x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2009 |
o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to |
Maryland
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20-5101287
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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No. 588 Shiji Xi Avenue
Xianyang, Shaanxi Province
The People’s Republic of China
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712046
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(Address of principal executive offices)
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(Zip Code)
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PART I
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Page
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Item 1.
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Item 1A.
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3 | |
Item 1B.
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25 | |
Item 2.
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41 | |
Item 3.
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42 | |
42 | ||
PART II
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Item 5.
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43 | |
Item 6.
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44 | |
Item 7.
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44 | |
Item 7A.
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51 | |
Item 8.
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51 | |
Item 9.
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51 | |
Item 9A.
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52 | |
Item 9B.
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52 | |
PART III
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Item 10.
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53 | |
Item 11.
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57 | |
Item 12.
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61 | |
Item 13.
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63 | |
Item 14.
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64 | |
PART IV
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Item 15.
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65 | |
68 |
(1)
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Subject to our receipt of certificate from the Administration for Industry and Commerce of the Xi’an Hi-Tech District certifying our ownership registration.
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Name
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Treatment
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Benefits and Side Effects
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SFDA Classification
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|||
Xin Ao Xing
Oleanlic Acid
Capsule
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Hepatitis B
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Relieves hepatic injury, reduce glutamic-pyruvic transaminase activity, reduce r-GLO. Believed to promote hepatic cell regeneration, to be effective in hepatic coma treatment, to inhibit fibrous hyperplasia and prevent hepatocirrhosis. Used to reduce hepatic damage caused by HBV regeneration.
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OTC
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|||
Ganwang
Compound
Paracetamol &
Amantadine
Hydrochloride Capsule
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Colds, runny nose, sore throat pain, headache and fever
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Relieves the symptoms of the common cold, including runny nose, sniffles and sneezing. Some patients experience symptoms of anorexia, queasiness and upset stomach after use.
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OTC
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|||
Danshen Granule
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Coronary heart disease, myocarditis and angina pectoris
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Believed to stimulate circulation to end stasis, regulating the flow of qi (vital energy) to alleviate pain. There are no known side effects.
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Prescription
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|||
Taohuasan
Pediatric Medicine
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Bronchial congestion and coughs
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Used for the treatment for children’s cough and respiratory tract infection. There are no known side effects.
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Prescription
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|||
Tianqi
Dysmenorrhea
Capsule
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Dysmenorrhea
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Traditional Chinese medicine used for treatment of pain and other symptoms associated with menstruation. There are no known side effects.
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OTC
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Name
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Primary Ingredients
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Function and Benefits
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SFDA Classification
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|||
Ao Xing No.1
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Egg yolk lecithin, vitamin E, vitamin C
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Believed to promote health of the elderly, development of children's intelligence, and improve memory.
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Nutrient, OTC
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|||
Yanshuang
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Sterculia scaphigera, chrysanthemum, honeysuckle and mint
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For the relief of pharyngeal discomfort and chronic pharyngitis.
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Nutrient, OTC
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|||
NewChagederi
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Agastache, perilla, licorice and mint
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Believed to prevent and relive symptoms of rhinitis, sinusitis, headache congestion and running nose.
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Nutrient, OTC
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|||
Tiantianle
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Folicartemisiae, chrysanthemum, honeysuckle, agastache and mint
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Believed to strengthen immune system against influenza and certain viruses from sexually transmitted diseases and general detoxification.
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Nutrient, OTC
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|||
AoXing Ganbao
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Polygonum cuspidatum, cordyceps and ginseng
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Believed to promoting blood circulation by removing blood stasis, strengthen the spleen and stomach, detoxify, and act as a cholagogic purgative and lower transaminase.
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Nutrient, OTC
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|||
Fengningdan
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Safflower, osthol, cork, dragles, dracorhodin, borneol and angelica
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Believed to assist in elimination of toxins associated with gynecological inflammation of young and middle-aged women.
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Nutrient, OTC
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|||
Heigen
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Black sesame seeds and medla
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Believed to treat premature graying of beard and hair, phalacrosis caused by excess fat, and postpartum hair loss.
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Nutrient, OTC
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|||
Baitongning
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Bulleyacontitin, myrrh and centipede
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Believed to relieve rheumatism, hyperplasia, cervical spondylosis, lumbar lesion, osteoporosis and rheumatoid arthritis.
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Nutrient, OTC
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|||
Sukang Capsule
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Agkistrodon, cinnamon, safflower and hawthorn
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Believed to improve cardiovascular and cerebrovascular complications, such as, dizziness headache, amnesia, kidney deficiency, coronary heart disease, and Atherosclerosis, in the elderly.
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Nutrient, OTC
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|||
Aoxing Ointment
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Walnut meat and camphor
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Used to treat psoriasis, vitiligo and various dermatitis.
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Nutrient, OTC
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|||
Yizi Capsule
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Tibetan snow lotus, ejiao, cinnamon, mulberry, raspberry
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Believed to aid infertility and helps in fetal development during pregnancy
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Nutrient, OTC
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|||
Tangning Capsule
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Rhodiola, bitter, pueraria, white bud root, polygonatum, spirulina
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Believed to treat type II diabetes
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Nutrient, OTC
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|||
Shengjing Capsule
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Tibetan ginseng, yak organ, extract of deer organ, cinnamon, gorgon fruit, raspberry
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Believed to replenish kidney function
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Nutrient, OTC
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Name
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Functions
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Type
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STAGE
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|||
Gansukang
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For the treatment of acute and chronic hepatitis treatment, and removal of toxins from the body
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Prescription
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Awaiting approval permit
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|||
Niaosaitong
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A traditional Chinese medicine used for regulating vital energy, dredging collaterals and eliminating stagnation and ischuria
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Prescription
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Undergoing SFDA examination phase
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Azithromycin
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A chemical prescription medicine used for the treatment of tympanitis, pharyngitis, bronchitis, pneumonia and anti-infection
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Prescription
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Undergoing SFDA examination phase
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Shenrong
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Used for strengthening immunity, preventative cancer care and restraining growth of tumor, sedating and resting pain, anti-fatigue, anti-aging, strengthen sexual function and desire
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Prescription
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Clinical test has been completed. Now in phase of application for preliminary permit
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Zhixuening
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For stopping bleeding, relieving swelling and expelling blood stasis. Used in the treatment of uterine bleeding, acute vaginal bleeding and hematockezia in women , nose bleeding, blood regurgitation
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Prescription
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Clinic test has been completed. Now in the phase of application for preliminary permit.
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|||
Xiao'aiping
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For the treatments of tumors, and mainly on esophagus cancer, stomach cancer and lung cancer
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Prescription
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Clinic test has been completed. Now in phase of application for preliminary permit.
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Zhenbao Wan
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A type of traditional Chinese medicine. It is mainly used in the treatment of thrombus and coronary heart disease, hemiplegia, muscle and tendon atrophy, kidney impairment and meridian damage, murrain and pyreticosis
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Prescription
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Clinic test has been completed. Now in phase of application for preliminary permit.
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|||
Huazhi Pian
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Used to reduce temperature, clean blood, reduce bleeding, activate “Qi” flow and eliminate stasis to activate blood circulation
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Prescription
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Clinic test has been completed. Now in phase of application for preliminary permit.
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|||
KunLing Wan
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Used to regulate menstruation and nourish blood, dissipate blood stasis and generate new blood, treatment of irregular menses, abnormal menstrual blood volume, menstrual cramps, uterus cold, infertility, leucorrhea with red and white discharge, metrorrhagia and metrostaxis, deficiency of vital energy due to a long illness, deficiency of kidney and lower back pain
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OTC
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Clinic test has been completed. Now in phase of application for preliminary permit.
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Zushima
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An aerosol pain suppressant and blood coagulant, which has already been approved by the Chinese Military SFDA for clinic trial
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OTC
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Undergoing SFDA examination phase
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Product
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Sales through Distributors
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Sales by Company
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Xin Ao Xing Oleanlic Acid Capsule
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6.7%
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62.1%
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||
Ganwang Compound Paracetamol & Amantadine Hydrochloride Capsule
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5.3%
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2.9%
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Danshen Granule
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3.3%
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2.8%
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Taohuasan Pediatric Medicine
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4.5%
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3.6%
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Tianqi Dysmenorrhea Capsule
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4.5%
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4.4%
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Total
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24.3%
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75.8%
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Product
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Competitors
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Xin Ao Xing Oleanlic Acid Capsule
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Wulanhaote Zhong Meng pharmaceutical Co., Ltd., Yang Ling Mai Di Sen Pharmaceutical Co., Ltd. and other suppliers of prescription medicines that are used for hepatitis treatment
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Ganwang Compound Paracetamol & Amantadine Hydrochloride Capsule
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Jiang Xi Ren He Pharmaceuticals, Inc. and Hainan Asia Pharmaceuticals, Inc.
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Danshen Granule
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Yun Nan Yong An Pharmaceuticals, Inc. and Hai Nan Min Hai Pharmaceuticals, Ltd.
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Taohuasan Pediatric Medicine
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Shandong Bai Cao Pharmaceuticals, Ltd., and Chang Chun Ren Min Pharmaceuticals, Ltd.
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Tianqi Dysmenorrhea Capsule
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Yun Nan Yu Xi City Wei He Pharmaceutical, Ltd., and Shandong Phoenix Pharmaceuticals, Ltd.
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Nutrient Products
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Wulanhaote Zhong Meng Pharmaceutical Co., Ltd. and and Yang Ling Mai Di Sen Pharmaceutical Co., Ltd. and other traditional Chinese medicine suppliers
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Name of Supplier
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Amount Purchased ($)
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Percentage of Total Purchase
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||
Xi’an Chinese Medicine Herbal Tablets Factory
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3,541,819
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25.9%
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||
Xianyang Wenlin
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2,858,843
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20.9%
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||
Sichuankangfulai Pharmaceutical Group Ltd.
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1,899,558
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13.9%
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||
Zhejiang Xinchang Yaofeng
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1,615,816
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11.8%
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||
Sichuan Xieli Pharmaceutical Co., Ltd.
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1,443,709
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10.5%
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||
Shaanxi Hengqing Pharmaceutical Co., Ltd.
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933,013
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6.8%
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Xi’an Jinqiao Plastics Plant
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531,627
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3.9%
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||
Xi’an Xinping Industry &Trade Co., Ltd.
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394,268
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2.9%
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||
Xianyang Si Fang Carton Co., Ltd.
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263,857
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1.9%
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Trademark
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International Class
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Registration
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Issuing Authority
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Term
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“Bai Ying Shen” & device
(Certificate No. 1196275)
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5
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Aoxing Pharmaceutical
Note: This trademark was first registered by Shaanxi Xianyang Pharmaceutical Baiyingshen Drug Centre, and was transferred to us on March 14, 2001. The transfer was duly recorded in the Trademark Certificate.
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Trademark Bureau of State Administration for Industry and Commerce
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From August 7, 1998 to August 6, 2008 and is in the process of renewal
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“Yi Wen Ling” & device
(Certificate: No. 1008816)
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5
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Aoxing Pharmaceutical
Note: This trade mark was first registered by Shaanxi Xianyang Pharmaceutical Baiyingshen Drug Centre, and then was transferred to the Company on April 12, 2002. The transfer was duly recorded in the Trademark Certificate.
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Trademark Bureau of State Administration for Industry and Commerce
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From May 21, 2007 to May 20, 2017
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“Zhong Ao” & device. (Certificate: No. 1728599)
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5
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Aoxing Pharmaceutical
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Trademark Bureau of State Administration for Industry and Commerce
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From March 14, 2002 to March 13, 2012
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“Xin Tai Ke” & device (Certificate:
No. 1908333)
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5
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Aoxing Pharmaceutical
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Trademark Bureau of State Administration for Industry and Commerce
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From September 28, 2002 to September 27, 2012
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“Gan Wang” & device
(Certificate: No. 3001006)
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5
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Aoxing Pharmaceutical
Note: This trade mark was first registered by Xianyang Aotong Baojian Technology Limited, and then was transferred to us on August 14, 2003. The transfer was duly recorded in the Trademark Certificate.
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Trademark Bureau of State Administration for Industry and Commerce
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From November 14, 2002 to November 13, 2012
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“Hei Gen” (Certificate: No. 3168882)
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5
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Aoxing Pharmaceutical
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Trademark Bureau of State Administration for Industry and Commerce
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From July 7, 2003 to July 6, 2013
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“Shi Li Ming” (Certificate: No. 3180355)
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5
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Aoxing Pharmaceutical
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Trademark Bureau of State Administration for Industry and Commerce
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From August 7, 2003 to August 6, 2013
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“Aoxing No.1” (Certificate: No. 3168883)
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5
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Aoxing Pharmaceutical
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Trademark Bureau of State Administration for Industry and Commerce
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From February 21, 2004 to February 20, 2014
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“Dan Shen” (Certificate: No. 1908335)
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5
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Aoxing Pharmaceutical
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Trademark Bureau of State Administration for Industry and Commerce
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From October 7, 2002 to October 6, 2012
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“Cha Ge De Ri” & device (Certificate: No. 4770095)
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5
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Aoxing Pharmaceutical
Note: This trademark was first registered by Wulanhaote Zhongmeng Pharmaceutical Limited, and then was transferred to us on May 30, 2002. The transfer was duly recorded in the Trademark Certificate.
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Trademark Bureau of State Administration for Industry and Commerce
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From Auguast 28, 2001 to August 27 2011
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“Mei Bi De” & device (Certificate: No. 1330246 )
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5
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Aoxing Pharmaceutical
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Trademark Bureau of State Administration for Industry and Commerce
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From November 7, 1999 to November 6, 2009 and is in the process of renewal
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“Ao Xing Xin Le” & device (Certificate: No. 4319027)
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5
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Aoxing Pharmaceutical
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Trademark Bureau of State Administration for Industry and Commerce
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From November 28, 2007 to November 27, 2017
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Drug Administration Law of the PRC was promulgated by the Standing Committee of National People’s Congress on February 28, 2001 and effective as of December 1, 2001, and its implementing guidelines were promulgated by the State Council on August 4, 2004 and effective as of September 15, 2002. According to Drug Administration Law of the PRC and its implementing guidelines, a pharmaceutical manufacturer is required to obtain a Pharmaceutical Manufacturing Permit and Drug Approval Number for each manufactured drug from the relevant SFDA’s provincial branch, which will be valid for five years and is renewable upon application before expiration. Accordingly, we are required to apply for these approvals and any extensions thereof for each of our products.
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Administration Regulations for Drug Registration was promulgated by the SFDA on July 10, 2007, and was effective as of October 1, 2007. The Administration Regulations for Drug Registration specifies the requirements and procedure for obtaining a Drug Approval Number for a new drug. It includes the requirements for clinical trial of new drugs, procedure for registering imported medicine and reporting and approval procedure for generic medicine. The Drug Approval Number is valid for five years and can be re-registered upon expiration. We are required to obtain a Drug Approval Number for each of our new drugs and reapply for an extension prior to the expiration date the drugs.
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Good Manufacturing Practices (GMP) for Pharmaceutical Products, as revised in 1998 was promulgated by the SFDA on June 18, 1999 and became effective as of August 1, 1999, and the Authentication Regulations for Drug GMP was promulgated by the SFDA on September 7, 2005 and became effective on October 1, 2005. A pharmaceutical manufacturer must meet the GMP standards and obtain the GMP Certificate with a five-year validity period from SFDA. Before the GMP Certification expires, the pharmaceutical manufacturer must apply again and complete the relevant procedures, which may take about 120 working days, to obtain a new GMP Certificate. On October 24, 2007, the SFDA issued new guidelines for authentication standards of GMP, effective as of January 1, 2008. The new guideline may result in a rise of cost for a pharmaceutical manufacturer to meet the new standards in order to maintain the GMP qualification. If a pharmaceutical manufacturer fails to obtain or maintain GMP Certification and still carries on production of its drugs, it will be fined and its Pharmaceutical Manufacturing Permit may be revoked under serious circumstances. We are required to apply for a GMP certificate for each of our products and reapply prior to the expiration date and maintain our Pharmaceutical Manufacturing Permit.
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Administration Regulations for Drug Call-back was promulgated by the SFDA on December 10, 2007 and effective on the same day. According to the Administration Regulations for Drug Call-back, the pharmaceutical manufacturer should establish a drug call-back system and collect information regarding the drug safety. If a manufacturer discovers any unreasonable danger of drug that threatens people’s safety and health, it should immediately stop the manufacturing and sale of such drug, notify the distributors and report to the branch of the SFDA. This regulation also stipulates the procedures of drug call-back and danger valuation standards established and maintain a drug call back system in conformance the regulations.
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Administration Regulations for Drug Instructions and Labels was promulgated by the SFDA on March 15, 2006 and was effective as of June 1, 2006. According to Administration Regulations for Drug Instructions and Labels, the contents of instructions and labels of each drug must be approved by the SFDA, and the smallest packing unit of drug shall be attached with instruction. We have developed, received approval and maintain drug labeling in conformance with the regulations for our existing products and must do so for new products.
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Supervision Administration Regulations for Drug Distribution was promulgated by the SFDA on January 31, 2007 and effective as of May 1, 2007. According to Supervision Administration Regulations for Drug Distribution, a pharmaceutical manufacturer can only sell drugs produced by itself, and it shall not sell drugs produced by other manufacturers or produced by itself but for commissioning manufacturing purposes. We do not resell drugs from any other pharmaceutical manufacturers.
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Regulations for Drug Advertisement Censoring was promulgated by the SFDA and State Administration for Industry and Commerce (the “SAIC”) on March 13, 2007 and effective as of May 1, 2007. The Standards for Drug Advertisement Censoring and Publication was promulgated by the SFDA and the SAIC on March 3, 2007 and made effective as of May 1, 2007. According to Regulations for Drug Advertisement Censoring, a pharmaceutical manufacturer must obtain a Drug Advertisement Approval Number from the provincial branch of the SFDA which is valid period of one year if the drug advertisement describes the functions or benefits of a drug. However, if an over the counter drug advertisement in any media, or a prescription drug advertisement in professional medical magazine, only refers to the name of the drug, including the general name and commercial name, without any other addition promotional information, the advertisement does not need to be censored or approved. We have obtained a Drug Advertisement Approval Number for all our drugs and review all of our OTC drug advertisements so that they are in conformance with the regulations relating to advertising these products.
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Food Hygiene Law and Rules on Food Hygiene Certification mandates that a distributor of nutritional supplements and other food products must obtain a food hygiene certificate from relevant provincial or local health regulatory authorities. The grant of such certificate is subject to an inspection of the distributor’s facilities, warehouses, hygienic environment, quality control systems, personnel and equipment. The food hygiene certificate is valid for four years, and the holder must apply for renewal of the certificate within six months prior to its expiration.
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·
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raise adequate capital for expansion and operations;
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·
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implement our business model and strategy and adapt and modify them as needed;
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increase awareness of our brand name, protect our reputation and develop customer loyalty;
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manage our expanding operations and service offerings, including the integration of any future acquisitions;
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maintain adequate control of our expenses; or
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·
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anticipate and adapt to changing conditions in the medical over the counter, pharmaceutical and nutritional supplement markets in which we operate as well as the impact of any changes in government regulations, mergers and acquisitions involving our competitors, technological developments and other significant competitive and market dynamics.
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·
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issue equity securities which would dilute current stockholders’ percentage ownership;
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incur substantial debt;
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·
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assume contingent liabilities; or
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·
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expend significant cash.
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·
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difficulties in the assimilation of acquired operations, technologies and/or products;
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·
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unanticipated costs associated with the acquisition or investment transaction;
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·
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the diversion of management’s attention from other business concerns;
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·
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adverse effects on existing business relationships with suppliers and customers;
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·
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risks associated with entering markets in which Aoxing Pharmaceutical has no or limited prior experience;
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·
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the potential loss of key employees of acquired organizations; and
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·
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substantial charges for the amortization of certain purchased intangible assets, deferred stock compensation or similar items.
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·
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the costs of pharmaceutical products and development;
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·
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the relative speed and success with which we can obtain and maintain customers, merchants and vendors for our products;
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·
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capital expenditure for equipment;
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·
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marketing and promotional activities and other costs;
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·
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changes in our pricing policies, suppliers and competitors;
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·
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the ability of our suppliers to provide products in a timely manner to their customers;
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·
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changes in operating expenses;
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·
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increased competition in the pharmaceutical markets; and
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·
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other general economic and seasonal factors.
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·
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require us to incur substantial expense, even if covered by insurance or are successful in the litigation;
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·
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require us to divert significant time and effort of our technical and management personnel;
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·
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result in the loss of our rights to develop or make certain products; and
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·
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require us to pay substantial monetary damages or royalties in order to license proprietary rights from third parties.
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Pharmaceutical Products
|
Expires on
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|
Xin Ao Xing Oleanlic Acid Capsule
|
January 28, 2013
|
|
Ganwang (Compound Paracetamol Capsule)
|
October 15, 2012
|
|
Danshen granule
|
October 15, 2012
|
|
Taohuasan (Pediatric Medicine)
|
September 12, 2012
|
|
Tianqi Dysmenorrhea Capsule
|
September 12, 2012
|
Nutrient Products
|
Expires on
|
|
Ao Xing No.1
|
August 24, 2010
|
|
Yanshuang
|
August 4, 2010
|
|
New Chakederi
|
October 16, 2010
|
|
Tiantianle
|
June 28, 2010
|
|
AoXing Gan Bao
|
June 28, 2010
|
|
Fengningdan
|
April 8, 2011
|
|
Heigen
|
May 28, 2010
|
|
Baitongning
|
July 14, 2010
|
|
Sukang Capsule
|
July 28, 2010
|
|
Aoxing Ointment
|
September 14, 2010
|
·
|
producing counterfeit medicine;
|
·
|
producing inferior quality products;
|
·
|
failing to meet the drug GMP standards;
|
·
|
purchasing medical ingredients used in the production of products sources that do not have Pharmaceutical Manufacturing Permit or Pharmaceutical Trade Permit;
|
·
|
fraudulent reporting of results or product samples in application process;
|
·
|
failing to meet drug labeling and direction standards;
|
·
|
bribing doctors or hospital personnel to entice them to use products,
|
·
|
producing pharmaceuticals for use or resale by companies that are not approved by the SFDA, or
|
·
|
the approved drug has a serious side effect.
|
·
|
the safety and quality of our products and ingredients;
|
·
|
the safety and quality of similar products and ingredients distributed by other companies; and
|
·
|
our sales force.
|
·
|
levying fines;
|
·
|
revoking Aoxing Pharmaceutical’s business and other licenses;
|
·
|
requiring that we restructure our ownership or operations; and
|
·
|
requiring that we discontinue any portion or all of our business.
|
·
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If penny stocks are sold in violation of the investor's rights listed above, or other federal or state securities laws, the investor may be able to cancel his purchase and get his money back;
|
·
|
If the stocks are sold in a fraudulent manner, the investor may be able to sue the persons and firms that caused the fraud for damages;
|
·
|
If the investor has signed an arbitration agreement, however, s/he may have to pursue a claim through arbitration.
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Location
|
Principal Activities
|
Area (sq. meters)
|
Land Use Right/Lease Expiration Date
|
|||
No. 588 Shiji Xi Road
Xianyang, Shaanxi Province
PRC 712000
|
Headquarters, production facilities, R&D, quality control
|
52,264
|
50-year land use right expiring in June 2056
|
|||
Wuquan Village Jiangcun Town Hu Country Xi'an City
|
Herb cultivation
|
343,983
|
40-year land lease expiring on May 4, 2049
|
|||
Zouan Town Xi'an City
|
Processing plant and laboratory*
|
34,803
|
50-year land use right, certificate pending
|
Quarter Ended
|
High Bid
|
Low Bid
|
||||||
March 31, 2010*
|
$ | 4.75 | $ | 3.14 | ||||
December 31, 2009
|
4.55 | 1.85 | ||||||
September 30, 2009
|
3.99 | 0.67 | ||||||
June 30, 2009
|
2.10 | 0.25 | ||||||
March 31, 2009
|
1.01 | 0.25 |
Year Ended December 31,
|
% of
|
|||||||||||||||||||
2009
|
2008
|
change
|
||||||||||||||||||
Xin Aoxing Oleanolic Acid Capsule
|
$ | 36,703,857 | 69 | % | $ | 18,742,952 | 55 | % | 96 | % | ||||||||||
Taohuasan Pediatrics Medicine
|
4,306,220 | 8 | % | 4,315,558 | 13 | % | 0 | % | ||||||||||||
Gan Wang Compound Paracetamol Capsule
|
4,352,902 | 8 | % | 3,671,955 | 11 | % | 19 | % | ||||||||||||
Tianqi Dysmenorrhea Capsule
|
4,748,206 | 9 | % | 3,815,790 | 11 | % | 24 | % | ||||||||||||
Danshen Granule
|
3,207,559 | 6 | % | 3,364,667 | 10 | % | -5 | % | ||||||||||||
Total net sales
|
$ | 53,318,744 | 100 | % | $ | 33,910,922 | 100 | % | 57 | % |
Year Ended December 31,
|
% of
|
|||||||||||||||||||
2009
|
2008
|
change
|
||||||||||||||||||
Xin Aoxing Oleanolic Acid Capsule
|
$ | 6,293,000 | 45 | % | $ | 5,441,750 | 39 | % | 16 | % | ||||||||||
Taohuasan Pediatrics Medicine
|
1,502,427 | 10 | % | 1,468,654 | 10 | % | 2 | % | ||||||||||||
Gan Wang Compound Paracetamol Capsule
|
2,345,918 | 16 | % | 2,138,676 | 15 | % | 10 | % | ||||||||||||
Tianqi Dysmenorrhea Capsule
|
1,695,956 | 12 | % | 1,504,485 | 11 | % | 13 | % | ||||||||||||
Danshen Granule
|
2,477,475 | 17 | % | 3,505,778 | 25 | % | -29 | % | ||||||||||||
Total cost of sales
|
$ | 14,314,776 | 100 | % | $ | 14,059,343 | 100 | % | 2 | % |
Year Ended December 31,
|
||||||||||||||||||||
2009
|
2008
|
|||||||||||||||||||
gross profit
|
gross profit
|
% of
|
||||||||||||||||||
margin
|
margin
|
change
|
||||||||||||||||||
Xin Aoxing Oleanolic Acid Capsule
|
$ | 30,410,857 | 83 | % | $ | 13,301,202 | 71 | % | 129 | % | ||||||||||
Taohuasan Pediatrics Medicine
|
2,803,793 | 65 | % | 2,846,904 | 66 | % | -2 | % | ||||||||||||
Gan Wang Compound Paracetamol Capsule
|
2,006,984 | 46 | % | 1,533,279 | 42 | % | 31 | % | ||||||||||||
Tianqi Dysmenorrhea Capsule
|
3,052,250 | 64 | % | 2,311,305 | 61 | % | 32 | % | ||||||||||||
Danshen Granule
|
730,084 | 23 | % | (141,111 | ) | -4 | % | n/a | ||||||||||||
Total
|
$ | 39,003,968 | 73 | % | $ | 19,851,579 | 59 | % | 96 | % |
Year Ended December 31,
|
||||||||||||||||||||
2009
|
2008
|
|||||||||||||||||||
% of total
|
% of total
|
% of
|
||||||||||||||||||
net sales
|
net sales
|
change
|
||||||||||||||||||
Selling, general and administrative expenses
|
$ | 22,873,250 | 43 | % | $ | 12,089,937 | 36 | % | 89 | % |
Year Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Provision for income taxes
|
$ | 4,250,922 | $ | 1,033,402 | ||||
Effective tax rate
|
29 | % | 13 | % |
Accounts Receivable Aging
|
Total
|
1-30 days
|
31-60 days
|
61-90 days
|
91-120 days
|
121-365 days
|
> 365 days
|
|||||||||||||||||||||
As of December 31, 2009
|
$ | 19,937,154 | $ | 7,238,448 | $ | 6,598,953 | $ | 6,093,151 | - | $ | 6,602 | - | ||||||||||||||||
As of December 31, 2008
|
$ | 11,835,630 | $ | 3,627,709 | $ | 4,102,305 | $ | 2,807,852 | $ | 887,760 | $ | 408,638 | $ | 1,366 | ||||||||||||||
Year Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Days sales outstanding
|
135 | 124 |
1.
|
If after taking legal action, it appears that an accounts receivable is not likely to become collectible, such accounts receivable will be written off if it is more than two years old.
|
2.
|
If during the collection period, a customer provides bankruptcy or other insolvency documentation, the corresponding accounts receivable will be written off.
|
3.
|
If we are no longer able to locate a particular customer in order for us to take any collection or legal actions, the accounts receivable for such customer will be written off if more than two years old.
|
Name
|
Position
|
Age
|
Date of Appointment
|
|||
Ronghua Wang
|
Chairman of the Board of Directors, President, Chief Executive Officer
|
55
|
November 1, 2007
|
|||
|
||||||
Qinghua Liu
|
Director
|
43
|
November 1, 2007
|
|||
|
||||||
Haipeng Wu
|
Director
|
53
|
July 1, 2007
|
|||
|
||||||
Zibing Pan
|
Director
|
41
|
December 30, 2009
|
|||
|
||||||
Zhongyang Shang
|
Director
|
57
|
December 30, 2009
|
|||
Elaine Zhao
|
Chief Financial Officer
|
36
|
July 1, 2007
|
|||
Shuang Gong
|
Secretary
|
43
|
April 1, 2008
|
|||
|
||||||
Amei Zhang
|
Chief Operating Officer
|
36
|
November 1, 2007
|
|
None of our directors or executive officers has, during the past ten years:
|
·
|
Had any petition under the federal bankruptcy laws or any state insolvency law filed by or against, or had a receiver, fiscal agent, or similar officer appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
|
·
|
Been convicted in a criminal proceeding or a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
|
·
|
Been the subject of any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
|
|
(i)
|
Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
|
|
(ii)
|
Engaging in any type of business practice; or
|
|
(iii)
|
Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws;
|
·
|
Been the subject of any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any federal or state authority barring, suspending, or otherwise limiting for more than 60 days the right of such person to engage in any activity described in (i) above, or to be associated with persons engaged in any such activity;
|
·
|
Been found by a court of competent jurisdiction in a civil action or by the SEC to have violated any federal or state securities law, where the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended, or vacated; or
|
·
|
Been found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, where the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended, or vacated.
|
•
|
The appointment, replacement, compensation, and oversight of work of the independent auditor, including resolution of disagreements between management and the independent auditor regarding financial reporting, for the purpose of preparing or issuing an audit report or performing other audit, review or attest services.
|
•
|
Reviewing and discussing with management and the independent auditor various topics and events that may have significant financial impact on our Company or that are the subject of discussions between management and the independent auditors.
|
Name and
Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock Awards ($)
|
Option
Awards ($)
|
Non-Equity Incentive Plan Compensation ($)
|
Non-
Qualified Deferred Compensation Earnings
($)
|
All Other Compensation ($)
|
Total
($)
|
|||||||||||||||
Ronghua Wang
chief executive officer, president (1)
|
2009
2008
|
8,771
8,640
|
—
13,000
|
—
—
|
412,050 —
|
—
—
|
—
—
|
—
—
|
420,821
21,640
|
|||||||||||||||
Elaine Zhao
chief financial officer (2)
|
2009
2008
|
47,917
45,000
|
—
—
|
—
—
|
306,851
—
|
—
—
|
—
—
|
—
—
|
354,768
45,000
|
(1)
|
Mr. Ronghua Wang was appointed our president and chief executive officer on November 1, 2007. Mr. Wang received the compensation set forth above from Aoxing Pharmaceutical and he received no compensation from Biostar in 2008 or 2009. Mr. Wang’s cash compensation was paid in RM which, for reporting purposes, has been converted to U.S. dollars at the conversion rate of 6.9444 RMB to one U.S. dollar for 2008, and 6.8409 RMB to one U.S. dollars for 2009.
|
(2)
|
Mrs. Elaine Zhao was appointed our chief financial officer on July 1, 2007. Mrs. Zhao received the compensation set forth above from Biostar.
|
All Other
|
All Other
|
|||||||||||||||||||||||||||||
Stock
|
Option
|
Exercise
|
||||||||||||||||||||||||||||
Awards:
|
Awards:
|
or Base
|
Grant Date
|
|||||||||||||||||||||||||||
Estimated Future Payouts Under
|
Estimated Future Payouts Under
|
Number
|
Number of
|
Price of
|
Fair Value
|
|||||||||||||||||||||||||
Non-Equity Incentive Plan Awards
|
Equity Incentive Plan Awards
|
of Shares
|
Securities
|
Option
|
of Stock
|
|||||||||||||||||||||||||
Grant
|
Thres-
|
Target
|
Max-
|
Thres-
|
Target
|
Max-
|
of Stock
|
Underlying
|
Awards
|
and Option
|
||||||||||||||||||||
Name
|
Date
|
hold ($)
|
($)
|
$ |
imum
|
hold ($)
|
($)
|
$ |
imum
|
or Units (#)
|
Options (#)(2)
|
($/Sh)
|
Awards (1)
|
|||||||||||||||||
Ronghua Wang | 10/22/09 | $ | ― | $ | ― | $ | ― |
$
|
― | $ | ― |
$
|
― | ― | 220,000 | $ | 2.60 | $ | 160,242 | |||||||||||
Elaine Zhao | 10/22/09 | $ | ― | $ | ― | $ | ― | $ | ― | $ | ― | $ | ― | ― | 200,000 | $ | 2.60 | $ | 119,331 |
(1)
|
Reflects dollar amount expensed by the Company during the applicable fiscal year for financial statement reporting purposes pursuant to FAS 123R.
|
(2)
|
The vesting schedule for these options is as follows: 33.33% on the grant date and each of the 1st and 2nd-year anniversary of the grant date.
|
Option Awards
|
Stock Awards
|
||||||||||||||||||||||||||||||||
Name
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
Option
Exercise
Price ($)
|
Option
Expiration
Date
|
Number
of Shares
or Units
of Stock
That
Have Not
Vested
(#)
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($)
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units, or
Other
Rights
That
Have Not
Vested (#)
|
Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares, Units,
or Other
Rights That
Have Not
Vested (#)
|
||||||||||||||||||||||||
Ronghua Wang
|
73,334
|
(1)
|
146,666
|
(1)
|
―
|
$
|
2.60
|
10/21/14
|
―
|
―
|
―
|
―
|
|||||||||||||||||||||
Elaine Zhao
|
66,667
|
(1)
|
133,333
|
(1)
|
―
|
$
|
2.60
|
10/21/14
|
―
|
―
|
―
|
―
|
(1)
|
33.33% of this named executive officer’s options vest(ed) on October 22, 2009, October 22, 2010 and October 22, 2011.
|
Name
|
|
Fees
Earned or
Paid in Cash
($)
|
Stock
Awards
($)(1)
|
Option
Awards ($)(1)
|
Non-Equity
Incentive Plan
Compensation ($)
|
Non-Qualified
Deferred
Compensation
Earnings ($)
|
All Other
Compensation
($)
|
Total
($)
|
|
|||||||||||||||||||
Ronghua Wang (2)
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||||||
|
||||||||||||||||||||||||||||
Qinghua Liu
|
$
|
5,262
|
$
|
-
|
$
|
47,732
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
52,994
|
||||||||||||||
|
||||||||||||||||||||||||||||
Haipeng Wu
|
$
|
3,508
|
$
|
-
|
$
|
11,933
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
15,441
|
||||||||||||||
|
||||||||||||||||||||||||||||
Ziping Pan
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||||||
Zhongyang Shang
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
(1)
|
Reflects dollar amount expensed by the Company during the applicable fiscal year for financial statement reporting purposes pursuant to FAS 123R. FAS 123R requires the Company to determine the overall value of the stock award as of the date of grant, and to then expense that value over the service period over which the stock award becomes exercisable (vested). As a general rule, for time in service based stock awards, the Company will immediately expense any stock award or portion thereof that is vested upon grant, while expensing the balance on a pro rata basis over the remaining vesting term of the stock award.
|
(2)
|
This individual’s compensation is reflected in the Summary Compensation Table on page 57 above.
|
Plan Category
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
|
Weighted-average exercise price of outstanding options, warrants and rights
|
Number of securities remaining available for future issuance under equity compensation plans
|
||||||
Equity compensation plans
approved by security holders
|
—
|
—
|
—
|
||||||
Equity compensation plans
not approved by security holders
|
1,080,000
|
$2.77
|
920,000
|
||||||
TOTAL
|
1,080,000
|
$2.77
|
920,000
|
On August 25, 2009, our board of directors approved a stock incentive plan for officers, directors, employees, and consultants entitled “Biostar Pharmaceuticals, Inc. 2009 Incentive Stock Plan” (hereinafter the “2009 Plan”). The maximum number of shares that may be issued under the 2009 Plan is 2,000,000 shares of our common stock. The 2009 Plan was approved by written consent of shareholders holding a majority of our issued and outstanding common stock; however, we have not notified all of our shareholders of such approval as required under applicable Maryland law. Under this Plan, the Company may issue common stock and/or options to purchase common stock to certain officers, directors and employees and consultants of the Company and its subsidiaries. The 2009 Plan is administered either by the compensation committee or a committee appointed by the Board, which is comprised of a combination of two or more officers and/or members of the Board. The committee has full and complete authority, in its discretion, but subject to the express provisions of the Plan to approve the eligible persons nominated by the management of the Company to be granted awards of common stock (“Awards”) or stock options, to determine the number of Awards or stock options to be granted to an eligible person; to determine the time or times at which or stock options shall be granted; to establish the terms and conditions upon which Awards or Stock Options may be exercised; to remove or adjust any restrictions and conditions upon Awards or Stock Options; to specify, at the time of grant, provisions relating to exercisability of Stock Options and to accelerate or otherwise modify the exercisability of any Stock Options; and to adopt such rules and regulations and to make all other determinations deemed necessary or desirable for the administration of the Plan. As of December 31, 2009, there are 920,000 shares of our common stock remaining available for future issuance under the 2009 Plan.
|
Title of
Class
|
Name and
Address of
Beneficial Owner (1)
|
Amount of
Beneficial
Owner (2)
|
Percent of
Class (2)
|
|||||
Common Stock
|
Ronghua Wang
chairman of Board, president and chief executive officer
|
9,040,308
|
(3)
|
35.01
|
% |
(3)
|
||
|
||||||||
Common Stock
|
Qinghua Liu
Director
|
29,667
|
(4)
|
*
|
% |
(4)
|
||
Common Stock
|
Haipeng Wu
Director
|
6,667
|
(5)
|
*
|
% |
(5)
|
||
|
||||||||
Common Stock
|
Zibing Pan (6)
Director
|
0
|
-
|
|||||
|
||||||||
Common Stock
|
Zhongyang Shang
Director
|
0
|
-
|
|||||
|
||||||||
Common Stock
|
Elaine Zhao (7)
chief financial officer
|
69,907
|
(7)
|
*
|
%
|
|
||
Common Stock
|
Amei Zhang
chief operating officer
|
49,667
|
(8)
|
*
|
% |
(8)
|
||
Common Stock
|
Shuang Gong
corporate secretary
|
36,334
|
(9)
|
*
|
% |
(9)
|
||
Common Stock
|
All Directors and Officers of the Company as a group
|
9,232,550
|
35.76
|
%
|
|
|||
Common Stock
|
Andrew Barron Worden
|
2,556,629
|
(10)
|
9.90
|
% |
(10)
|
(1)
|
Unless otherwise noted, the address for each of the named beneficial owners is: No. 588 Shiji Avenue, Xianyang City, Shaanxi province, PRC, 712046.
|
(2)
|
Unless otherwise noted, the number and percentage of outstanding shares of common stock of Biostar is based upon 25,820,119 shares outstanding as of March 24, 2010. Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person's actual ownership or voting power with respect to the number of shares of common stock actually outstanding.
|
(3)
|
Includes 73,334 shares of common stock issuable upon exercise of stock options that were granted to this stockholder on October 22, 2009.
|
(4)
|
Includes 26,667 shares of common stock issuable upon exercise of stock options that were granted to this stockholder on October 22, 2009.
|
(5)
|
Includes 6,667 shares of common stock issuable upon exercise of stock options that were granted to this stockholder on October 22, 2009.
|
(6)
|
Zibing Pan’s address is: 1813 NW 176th PL Edmond, OK 73012.
|
(7)
|
Elaine Zhao’s address is: 20955 Pathfinder Road, Suite 100, Diamond Bar, California 91765. Includes 66,66 shares of common stock issuable upon exercise of stock options that were granted to this stockholder on October 22, 2009.
|
(8)
|
Includes 26,667 shares of common stock issuable upon exercise of stock options that were granted to this stockholder on October 22, 2009.
|
(9)
|
Includes 33,334 shares of common stock issuable upon exercise of stock options that were granted to this stockholder on October 22, 2009.
|
(10)
|
Andrew Barron Worden’s address is 730 Fifth Avenue, 25th Floor, New York, New York 10019. The number of shares reported herein as beneficially owned by Mr. Worden includes 1,690,634 shares held by a group of shareholders to which Mr. Worden has been granted trading authorization to and share dispositive power of.
|
Fiscal Year Ended December 31,
|
||||||||||||||||
2009
|
2008
|
|||||||||||||||
Billing Firm
|
Mazars
|
ACSB
|
MSB
|
MSB
|
||||||||||||
Audit Fees (1)
|
$
|
105,000
|
$
|
16,000
|
$
|
44,000
|
$
|
76,707
|
||||||||
Audit-related Fees (2)
|
-
|
-
|
-
|
-
|
||||||||||||
Tax Fees (3)
|
-
|
-
|
-
|
-
|
||||||||||||
All Other Fees (4)
|
-
|
-
|
-
|
-
|
||||||||||||
Total
|
$
|
105,000
|
$
|
16,000
|
$
|
44,000
|
$
|
76,707
|
(1)
|
Audit Fees – This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q, and services that are normally provided by independent auditors in connection with statutory and regulatory filings or the engagement for fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.
|
(2)
|
Audit-Related Fees – This category consists of assurance and related services by our independent auditors that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under "Audit Fees." The services for the fees disclosed under this category include consultation regarding our correspondence with the SEC.
|
(3)
|
Tax Fees – This category consists of professional services rendered by our independent auditors for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.
|
(4)
|
All Other Fees – This category consists of fees for other miscellaneous items.
|
Exhibit
Number
|
Description
|
|||||
3.1
|
Articles of Incorporation filed with the corporate secretary of State of the State of Maryland on March 27, 2007 (1)
|
|||||
3.2
|
Articles of Amendment. filed with the corporate secretary of State of the State of Maryland on August 1, 2007 (1)
|
|||||
3.3
|
Articles of Amendment filed with the corporate secretary of State of the State of Maryland on September 14, 2007 (1)
|
|||||
3.4
|
Certificate of Designation for the Series B Convertible Preferred Stock as filed with the corporate secretary of State of Maryland on November 2, 2009 (8)
|
|||||
3.4
|
Bylaws (1)
|
|||||
4.1
|
Form of $1.00 Common Stock Warrant (1)
|
|||||
4.2
|
Form of $3.00 Common Stock Warrant (8)
|
|||||
10.1
|
Amended and Restated Entrusted Management Agreement by and among Shaanxi Aoxing Pharmaceutical Co., Ltd., its shareholders and Shaanxi Biostar Biotech Ltd. dated May 6, 2008 (4)
|
|||||
10.2
|
Form of Preferred Stock and Warrant Purchase Agreement between the Company and the purchasers of the Series A Convertible Preferred Stock (1)
|
|||||
10.3
|
Form of Amendment No. 1 to the Preferred Stock and Warrant Purchase Agreement between the Company and the purchasers of the Series A Convertible Preferred Stock (1)
|
|||||
10.4
|
Exclusive Option Agreement by and among Shaanxi Biostar Biotech Ltd., Wang Ronghua, Wang Yan, Wang Rongfa, Wang Rangmei, Cao Xuezhu, Wang Yuxing, An Xiaoru, Ao Quanfang, Tang Wenying, Qin Hongxia, Wu Gang, Wu Weiping, Bai Rong, Wu Jin and Shaanxi Aoxing Pharmaceutical Co., Ltd. (2)
|
|||||
10.5
|
Share Pledge Agreement by and among Wang Ronghua, Wang Yan, Wang Rongfa, Wang Rangmei, Cao Xuezhu, Wang Yuxing, An Xiaoru, Ao Quanfang, Tang Wenying, Qin Hongxia, Wu Gang, Wu Weiping, Bai Rong, Wu Jin, and Shaanxi Biostar Biotech Ltd. (2)
|
|||||
10.6
|
Shareholders’ Voting Proxy Agreement by and among Shaanxi Biostar Biotech Ltd., Wang Ronghua, Wang Yan, Wang Rongfa, Wang Rangmei, Cao Xuezhu, Wang Yuxing, An Xiaoru, Ao Quanfang, Tang Wenying, Qin Hongxia, Wu Gang, Wu Weiping, Bai Rong and Wu Jin (2)
|
|||||
10.7
|
Cooperation Agreement by and between Shaanxi Aoxing Pharmaceutical Co., Ltd. and Xianyang Material Medical Institute (3)
|
|||||
10.8
|
Technological Cooperation Agreement between Shaanxi Aoxing Pharmaceutical Co., Ltd. and Shaanxi University of Science and Technology (3)
|
|||||
10.9
|
Drug Supply and Marketing Contract between Shaanxi Aoxing Pharmaceutical Co., Ltd. and Guangdong Runtai Pharmaceutical Co., Ltd. (2)
|
|||||
10.10
|
Purchase Contract between Shaanxi Aoxing Pharmaceutical Co., Ltd. and Xi'an Chemical Industry Medicine Supply and Marketing Company (2)
|
|||||
10.11
|
Labor Contract between Shaanxi Aoxing Pharmaceutical Co., Ltd. and Shuang Gong dated June 10, 2006 (2)
|
|||||
10.12
|
Labor Contract between Shaanxi Aoxing Pharmaceutical Co., Ltd. and Jianmin Du dated January 2, 2006 (2)
|
|||||
10.13
|
Labor Contract between Shaanxi Aoxing Pharmaceutical Co., Ltd. and Ame Zhang dated July 7, 2007 (2)
|
|||||
10.14
|
Corporate Finance Advisory Agreement between Friedland Capital Inc. and Shaanxi Aoxing Pharmacy Co., Ltd. dated March 8 , 2007 (2)
|
|||||
10.15
|
Entrust Agreement for Land Acquisition (2)
|
|||||
10.16
|
Land Use Right (2)
|
|||||
10.17
|
Purchase Contract between Shaanxi Aoxing Pharmaceutical Co., Ltd. and Xi’an Chinese Drug Tablet Factory (2)
|
|||||
10.18
|
Loan Agreement between Shaanxi Aoxing Pharmaceutical Co., Ltd and Qindu District Rural Credit Cooperative (Fengxi Branch) dated February 13, 2008 (3)
|
|||||
10.19
|
Technological Cooperation Agreement between Shaanxi Aoxing Pharmaceutical Co., Ltd and College of Life Sciences of Northwest University dated September 10, 2006 (3)
|
10.20
|
Preliminary Employment Agreement between Biostar Pharmaceuticals, Inc. and Elaine Zhao dated June 25, 2007 (5)
|
|||||
10.21
|
Stock Purchase Agreement by and between the Company and purchasers of Series B Convertible Preferred Stock dated November 2, 2009 (8)
|
|||||
10.22
|
Make Good Escrow Agreement by and among the Company, purchasers of Series B Convertible Preferred Stock, and Sichenzia Ross Friedman Ference LLP dated November 2, 2009 (8)
|
|||||
10.23
|
Closing Escrow Agreement by and among the Company, purchasers of Series B Convertible Preferred Stock and Sichenzia Ross Friedman Ference LLP dated November 2, 2009 (8)
|
|||||
10.24
|
Stock Purchase Agreement by and between the Company and purchasers of Series B Convertible Preferred Stock dated November 18, 2009 (9)
|
|||||
10.25
|
Financial Services Agreement by and among the Company, ELZ Accountancy Corp., and Elaine Zhao dated August 1, 2009 (7)
|
|||||
10.26
|
Form of Director Offer Letter with Zibing Pan and Zhongyang Shang (10)
|
|||||
10.27
|
||||||
14
|
Code of Ethics (10)
|
|||||
16.1
|
Letter from Morgenstern, Svoboda & Baer CPA (6)
|
|||||
16.2
|
Letter from Acquavella, Chiarelli, Shuster, Berkower & Co., LLP (11)
|
|||||
21
|
Subsidiaries (1)
|
|||||
31.1 | ||||||
31.2 | ||||||
32.1 | ||||||
32.2 |
|
*
|
Filed herewith
|
|
(1)
|
Previously filed as an exhibit to the Company’s Registration Statement on Form SB-2 (File No. 333-147363) filed with the SEC on November 13, 2007.
|
||
(2)
|
Previously filed as an exhibit to the Company’s Registration Statement on Form S-1A (File No. 333-147363) filed with the SEC on February 25, 2008.
|
||
(3)
|
Previously filed as an exhibit to the Company’s Registration Statement on Form S-1A (File No. 333-147363) filed with the SEC on May 9, 2008.
|
||
(4)
|
Previously filed as an exhibit to the Company’s Registration Statement on Form S-1A (File No. 333-147363) filed with the SEC on June 12, 2008.
|
||
(5)
|
Previously filed as an exhibit to the Company’s Registration Statement on Form S-1A (File No. 333-147363) filed with the SEC on June 27, 2008.
|
||
(6)
|
Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on July 6, 2009.
|
||
(7)
|
Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on August 6, 2009.
|
||
(8)
|
Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on November 3, 2009.
|
||
(9)
|
Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on November 19, 2009.
|
||
(10)
|
Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on January 5, 2010.
|
||
(11)
|
Previously filed as an exhibit to the Company’s Current Report on Form 8-K/A filed with the SEC on January 28, 2010.
|
|
||||||||
BIOSTAR PHARMACEUTICALS, INC.
(Registrant)
|
||||||||
Date: March 31, 2010
|
|
By: /s/ Ronghua Wang
|
||||||
Ronghua Wang
Chief Executive Officer
(Principal Executive Officer)
|
||||||||
Date: March 31, 2010
|
By: /s/ Elaine Zhao
|
|||||||
Elaine Zhao
Chief Financial Officer
(Principal Financial Officer)
|
Name
|
Title
|
Date
|
||
/s/ Ronghua Wang
|
Chief Executive Officer/Director
|
March 31, 2010
|
||
Ronghua Wang
|
||||
/s/ Elaine Zhao
|
Chief Financial Officer
|
March 31, 2010
|
||
Elaine Zhao
|
||||
/s/ Qinghua Liu
|
Director
|
March 31, 2010
|
||
Qinghua Liu
|
||||
/s/ Haipeng Wu
|
Director
|
March 31, 2010
|
||
Haipeng Wu
|
||||
/s/ Zibing Pan
|
Director
|
March 31, 2010
|
||
Zibing Pan
|
||||
/s/ Zhongyang Shang
|
Director
|
March 31, 2010
|
||
Zhongyang Shang
|
Page(s)
|
|
Financial Statements
|
|
F-1
|
|
F-2
|
|
F-3
|
|
F-4
|
|
F-5
|
BIOSTAR PHARMACEUTICALS, INC.
|
||||||||
CONSOLIDATED BALANCE SHEETS
|
||||||||
December 31,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Current Assets
|
||||||||
Cash and cash equivalents
|
$ | 8,577,704 | $ | 758,316 | ||||
Accounts receivable
|
19,803,434 | 11,700,841 | ||||||
Inventories
|
340,078 | 315,745 | ||||||
Prepaid expenses and other receivables
|
1,500,327 | 8,753 | ||||||
Total Current Assets
|
30,221,543 | 12,783,655 | ||||||
Deposits
|
1,316,328 | 2,917,919 | ||||||
Property and equipment, net
|
4,340,917 | 5,930,467 | ||||||
Intangible assets, net
|
11,131,681 | 7,365,765 | ||||||
Total Assets
|
$ | 47,010,469 | $ | 28,997,806 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current Liabilities
|
||||||||
Accounts payable and accrued expenses
|
$ | 3,559,281 | $ | 2,228,296 | ||||
Customer and other deposits
|
- | 2,556,097 | ||||||
Value-added tax payable
|
1,050,051 | 527,103 | ||||||
Income tax payable
|
1,481,266 | 413,205 | ||||||
Total Current Liabilities
|
6,090,598 | 5,724,701 | ||||||
Commitment and contingencies
|
||||||||
Stockholders' Equity
|
||||||||
Series B, convertible preferred stock, $0.001 par value, 5,000,000 shares
|
||||||||
authorized, 3,060,000 shares and Nil issued and outstanding at December 31, 2009 and 2008
|
3,060 | - | ||||||
Common stock, $0.001 par value, 100,000,000 shares authorized,
|
||||||||
23,374,799 and 23,240,899 shares issued and outstanding at December 31, 2009 and 2008
|
23,375 | 23,241 | ||||||
Additional paid-in capital
|
19,801,366 | 10,430,168 | ||||||
Statutory reserve
|
2,860,685 | 1,585,383 | ||||||
Retained earnings
|
17,548,676 | 10,996,655 | ||||||
Accumulated other comprehensive income
|
682,709 | 237,658 | ||||||
Total Stockholders' Equity
|
40,919,871 | 23,273,105 | ||||||
Total Liabilities and Stockholders' Equity
|
$ | 47,010,469 | $ | 28,997,806 |
BIOSTAR PHARMACEUTICALS, INC.
|
||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||
Year Ended
|
||||||||
December 31,
|
||||||||
2009
|
2008
|
|||||||
Sales, net
|
$ | 53,318,744 | $ | 33,910,922 | ||||
Cost of sales
|
14,314,776 | 14,059,343 | ||||||
Gross profit
|
39,003,968 | 19,851,579 | ||||||
Operating expenses:
|
||||||||
Selling, general and administrative expenses
|
22,873,250 | 12,089,937 | ||||||
Stock-based compensation
|
1,029,875 | - | ||||||
Total operating expenses
|
23,903,125 | 12,089,937 | ||||||
Income from operations
|
15,100,843 | 7,761,642 | ||||||
Other Income (Expense)
|
||||||||
Interest income
|
2,899 | 2,917 | ||||||
Interest expense
|
- | (40,615 | ) | |||||
Loss on disposal of building
|
(357,789 | ) | - | |||||
Foreign exchange loss
|
2,809 | - | ||||||
Total other Income (Expense)
|
(352,081 | ) | (37,698 | ) | ||||
Income before income taxes
|
14,748,762 | 7,723,944 | ||||||
Provision for income taxes
|
4,250,922 | 1,033,402 | ||||||
Net income
|
$ | 10,497,840 | $ | 6,690,542 | ||||
Deemed dividend from beneficial conversion feature of preferred stock
|
(2,670,517 | ) | (1,462,240 | ) | ||||
Net income applicable to common stockholders
|
$ | 7,827,323 | $ | 5,228,302 | ||||
Net income per common stock
|
||||||||
Basic
|
$ | 0.34 | $ | 0.23 | ||||
Diluted
|
$ | 0.32 | $ | 0.22 | ||||
Weighted average number of common stocks outstanding
|
||||||||
Basic
|
23,255,391 | 22,369,434 | ||||||
Diluted
|
24,338,471 | 23,257,470 |
BIOSTAR PHARMACEUTICALS, INC.
|
||||||||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
|
||||||||||||||||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||||||||||||||||
Additional
|
Other
|
Total
|
||||||||||||||||||||||||||||||||||
Capital Stock
|
Preferred Stock
|
Paid-in
|
Statutory
|
Retained
|
Comprehensive
|
Stockholders'
|
||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Reserve
|
Earnings
|
Income (Loss)
|
Equity
|
||||||||||||||||||||||||||||
BALANCE, JANUARY 1, 2008
|
22,152,311 | $ | 22,152 | 72,500 | $ | 725,000 | $ | 8,244,017 | $ | 902,113 | $ | 6,451,623 | $ | (53,517 | ) | $ | 16,291,388 | |||||||||||||||||||
Conversion of Series A preferred stock
|
1,088,588 | 1,089 | (72,500 | ) | (725,000 | ) | 723,911 | - | - | - | - | |||||||||||||||||||||||||
Deemed dividend on Series A preferred stock
|
- | - | - | - | 1,462,240 | - | (1,462,240 | ) | - | - | ||||||||||||||||||||||||||
Transfer to statutory reserve
|
- | - | - | - | - | 683,270 | (683,270 | ) | - | - | ||||||||||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||||||||||
Net income
|
- | - | - | - | - | - | 6,690,542 | - | 6,690,542 | |||||||||||||||||||||||||||
Foreign currency translation adjustment
|
- | - | - | - | - | - | - | 291,175 | 291,175 | |||||||||||||||||||||||||||
Total comprehensive income
|
- | - | - | - | - | - | - | - | 6,981,717 | |||||||||||||||||||||||||||
BALANCE, DECEMBER 31, 2008
|
23,240,899 | $ | 23,241 | - | $ | - | $ | 10,430,168 | $ | 1,585,383 | $ | 10,996,655 | $ | 237,658 | $ | 23,273,105 | ||||||||||||||||||||
Issuance of Series B preferred stock
|
- | - | 3,060,000 | 3,060 | 5,670,940 | - | - | - | 5,674,000 | |||||||||||||||||||||||||||
Deemed dividend on Series B preferred stock
|
- | - | - | - | 2,670,517 | - | (2,670,517 | ) | - | - | ||||||||||||||||||||||||||
Stock-based compensation
|
133,900 | 134 | - | - | 1,029,741 | - | - | - | 1,029,875 | |||||||||||||||||||||||||||
Transfer to statutory reserve
|
- | - | - | - | - | 1,275,302 | (1,275,302 | ) | - | - | ||||||||||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||||||||||
Net income
|
- | - | - | - | - | - | 10,497,840 | - | 10,497,840 | |||||||||||||||||||||||||||
Foreign currency translation adjustment
|
- | - | - | - | - | - | - | 445,051 | 445,051 | |||||||||||||||||||||||||||
Total comprehensive income
|
- | - | - | - | - | - | - | - | 10,942,891 | |||||||||||||||||||||||||||
BALANCE, DECEMBER 31, 2009
|
23,374,799 | $ | 23,375 | 3,060,000 | $ | 3,060 | $ | 19,801,366 | $ | 2,860,685 | $ | 17,548,676 | $ | 682,709 | $ | 40,919,871 |
BIOSTAR PHARMACEUTICALS, INC.
|
||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
Year Ended
|
||||||||
December 31,
|
||||||||
2009
|
2008
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net income
|
$ | 10,497,840 | $ | 6,690,542 | ||||
Adjustments to reconcile net income to net cash
|
||||||||
provided by operating activities:
|
||||||||
Depreciation and amortization
|
607,649 | 645,846 | ||||||
Loss on disposal of building
|
357,789 | - | ||||||
Stock-based compensation
|
1,029,875 | - | ||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(8,069,157 | ) | (7,187,746 | ) | ||||
Inventories
|
(23,535 | ) | (92,443 | ) | ||||
Prepaid expenses and other receivables
|
(1,490,765 | ) | 10,528 | |||||
Accounts payable and accrued expenses
|
1,175,997 | 1,593,165 | ||||||
Other deposits
|
- | 17,236 | ||||||
VAT tax payable
|
521,357 | 205,829 | ||||||
Income tax payable
|
1,066,459 | 210,249 | ||||||
Net cash provided by operating activities
|
5,673,509 | 2,093,206 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Purchase of property and equipment
|
(16,561 | ) | (51,770 | ) | ||||
Construction in progress
|
(1,169,440 | ) | - | |||||
Acquisition of land use right
|
(1,169,440 | ) | (276,531 | ) | ||||
Deposit paid for acquisition of land use right
|
- | (2,872,635 | ) | |||||
Proceeds from disposal of property and equipment
|
143,256 | - | ||||||
Deposit paid for acquisition of business
|
(1,315,620 | ) | - | |||||
Net cash used in investing activities
|
(3,527,805 | ) | (3,200,936 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Repayment of short-term bank loan
|
- | (545,801 | ) | |||||
Proceeds from issuance of preferred stock
|
5,674,000 | - | ||||||
Net cash provided by (used in) financing activities
|
5,674,000 | (545,801 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents
|
(316 | ) | 125,428 | |||||
Net increase (decrease) in cash and cash equivalents
|
7,819,388 | (1,528,103 | ) | |||||
Cash and cash equivalents, beginning balance
|
758,316 | 2,286,419 | ||||||
Cash and cash equivalents, ending balance
|
$ | 8,577,704 | $ | 758,316 | ||||
SUPPLEMENTAL DISCLOSURES:
|
||||||||
Interest payments
|
$ | - | $ | 40,615 | ||||
Income tax payments
|
$ | 3,184,462 | $ | 823,153 | ||||
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
||||||||
Conversion of preferred stock to common stock
|
$ | - | $ | 725,000 | ||||
Prior year deposit received for disposed building
|
$ | 2,561,074 | $ | - | ||||
Prior year deposit paid for acquisition of land use right
|
$ | 2,923,600 | $ | - |
·
|
Shaanxi Biostar has the full right to control and administrate the financial affairs and daily operation of Aoxing Pharmaceutical and has the right to manage and control all assets of Aoxing Pharmaceutical. The equity holders of Aoxing Pharmaceutical as a group have no right to make any decision about Aoxing Pharmaceutical’s activities without the consent of Shaanxi Biostar.
|
·
|
Shaanxi Biostar was assigned all voting rights of Aoxing Pharmaceutical and has the right to appoint all directors and senior management personnel of Aoxing Pharmaceutical. The equity holders of Aoxing Pharmaceutical possess no substantive voting rights.
|
·
|
Shaanxi Biostar will provide financial support if Aoxing Pharmaceutical requires additional funds to maintain its operations and to repay its debts.
|
·
|
Shaanxi Biostar is entitled to a management fee equal to Aoxing Pharmaceutical’s net profits and is obligated to assume all operation risks and bear all losses of Aoxing Pharmaceutical. Therefore, Shaanxi Biostar is the primary beneficiary of Aoxing Pharmaceutical.
|
December 31,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
Raw materials
|
$ | 261,868 | $ | 29,387 | ||||
Work in process
|
41,010 | 8,597 | ||||||
Finished goods
|
37,200 | 277,761 | ||||||
$ | 340,078 | $ | 315,745 |
Real property
|
30 years
|
Machinery & equipment
|
5-10 years
|
Leasehold improvements
|
30 years
|
Computers & office equipment
|
5-10 years
|
December 31,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
Construction in progress
|
$ | 1,169,440 | $ | - | ||||
Real property
|
1,528,543 | 4,393,371 | ||||||
Machinery & equipment
|
542,195 | 541,063 | ||||||
Leasehold improvements
|
1,956,289 | 1,946,831 | ||||||
Furniture & fixtures
|
63,420 | 62,982 | ||||||
Vehicle
|
24,970 | 19,437 | ||||||
5,284,857 | 6,963,684 | |||||||
Less: Accumulated depreciation
|
(943,940 | ) | (1,033,217 | ) | ||||
$ | 4,340,917 | $ | 5,930,467 |
Land use right
|
50 years
|
Proprietary technologies
|
10 years
|
December 31,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
Land use right
|
$ | 10,571,810 | $ | 6,478,769 | ||||
Proprietary technologies
|
1,511,544 | 1,511,544 | ||||||
12,083,354 | 7,990,313 | |||||||
Less: Accumulated amortization
|
(951,673 | ) | (624,548 | ) | ||||
$ | 11,131,681 | $ | 7,365,765 |
Years Ending December 31,
|
|
2010
|
$ 327,200
|
2011
|
327,200
|
2012
|
327,200
|
2013
|
327,200
|
2014
|
327,200
|
Thereafter
|
9,495,681
|
Weighted
|
||||||||
Underlying
|
Average
|
|||||||
Shares
|
Exercise Price
|
|||||||
Warrants outstanding, January 1, 2008
|
1,088,588 | $ | 1.00 | |||||
Issued
|
- | |||||||
Warrants outstanding, December 31, 2008
|
1,088,588 | $ | 1.00 | |||||
Issued
|
500,000 | $ | 3.00 | |||||
Warrants outstanding, December 31, 2009
|
1,588,588 | $ | 1.63 | |||||
Exercisable as of December 31, 2009
|
1,588,588 | $ | 1.63 |
2009
|
|
Risk-free interest rate (%)
|
1.7%
|
Expected dividend yield (%)
|
-
|
Expected option life (years)
|
3.4
|
Expected volatility (%)
|
93.3%
|
Weighted average grant date fair value
|
$1.70
|
Options Outstanding
|
||||||||||||
Number of Shares
|
Weighted-Average Exercise Price
|
Weighted-Average Remaining Life (in years)
|
||||||||||
Balance at January 1, 2009
|
- | |||||||||||
Granted
|
1,080,000 | $ | 2.77 | |||||||||
Balance at December 31, 2009
|
1,080,000 | $ | 2.77 | 4.7 | ||||||||
Vested and exercisable as of December 31, 2009
|
326,667 | $ | 2.60 | 4.8 |
Exercise Price
|
Options Outstanding
|
Weighted-Average Remaining Life (in years)
|
Options Exercisable and Vested
|
|||||||||||
$ | 2.60 | 980,000 | 4.8 | 326,667 | ||||||||||
$ | 4.45 | 100,000 | 4.0 | - | ||||||||||
1,080,000 | 4.7 | 326,667 |
Year Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Basic net income per share:
|
||||||||
Numerator:
|
||||||||
Net income
|
$ | 10,497,840 | $ | 6,690,542 | ||||
Deemed dividend from beneficial conversion feature of preferred stock
|
(2,670,517 | ) | (1,462,240 | ) | ||||
Net income applicable to common stockholders
|
$ | 7,827,323 | $ | 5,228,302 | ||||
Denominator:
|
||||||||
Weighted average number of common stock outstanding
|
23,255,391 | 22,369,434 | ||||||
Basic net income per share
|
$ | 0.34 | $ | 0.23 | ||||
Diluted net income per share:
|
||||||||
Numerator:
|
||||||||
Net income
|
$ | 10,497,840 | $ | 6,690,542 | ||||
Deemed dividend from beneficial conversion feature of preferred stock
|
(2,670,517 | ) | (1,462,240 | ) | ||||
Net income applicable to common stockholders
|
$ | 7,827,323 | $ | 5,228,302 | ||||
|
||||||||
Denominator:
|
||||||||
Weighted average number of common stock outstanding
|
23,255,391 | 22,369,434 | ||||||
Weighted average effect of dilutive securities:
|
||||||||
Convertible preferred stocks
|
461,918 | 871,465 | ||||||
Stock warrants
|
604,638 | 16,571 | ||||||
Make good shares
|
16,524 | - | ||||||
Shares used in computing diluted net income per share
|
24,338,471 | 23,257,470 | ||||||
Diluted net income per share
|
$ | 0.32 | $ | 0.22 |
Year Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Current:
|
||||||||
Domestic
|
$ | - | $ | - | ||||
Foreign
|
4,250,922 | 1,033,402 | ||||||
Deferred
|
- | - | ||||||
Provision for income taxes
|
$ | 4,250,922 | $ | 1,033,402 |
Year Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Income tax at USA statutory rate (34%)
|
$ | 5,014,579 | $ | 2,626,141 | ||||
State tax, net of federal effect
|
- | - | ||||||
Foreign rate differential
|
(1,234,130 | ) | (1,641,074 | ) | ||||
Change in valuation allowance
|
470,473 | 48,335 | ||||||
Provision for income taxes
|
$ | 4,250,922 | $ | 1,033,402 |
December 31,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
Accumulated other comprehensive income (loss), beginning of period
|
$ | 237,658 | $ | (53,517 | ) | |||
Change in cumulative translation adjustment
|
445,051 | 291,175 | ||||||
Accumulated other comprehensive income, end of period
|
$ | 682,709 | $ | 237,658 |
§
|
The Company may not be able to adequately protect and maintain its intellectual property.
|
§
|
The Company may not be able to obtain regulatory approvals for its products.
|
§
|
The Company may have difficulty competing with larger and better financed companies in the same sector. New legislative or regulatory requirements may adversely affect the Company’s business and operations. The Company is dependant on certain key existing and future personnel.
|
§
|
The Company’s growth is dependent on its ability to successfully develop, market, or acquire new drugs. The Company may be subject to product liability claims in the future.
|
§
|
Changes in the laws and regulations in the PRC may adversely affect the Company’s ability to conduct its business.
|
§
|
The Company may experience barriers to conducting business due to governmental policy.
|
§
|
Capital outflow policies in the PRC may hamper the Company’s ability to remit income to the United States.
|
§
|
Fluctuation of the Renminbi could materially affect the Company’s financial condition and results of operations.
|
§
|
The Company may face obstacles from the communist system in the PRC.
|
§
|
The Company may have difficulty establishing adequate management, legal and financial controls in the PRC.
|
§
|
Trade barriers and taxes may have an adverse affect on the Company’s business and operations. There may not be sufficient liquidity in the market for the Company’s securities in order for investors to sell their securities.
|