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: June 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 June 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 June 30, 2008 (unaudited) and December
31, 2007
|
|
1
|
|
|
|
|
|
|
|
Unaudited
Condensed Consolidated Statements of Operations for the three and six
month periods ended June 30, 2008 and 2007 and for the period from
February 11, 2002 (inception) through June 30, 2008
|
|
2
|
|
|
|
|
|
|
|
Unaudited
Condensed Consolidated Statements of Changes in Shareholders' Equity
and
Comprehensive Gain (Loss) for the period from February 11, 2002
(inception) through June 30, 2008
|
|
3
|
|
|
|
|
|
|
|
Unaudited
Condensed Consolidated Statements of Cash Flows for the six month
periods
ended June 30, 2008 and 2007 and for the period from February 11,
2002
(inception) through June 30, 2008
|
|
9
|
|
|
|
|
|
|
|
Notes
to Unaudited Condensed Consolidated Financial Statements
|
|
11
|
|
|
|
|
|
Item
2.
|
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operation
|
|
23
|
|
|
|
|
|
Item
3.
|
|
Quantitative
and Qualitative Disclosure About Market Risk
|
|
30
|
|
|
|
|
|
Item
4.
|
|
Controls
and Procedures
|
|
30
|
|
|
|
|
|
Part
II
|
|
Other
Information
|
|
30
|
|
|
|
|
|
Item
1.
|
|
Legal
Proceedings
|
|
30
|
|
|
|
|
|
Item
1A.
|
|
Risk
Factors
|
|
30
|
|
|
|
|
|
Item
2.
|
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
|
30
|
|
|
|
|
|
Item
3.
|
|
Defaults
Upon Senior Securities
|
|
30
|
|
|
|
|
|
Item
4.
|
|
Submission
of Matters to a Vote of Security Holders
|
|
30
|
|
|
|
|
|
Item
5.
|
|
Other
Information
|
|
30
|
|
|
|
|
|
Item
6.
|
|
Exhibits
|
|
30
|
|
|
|
|
|
|
|
SIGNATURES
|
|
31
|
Item
1. Financial Statements
BIO-BRIDGE
SCIENCE INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
June
30
|
|
December
31
|
|
|
|
2008
|
|
2007
|
|
|
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
932,020
|
|
$
|
104,372
|
|
|
|
|
|
|
|
|
|
Prepaid
expenses and other current assets
|
|
|
43,511
|
|
|
28,662
|
|
|
|
|
|
|
|
|
|
Trading
securities, at fair value
|
|
|
193,675
|
|
|
1,509,916
|
|
Total
Current Assets
|
|
|
1,169,206
|
|
|
1,642,950
|
|
|
|
|
|
|
|
|
|
Fixed
assets, net
|
|
|
59,849
|
|
|
65,774
|
|
|
|
|
|
|
|
|
|
Construction
in progress
|
|
|
2,160,203
|
|
|
1,814,291
|
|
|
|
|
|
|
|
|
|
Land
use right, net of current portion
|
|
|
380,886
|
|
|
366,597
|
|
Total
Long-term Assets
|
|
|
2,600,938
|
|
|
2,246,662
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
3,770,144
|
|
$
|
3,889,612
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
Accrued
expenses and other payables
|
|
$
|
159,328
|
|
$
|
121,270
|
|
Due
to related party
|
|
|
61,233
|
|
|
-
|
|
Payable
to contractors
|
|
|
132,073
|
|
|
124,017
|
|
Total
current liabilities
|
|
|
352,634
|
|
|
245,287
|
|
|
|
|
|
|
|
|
|
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
|
|
|
10,920,612
|
|
|
10,349,611
|
|
Preferred
stock dividend
|
|
|
137,000
|
|
|
137,000
|
|
Subscription
receivable
|
|
|
(265,035
|
)
|
|
(20
|
)
|
Stock
to be issued, 393,334 and 50,000 shares, respectively
|
|
|
393
|
|
|
50
|
|
Accumulated
other comprehensive gain
|
|
|
361,015
|
|
|
221,358
|
|
Deficit
accumulated during the development stage
|
|
|
(7,775,063
|
)
|
|
(7,102,032
|
)
|
|
|
|
|
|
|
|
|
Total
Shareholders’ Equity
|
|
|
3,417,510
|
|
|
3,644,325
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
$
|
3,770,144
|
|
$
|
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 SIX MONTHS ENDED
JUNE 30, 2008
AND
FOR THE PERIOD FROM FEBRUARY 11, 2002
(INCEPTION) THROUGH JUNE 30, 2008
|
|
Three
Months Ended
June
30,
|
|
Six
Months Ended
June
30,
|
|
For
The Period From February 11, 2002 (Inception) Through June 30,
2008
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
REVENUE
|
|
$
|
5,142
|
|
$
|
333
|
|
$
|
7,427
|
|
$
|
690
|
|
$
|
12,174
|
|
COST
OF GOODS SOLD
|
|
|
(1,957
|
)
|
|
(178
|
)
|
|
(2,848
|
)
|
|
(405
|
)
|
|
(5,656
|
)
|
GROSS
PROFIT
|
|
|
3,185
|
|
|
155
|
|
|
4,579
|
|
|
285
|
|
|
6,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development cost
|
|
|
(20,467
|
)
|
|
(38,355
|
)
|
|
(56,873
|
)
|
|
(82,050
|
)
|
|
(529,214
|
)
|
Selling
and distribution expenses
|
|
|
(21,281
|
)
|
|
(10,838
|
)
|
|
(33,610
|
)
|
|
(16,311
|
)
|
|
(121,891
|
)
|
General
and administrative expenses
|
|
|
(243,031
|
)
|
|
(419,374
|
)
|
|
(448,875
|
)
|
|
(718,600
|
)
|
|
(5,151,363
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS
|
|
|
(281,594
|
)
|
|
(468,412
|
)
|
|
(534,779
|
)
|
|
(816,676
|
)
|
|
(5,795,950
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
(expense) income
|
|
|
(1,521
|
)
|
|
396
|
|
|
(1,671
|
)
|
|
3,803
|
|
|
15,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
loss on trading securities
|
|
|
(519
|
)
|
|
(85,360
|
)
|
|
(71,381
|
)
|
|
(108,426
|
)
|
|
(443,573
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
on sale of trading securities
|
|
|
64,916
|
|
|
-
|
|
|
55,150
|
|
|
-
|
|
|
52,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend
income
|
|
|
13,533
|
|
|
38,556
|
|
|
59,650
|
|
|
48,001
|
|
|
187,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
|
(205,185
|
)
|
|
(514,820
|
)
|
|
(493,031
|
)
|
|
(873,298
|
)
|
|
(5,984,743
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEEMED
PREFERRED STOCK DIVIDEND
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,293,320
|
)
|
|
(1,293,320
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PREFERRED
STOCK DIVIDENDS
|
|
|
(90,000
|
)
|
|
(90,000
|
)
|
|
(180,000
|
)
|
|
(137,000
|
)
|
|
(497,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS
|
|
$
|
(295,185
|
)
|
$
|
(604,820
|
)
|
$
|
(673,031
|
)
|
$
|
(2,303,618
|
)
|
$
|
(7,775,063
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
PER SHARE, attributable to common shareholders, basic and
diluted
|
|
$
|
(0.01
|
)
|
$
|
(0.02
|
)
|
$
|
(0.02
|
)
|
$
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE SHARES OUTSTANDING, basic and diluted
|
|
|
34,516,907
|
|
|
33,785,874
|
|
|
34,249,109
|
|
|
33,720,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 AND COMPREHENSIVE INCOME
FOR
THE PERIOD FROM
FEBRUARY
11, 2002 (INCEPTION) THROUGH JUNE 30, 2008
|
|
|
|
|
|
Additional
|
|
|
|
Common
Stock
|
|
Accumulated
Other
|
|
Deficit
Accumulated
During
the
|
|
|
|
|
|
Common
Stock
|
|
Paid-in
|
|
Deferred
|
|
To
be
|
|
Comprehensive
|
|
Development
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Compensation
|
|
Issued
|
|
Gain
(Loss)
|
|
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 AND COMPREHENSIVE INCOME (continued)
FOR
THE PERIOD FROM FEBRUARY 11, 2002
(INCEPTION)
THROUGH JUNE 30, 2008
|
|
|
|
|
|
Additional
|
|
|
|
Common
Stock
|
|
Accumulated
Other
|
|
Deficit
Accumulated
During
the
|
|
|
|
|
|
Common
Stock
|
|
Paid-in
|
|
Deferred
|
|
To
be
|
|
Comprehensive
|
|
Development
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Compensation
|
|
Issued
|
|
Gain
(Loss)
|
|
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 AND COMPREHENSIVE INCOME (continued)
FOR
THE PERIOD FROM FEBRUARY 11, 2002 (INCEPTION) THROUGH JUNE 30, 2008
|
|
Common
|
|
Stock
|
|
Additional
Paid-in
|
|
Deferred
|
|
Common
Stock to be
|
|
Accumulated
Other
Comprehensive
|
|
Subscription
|
|
Deficit
Accumulated
During
the Development
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Compensation
|
|
Issued
|
|
Gain
(Loss)
|
|
Receivable
|
|
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 AND COMPREHENSIVE INCOME (continued)
FOR
THE PERIOD FROM FEBRUARY 11, 2002
(INCEPTION)
THROUGH JUNE 30, 2008
|
|
|
|
|
|
Preferred
stock dividend payable in common
|
|
|
|
|
|
Accumulated
Other Comprehensive
|
|
|
|
Deficit
Developed During the Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stock
|
|
|
|
Issued
|
|
Gain
(loss)
|
|
Receivable
|
|
Stage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of vested 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 AND COMPREHENSIVE INCOME (continued)
FOR
THE PERIOD FROM FEBRUARY 11, 2002 (INCEPTION) THROUGH JUNE 30, 2008
|
|
|
|
|
|
|
|
|
Preferred
stock dividend payable in common
|
|
|
|
|
|
|
|
|
Accumulated
Other Comprehensive
|
|
|
|
|
|
Deficit
Developed During the Development
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
stock
|
|
|
Capital
|
|
|
Issued
|
|
|
Gain
(loss)
|
|
|
Receivable
|
|
|
Stage
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of consultant stock options
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
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)
BIO-BRIDGE
SCIENCE INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN
SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (continued)
FOR
THE PERIOD FROM FEBRUARY 11, 2002(INCEPTION) THROUGH JUNE 30,
2008
|
|
Common
Stock
|
|
Preferred
Stock
|
|
Preferred
stock dividend payable in common
|
|
Additional
paid-in
|
|
Accumulated
other comprehensive
|
|
Common
stock to be
|
|
Subscriptions
|
|
Deficit
accumulated during the development
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
stock
|
|
capital
|
|
gain
(loss)
|
|
issued
|
|
receivable
|
|
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
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
294,607
|
|
|
-
|
|
|
393
|
|
|
(265,015
|
)
|
|
-
|
|
|
29,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of warrants issued to directors
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
11,507
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
11,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of vested employee stock options
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
85,066
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
85,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual
of preferred stock dividend
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
180,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(180,000
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment
of preferred stock dividend
|
|
|
180,000
|
|
|
180
|
|
|
-
|
|
|
-
|
|
|
(180,000
|
)
|
|
179,820
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares
|
|
|
50,000
|
|
|
50
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(50
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation gain
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
139,658
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
139,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(493,031
|
)
|
|
(493,031
|
)
|
BALANCE
JUNE 30, 2008
|
|
|
34,587,676
|
|
$
|
34,588
|
|
|
4,000,000
|
|
$
|
4,000
|
|
$
|
137,000
|
|
$
|
10,920,611
|
|
$
|
361,016
|
|
$
|
393
|
|
$
|
(265,035
|
)
|
$
|
(7,775,063
|
)
|
$
|
3,417,510
|
|
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 FLOW
FOR
THE SIX MONTHS ENDED JUNE 30,
2008
AND
FOR THE PERIOD FROM FEBRUARY 11, 2002
(INCEPTION)
THROUGH
JUNE 30, 2008
|
|
For
Six Months Ended June 30, 2008
|
|
For
the Period From February 11, 2002 (Inception) Through June 30,
2008
|
|
|
|
2008
|
|
2007
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(493,031
|
)
|
$
|
(873,298
|
)
|
$
|
(5,984,743
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
-
|
|
|
|
|
|
|
|
Depreciation
|
|
|
10,133
|
|
|
9,408
|
|
|
54,329
|
|
Amortization
of land use right
|
|
|
9,222
|
|
|
8,469
|
|
|
82,546
|
|
Non
cash stock compensation expense
|
|
|
96,573
|
|
|
281,487
|
|
|
1,744,355
|
|
Write
off for notes receivable
|
|
|
-
|
|
|
-
|
|
|
40,000
|
|
Unrealized
loss on trading securities
|
|
|
71,381
|
|
|
108,426
|
|
|
443,573
|
|
Income
on sale of trading securities
|
|
|
(55,150
|
)
|
|
-
|
|
|
(52,332
|
)
|
Loss
on sale of investment
|
|
|
-
|
|
|
-
|
|
|
2,107
|
|
Change
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
-
|
|
(Increase)
decrease in prepaid expense and other assets
|
|
|
(14,849
|
)
|
|
633
|
|
|
(43,511
|
)
|
Decrease
(increase) payable to contractors
|
|
|
-
|
|
|
(355,631
|
)
|
|
124,017
|
|
Increase
(decrease) in accrued expenses and other payable
|
|
|
38,058
|
|
|
(12,010
|
)
|
|
159,328
|
|
Net
Cash Used In Operating Activities
|
|
|
(337,663
|
)
|
|
(832,516
|
)
|
|
(3,430,331
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Purchase
of land use right
|
|
|
|
|
|
-
|
|
|
(394,559
|
)
|
Increase
in construction in progress
|
|
|
(220,900
|
)
|
|
(3,951
|
)
|
|
(1,918,836
|
)
|
Purchase
of fixed assets
|
|
|
(593
|
)
|
|
(720
|
)
|
|
(106,833
|
)
|
Purchase
of investment
|
|
|
-
|
|
|
-
|
|
|
(40,000
|
)
|
Purchase
of trading securities
|
|
|
-
|
|
|
(2,000,000
|
)
|
|
(1,984,924
|
)
|
Proceeds
from sale of trading securities
|
|
|
1,300,010
|
|
|
102,816
|
|
|
1,400,008
|
|
Net
Cash Provided By (Used In) Investing Activities
|
|
|
1,078,517
|
|
|
(1,901,855
|
)
|
|
(3,045,144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of common stock
|
|
|
29,985
|
|
|
22,500
|
|
|
4,295,890
|
|
Proceeds
from issuance of preferred stock
|
|
|
-
|
|
|
3,000,000
|
|
|
3,000,000
|
|
Proceeds
from issuance of previously issued stocks
|
|
|
-
|
|
|
10,071
|
|
|
-
|
|
Proceeds
from exercise of stock option
|
|
|
-
|
|
|
416
|
|
|
994
|
|
Advances
from related party
|
|
|
61,233
|
|
|
(18,885
|
)
|
|
61,233
|
|
Net
Cash Provided By Financing Activities
|
|
|
91,218
|
|
|
3,014,102
|
|
|
7,358,117
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
832,072
|
|
|
279,731
|
|
|
882,642
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
(4,424
|
)
|
|
(3,160
|
)
|
|
49,378
|
|
Cash
and cash equivalents, beginning of period
|
|
|
104,372
|
|
|
149,613
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
932,020
|
|
$
|
426,184
|
|
$
|
932,020
|
|
See
accompanying notes to the condensed consolidated financial
statements.
|
|
For
Six Months Ended June 30, 2008
|
|
For
Six Months Ended June 30, 2007
|
|
For
the Period From February 11, 2002 (Inception) Through June 30,
2008
|
|
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
|
|
$
|
1,293,320
|
|
Accrual
of preferred stock dividend
|
|
$
|
180,000
|
|
$
|
137,000
|
|
$
|
497,000
|
|
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 JUNE 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 insignificant
revenue. 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.
History
of losses and negative cash flows
The
accompanying consolidated financial statements have been prepared on the basis
that the Company will continue as a going concern which assumes the realization
of assets and settlement of liabilities in the normal course of business.
Since its inception, the Company has been engaged in organizational and
pre-operating activities. The Company has generated insignificant revenues
and
has incurred accumulated losses and negative operating cash flows of $5,984,743
and $3,430,331, respectively, from February 11, 2002 (inception) through June
30, 2008. We incurred a net loss of $493,031 for the six months ended June
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 (See Note 4). Our capital
requirements for the next 12 months, as they relate to further research and
development relating to our product candidates have been and will continue
to be
significant. As of June 30, 2008, we have funded our operations through equity
offerings whereby we raised an aggregate $7,358,117 since
inception.
Based
on
our current operating plan, we believe that we have sufficient cash and cash
equivalents to last approximately through December 2009. 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
December 2009. 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 its wholly owned subsidiaries, Bio-Bridge Science
Corp., Bio-Bridge Science (Beijing) Corp, Bio-Bridge Science Holding Co. and
Bio
Bridge Science (HK), Co. Inter-company 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.
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
June
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
$194,193, a gross unrealized loss of $519, and a fair value of $193,675. The
Company estimates the fair value of its trading securities based on unadjusted
quoted prices in active markets of identical assets. In accordance with SFAS
No.
157, this is a Level 1 valuation.
Foreign
Currency Translation
The
Company’s financial information is presented in US dollars. The functional
currency Renminbi (RMB) of the Company is translated into United States dollars
from RMB at quarter / year-end exchange rates as to assets and liabilities
and
average exchange rates as to revenues and expenses. Capital accounts are
translated at their historical exchange rates when the capital transactions
occurred.
|
|
As
of and for the
six
months ended
June
30,
2008
|
|
As
of and for the
six
months ended
June
30,
2007
|
|
Period
end RMB : US$ exchange rate
|
|
|
6.8591
|
|
|
7.6155
|
|
|
|
|
|
|
|
|
|
Average
period RMB : US$ exchange rate
|
|
|
7.0819
|
|
|
7.6749
|
|
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.
In
2007
the RMB appreciated against the US dollar by approximately 6.9%. The Chinese
government manifested that it would adopt a more flexible exchange rate system.
Therefore, it is expected that the RMB will appreciate gradually against major
currencies in the future.
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.
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 derecognition, classification,
interest and penalties on income taxes, accounting in interim periods and
requires increased disclosures. At the date of adoption, and as of June 30,
2008, the Company does not have a liability for unrecognized tax
benefits.
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 also files tax returns with other jurisdictions, including the PRC.
These returns are subject to audit by the taxing authorities. The Company
believes it files all returns properly. In accordance with the relevant tax
laws
and regulations of PRC, the applicable corporation income tax rate for the
subsidiary was 15%. The Company is entitled to full exemption from CIT for
the
first two years and a 50% reduction in CIT for the next three years, commencing
from the first profitable year after offsetting all tax losses carried forward
from the previous five years. From January 2008, China implemented new CIT,
in
which local and foreign enterprises are subject to CIT of 25%, unless the
enterprise is a high tech enterprise. We are able to enjoy the grandfathering
treatment for our tax holiday, in which we are exempt from paying taxes in
2008
and 2009, and CIT rate is 12.5% from 2010-2012. The State Administration of
Taxation of China has issued a circular recently that companies in the eight
high tech encouraging industries are able to enjoy CIT deductions if approved
after application. The Company believes it belongs to the eight industries,
and
expects to be able to enjoy 15% CIT after 2013 if qualified as a high-tech
enterprise.
The
Company’s policy is to record interest and penalties on uncertain tax provisions
as income tax expense. As of June 30, 2008, the Company has no accrued interest
or penalties related to uncertain tax positions.
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.
Loss
Per
Share
Basic
loss per share has been computed using the weighted average number of common
shares outstanding 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 June 30, 2008 common stock equivalents composed of options
convertible into 2,297,000 shares of the Company's common stock and warrants
convertible into 3,366,666 shares of the Company's common stock. For the three
and six month periods ended June 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 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 does not believe that the adoption of the above recent pronouncements
will have a material effect on the Company’s consolidated results of operations,
financial position, or cash flows.
NOTE 4
- 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 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 the date of
inception to June 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. The
shares were issued in 2007.
Sale
of
140,000 shares at $0.75 per share for total consideration of $105,000. The
shares were 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. At June
30,
2008, the $20,000 has not been received and is included in subscription
receivable.
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 and the 20,000 warrants acquired were considered
additional compensation expense (See Note 5). At June 30, 2008, $29,985 of
the
total consideration of $275,000 had been received and the balance of
$245,015 is included in subscription receivable.
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.
NOTE
5 - 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 June 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 June 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 June 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 Janua
ry
1, 2008
|
|
|
2,317,000
|
|
$
|
0.42
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
0
|
|
|
0
|
|
Exercised
|
|
|
0
|
|
$
|
0
|
|
Withdrawn
|
|
|
(20,000
|
)
|
$
|
0.001
|
|
|
|
|
|
|
|
|
|
Outstanding
at June 30, 2008
|
|
|
2,297,000
|
|
$
|
0.42
|
|
|
|
|
|
|
|
|
|
Exercisable
at June 30, 2008
|
|
|
2,140,751
|
|
$
|
0.42
|
|
The
following table summarizes information about stock options outstanding as of
June 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
|
|
|
2,140,751
|
|
$
|
0.42
|
|
|
|
|
2,297,000
|
|
|
|
|
|
|
|
|
2,140,751
|
|
|
|
|
T
he
aggregate intrinsic value of the 2,297,000 options outstanding and 1,984,501
options exercisable as of June 30, 2008 was $3,055,010 and $2,847,199
respectively. 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 June 30,
2008.
A
summary
of the status of nonvested shares as of June 30, 2008 are as
follows:
|
|
Number
of
Shares
|
|
Nonvested
at January 1, 2008
|
|
|
473,750
|
|
Granted
|
|
|
—
|
|
Vested
|
|
|
(314,167)
|
)
|
Withdrawn
|
|
|
(3,334
|
)
|
Nonvested
at June 30, 2008
|
|
|
156,249
|
|
The
total
deferred compensation expense for the outstanding value of unvested stock
options was $42,305 as of June 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).
Since
two
of the investors are our directors, we recorded the issuance of 20,000 warrants
included in the sale units valued at $11,507 as compensation costs.
The
fair value of three-year warrant and four-year warrant issued to our directors
was $5,898 and $5,609, 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 $11,507 was
charged to compensation cost at the date the options were granted.
At
June
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
|
|
|
366,667
|
|
|
.97
|
|
Warrants
expired
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Warrants
outstanding at June 30, 2008
|
|
|
3,416,667
|
|
$
|
1.00
|
|
The
following table summarizes information about warrants outstanding at June
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, 2012
|
|
$
|
1.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,416,667
|
|
$
|
0.75-$1.20
|
|
|
|
|
$
|
1.00
|
|
NOTE 6
- 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 $2,730,000. At June
30,
2008, the Phase One construction and internal clean room decoration costing
a
total of approximately $1,900,000 is awaiting permanent electrical equipment
to
be installed, and is recorded as construction in progress. At June 30, 2008,
$132,073 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 $567,000, primarily for permanent electrical
equipment to be installed and related works to be finished. As of June 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 in the third quarter
of 2008. In addition, the Company estimates the cost of laboratory equipment
it
needs before Phase One is fully operational will be approximately $1,000,000.
At
June 30, 2008, the Company had not negotiated any contracts for the purchase
of
any of the laboratory equipment. The Company estimates the purchase and
installation of the laboratory equipment will be completed by the end of
2008. At June 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
June 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
$27,396 is due within one year, $28,041is due in 2009 and $4,751 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 $22,744 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 June 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 June 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 $21,431 as of June 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 June 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 June 30, 2008 were $7,427.
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 6
- SUBSEQUENT EVENTS
On
July
2, 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 investment units from BGES at $0.725 per unit. Each unit consists
of
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. 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, 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 BGES at $0.725 per unit. Each unit
consists of 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. The total investment is $1.45 million. $120,000 of this
total was paid upon execution of the equity purchase agreement and the balance
will be paid in ten equal installments until May 31, 2009.
On
April
30, 2008, the Company entered into an equity sale and purchase agreement with
Huhhot Xinheng Baide Biotechnology Co. Ltd., (“HXBD”), pursuant to which we
agreed to purchase newly issued shares of HXBD. The equity sale and purchase
agreement was completed on July 31, 2008, and the Company purchased 51% of
the
outstanding capital interest of HXBD for RMB 6 million (approximately US$
881,000). HXBD is located in the city of Huhhot in Inner Mongolia of the PRC
and
is organized under the laws of the PRC. HXBD
manufactures
and distributes bovine serum products, which is used in research, the production
of pharmaceuticals, and production of veterinary medicines. The acquisition
will
be accounted for as a purchase in accordance with Statement of Financial
Accounting Standards No. 141 “Business Combinations.” The assets acquired and
liabilities assumed will be recorded at their fair values at the date of
acquisition.
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,
and Bio-Bridge Science(HK) CO. Ltd, a Hong Kong company.
OVERVIEW
Bio-Bridge
Science, Inc. is a development stage company whose subsidiaries are focused
on
the commercial development of HIV-PV Vaccine I, HPV vaccine, colon cancer
vaccine, mucosal adjuvant. The pre-clinical testing of HIV-PV Vaccine I on
laboratory animals in Beijing, China was completed in June 2006. After the
lab
equipment is installed and we are able to produce vaccine candidate samples,
we
will apply to China's State Food and Drug Administration for approval to conduct
clinical trials of HIV-PV Vaccine I. As of December 31, 2005, we had completed
the construction of the outside body of our laboratory and bio-manufacturing
facility in Beijing, China. The internal clean room installation project has
been substantially completed as of end of 2006.
History
of Losses and Negative Cash Flows
Since
inception, we have generated few revenues. We incurred net losses of $205,185
and $493,031 for the three and six month periods ended June 30, 2008,
respectively. As of June 30, 2008, we had an accumulated deficit of $7,775,063.
As of June 30, 2008, we have funded our operations through equity offerings
whereby we raised an aggregate $7,295,000 since inception. In the second quarter
of 2008, the Company raised $275,000 in a private placement in the form of
investment unit priced at $0.75 per unit. A total of 366,337 investment units
were sold in the second quarter of 2008. Each unit includes one share of common
stock, a three-year warrant to purchase 0.5 share of common stock at $0.75
and a
five-year warrant to purchase 0.5 share of common stock at $1.20. Wenhui Qiao
and Toshihiro Komoike, who are both our directors, purchased 20,000 investment
units in the offering. $210,000 of the purchase price remains to be received
as
of July 30, 2008. Our capital requirements for the next 12 months, as they
relate to further research and development relating to our product candidates,
have been and will continue to be significant. We plan to raise more capital
in
the near future to meet our capital requirement for the development of our
product candidates as well as our potential acquisitions and joint ventures
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 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 by mid- 2009 and that of HPV vaccine by early 2010. We expect
to
enter clinical trials of colon cancer vaccine before the end of 2009. 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.
To
date
we have funded our operations from funds we raised in private offerings. During
the next twelve months, we will need to raise 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 the potential
acquisition activities in China. We estimate that our capital requirements
for
the next twelve months will be as follow:
·
|
approximately
$0.6 million for our laboratory/bio-manufacturing facility’ electricity
work for Phase One laboratory manufacturing facility project in Beijing,
China;
|
·
|
approximately
$1.1 million to purchase advanced laboratory equipment and supplies
for
our vaccine production;
|
·
|
approximately
$0.6 million for preparatory work for Phase I clinical
study;
|
·
|
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, if we are
successful in raising funds to complete development of the vaccines. As of
June
30, 2008, our cash and cash equivalents and trading securities position was
$1,125,695 and we have entered into securities purchase agreements in July,
2008
with several investors that we will get funding of $ 3,950,000. 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 the expenses of
our
planned operations. 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
December 2009, 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.
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 $7,427 in the first half of 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
$55,000 and increases 10% annually thereafter. The Company is responsible for
advertising and marketing expenses in connection with distribution of Xinhua
surgical instruments in these three areas. Subject to minimum sale requirements,
the Company's exclusivity rights in these three areas will be extended. The
new
Agreement supersedes the previous agreement signed on November 21,
2005.
Acquisitions
of companies complementary to the Company
Another
major corporate focus is for the Company to acquire other profitable vaccine
companies or vaccine production related companies, such as those producing
materials for vaccine production, in China. Such an acquisition may help support
our development of our in-house vaccines candidates by providing us with
operating cash flows, lower cost for material used in our vaccine production,
skillful work force in vaccine production, and a distribution channel. We
believe these companies will be complementary to us and make us more
competitive.
On
April
30, 2008, the Company entered into an equity sale and purchase agreement with
Huhhot Xinheng Baide Biotechnology Co. Ltd., (“HXBD”), pursuant to which we
agreed to purchase newly issued shares of HXBD. The equity sale and purchase
agreement was completed on July 31, 2008, and the Company purchased 51% of
the
outstanding capital interests of HXBD for RMB 6 million (approximately US$
881,000). HXBD is located in the city of Huhhot in Inner Mongolia of the PRC
and
is organized under the laws of the PRC. HXBD
manufactures
and distributes bovine serum products, which is used in research, the production
of vaccine products. The acquisition will be accounted for as a purchase in
accordance with Statement of Financial Accounting Standards No. 141 “Business
Combinations”. The assets acquired and liabilities assumed will be recorded at
their fair values at the date of acquisition.
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. 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 June 30, 2008 and June 30, 2007
During
the quarter ended June 30, 2008, we had revenues of $5,142. The cost of revenue
was $1,957 which was 38% of the total revenue.
During
the quarter ended June 30, 2007, we had revenues of $333. The cost of revenue
was $178, which was 53% of the total revenue. The decrease of the percentage
of
the cost of sales to sales was due to the decrease in costs of the surgical
instruments. All these revenues were due to our selling surgical instruments
in
the United States. Since we entered into this agreement, we have established
a
sales inventory of Xinhua’s surgical instruments, printed marketing materials
such as catalogs and post cards, compiled a list of potential customers, and
implemented a strategic marketing plan for selling Xinhua’s
instruments.
The
revenue has been increasing as a result of these efforts and we expect the
increasing trend will continue in the near future.
For
the
quarter ended June 30, 2008, research and development expenses were $20,467,
as
compared to $38,355 for the quarter ended June 30, 2007. The decrease of $17,888
is due primarily to the decrease of the pre-clinical trial development of our
vaccine candidates.
For
the
quarter ended June 30, 2008, general and administrative expenses were $243,031
as compared to $419,374 for the quarter ended June 30, 2007. The decrease of
$176,343 is due primarily to decreases in consulting expense.
For
the
quarter ended June 30, 2008, selling and distribution expenses were $21,281
as
compared to $10,838 for the quarter ended June 30, 2007. The increase of $10,443
is due primarily to increases in shipping and selling expense.
For
the
quarter ended June 30, 2008, interest expense was $1,521 as compared to interest
income of $396 for the quarter ended June 30, 2007. The decrease of $1,917
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 quarter ended June 30, 2008, was $205,185 as compared to $514,820
for the quarter ended June 30, 2007. This decrease of $309,635 in net loss
is
attributable primarily to the decrease in general and administrative expense
and
decrease in unrealized loss of trading securities.
Six-month
period ended June 30, 2008 and June 30, 2007
During
the six months ended June 30, 2008, we had revenues of $7,427. The cost of
revenue was $2,848 which was 40% of the total revenue.
During
the six months ended June 30, 2007, we had revenues of $690. The cost of revenue
was $405, which was 59% of the total revenue. The decrease of the percentage
of
cost of sales to sales was due to the decrease in costs of the surgical
instruments. All these revenues were due to our selling surgical instruments
in
the United States. Since we entered into this agreement, we have established
a
sales inventory of Xinhua’s surgical instruments, printed marketing materials
such as catalogs and post cards, compiled a list of potential customers, and
implemented a strategic marketing plan for selling Xinhua’s instruments. The
revenue has been increasing as a result of these efforts and we expect the
increasing trend will continue in the near future.
For
the
six months ended June 30, 2008, research and development expenses were $56,873,
as compared to $82,050 for the six months ended June 30, 2007. The decrease
of
$25,177 is due primarily to the decrease of pre-clinical trial development
of
our vaccine candidates.
For
the
six months ended June 30, 2008, general and administrative expenses were
$448,875 as compared to $718,600 for the six months ended June 30, 2007. The
decrease of $269,725 is due primarily to decreases in consulting
expense.
For
the
six months ended June 30, 2008, selling and distribution expenses were $33,610
as compared to $16,311 for the six months end June 30, 2007. The increase of
$17,299 is due primarily to increases in shipping and selling
expense.
For
the
six months ended June 30, 2008, interest expense was $1,671 as compared to
interest income of $3,803 for the six months ended June 30, 2007. The decrease
of $5,474 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 six months ended June 30, 2008, was $493,031 as compared to $873,298
for
the six months ended June 30, 2007. This decrease of $380,267 in net loss is
attributable primarily to the decrease in general and administrative expense
and
decrease in unrealized loss on trading securities.
Liquidity
and Capital Resources
Our
principal sources of liquidity are cash and cash equivalent balances, which
were
$932,020 at June 30, 2008. Also, we had marketable securities valued at
$193,675 as of June 30, 2008. These marketable securities were classified
as trading securities.
Net
cash
used in operating activities was $337,662 for the six months ended June 30,
2008
and $832,516 for the six months ended June 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 $1,078,517 for the six months
ended June 30, 2008 and ($1,901,855) for the six months ended June 30, 2007.
This change was due to the sale in part of our trading securities during the
six
months ended June 30, 2008.
Net
cash
provided by financing activities was $91,127 for the six months ended June
30,
2008 compared to $3,014,102 for the six months ended June 30, 2007. This large
decrease was mainly due to proceeds from the issuance of preferred stock in
2007.
To
date,
our operations have been funded through issuances of our common stock and
preferred stock whereby we raised an aggregate $7,358,117 from inception through
June 30, 2008.
We
estimate the total project costs for Phase One will be approximately $2,730,000.
As of June 30, 2008, the remaining costs associated with completion of Phase
One
project will be approximately $567,000, primarily for permanent electrical
equipment to be installed and related works to be finished. Also, we plan to
use
RMB 6 million (approximately $881,000) to acquire Xinheng Baide, a bovine serum
manufacturing company in China. We plan to use our cash on hand to acquire
the
target, and in the meantime, to raise funds through private placements to
increase our cash position and further to proceed with our potential joint
venture with JRS in Beijing, China. We have signed securities purchase
agreement with several board members and investors for investment in our Company
in the form of common stock investment plus warrants.
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 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.
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
0.5 share of common stock at $0.725 and five-year warrant to purchase 0.5
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 December 2009. 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 December 2009. 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 June 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
June
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
$194,194, a gross unrealized loss of $519, and a fair value of $193,675. 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 does not believe that the adoption of the above recent pronouncements
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 $2,730,000. At June
30,
2008, Phase One construction and internal clean room decoration was
substantially completed at a cost of approximately $2,160,000, and is recorded
as construction in progress. At June 30, 2008, $132,073 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 $567,000, primarily for permanent electrical
equipment to be installed and related works to be finished. As of June 30,
2008,
the Company had signed an agreement with several contractors and vendors to
finish the electricity project, and the remaining commitment is $62,306. The
Company estimates the purchase and installation of the electrical and steam
equipment will be completed in the third quarter of 2008. In addition, the
Company estimates the cost of laboratory equipment it needs before Phase One
is
fully operational will be approximately $1,000,000. At June 30, 2008, the
Company had not negotiated any contracts for the purchase of any of the
laboratory equipment. The Company estimates the purchase and installation of
the
laboratory equipment will be completed by the end of 2008. At June 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
June30, 2008, the Company had remaining outstanding commitments with respect
to
its non-cancelable operating lease for its office in Oak Brook, IL, of which
$27,396 is due within one year, $28,041is due in 2009 and $4,751 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 $22,744 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 June 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 June 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 $21,431 as of June 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 June 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 June 30, 2008 were $7,427.
On
December 6, 2005, we received confirmation from the FDA of our registration
as a
medical device establishment, which enables us to perform initial distributor
and repackager operations. This confirmation is not a FDA approval of any
product or any of our activities. It is neither a license, nor a certification.
We market Xinhua surgical instruments that meet the criteria for Class I medical
devices under FDA rules, which do not require pre-market notification to the
FDA.
Contractual
Obligations
Payments
due under contractual obligations at June30, 2008 mature as
follows:
|
|
Payments
due by period ($ in thousands)
|
|
Contractual
Obligations
|
|
Total
|
|
Less
than
1
year
|
|
1
to 3
years
|
|
Lease
obligation
|
|
$
|
83
|
|
$
|
50
|
|
$
|
33
|
|
Payable
to contractors
|
|
|
132
|
|
|
132
|
|
|
—
|
|
R&D
agreement obligation
|
|
|
51
|
|
|
51
|
|
|
—
|
|
Total
|
|
$
|
266
|
|
$
|
233
|
|
$
|
33
|
|
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
Not
applicable.
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.
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Dr. Liang Qiao
|
|
|
Dated:
August 14, 2008
|
By:
Dr. Liang Qiao
|
|
|
|
Chief
Executive Officer
|
|
|
|
EXHIBIT
INDEX
3.1(i)*
|
|
Certificate
of incorporation of the registrant, as currently in
effect
|
|
|
|
3.1(ii)*
|
|
Bylaws
of the registrant, as currently in effect
|
|
|
|
3.1(iii)**
|
|
Certificate
of Designation of Series A Preferred Stock
|
|
|
|
4.1**
|
|
Form
of Common Stock Warrant Agreement dated January 2007
|
|
|
|
4.2**
|
|
Registration
Rights Agreement dated January 2007
|
|
|
|
10.1**
|
|
Securities
Purchase Agreement dated January 2007
|
|
|
|
31.1
|
|
Certification
of Chief Executive Officer
|
|
|
|
31.2
|
|
Certification
of Chief Financial Officer
|
|
|
|
32.1
|
|
Section
1350 Certifications of Chief Executive Officer and Chief Financial
Officer
|
*
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.
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