholes
valuation method, using the following assumptions: no expected dividend yield;
a
risk-free interest rate of 2.4%; an expected life of 3 and 5 years respectively;
and an estimated volatility of 56 percent based on recent history of the stock
price in the industry. The total of $11,508 was charged to compensation cost
at
the date the warrants were granted.
On
July
2, 2008, Company issued two series of warrants to two investors to purchase
1,724,138 shares of common stock at $0.725 per share with a term of four years
and to purchase 1,724,138 shares of common stock at $1.10 per share with a
term
of five years. Since the control person of the two institutional investors
is
our director (see Note 7), we recorded the fair value of the warrants to
purchase 3,448,276 shares of common stock as compensation cost. The fair value
of four-year warrant and five-year warrant issued to these two investors was
$633,091 and $546,220, respectively, at the grant date, which was determined
using the Black-Scholes valuation method, using the following assumptions:
no
expected dividend yield; a risk-free interest rate of 2.4%; an expected life
of
4 and 5 years respectively; and an estimated volatility of 56 percent based
on
recent history of the stock price in the industry. The total of $1,179,311
was
charged to compensation cost at the date the warrants were granted.
On
July
9, 2008, Company issued two series of warrants to an investor to purchase
1,000,000 shares of common stock at $0.725 per share with a term of four years
and to purchase 1,000,000 shares of common stock at $1.10 per share with a
term
of five years. Since the investor is our director (see Note 7), we recorded
the
fair value of the warrants to purchase 2,000,000 shares of common stock as
compensation cost. The fair value of four-year warrant and five-year warrant
issued to these two investors was $382,474 and $330,293, respectively, at the
grant date, which was determined using the Black-Scholes valuation method,
using
the following assumptions: no expected dividend yield; a risk-free interest
rate
of 2.4%; an expected life of 4 and 5 years respectively; and an estimated
volatility of 56 percent based on recent history of the stock price in the
industry. The total of $712,767 was charged to compensation cost at the date
the
warrants were granted.
At
September 30, 2008, warrants outstanding were as follows:
|
|
|
Number
of
Shares
under Warrants
|
|
|
Weighted
Average Exercise Price
|
|
|
|
|
|
|
|
|
|
Warrants
outstanding at January 1, 2008
|
|
|
3,050,000
|
|
$
|
1.01
|
|
Warrants
granted
|
|
|
5,814,943
|
|
|
.97
|
|
Warrants
expired
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Warrants
outstanding at September 30, 2008
|
|
|
8,864,943
|
|
$
|
0.95
|
|
The
following table summarizes information about warrants outstanding at September
30, 2008:
Warrants
Outstanding and Exercisable
|
|
|
|
|
|
|
|
|
|
Number
of Shares Under Warrants
|
|
Exercise
Price
|
|
Expiration
Date
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
50,000
|
|
$
|
1.20
|
|
|
November
20, 2009
|
|
$
|
1.20
|
|
3,000,000
|
|
$
|
1.00
|
|
|
January
20, 2010
|
|
$
|
1.00
|
|
183,334
|
|
$
|
0.75
|
|
|
June
4, 2011
|
|
$
|
0.75
|
|
183,333
|
|
$
|
1.20
|
|
|
June
4, 2013
|
|
$
|
1.20
|
|
1,724,138
|
|
$
|
0.725
|
|
|
July
2, 2012
|
|
$
|
0.725
|
|
1,724,138
|
|
$
|
1.10
|
|
|
July
2, 2013
|
|
$
|
1.10
|
|
1,000,000
|
|
$
|
0.725
|
|
|
July
9, 2012
|
|
$
|
0.725
|
|
1,000,000
|
|
$
|
1.10
|
|
|
July
9, 2013
|
|
$
|
1.10
|
|
8,864,943
|
|
$
|
0.75-$1.20
|
|
|
|
|
$
|
0.95
|
|
NOTE 9
- COMMITMENTS AND CONTINGENCIES
Construction
in progress
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, which
the Company plans to develop into a laboratory and bio-manufacturing facility
in
compliance with Good Manufacturing Practices, or GMP, regulations primarily
for
clinical trials of HIV-PV Vaccine I. As of December 31, 2005, the Company had
received all necessary permits and approvals. The general plans for development
include the construction of a laboratory facility (“Phase One”) and construction
of an administrative office building (“Phase Two”). The Company estimates the
total project costs for Phase One will be approximately $2,850,000. At September
30, 2008, the Phase One construction and internal clean room decoration costing
a total of approximately $2,405,900 is awaiting permanent electrical equipment
to be installed, and is recorded as construction in progress. At September
30,
2008, $184,195 is due to the contractors of Phase One for the completed
construction and internal clean room decoration and this obligation is recorded
as due to contractors.
The
Company estimates that the remaining costs associated with completion of Phase
One project will be approximately $260,000, primarily for permanent electrical
equipment to be installed and related works to be finished. As of September
30,
2008, the Company had signed agreements with various contractors and vendors
to
finish the electricity project. The Company estimates the purchase and
installation of the electrical and steam equipment will be completed by the
end of 2008. In addition, the Company estimates the cost of laboratory equipment
it needs before Phase One is fully operational will be approximately $600,000.
As of September 30, 2008, the Company had negotiated with several parties about
contracts for the purchase of the laboratory equipment, but had not signed
any
contract yet. The Company estimates the purchase and installation of the
laboratory equipment will be completed by early 2009. At September 30,
2008, Phase Two was still in the design stage. The Company estimates total
project costs for Phase Two will be approximately $1,200,000. The Company
estimates that construction may begin on Phase Two in 2010 or later, but
currently has no plans for Phase Two construction.
Lease
commitment
As
of
September 30, 2008, the Company had remaining outstanding commitments with
respect to its non-cancelable operating lease for its office in Oak Brook,
IL,
of which $6970 is due in 2008, $28,088 is due in 2009 and $19,004 is due in
2010, and for its office in Beijing, PRC (which is leased from Mr. Wenhui Qiao,
the Company's director and president), of which $17,160 is due within one
year.
Research
and Development Agreements
On
May 6,
2004, Beijing Institute of Radiation Medicine and the Company entered
into agreements for conducted biodistribution and integration studies for HIV-PV
Vaccine I. The aggregate amount for the testing is $28,494 and as of September
30, 2008, the remaining commitment was $5,832. On April 1, 2007, we entered
into
a biosample inspection for vaccine development research agreement with Beijing
Xingde Biomedicine Research Institute. The aggregate amount paid for the testing
is $22,452 and the remaining commitment was $23,910 as of September 30, 2008.
On
March 1, 2008, we signed an agreement with Changchun Wandi Biotechnology Co.
Ltd, to conduct SF9 cell culture and stability study. The payment will be on
a
monthly basis and the remaining commitment is $17,453 as of September 30,
2008.
Royalty
and License Arrangements
Mr.
Liang
Qiao, M.D., the Company's co-founder and chief executive officer, is one of
the
co-inventors of the Company's core technology that was assigned to Loyola
University Chicago in April 2001. Under the 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 the People's Republic
of
China, including mainland China, Hong Kong, Taiwan and Macau. 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 all uses of the licensed
technology, including uses under sublicenses. As of September 30, 2008, the
Company had not generated any revenues from the sale of any products under
development, nor had the Company received any revenues from
sublicenses.
Distribution
Agreement
On
November 21, 2005, we entered into an exclusive distribution agreement with
Xinhua Surgical Instruments Co. Ltd., (“Xinhua”) located in Shandong, China.
Under this agreement, we have been granted exclusive distribution rights for
all
Xinhua surgical instruments in the United States, which are subject to FDA
approval. The Company is responsible for advertising and marketing expenses
in
connection with distribution of Xinhua surgical instruments in the United
States. Sales were $2,979 in 2007 and $1,768 in 2006. Minimum sales per the
agreement are $50,000 in 2007, $60,000 in 2008, and increases 10% annually
thereafter. Although we did not reach the minimum sales requirement in 2007,
Xinhua indicated that we still have the exclusive distribution right in
2008.
On
March
17, 2008, the Company entered into an exclusive agency agreement with Xinhua.
Under the renewed Agreement, the Company has been granted exclusive distribution
rights for all Xinhua surgical instruments in the United States, Australia,
and
New Zealand. The Company’s minimum annual sale requirement for these three areas
for a whole year from the date of signing the agreement will be $55,000 and
increases 10% annually thereafter. The Company is responsible for advertising
and marketing expenses in connection with distribution of Xinhua surgical
instruments in these three areas. Subject to minimum sale requirements, the
Company's exclusivity rights in these three areas will be extended. The new
agreement supersedes the previous agreement signed on November 21, 2005. Sales
in 2008 as of September 30, 2008 were $13,560.
On
December 6, 2005, we received confirmation from the FDA of our registration
as a
medical device establishment, which enables us to perform initial distributor
and repackager operations. This confirmation is not a FDA approval of any
product or any of our activities. It is neither a license, nor a certification.
We market Xinhua surgical instruments that meet the criteria for Class I medical
devices under FDA rules, which do not require pre-market notification to the
FDA.
NOTE 10
- SUBSEQUENT EVENT
On
October 1, 2008, we signed two scientific advisory board agreements with Dr.
Katherine Knight and Dr. Mitchell Kronenberg, respectively. In these agreements,
both professors will serve as our Scientific Advisory Board members for one
year
beginning October 1, 2008, and in turn, the Company will issue 10,000 shares
of
restricted common shares to each member. In addition to the restricted shares,
Dr. Knight will also receive $10,000 cash as compensation for providing
scientific consulting service to us.
Item
2. Management's Discussion and Analysis of Financial Condition and Results
of
Operation
Some
of
the statements made by us in this Quarterly Report on Form 10-Q are
forward-looking in nature, including but not limited to, statements relating
to
our future revenue and expenses, product development, future market acceptance,
levels of research and development, our management's plans and objectives for
our current and future operations, and other statements that are not historical
facts. Forward-looking statements include, but are not limited to, statements
that are not historical facts, and statements including forms of the words
"intend", "believe", "will", "may", "could", "expect", "anticipate", "plan",
"possible", and similar terms. Actual results could differ materially from
the
results implied by the forward looking statements due to a variety of factors,
many of which are discussed throughout this Quarterly Report and in our SEC
filings. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. We undertake
no obligation to publicly release any revisions to these forward-looking
statements that may reflect events or circumstances after the date hereof or
to
reflect the occurrence of unanticipated events, unless required by law. Factors
that could cause actual results to differ materially from those expressed in
any
forward-looking statement made by us include, but are not limited
to:
·
|
our
ability to finance our activities and maintain our financial
liquidity;
|
·
|
our
ability to attract and retain qualified, knowledgeable
employees;
|
·
|
our
ability to complete product
development;
|
·
|
our
ability to obtain regulatory approvals to conduct clinical
trials;
|
·
|
our
ability to design and market new products
successfully;
|
·
|
our
failure to acquire new customers in the
future;
|
·
|
deterioration
of business and economic conditions in our
markets;
|
·
|
intensely
competitive industry conditions.
|
In
this
document, the words "we," "our," "ours," and "us" refers to Bio-Bridge Science,
Inc. and our wholly owned subsidiaries, including Bio-Bridge Science (Beijing)
Co. Ltd., a Wholly-Foreign Owned Enterprise of the People's Republic of China
("Bio-Bridge (Beijing)") , Bio-Bridge Science Corporation, a Cayman Islands
corporation, Bio-Bridge Science Holding Co. Ltd, a Cayman Islands corporation,
Bio-Bridge Science(HK) CO. Ltd, a Hong Kong company, and Xinheng Baide
Biotechnology Co. Ltd., a Chinese company.
OVERVIEW
Bio-Bridge
Science, Inc. is a biotechnology company which focuses on the commercial
development of vaccines to improve human health. Bio-Bridge Science has
exclusive license granted from Loyola University Chicago, USA, for a technology
(papilloma pseudovirus). The company plans to use the unique technology to
develop vaccines against HIV, colon cancer, and an adjuvant to enhance immune
response to vaccines in elderly. The company also plans to develop an HPV
vaccine using a different technology, which provides protection against more
HPV
infection than the one currently in the market. Bio-Bridge Science Inc has
a
wholly owned subsidiary in Beijing, China, which undertake the task to produce
these vaccines and file applications with Chinese FDA for clinical trials.
Bio-Bridge Science also acquired a biotechnology company (Huhhot Xinheng Baide
Biotechnology Co., Ltd. (“XHBD”) that produces bovine serum, that is a
material for vaccine production and scientific research. Bio-Bridge Science
plans to acquire more profitable biotech companies which are complimentary
to
our own products. We expect that these profitable companies will provide us
with
cash to support development of our proprietary products, lower cost for
material used in our vaccine production, skillful work force in vaccine
production, and a distribution channel.
History
of Losses and Negative Cash Flows
Since
inception, we have generated few revenues. We incurred net losses of $2,716,020
and $3,204,053 for the three and nine month periods ended September 30, 2008,
respectively. As of September 30, 2008, we had an accumulated deficit of
$8,695,765. As of September 30, 2008, we have funded our operations through
equity offerings whereby we raised an aggregate $8,365,888 since inception.
In
the third quarter of 2008, the Company entered into common stock purchase
agreements with three investors in private placements in the form of investment
unit priced at $0.725 per unit. A total of 5,448,276 investment units were
sold
in the third quarter of 2008. Each unit includes one share of common stock,
a
four-year warrant to purchase 0.5 share of common stock at $0.725 and a
five-year warrant to purchase 0.5 share of common stock at $1.10. Although
we
have secured funding of $ 3,950,000 in third quarter of 2008,our capital
requirements beyond April 2010, as they relate to further research and
development relating to our product candidates, will continue to be significant.
We plan to raise more capital to meet our capital requirement for the
development of our product candidates in the future as well as our future
potential acquisitions in China.
Plan
of Operation
Vaccine
Development
Our
primary corporate focus is on the commercial development of our potential
vaccine products 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 vaccine candidates, 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.
The
pre-clinical testing of our HIV vaccine (HIV-PV Vaccine I) on laboratory animals
was completed in Beijing Institute of Radiation Medicine and the testing result
was issued in June 2006 and showed encouraging results. After the vaccine
samples are produced in our GMP facility, we will submit application for
clinical trials with the Chinese SFDA. The clinical trial for therapeutic
vaccine is expected to last three years. The clinical trial for preventive
vaccine will last longer, most likely five to seven years.
We
also
plan to conduct the pre-clinical trials for colon cancer vaccine and HPV
vaccine. We estimate that we will complete the pre-clinical trial of colon
cancer vaccine in 2009 and that of HPV vaccine in early 2010. We expect to
enter
clinical trials of colon cancer vaccine in 2009 or 2010. As we discussed
previously, clinical trial for therapeutic vaccine is expected to last three
years. All the technology to make HIV vaccine and colon cancer vaccine is based
on the technology co-developed by our CEO, Dr. Liang Qiao. Because we use the
same technology to develop our potential vaccine products, we expect to use
the
same GMP facility in Beijing, China , to produce the HIV vaccine and colon
cancer vaccine for pre-clinical and clinical trials.
As
of
December 31, 2005, we had completed the construction of the outside body of
our
laboratory and bio-manufacturing facility in our wholly owned subsidiary in
Beijing, China. The internal clean room installation project will be completed
by the end of this year, and the equipment for vaccine production will be
purchased and installed in the facility by the end of this year or early next
year. We plan to start our HIV vaccine production in the first quarter of
2009.
To
date,
we have funded our operations from funds we raised in private offerings. During
the next twelve months, we plan to raise more capital through an offering of
our
securities or from loans to continue research and development of our various
vaccine product candidates in China as well as conducting more potential
acquisition activities in China. We estimate that the capital requirements
for
the operations of our core business for the next twelve months will be as
follow:
·
|
approximately
$ 0.3 million for our laboratory/bio-manufacturing facility’s electricity
work for Phase One laboratory manufacturing facility project in Beijing,
China;
|
·
|
approximately
$ 0.75 million to purchase advanced laboratory equipment and supplies
for
our vaccine production;
|
·
|
approximately
$0.6 million for preparatory work for Phase I clinical study of our
HIV
vaccine;
|
·
|
approximately
$1.0 million for working capital and general corporate needs;
and
|
·
|
approximately
$0.7 million for pre-clinical trials on colon cancer vaccine and
HPV
vaccine.
|
We
expect
that the therapeutic vaccine can be brought to market in three years and the
preventive vaccine can be brought to market in five to seven years after they
enter clinical trials, if we are successful in raising funds to complete
development of the vaccines. As of September 30, 2008, our cash and cash
equivalents and trading securities position was $1,057,714 and we entered into
securities purchase agreements in July 2008 with three investors that we will
get a total of $ 3,950,000 that we will receive in installments from July
2008 to May 2009. However, we still need to raise additional funds through
the
public or private sales of our securities, loans, or a combination of the
foregoing to meet our future planned operations beyond April 2010. We cannot
guarantee that financing will be available to us, on acceptable terms or at
all.
We also may borrow from local banks in China given that our land use right
and
laboratory facility could be used as collateral for borrowing. If we fail to
obtain other financing by the end of April 2010, either through an offering
of
our securities or by obtaining additional loans, we may be unable to develop
our
planned projects and may be forced to scale back some of our planned projects.
Distribution
of Xinhua surgical instruments
On
November 21, 2005, we entered into an exclusive distribution agreement with
Xinhua Surgical Instruments Co. Ltd., (“Xinhua”) located in Shandong , China.
Under this agreement, we have been granted exclusive distribution rights for
all
Xinhua surgical instruments in the United States , which are subject to FDA
approval. The Company is responsible for advertising and marketing expenses
in
connection with distribution of Xinhua surgical instruments in the United States
. Sales were $13,560 for the nine months ended September 30, 2008, $ 2,979
in
2007 and $ 1,768 in 2006. Minimum sales per the agreement are $ 50,000 in 2007,
$ 60,000 in 2008, and increases 10% annually thereafter. Although we did not
reach the minimum sales requirement in 2007, Xinhua indicated that we still
have
the exclusive distribution right in 2008.
On
March
17, 2008, we entered into an exclusive agency agreement with Xinhua. Under
the
renewed Agreement, we have been granted exclusive distribution rights for all
Xinhua surgical instruments in the United States, Australia and New Zealand.
The
Company’s minimum sale requirement for these three areas in 2008 will be $55,000
and increases 10% annually thereafter. The Company is responsible for
advertising and marketing expenses in connection with distribution of Xinhua
surgical instruments in these three areas. Subject to minimum sale requirements,
the Company's exclusivity rights in these three areas will be extended. The
new
Agreement supersedes the previous agreement signed on November 21,
2005.
Acquisitions
of companies complementary to the Company
Another
major corporate focus is for the Company to acquire other profitable vaccine
companies or vaccine production related companies, such as those producing
materials for vaccine production, in China. Such an acquisition may help support
our development of our in-house vaccines candidates by providing us with
operating cash flows, lower cost for material used in our vaccine production,
skillful work force in vaccine production, and a distribution channel. We
believe these companies will be complementary to us and make us more
competitive.
Huhhot
Xinheng Baide Biotechnology Co., Ltd. (“XHBD”) was
incorporated
on May 17, 2006 under the laws of the People’s Republic of China (“PRC”) as
a limited company. XHBD is located in the city of Huhhot in Inner Mongolia,
China. The primary operations of the Company are the manufacture and
distribution of bovine serum products, which is used in research, and production
of vaccines. On July 31, 2008, the Company completed the acquisition of
Huhhot Xinheng Baide Biotechnology Co. Ltd., (“XHBD”), in which the Company
purchased 51% of the outstanding capital interests of XHBD for RMB 6 million
(approximately US$ 881,000). XHBD is located in the city of Huhhot in Inner
Mongolia of the PRC and is organized under the laws of the PRC. The
acquisition was accounted for as a purchase in accordance with Statement of
Financial Accounting Standards No. 141 “Business Combinations”. The assets
acquired and liabilities assumed were recorded at their fair values at the
date
of acquisition. We completed the 51% acquisition of Xinheng Baide on July 31,
2008 and began to consolidate its financial statements starting from August
1,
2008.
Potential
Joint Venture
We
entered into a non-binding memorandum of understanding with JR Scientific,
Inc.,
a Woodland, California based manufacturer of classical and custom cell culture
medium and sera products ("JRS”) and Mr. Jan Baker, President and CEO of JRS on
April 15, 2008. Under the MOU, the Company will form a joint venture together
with JRS and several other investors in China. The joint venture is expected
to
mainly produce culture medium, serum, and other biomaterial for sale in China
and other countries under the brand name of the joint venture. Cell culture
medium and serum are used in vaccine production as well as scientific research.
JRS and Mr. Baker as part of the MOU, agree to transfer technology and
“know-how” to the joint venture. The total investment for the joint venture is
planned to be around RMB 10 million (about US$ 1.47 million). We expect to
own
at least 51% of the new joint venture. The joint venture is expected to be
formed in the fourth quarter of 2008 or early 2009. However, the agreement
is
non-binding and we cannot assure you that a joint venture will be
formed.
Results
of Operations
Three-month
period ended September 30, 2008 and September 30, 2007
During
the three-month period quarter ended September 30, 2008, we had revenues of
$113,314. The cost of revenue was $89,348, which was 79% of the total revenue.
On July 31, 2008, the Company finished the acquisition of Huhhot Xinheng Baide
Biotechnology Co. Ltd., (“XHBD”). Included in consolidate revenues and cost of
revenue for the three-month period ended September 30, 2008 are XHBD’s revenue
and cost of revenue from August 1, 2008 to September 30, 2008 which totaled
$107,181 and $84,303, respectively.
During
the three-month period ended September 30, 2007, we had revenues of $1,694.
The
cost of revenue was $950, which was 56% of the total revenue. The increase
of
the revenue was mainly due to sales of bovine serum, which was $107,181. Also,
the sale of surgical instruments was increased to $6,133 during the three-month
period ended September 30, 2008.
The
decrease of the gross margin was due to the gross margin of bovine serum was
lower, which was 19% during the three-month period ended September 30, 2008,
compared with 55% for sale of surgical instruments.
For
the
quarter ended September 30, 2008, research and development expenses were
$19,885, as compared to $21,476 for the quarter ended September 30, 2007. The
decrease of $1,591 is due to the decrease of the pre-clinical trial development
of our vaccine candidates.
For
the
quarter ended September 30, 2008, general and administrative expenses were
$2,658,966 as compared to $203,878 for the quarter ended September 30, 2007.
The
increase $2,457,015 is due primarily to that we recorded non-cash stock
compensation costs of $2,231,733 related to investments from directors in the
third quarter.
For
the
quarter ended September 30, 2008, selling and distribution expenses were $22,499
as compared to $8,640 for the quarter ended September 30, 2007. The increase
of
$13,859 is due primarily to increases in shipping and selling expense and
selling and distribution of XHBD.
For
the
quarter ended September 30, 2008, interest expense was $798 as compared to
interest income of $1,328 for the quarter ended September 30, 2007. The decrease
of $2,126 is due primarily to a decrease in cash balance and borrowing
cost.
However,
none of these revenues pertain to our core planned principal operations of
developing vaccine candidates. Therefore, we believe a separate analysis of
these revenues is not as helpful as an analysis of our liquidity and capital
resources.
Net
loss
for the quarter ended September 30, 2008 was $2,716,020 as compared to $312,625
for the quarter ended September 30, 2007. This increase of $2,403,395 in net
loss is attributable primarily to the increase of non-cash stock compensation
cost related to investments from directors and was little offset by decrease
in
unrealized loss of trading securities.
Nine-month
period ended September 30, 2008 and September 30, 2007
During
the nine months ended September 30, 2008, we had revenues of $120,741. The
cost
of revenue was $92,196, which was 76% of the total revenue. On July 31, 2008,
the Company finished the acquisition of Huhhot Xinheng Baide Biotechnology
Co.
Ltd., (“XHBD”). Included in consolidate revenues and cost of revenue for the
nine-month period ended September 30, 2008 are XHBD’s revenue and cost of
revenue from August 1, 2008 to September 30, 2008 which totaled $107,181 and
$84,303, respectively.
During
the nine months ended September 30, 2007, we had revenues of $2,384. The cost
of
revenue was $1,355, which was 57% of the total revenue. The increase of the
revenue of $118,357 was mainly due to sales of bovine serum, which was $107,181.
Also the sale of surgical instruments was increased to $13,560 during the nine
months ended September 30, 2008.
For
the
nine months ended September 30, 2008, research and development expenses were
$76,264, as compared to $103,816 for the nine months ended September 30, 2007.
The decrease of $27,552 is due primarily to the decrease of pre-clinical trial
development of our vaccine candidates.
For
the
nine months ended September 30, 2008, general and administrative expenses were
$3,103,364 as compared to $922,570 for the nine months ended September 30,
2007.
The increase of $2,182,721 is due primarily to the increase of non-cash stock
compensation costs related to investments from directors.
For
the
nine months ended September 30, 2008, selling and distribution expense was
$56,109 as compared to $24,952 for the nine months end September 30, 2007.
The
increase of $31,157 is due primarily to increases in shipping and selling
expense and selling expense from XHBD.
For
the
nine months ended September 30, 2008, interest expense was $2,443 as compared
to
interest income of $5,128 for the nine months ended September 30, 2007.
Th
e
decrease of $7,571 is due primarily to a decrease in cash balance and borrowing
cost.
However,
none of these revenues pertain to our core planned principal operation of
developing vaccines. Therefore, we believe a separate analysis of these revenues
is not as helpful as an analysis of our liquidity and capital
resources.
Net
loss
for the nine months ended September 30, 2008 was $3,204,053 as compared to
$1,186,308 for the nine months ended September 30, 2007. This increase of
$2,017,745 in net loss is attributable primarily to the increase of non-cash
stock compensation cost related to investments from directors and was little
offset by decrease in unrealized loss of trading securities.
Liquidity
and Capital Resources
Our
principal sources of liquidity are cash and cash equivalent balances, which
were
$909,671 at September 30, 2008. Also, we had marketable securities valued
at $148,043 as of September 30, 2008. These marketable securities were
classified as trading securities.
Net
cash
used in operating activities was $737,670 for the nine months ended September
30, 2008 and $948,355 for the nine months ended September 30, 2007. The decrease
was due primarily to a decrease in payments made to contractors for building
our
laboratory facilities.
Net
cash
provided by (used in) investing activities was $468,383 for the nine months
ended September 30, 2008 and ($1,916,058) for the nine months ended September
30, 2007. This change was due to the sale of our trading securities during
the
nine months ended September 30, 2008.
Net
cash
provided by financing activities was $1,098,988 for the nine months ended
September 30, 2008 compared to $3,029,102 for the nine months ended September
30, 2007. This large decrease was mainly due to proceeds from the issuance
of
preferred stock in 2007, and was offset somewhat by proceeds we received from
the sale of common stock in the third quarter of 2008.
To
date,
our operations have been funded through issuances of our common stock and
preferred stock whereby we raised an aggregate $8,365,888 from inception through
September 30, 2008.
We
estimate the total project costs for Phase One will be approximately $2,850,000.
As of September 30, 2008, the remaining costs associated with completion of
Phase One project will be approximately $260,000, primarily for permanent
electrical equipment to be installed and related works to be finished. In
addition, the Company estimates the cost of laboratory equipment it needs before
Phase One is fully operational will be approximately $600,000.
On
July
2, 2008, the Company entered into a securities purchase agreement with NFR
International Pty Limited (“NFR”) and China Diamond Limited (“China Diamond”),
two companies controlled by a member of our Board of Directors, Mr. Trevor
Roy,
and his wife, in which NFR and China Diamond agreed to purchase a total of
3,448,276 investments units from BGES at $0.725 per unit. Each unit consists
of
one share of common stock, a four-year warrant to purchase one-half share of
common stock at $0.725 and a five-year warrant to purchase one-half share of
common stock at $1.10. The total investment of China Diamond and NFR is $2.5
million. $125,000 of this total was paid upon execution of the equity purchase
agreement and the balance will be paid in ten monthly equal amounts until May
1,
2009.
On
July
9, 2008, the Company entered into a securities purchase agreement with Cheung
Hin Shun Anthony, a member of our Board of Directors, in which Mr. Cheung agreed
to purchase a total of 2,000,000 investment units from BGES at $0.725 per unit.
Each unit consists of one share of common stock, a four-year warrant to purchase
one-half share of common stock at $0.725 and five-year warrant to purchase
one-half share of common stock at $1.10. The total investment is $1.45 million.
$120,000 of this total was paid upon execution of the equity purchase agreement
and the balance will be paid in ten equal installments until May 31,
2009.
Based
on
our current operating plan, we believe that we have sufficient cash and cash
equivalents to last approximately through April 2010. We will need to
obtain additional financing in addition to the funds already raised through
the
sale of equity securities to fund our cash needs and continue our operations
beyond April 2010. Additional financing, whether through public or private
equity or debt financing, arrangements with stockholders or other sources to
fund operations, may not be available, or if available, may be on terms
unacceptable to us. Our ability to maintain sufficient liquidity is dependent
on
our ability to raise additional capital. If we issue additional equity
securities to raise funds, the ownership percentage of our existing stockholders
would be reduced. New investors may demand rights, preferences or privileges
senior to those of existing holders of our common stock. Debt incurred by us
would be senior to equity in the ability of debt holders to make claims on
our
assets. The terms of any debt issued could impose restrictions on our
operations. If adequate funds are not available to satisfy either medium or
long-term capital requirements, our operations and liquidity could be adversely
affected.
Critical
Accounting Policies
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.
Stock-Based
Compensation
The
Company periodically issues stock options and warrants to employees and
non-employees in capital raising transactions, for services and for financing
costs. The Company adopted SFAS No. 123R effective January 1, 2006, and is
using
the modified prospective method in which compensation cost is recognized
beginning with the effective date (a) based on the requirements of SFAS No.
123R
for all share-based payments granted after the effective date and (b) based
on
the requirements of SFAS No. 123R for all awards granted to employees prior
to
the effective date of SFAS No. 123R that remain unvested on the effective date.
The Company accounts for stock option and warrant grants issued and vesting
to
non-employees in accordance with EITF No. 96-18: “Accounting for Equity
Instruments that are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services” and EITF No. 00-18 “Accounting
Recognition for Certain Transactions involving Equity Instruments Granted to
Other Than Employees” whereas the value of the stock compensation is based upon
the measurement date as determined at either a) the date at which a performance
commitment is reached, or b) at the date at which the necessary performance
to
earn the equity instruments is complete.
Impairment
of Long-Lived Assets
We
account for long-lived assets in accordance with SFAS 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 SFAS No. 121, Accounting
for
the Impairment of Long-Lived Assets and for Long- Lived Assets To Be Disposed
of, or SFAS No. 121. Our long-lived assets consist of land use right, notes,
fixed assets, construction in process, and prepaid consulting fees. 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 ended September 30, 2008, we performed
an
evaluation of our long-lived assets and concluded there was no
impairment.
Research
and Development Costs
We
account for research and development expense under the guidance of SFAS No.2,
Accounting for Research and Development Costs, which was adopted in October
1974. Research and development costs are charged to operations as incurred.
Our
research and development costs include salaries of research and development
personnel and contract service expenses for conducting pre-clinical trial
studies.
Registration
Payment Arrangements
The
Company accounts for registration payment arrangements under Financial
Accounting Standards Board (FASB) Staff Position EITF 00-19-2,
Accounting
for Registration Payment Arrangements
(“FSP
EITF 00-19-2”). FSP EITF 00-19-2 specifies that the contingent obligation to
make future payments under a registration payment arrangement should be
separately recognized and measured in accordance with SFAS No. 5,
Accounting
for Contingencies
.
FSP
EITF 00-19-2 was issued in December, 2006. The Company adopted FSP EITF 00-19-2,
effective January 1, 2007. Certain registration payment arrangements were
included with a private placement of the Company’s preferred stock in the first
quarter of 2007. The Company did not record any liability related to these
registration payment arrangements because it determined there is a remote chance
that the Company will be required to remit any payments for failing to obtain
an
effective registration statement.
Financial
Assets and Liabilities Measured at Fair Value
Effective
January 1, 2008, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 157, Fair Value Measurements. This Statement defines fair value
for certain financial and nonfinancial assets and liabilities that are recorded
at fair value, establishes a framework for measuring fair value, and expands
disclosures about fair value measurements. This guidance applies to other
accounting pronouncements that require or permit fair value measurements. On
February 12, 2008, the FASB finalized FASB Staff Position (FSP) No. 157-2,
Effective Date of FASB Statement No. 157. This Staff Position delays the
effective date of SFAS No. 157 for nonfinancial assets and liabilities to
fiscal years beginning after November 15, 2008 and interim periods within those
fiscal years, except for those items that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least annually).
The
adoption of SFAS No. 157 had no effect on the Company’s consolidated
financial position or results of operations.
At
September 30, 2008, the Company’s financial assets and liabilities that were
measured at fair value include its investment in trading securities which have
a
cost of $259,270, a gross unrealized loss of $111,227 and a fair value of
$148,043. The Company estimates the fair value of its trading securities based
on unadjusted quoted prices in active markets of identical assets.
Recent
Accounting Pronouncements
In
December 2007, the FASB issued FASB Statement No. 141 (R), “Business
Combinations” (FAS 141(R)), which establishes accounting principles and
disclosure requirements for all transactions in which a company obtains control
over another business. Statement 141 (R) applies prospectively to business
combinations for which the acquisition date is on or after the beginning of
the
first annual reporting period beginning on or after December 15, 2008. Earlier
adoption is prohibited.
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51”. SFAS No. 160
establishes accounting and reporting standards that require that the ownership
interests in subsidiaries held by parties other than the parent be clearly
identified, labeled, and presented in the consolidated statement of financial
position within equity, but separate from the parent’s equity; the amount of
consolidated net income attributable to the parent and to the noncontrolling
interest be clearly identified and presented on the face of the consolidated
statement of income; and changes in a parent’s ownership interest while the
parent retains its controlling financial interest in its subsidiary be accounted
for consistently. SFAS No. 160 also requires that any retained noncontrolling
equity investment in the former subsidiary be initially measured at fair value
when a subsidiary is deconsolidated. SFAS No. 160 also sets forth the disclosure
requirements to identify and distinguish between the interests of the parent
and
the interests of the noncontrolling owners. SFAS No. 160 applies to all entities
that prepare consolidated financial statements, except not-for-profit
organizations, but will affect only those entities that have an outstanding
noncontrolling interest in one or more subsidiaries or that deconsolidate a
subsidiary. SFAS No. 160 is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December 15, 2008. Earlier
adoption is prohibited. SFAS No. 160 must be applied prospectively as of the
beginning of the fiscal year in which it is initially applied, except for the
presentation and disclosure requirements. The presentation and disclosure
requirements are applied retrospectively for all periods presented.
In
March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No. 133,”
(SFAS No.161). SFAS No.161 requires enhanced disclosures about an entity’s
derivative and hedging activities, including (i) how and why an entity uses
derivative instruments, (ii) how derivative instruments and related hedged
items are accounted for under SFAS No. 133, and (iii) how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows. This standard becomes effective for
financial statements issued for fiscal years and interim periods beginning
after
November 15, 2008. Earlier adoption of SFAS 161 and, separately, comparative
disclosures for earlier periods at initial adoption are encouraged. As SFAS
No.161 only requires enhanced disclosures, this standard will have no impact
on
the Financial Statements.
The
Company has not determined whether the adoption of SFAS No. 141R will have
a
material impact on its results of operations and financial condition.
The
Company does not believe that the adoption of
SFAS
No.
160 or
SFAS
No.
161 will have a material effect on the Company’s consolidated results of
operations, financial position, or cash flows.
Construction
in progress
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, which
the Company plans to develop into a laboratory and bio-manufacturing facility
in
compliance with Good Manufacturing Practices, or GMP, regulations primarily
for
clinical trials of HIV-PV Vaccine I. As of December 31, 2005, the Company had
received all necessary permits and approvals. The general plans for development
include the construction of a laboratory facility (“Phase One”) and construction
of an administrative office building (“Phase Two”). The Company estimates the
total project costs for Phase One will be approximately $2,850,000. At September
30, 2008, the Phase One construction and internal clean room decoration costing
a total of approximately $2,405,900 is awaiting permanent electrical equipment
to be installed, and is recorded as construction in progress. At September
30,
2008, $184,195 is due to the contractors of Phase One for the completed
construction and internal clean room decoration and this obligation is recorded
as due to contractors.
The
Company estimates that the remaining costs associated with completion of Phase
One project will be approximately $260,000, primarily for permanent electrical
equipment to be installed and related works to be finished. As of September
30,
2008, the Company had signed agreements with various contractors and vendors
to
finish the electricity project. The Company estimates the purchase and
installation of the electrical and steam equipment will be completed by the
end of 2008. In addition, the Company estimates the cost of laboratory equipment
it needs before Phase One is fully operational will be approximately $600,000.
As of September 30, 2008, the Company had negotiated with several parties about
contracts for the purchase of the laboratory equipment, but had not signed
any
contract yet. The Company estimates the purchase and installation of the
laboratory equipment will be completed by early 2009. At September 30,
2008, Phase Two was still in the design stage. The Company estimates total
project costs for Phase Two will be approximately $1,200,000. The Company
estimates that construction may begin on Phase Two in 2010 or later, but
currently has no plans for Phase Two construction.
Lease
commitment
As
of
September 30, 2008, the Company had remaining outstanding commitments with
respect to its non-cancelable operating lease for its office in Oak Brook,
IL,
of which $6970 is due in 2008, $28,088 is due in 2009 and $19,004 is due in
2010, and for its office in Beijing, PRC (which is leased from Mr. Wenhui Qiao,
the Company's director and president), of which $17,160 is due within one
year.
Research
and Development Agreements
On
May 6,
2004, Beijing Institute of Radiation Medicine and the Company entered
into agreements for conducted biodistribution and integration studies for HIV-PV
Vaccine I. The aggregate amount for the testing is $28,494 and as of September
30, 2008, the remaining commitment was $5,832. On April 1, 2007, we entered
into
a biosample inspection for vaccine development research agreement with Beijing
Xingde Biomedicine Research Institute. The aggregate amount paid for the testing
is $22,452 and the remaining commitment was $23,910 as of September 30, 2008.
On
March 1, 2008, we signed an agreement with Changchun Wandi Biotechnology Co.
Ltd, to conduct SF9 cell culture and stability study. The payment will be on
a
monthly basis and the remaining commitment is $17,453 as of September 30,
2008.
Royalty
and License Arrangements
Mr.
Liang
Qiao, M.D., the Company's co-founder and chief executive officer, is one of
the
co-inventors of the Company's core technology that was assigned to Loyola
University Chicago in April 2001. Under the 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 the People's Republic
of
China, including mainland China, Hong Kong, Taiwan and Macau. 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 all uses of the licensed
technology, including uses under sublicenses. As of September 30, 2008, the
Company had not generated any revenues from the sale of any products under
development, nor had the Company received any revenues from
sublicenses.
Distribution
Agreement
On
November 21, 2005, we entered into an exclusive distribution agreement with
Xinhua Surgical Instruments Co. Ltd., (“Xinhua”) located in Shandong, China.
Under this agreement, we have been granted exclusive distribution rights for
all
Xinhua surgical instruments in the United States, which are subject to FDA
approval. The Company is responsible for advertising and marketing expenses
in
connection with distribution of Xinhua surgical instruments in the United
States. Sales were $2,979 in 2007 and $1,768 in 2006. Minimum sales per the
agreement are $50,000 in 2007, $60,000 in 2008, and increases 10% annually
thereafter. Although we did not reach the minimum sales requirement in 2007,
Xinhua indicated that we still have the exclusive distribution right in
2008.
On
March
17, 2008, the Company entered into an exclusive agency agreement with Xinhua.
Under the renewed Agreement, the Company has been granted exclusive distribution
rights for all Xinhua surgical instruments in the United States, Australia,
and
New Zealand. The Company’s minimum annual sale requirement for these three areas
for a whole year from the date of signing the agreement will be $55,000 and
increases 10% annually thereafter. The Company is responsible for advertising
and marketing expenses in connection with distribution of Xinhua surgical
instruments in these three areas. Subject to minimum sale requirements, the
Company's exclusivity rights in these three areas will be extended. The new
agreement supersedes the previous agreement signed on November 21, 2005. Sales
in 2008 as of September 30, 2008 were $13,560.
On
December 6, 2005, we received confirmation from the FDA of our registration
as a
medical device establishment, which enables us to perform initial distributor
and repackager operations. This confirmation is not a FDA approval of any
product or any of our activities. It is neither a license, nor a certification.
We market Xinhua surgical instruments that meet the criteria for Class I medical
devices under FDA rules, which do not require pre-market notification to the
FDA.
Contractual
Obligations
Payments
due under contractual obligations at September 30, 2008 mature as
follows:
|
|
|
Payments
due by period ($ in thousands)
|
|
Contractual
Obligations
|
|
|
Total
|
|
|
Less
than
1
year
|
|
|
1
to 3
years
|
|
Lease
obligation
|
|
$
|
71
|
|
$
|
45
|
|
$
|
26
|
|
Payable
to contractors
|
|
|
184
|
|
|
184
|
|
|
—
|
|
R&D
agreement obligation
|
|
|
47
|
|
|
47
|
|
|
—
|
|
Total
|
|
$
|
302
|
|
$
|
276
|
|
$
|
26
|
|
Item
3. Quantitative and Qualitative Disclosure about Market
Risk
The
Company is a smaller reporting company and is not required to provide the
information required by this.
Item
4. Controls and Procedures
(a)
Evaluation of disclosure controls and procedures. As of the end of the period
covered by this report, we carried out an evaluation, under the supervision
and
with the participation of our management, including our Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation
of
our disclosure controls and procedures, as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon
that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were effective as of the end of
the
applicable period to ensure that the information required to be disclosed by
us
in reports that we file or submit under the Exchange Act (i) is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms and (ii) is accumulated
and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required
disclosures.
(b)
Changes in internal controls over financial reporting. There was no change
in
our internal control over financial reporting during our most recent fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
PART
II - OTHER INFORMATION
Item
1.
Legal
Proceedings
Not
Applicable.
Item
1A. Risk Factors
There
have been no material changes in the risk factors previously disclosed in Form
10-KSB we filed with the SEC on March 31, 2008.
Item
2.
Unregistered
Sales of Equity Securities and Use of Proceeds
On
July
2, 2008, the Company entered into a securities purchase agreement with NFR
International Pty Limited and China Diamond Limited (collectively, NFR/China
Diamond”), two companies controlled by Mr. Trevor Roy, a member of our Board of
Directors. NFR/ China Diamond agreed to purchase a total of 3,448,276 investment
units from us at $0.725 per unit. Each unit consists of one share of common
stock, a four-year warrant to purchase one-half share of common stock at $0.725
and a five-year warrant to purchase one-half share of common stock at $1.10.
The
total investment by NFR/China Diamond totals $2,500,000, of which $125,000
was
paid on July 2, 2008, with the balance due in ten monthly installments through
May 1, 2009. As of September 30, 2008, we had received $600,000 from NFR and
China Diamond. The fair value of the warrants acquired by NFR/China Diamond
resulted in compensation expense of $1,179,310 (see Note 7). In addition,
$189,655 of stock compensation was recognized for the difference between the
fair value of the units based on the closing price of the Company’s common stock
on the date the agreement was signed and the purchase price of the units.
On
July
9, 2008, the Company entered into a securities purchase agreement with Cheung
Hin Shun Anthony, a member of our Board Directors, in which Mr. Cheung agreed
to
purchase a total of 2,000,000 investment units from us at $0.725 per unit.
Each
unit consists of one share of common stock, a four-year warrant to purchase
one-half share of common stock at $0.725 and a five-year warrant to purchase
one-half share of common stock at $1.10. The total investment by Mr. Cheung
totals $1,450,000, of which $120,000 was received on July 9, 2008, and the
balance will be paid in ten monthly installments through May 31, 2009. As of
September 30, 2008, we had received $386,000 from Mr. Cheung. The fair value
of
the warrants acquired by Mr. Cheung resulted in compensation expense of $712,800
(see Note 7). In addition, $150,000 of stock compensation was recognized for
the
difference between the fair value of the units based on the closing price of
the
Company’s common stock on the date the agreement was signed and the purchase
price of the units.
Item
3.
Defaults
Upon Senior Securities
Not
applicable.
Item
4.
Submission
of Matters to a Vote of Security Holders
Not
applicable.
Item
5.
Other
Information
Not
applicable.
Item
6.
Exhibits
The
exhibits listed in the Exhibit Index are filed as part of this
report.
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Bio-Bridge
Science, Inc.
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/s/
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Dr.
Liang Qiao
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Dated:
November 14, 2008
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By:
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Dr.
Liang Qiao
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Chief
Executive Officer
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EXHIBIT
INDEX
3.1(i)*
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Certificate
of incorporation of the registrant, as currently in
effect
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3.1(ii)*
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Bylaws
of the registrant, as currently in effect
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3.1(iii)**
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Certificate
of Designation of Series A Preferred Stock
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4.1**
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Form
of Common Stock Warrant Agreement dated January 2007
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4.2**
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Registration
Rights Agreement dated January 2007
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10.1**
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Securities
Purchase Agreement dated January 2007
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31.1
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Certification
of Chief Executive Officer
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31.2
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Certification
of Chief Financial Officer
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32.1
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Section
1350 Certifications of Chief Executive Officer and Chief Financial
Officer
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*
Previously filed with the Securities and Exchange Commission pursuant to
Registration Statement No. 333-121786.
**
Previously filed as an exhibit to the Registrant's Form 10-KSB for its year
ended December 31, 2006.