Florida
|
|
2834
|
|
65-1130026
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
|
(Primary
Standard Industrial
Classification
Code Number)
|
|
(I.R.S.
Employer Identification
Number)
|
Title
of each class of securities to be registered
|
Amount to be
registered (1)
|
Proposed
maximum
offering price
per share (2)
|
Proposed
maximum
aggregate
offering price
|
Amount of
registration fee
|
|||||||||
Common
Stock, $.001 par value per share
|
321,498
|
(3)
|
$
|
7.00
|
$
|
2,250,486
|
$
|
88.44
|
|||||
Common
Stock, $.001 par value per share
|
1,498,921
|
(4)
|
$
|
7.00
|
$
|
10,492,447
|
$
|
412.36
|
|||||
TOTAL
|
1,820,419
|
(4)
|
$
|
—
|
$
|
12,742,933
|
$
|
500.80
|
(5)
|
(1) |
Pursuant
to Rule 416 of the Securities Act of 1933, as amended, the shares
of
common stock offered hereby also include such presently indeterminate
number of shares of our common stock as shall be issued by us to
the
selling shareholders as a result of stock splits, stock dividends
or
similar transactions.
|
(2) |
Estimated
solely for purposes of calculating the registration fee in accordance
with
Rule 457(c) under the Securities Act of 1933, as amended based on
the
average of the bid and asked prices, as reported on the Over the
Counter
Bulletin Board on September 30,
2008.
|
(3) |
The
321,498 shares of common stock are being registered for resale by
the
Selling Stockholders named in this registration statement, which
shares
are issuable by the registrant upon the exercise of the Company’s warrants
issued in November 2007.
|
(4) |
The
1,498,921 shares of common stock are being registered for resale
by the
Selling Stockholders named in this registration statement, which
shares
are issuable by the registrant upon the exercise of the Company’s Class A
Warrants issued in May 2008.
|
(5) |
Registration
fee of $2,248.15 was previously
paid.
|
PROSPECTUS
SUMMARY
|
|
|
1
|
|
|
|
|
|
|
THE
OFFERING
|
|
|
3
|
|
|
|
|
|
|
CERTAIN
DISCLOSURE REGARDING CONVERSION OF THE DEBENTURES AND NOTES AND
EXERCISE
OF NOVEMBER WARRANTS AND CLASS A WARRANTS
|
|
|
3
|
|
|
|
|
|
|
SUMMARY
CONSOLIDATED FINANCIAL DATA
|
|
|
8
|
|
|
|
|
|
|
RISK
FACTORS
|
|
|
10
|
|
|
|
|
|
|
NOTE
REGARDING FORWARD-LOOKING STATEMENTS
|
|
|
27
|
|
|
|
|
|
|
USE
OF PROCEEDS
|
|
|
27
|
|
|
|
|
|
|
SELLING
STOCKHOLDERS
|
|
|
28
|
|
|
|
|
|
|
PLAN
OF DISTRIBUTION
|
|
|
30
|
|
|
|
|
|
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
|
32
|
|||
BUSINESS
|
|
|
45
|
|
|
|
|
|
|
TRANSACTIONS
WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL
PERSONS
|
66
|
|||
MARKET
FOR OUR COMMON STOCK, DIVIDENDS AND RELATED STOCKHOLDER
INFORMATION
|
69
|
|
||
|
|
|
|
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
|
|
65
|
|
|
|
|
|
|
DESCRIPTION
OF CAPITAL STOCK
|
|
|
70
|
|
|
|
|
|
|
TRANSFER
AGENT AND REGISTRAR
|
|
|
71
|
|
|
|
|
|
|
LEGAL
MATTERS
|
|
|
71
|
|
|
|
|
|
|
EXPERTS
|
|
|
71
|
|
|
|
|
|
|
WHERE
YOU CAN FIND MORE INFORMATION
|
|
|
71
|
|
|
|
|
|
|
INDEX
TO AUDITED FINANCIAL STATEMENTS
|
|
|
F-1
|
|
· |
321,498 shares
issuable upon the exercise of the November Warrants at an exercise
price
of $8.00 per share,
|
· |
1,498,921 shares
issuable upon the exercise of the Class A Warrants at an exercise
price of
$10.00 per share.
|
Common
Stock being offered by Selling Stockholders
|
Up
to 1,820,419 shares
|
OTCBB
Symbol
|
GNPH
|
Risk
Factors
|
The
securities offered by this prospectus are speculative and involve
a high
degree of risk and investors purchasing securities should not purchase
the
securities unless they can afford the loss of their entire investment.
See
“Risk Factors” beginning on page
7.
|
Gross
proceeds from issuance of the Debentures:
|
$
|
5,000,000.00
|
||
Payments
in connection with the transaction that the Company has made or
will
make:
|
|
|||
Finder's
fee (1)
|
$
|
250,000.00
|
||
Pope
Investments, LLC (legal fees reimbursement)(2)
|
$
|
20,000.00
|
||
Legal
fees (1)
|
$
|
69,000.00
|
||
Total
Payments made by the Company:
|
$
|
339,000.00
|
||
Net
proceeds to issuer:
|
$
|
4,661,000.00
|
Date
|
Interest Payment
Amount
|
|||
5/31/2008
|
$
|
150,000.00
|
||
11/30/2008
|
$
|
150,000.00
|
||
5/31/2009
|
$
|
150,000.00
|
||
11/30/2009
|
$
|
150,000.00
|
||
5/31/2010
|
$
|
150,000.00
|
||
Total
Interest Payments
|
$
|
750,000.00
|
Gross
proceeds from issuance of the Notes:
|
$
|
30,000,000.00
|
||
Payments
in connection with the transaction that the Company has made or
will
make:
|
|
|||
Placement
agent fees(1)
|
$
|
1,500,000.00
|
||
Legal
fees(1)
|
$
|
166,500.00
|
||
Pope
Investments, LLC (legal fees reimbursement)(2)
|
$
|
20,000.00
|
||
Bank
wire fees, printing and shipping fees
|
$
|
3,510.00
|
||
Total
Payments made by the Company:
|
$
|
1,690,010.00
|
||
Net
proceeds to issuer:
|
$
|
28,309,990.00
|
Date
|
Interest Payment
Amount
|
|||
11/30/2008
|
$
|
900,000.00
|
||
5/30/2009
|
$
|
900,000.00
|
||
11/30/2009
|
$
|
900,000.00
|
||
5/30/2010
|
$
|
900,000.00
|
||
11/30/2010
|
$
|
900,000.00
|
||
5/30/2011
|
$
|
900,000.00
|
||
Total
Interest Payments
|
$
|
5,400,000.00
|
Market
price per share on November 7, 2007 of common stock underlying
the
Debentures and November Warrants
|
$
|
0.40
|
||
Conversion
price per share on November 7, 2007 of securities underlying the
Debentures
|
$
|
0.25
|
||
Exercise
price per share on November 7, 2007 of securities underlying the
November
Warrants
|
$
|
0.32
|
||
Total
shares underlying Debentures (at a conversion price of
$0.25)
|
20,000,000
|
|||
Total
shares underlying November Warrants
|
10,000,000
|
|||
Combined
market price of the total number of shares (20,000,000) underlying
the
Debentures using $0.40 market price
|
$
|
8,000,000
|
||
Combined
conversion price of shares underlying the Debentures
|
$
|
5,000,000
|
||
Total
possible discount to market price of shares underlying the
Debentures
|
$
|
3,000,000
|
||
Combined
market price of the total number of shares (10,000,000) underlying
the
November Warrants using $0.40 market price
|
$
|
4,000,000
|
||
Combined
exercise price of shares underlying the November Warrants
|
$
|
3,200,000
|
||
Total
possible discount to market price of shares underlying the November
Warrants
|
$
|
800,000
|
||
Total
possible discount to market price:
|
$
|
3,800,000
|
· |
pursuant
to section 3(g)(ii) of the Debentures, the conversion price was reduced
from $0.25 to $0.20 per share; and
|
· |
pursuant
to sections 6(c) and 6(d) of the November Warrants, the exercise
price of
the November Warrants was reduced from $0.32 to $0.20 and the total
number
of shares of common stock underlying the November Warrants was increased
to 16,000,000 from 10,000,000.
|
Market
price per share on May 30, 2008 of common stock underlying the
Notes and
Class A Warrants
|
$
|
0.30
|
||
Conversion
price per share on May 30, 2008 of securities underlying the
Notes
|
$
|
0.20
|
||
Exercise
price per share on May 30, 2008 of securities underlying the Class
A
Warrants
|
$
|
0.25
|
||
Total
shares underlying Notes (at a conversion price of $0.20)
|
150,000,000
|
|||
Total
shares underlying Class A Warrants
|
75,000,000
|
|||
Combined
market price of the total number of shares (150,000,000) underlying
the
Notes using $0.30 market price
|
$
|
45,000,000
|
||
Combined
conversion price of shares underlying the Notes
|
$
|
30,000,000
|
||
Total
possible discount to market price of shares underlying the
Notes
|
$
|
15,000,000
|
||
Combined
market price of the total number of shares (75,000,000) underlying
the
Class A Warrants using $0.30 market price
|
$
|
22,500,000
|
||
Combined
exercise price of shares underlying the Class A Warrants
|
$
|
18,750,000
|
||
Total
possible discount to market price of shares underlying the November
Warrants
|
$
|
3,750,000
|
||
Total
possible discount to market price:
|
$
|
18,750,000
|
|
Amount
|
%
of Net
Proceeds
|
|||||
Gross
proceeds paid to issuer:
|
$
|
5,000,000
|
|
||||
All
payments that have been made by issuer:
|
$
|
339,000
|
7.27
|
%
|
|||
Net
proceeds to issuer:
|
$
|
4,661,000
|
100.00
|
%
|
|||
Combined
total possible profit as a result of discounted conversion price
of the
Debentures
|
$
|
3,000,000
|
64.36
|
%
|
|||
Combined
total possible profit as a result of discounted exercise price of
the
November Warrants
|
$
|
800,000
|
17.16
|
%
|
|||
Aggregate
possible profit for the November private placement
|
$
|
3,800,000
|
81.53
|
%
|
|
Amount
|
%
of Net
Proceeds
|
|||||
Gross
proceeds paid to issuer:
|
$
|
30,000,000
|
-
|
||||
All
payments that have been made by issuer:
|
$
|
1,690,010
|
5.97
|
%
|
|||
Net
proceeds to issuer:
|
$
|
28,309,990
|
100.00
|
%
|
|||
Combined
total possible profit as a result of discounted conversion price
of the
Notes
|
$
|
15,000,000
|
52.98
|
%
|
|||
Combined
total possible profit as a result of discounted exercise price of
the
Class A Warrants
|
$
|
3,750,000
|
13.25
|
%
|
|||
Aggregate
possible profit for the May private placement
|
$
|
18,750,000
|
66.23
|
%
|
Number
of shares on a post-reverse split basis outstanding prior to
November 2007 private placement held by persons other than the
selling
shareholders, affiliates of the Company and affiliates of the selling
shareholders
|
4,892,885
|
|||
Number
of shares on a post-reverse split basis outstanding prior to May 2008
private placement held by persons other than the selling shareholders,
Affiliates of the Company and affiliates of the selling
shareholders
|
4,870,385
|
|||
Number
of shares registered for resale by selling shareholders or affiliates
in
prior registration statements
|
0
|
|||
Number
of shares registered for resale by selling shareholders or affiliates
of
selling shareholders continue to be held by selling shareholders
or
affiliates of selling shareholder
|
0
|
|||
Number
of shares have been sold in registered resale by selling shareholders
or
affiliates of selling shareholders
|
0
|
|||
Number
of post-split shares registered for resale on behalf of selling
shareholders or affiliates of selling shareholders in current transaction
(i)
|
1,820,419
|
(i) |
Includes
(a) 321,498 shares issuable upon the exercise of the November
Warrants and (b) 1,498,921 shares issuable upon the exercise of the
Class A Warrants.
|
Year Ended June 30
|
||||||||||
2008
|
2007
|
2006
|
||||||||
Statement
of Operations Information:
|
|
|
|
|||||||
Sales
|
$ |
93,983
|
$
|
72,260
|
$
|
45,243
|
||||
Sales-
related party
|
5,564
|
3,934
|
3,913
|
|||||||
Cost
of sales
|
21,073
|
|
19,961
|
13,628
|
||||||
Cost
of sales - related party
|
1,434
|
1,200 | 2,058 | |||||||
Gross
profit
|
77,040
|
55,032
|
33,470
|
|||||||
Research
and development
|
3,236
|
11,144
|
13,642
|
|||||||
General
and administrative
|
41,593
|
25,579
|
7,895
|
|||||||
Income
from operations
|
32,211
|
18,309
|
11,933
|
|||||||
Other
expenses (income), net
|
(1)2,789
|
(2)(6,375
|
)
|
387
|
||||||
Income
before provision for income taxes
|
29,422
|
24,684
|
11,546
|
|||||||
Provision
for income taxes
|
6,971
|
2,631
|
3,810
|
|||||||
Net
income
|
22,451
|
22,053
|
7,736
|
|||||||
Other
comprehensive income
|
6,554
|
1,018
|
128
|
|||||||
Comprehensive
income
|
29,005
|
23,071
|
7,864
|
|||||||
(1) |
Other
expenses (income) for 2008 includes $1,446 representing the reversal
of
tax accruals previously made as the result of the grant by the
local tax
agency to Laiyang Jiangbo of a special tax exemption and release
from any
unpaid corporate taxes and value added tax liabilities and any
related
penalties as of June 30,
2008.
|
(2) |
Other
income for 2007 includes $6,189 representing the reversal of tax
accruals
previously made as the result of the grant by the local tax agency
to
Laiyang Jiangbo of a special tax exemption and release from any unpaid
corporate income tax and value added tax liabilities and any related
penalties from January 1, 2007 through June 30,
2007.
|
|
|
As of June 30,
|
|||||||
|
2008
|
2007
|
|||||
Balance
Sheet Data:
|
|
|
|||||
Cash
and cash equivalents
|
$ | 48,196 |
$
|
17,737
|
|||
Accounts
receivable, net
|
24,312
|
11,825
|
|||||
Accounts
receivable- related parties
|
674
|
499
|
|||||
Other
current assets
|
16,352
|
14,038
|
|||||
Property
and equipment, net
|
11,226
|
10,179
|
|||||
Other
assets, net
|
13,635
|
1,119
|
|||||
Total
assets
|
114,395
|
55,397
|
|||||
Total
Current Liabilities
|
16,378
|
28,101
|
|||||
Total
Liabilities
|
18,878
|
28,101
|
|||||
Total
Stockholders’ Equity
|
95,517
|
27,296
|
· |
maintain
our market position in the pharmaceuticals business in
China;
|
· |
offer
new and innovative products to attract and retain a larger customer
base;
|
· |
attract
additional customers and increase spending per
customer;
|
· |
increase
awareness of our brand and continue to develop user and customer
loyalty;
|
· |
respond
to competitive market conditions;
|
· |
respond
to changes in our regulatory
environment;
|
· |
manage
risks associated with intellectual property
rights;
|
· |
maintain
effective control of our costs and
expenses;
|
· |
raise
sufficient capital to sustain and expand our
business;
|
· |
attract,
retain and motivate qualified personnel;
and
|
· |
upgrade
our technology to support additional research and development of
new
products.
|
· |
terminates
or suspends its agreement with us;
|
· |
causes
delays;
|
· |
fails
to timely develop or manufacture in adequate quantities a substance
needed
in order to conduct clinical
trials;
|
· |
fails
to adequately perform clinical
trials;
|
· |
determines
not to develop, manufacture or commercialize a product to which it
has
rights; or
|
· |
otherwise
fails to meet its contractual
obligations.
|
· |
any
of our patent applications will result in the issuance of
patents;
|
· |
we
will develop additional patentable
products;
|
· |
the
patents we have been issued will provide us with any competitive
advantages;
|
· |
the
patents of others will not impede our ability to do business;
or
|
· |
third
parties will not be able to circumvent our
patents.
|
· |
the
commercialization of our products could be adversely
affected;
|
· |
any
competitive advantages of the products could be diminished;
and
|
· |
revenues
or collaborative milestones from the products could be reduced or
delayed.
|
· |
·we
only have contractual control over Laiyang Jiangbo. We do not own
it due
to the restriction of foreign investment in Chinese businesses;
and
|
· |
uncertainties
relating to the regulation of the pharmaceutical business in China,
including evolving licensing practices, means that permits, licenses
or
operations at our company may be subject to challenge. This may disrupt
our business, or subject us to sanctions, requirements to increase
capital
or other conditions or enforcement, or compromise enforceability
of
related contractual arrangements, or have other harmful effects on
us.
|
· |
levying
fines;
|
· |
revoking
our business and other licenses;
and
|
· |
requiring
that we restructure our ownership or operations.
|
· |
the
amount of government involvement;
|
· |
level
of development;
|
· |
growth
rate;
|
· |
control
of foreign exchange; and
|
· |
allocation
of resources.
|
· |
the
level of state-owned enterprises in the PRC, as well as the level
of
governmental control over the allocation of resources is greater
than in
most of the countries belonging to the
OECD;
|
· |
the
level of capital reinvestment is lower in the PRC than in other countries
that are members of the OECD;
|
· |
the
government of the PRC has a greater involvement in general in the
economy
and the economic structure of industries within the PRC than other
countries belonging to the OECD;
|
· |
the
government of the PRC imposes price controls on certain products
and our
products may become subject to additional price controls;
and
|
· |
the
PRC has various impediments in place that make it difficult for foreign
firms to obtain local currency, as opposed to other countries belonging
to
the OECD where exchange of currencies is generally free from
restriction.
|
· |
actual
or anticipated fluctuations in our quarterly operating
results;
|
· |
changes
in financial estimates by securities research
analysts;
|
· |
conditions
in pharmaceutical and agricultural
markets;
|
· |
changes
in the economic performance or market valuations of other pharmaceutical
companies;
|
· |
announcements
by us or our competitors of new products, acquisitions, strategic
partnerships, joint ventures or capital
commitments;
|
· |
addition
or departure of key personnel;
|
· |
fluctuations
of exchange rates between RMB and the U.S.
dollar;
|
· |
intellectual
property litigation; and
|
· |
general
economic or political conditions in
China.
|
· |
the
name of the selling stockholders,
|
· |
the
number of shares of our common stock that the selling stockholders
beneficially owned prior to the offering for resale of the shares
under
this prospectus,
|
· |
the
number of shares of our common stock that may be offered for resale
for
the account of the selling stockholders under this prospectus,
and
|
· |
the
number and percentage of shares of our common stock to be beneficially
owned by the selling stockholders after the offering of the resale
shares
(assuming all of the offered resale shares are sold by the selling
stockholders).
|
Name of Selling Stockholder
|
Shares
Beneficially
Owned Prior
to Offering (1)
|
Maximum
Number of
Shares to be
Sold
|
Number of
Shares
Beneficially
Owned After
Offering
|
Percentage
Ownership
After
Offering (2)
|
|||||||||
Pope
Investments LLC
|
1,146,250
|
(3)
|
1,175,478
|
(4)
|
1,213,720
|
(3)
|
9.99
|
%
|
|||||
Ardsley
Partners Fund II, L.P.
|
295,313
|
(5)
|
79,119
|
(6)
|
216,313
|
1.78
|
%
|
||||||
Ardsley
Partners Institutional Fund L.P.
|
193,125
|
(7)
|
51,742
|
(6)
|
141,383
|
1.16
|
%
|
||||||
Ardsley
Partners Offshore Fund, Ltd.
|
197,813
|
(8)
|
52,997
|
(6)
|
144,816
|
1.19
|
%
|
||||||
Marion
Lynton
|
7,500
|
(9)
|
2,009
|
(6)
|
5,491
|
*
|
|||||||
MidSouth
Investor Fund LP
|
56,250
|
(10)
|
15,071
|
(6)
|
41,179
|
*
|
|||||||
Sansar
Capital Special Opportunity Master Fund, LP
|
1,031,250
|
(11)
|
276,288
|
(6)
|
754,962
|
6.4
|
%
|
||||||
Ephraim
Fields
|
9,375
|
(12)
|
2,512
|
(6)
|
6,863
|
*
|
|||||||
Hua-Mei
21st
Century Partners, LP
|
337,500
|
(13)
|
90,421
|
(6)
|
247,079
|
2.03
|
%
|
Name of Selling Stockholder
|
Shares
Beneficially
Owned Prior
to Offering (1)
|
Maximum
Number of
Shares to be
Sold
|
Number of
Shares
Beneficially
Owned After
Offering
|
Percentage
Ownership
After
Offering (2)
|
|||||||||
Guerilla
Partners, LP
|
164,063
|
(14)
|
43,956
|
(6)
|
120,107
|
*
|
|||||||
Guerilla
IRA Partners, LP
|
4,688
|
(15)
|
1,256
|
(6)
|
3,432
|
*
|
|||||||
Excalibur
Special Opportunities, LP
|
93,750
|
(16)
|
25,118
|
(6)
|
68,632
|
*
|
|||||||
Whalehaven
Capital Fund Ltd.
|
46,875
|
(17)
|
4,452
|
(6)
|
42,423
|
*
|
(1)
|
Beneficial
ownership is determined in accordance with the rules and regulations
of
the SEC. In computing the number of shares beneficially owned by
a person
and the percentage ownership of that person, securities that are
currently
convertible or exercisable into shares of our common stock, or
convertible
or exercisable into shares of our common stock within 60 days of
the date
hereof are deemed outstanding. Such shares, however, are not deemed
outstanding for the purposes of computing the percentage ownership
of any
other person. Except as indicated in the footnotes to the following
table,
each stockholder named in the table has sole voting and investment
power
with respect to the shares set forth opposite such stockholder’s name. The
percentage of beneficial ownership is based on 10,328,938 shares
of common
stock outstanding as of September 25, 2008.
|
(2)
|
Assumes
the exercise of Warrants underlying all 1,820,419 shares offered
hereby.
|
(3)
|
Consists
of shares from the (i) 625,000 shares of Common Stock issuable
to Pope
Investments LLC, a Delaware limited liability company (“Pope
Investments”), upon conversion of $5,000,000 aggregate principal amount of
the Debentures and 400,000 shares of Common Stock issuable upon
exercise
of the November Warrants and (ii) the 2,125,000 shares of Common
Stock
issuable to Pope Investments upon conversion of $17,000,000 aggregate
principal amount of the Company’s Notes and 1,062,500 shares of Common
Stock issuable upon exercise of the Company’s Class A Warrants. Pursuant
to the terms of the Notes and the Class A Warrants, each of the
Selling
Stockholders has agreed that it will not convert any Notes or exercise
any
Class A Warrants to the extent that such conversion or exercise
would
result in it, together with its affiliates, beneficially own more
than
9.99% of the number of shares of our common stock outstanding at
the time
of conversion or exercise, and therefore, the number of shares
beneficially owned only reflects beneficial ownership of 9.9990
of our
shares. Any Selling Stockholder may waive these beneficial ownership
limitations as to itself upon no less than 61 days prior written
notice to
the Company. Pope Asset Management LLC, a Tennessee limited liability
company (“Pope Asset”) serves as an investment adviser and/or manager to
Pope Investments. Pope Asset is the sole manager for Pope Investments
and
has sole voting control and investment and disposition power and
discretion with respect to all securities held by Pope Investments.
Pope
Asset may be deemed to beneficially own shares owned or held by,
or held
for the account or benefit of, Pope Investments. William P. Wells
is the
sole manager of Pope Asset. Mr. Wells may be deemed to own shares
owned or
held by, or held for the account or benefit of, Pope Investments.
Pope
Asset and Mr. Wells do not directly own any shares of Common
Stock.
|
(4)
|
Consists
of (i) 321,498 shares of Common Stock issuable upon exercise of
the
November Warrants; and (ii) 853,980 shares of Common Stock issuable
upon
exercise of Class A Warrants.
|
(5)
|
Consists
of 196,875 shares of common stock issuable to Ardsley Partners
Fund II,
L.P., a Delaware limited partnership, upon conversion of $1,575,000
aggregate principal amount of the Company’s Notes and 98,438 shares of
common stock issuable upon exercise of the Company’s Class A Warrants.
Ardsley Partners Fund II, L.P. has direct beneficial ownership
with
respect to the shares. Philip J. Hempelman has voting and dispositive
power over the shares.
|
(6)
|
Consists
of shares issuable upon exercise of the Company’s Class A
Warrants.
|
(7)
|
Consists
of 128,750 shares of common stock issuable to Ardsley Partners
Institutional Fund L.P., a Delaware limited partnership, upon conversion
of $1,030,000 aggregate principal amount of the Company’s Notes and 64,375
shares of common stock issuable upon exercise of the Company’s Class A
Warrants. Ardsley Partners Institutional Fund L.P. has direct beneficial
ownership with respect to the shares. Philip J. Hempelman has voting
and
dispositive power over the shares.
|
(8)
|
Consists
of 131,875 shares of common stock issuable to Ardsley Partners
Offshore
Fund Ltd., a British Virgin Islands corporation, upon conversion
of
$1,055,000 aggregate principal amount of the Company’s Notes and 65,938
shares of common stock issuable upon exercise of the Company’s Class A
Warrants. Ardsley Partners Offshore Fund Ltd. has direct beneficial
ownership with respect to the shares. Philip J. Hempelman has voting
and
dispositive power over the shares.
|
(9)
|
Consists
of 5,000 shares of common stock issuable to Marion Lynton upon
conversion
of $40,000 aggregate principal amount of the Company’s Notes and 2,500
shares of common stock issuable upon exercise of the Company’s Class A
Warrants. Philip J. Hempelman has voting and dispositive power
over the
shares.
|
(10)
|
Consists
of 37,500 shares of common stock issuable to MidSouth Investor
Fund
LP upon
conversion of $300,000 aggregate principal amount of the Company’s Notes
and 18,750 shares of common stock issuable upon exercise of the
Company’s
Class A Warrants. Lyman O. Heidtke has voting and dispositive power
over
the shares.
|
(11)
|
Consists
of 687,500 shares of common stock issuable to Sansar Capital Special
Opportunity Master Fund, LP upon
conversion of $5,500,000 aggregate principal amount of the Company’s Notes
and 343,750 shares of common stock issuable upon exercise of the
Company’s
Class A Warrants. Sanjay Motwani has voting and dispositive power
over the
shares.
|
(12)
|
Consists
of 6,250 shares of common stock issuable to Ephraim Fields upon
conversion of $50,000 aggregate principal amount of the Company’s Notes
and 3,125 shares of common stock issuable upon exercise of the
Company’s
Class A Warrants.
|
(13)
|
Consists
of 225,000 shares of common stock issuable to Hua-Mei 21st
Century Partners, LP upon
conversion of $1,800,000 aggregate principal amount of the Company’s Notes
and 112,500 shares of common stock issuable upon exercise of the
Company’s
Class A Warrants. Peter Siris and Leigh S. Curry have voting and
dispositive power over the shares.
|
(14)
|
Consists
of 109,375 shares of common stock issuable to Guerilla Partners,
LP upon
conversion of $875,000 aggregate principal amount of the Company’s Notes
and 54,688 shares of common stock issuable upon exercise of the
Company’s
Class A Warrants. Peter Siris and Leigh S. Curry have voting and
dispositive power over the shares.
|
(15)
|
Consists
of 3,125 shares of common stock issuable to Guerilla IRA Partners,
LP upon
conversion of $25,000 aggregate principal amount of the Company’s Notes
and 1,563 shares of common stock issuable upon exercise of the
Company’s
Class A Warrants. Peter Siris and Leigh S. Curry have voting and
dispositive power over the shares.
|
(16)
|
Consists
of 62,500 shares of common stock issuable to Excalibur Special
Opportunities, LP upon
conversion of $500,000 aggregate principal amount of the Company’s Notes
and 31,250 shares of common stock issuable upon exercise of the
Company’s
Class A Warrants. William Hechter has voting and dispositive power
over
the shares.
|
(17)
|
Consists
of 31,250 shares of common stock issuable to Whalehaven Capital
Fund
Ltd. upon
conversion of $250,000 aggregate principal amount of the Company’s Notes
and 5,625 shares of common stock issuable upon exercise of the
Company’s
Class A Warrants. Arthur Jones, Trevor Williams and Brian Mazzella
have
voting and dispositive power over the
shares.
|
· |
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits Investors;
|
· |
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
· |
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
· |
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
· |
privately
negotiated transactions;
|
· |
to
cover short sales made after the date that this Registration Statement
is
declared effective by the
Commission;
|
· |
broker-dealers
may agree with the Selling Stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
· |
a
combination of any such methods of sale;
and
|
· |
any
other method permitted pursuant to applicable
law.
|
2008
|
2007
|
2006
|
||||||||
Net
Revenues (in '000)
|
$
|
99,547
|
$
|
76,194
|
$
|
49,156
|
||||
%
change year over year
|
30.65
|
%
|
55
|
%
|
285.50
|
%
|
2008
|
2007
|
2006
|
||||||||
Cost
of Goods Sold (in '000)
|
$
|
22,507
|
$
|
21,162
|
$
|
15,686
|
||||
Gross
Margin
|
77.39
|
%
|
72.23
|
%
|
68.09
|
%
|
2008
|
2007
|
2006
|
||||||||
SG&A
(in ‘000)
|
$
|
41,593
|
$
|
25,579
|
$
|
7,895
|
||||
Percentage
of Sales
|
41.78
|
%
|
33.57
|
%
|
16.06
|
%
|
2008
|
2007
|
2006
|
||||||||
Net
income (in '000)
|
$
|
22,451
|
$
|
22,053
|
$
|
7,736
|
||||
net
margin
|
22.55
|
%
|
28.94
|
%
|
15.74
|
%
|
|
Useful Life
|
||||||
Building
and building improvements
|
5 - 40
|
Years
|
|||||
Manufacturing
equipment
|
5 – 20
|
Years
|
|||||
Office
equipment and furniture
|
5 – 10
|
Years
|
|||||
Vehicle
|
5
|
Years
|
|
Year
Ended
June 30,
|
% of
|
Year
Ended
June 30,
|
% of
|
Year
Ended
June 30,
|
% of
|
|||||||||||||
|
2008
|
Revenue
|
2007
|
Revenue
|
2006
|
Revenue
|
|||||||||||||
REVENUES
|
$
|
93,983
|
94.41
|
%
|
$
|
72,260
|
94.84
|
%
|
$
|
45,243
|
92.04
|
%
|
|||||||
|
|||||||||||||||||||
REVENUES
- RELATED PARTY
|
5,564
|
5.59
|
%
|
3,934
|
5.16
|
%
|
3,913
|
7.96
|
%
|
||||||||||
|
|||||||||||||||||||
COST
OF REVENUES
|
21,073
|
21.17
|
%
|
19,961
|
26.20
|
%
|
13,628
|
27.72
|
%
|
||||||||||
|
|||||||||||||||||||
COST
OF REVENUES-RELATED PARTIES
|
1,434
|
1.44
|
%
|
1,200
|
1.58
|
%
|
2,058
|
4.19
|
%
|
||||||||||
|
|||||||||||||||||||
GROSS
PROFIT
|
77,040
|
77.39
|
%
|
55,032
|
72.23
|
%
|
33,470
|
68.09
|
%
|
|
Year
Ended
June 30,
|
% of
|
Year
Ended
June 30,
|
% of
|
Year
Ended
June 30,
|
% of
|
|||||||||||||
|
2008
|
Revenue
|
2007
|
Revenue
|
2006
|
Revenue
|
|||||||||||||
SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES
|
41,593
|
41.78
|
%
|
25,579
|
33.57
|
%
|
7,895
|
16.06
|
%
|
||||||||||
|
|||||||||||||||||||
RESEARCH
AND DEVELOPMENT
|
3,236
|
3.25
|
%
|
11,144
|
14.63
|
%
|
13,642
|
27.75
|
%
|
||||||||||
|
|||||||||||||||||||
INCOME
FROM OPERATIONS
|
32,211
|
32.36
|
%
|
18,309
|
24.03
|
%
|
11,933
|
24.28
|
%
|
||||||||||
|
|||||||||||||||||||
OTHER
EXPENSES(INCOME)
|
2,789
|
2.80
|
%
|
(6,375
|
)
|
(8.37
|
)%
|
387
|
0.79
|
%
|
|||||||||
|
|||||||||||||||||||
INCOME
BEFORE PROVISION FOR INCOME TAXES
|
29,422
|
29.56
|
%
|
24,684
|
32.40
|
%
|
11,546
|
23.49
|
%
|
||||||||||
|
|||||||||||||||||||
PROVISION
FOR INCOME TAXES
|
6,971
|
7.00
|
%
|
2,631
|
3.45
|
%
|
3,810
|
7.75
|
%
|
||||||||||
|
|||||||||||||||||||
NET
INCOME
|
22,451
|
22.55
|
%
|
22,053
|
28.94
|
%
|
7,736
|
15.74
|
%
|
||||||||||
|
|||||||||||||||||||
OTHER
COMPREHENSIVE INCOME
|
6,554
|
6.58
|
%
|
1,018
|
1.34
|
%
|
128
|
0.26
|
%
|
||||||||||
|
|||||||||||||||||||
COMPREHENSIVE
INCOME
|
$
|
29,005
|
29.14
|
%
|
$
|
23,071
|
30.28
|
%
|
$
|
7,864
|
16.00
|
%
|
Years Ended June 30,
|
|||||||
|
2008
|
2007
|
|||||
Shipping
and handling
|
$
|
365
|
$
|
280
|
|||
Advertisement,
marketing and promotion spending
|
28,119
|
18,097
|
|||||
Travel
and entertainment- sales related
|
982
|
564
|
|||||
Depreciation
and amortization
|
458
|
280
|
|||||
Salaries,
commissions, wages and related benefits
|
10,190
|
5,789
|
|||||
Travel
and entertainment- non sales related
|
325
|
36
|
|||||
Other
|
1,154
|
533
|
|||||
Total
|
$
|
41,593
|
$
|
25,579
|
·
|
An
increase of $10.0 million or approximately 55.39% in advertising,
marketing and promotional spending for the year ended June 30, 2008
was
primarily due to TV commercials and magazine advertisements expenses
to
promote our new product- Baobaole Chewable tablets, as well as our
brand
name. Additionally, we also increased our marketing and promotional
activities to promote our two best selling
products.
|
·
|
Travel
and entertainment -sales related expenses increased by $0.4 million
or
approximately 74.14% for the year ended June 30, 2008 as compared
to the
corresponding period in fiscal 2007 was primarily due to our marketing
and
sales travel related activities related to promoting our Baobole
Chewable
tablets and establishing the distribution network for the product
as well
as promoting our two other best selling products.
|
·
|
Shipping
and handling expenses increased by $0.1 million or approximately
30.43%
for the year ended June 30, 2008 as compared to the corresponding
period
of fiscal 2007, primarily because there was an increase in sales
volume in
fiscal year 2008.
|
·
|
Depreciation
and amortization increased by $0.2 million or 63.45% for the year
ended
June 30, 2008 as compared to the corresponding period of fiscal 2007,
primarily due to additional fixed assets being depreciated.
|
·
|
Salaries,
wages, commissions and related benefits increased by $4.4 million
or
76.00% for the year ended June 30, 2008 as compared to the corresponding
period of fiscal 2007. The increase was primarily due to increase
in
commission payments as a percentage of sales to sales representatives
as
well as an increase in number of employees and sales representatives
as a
result of expanding our distribution network from 26 provinces and
regions
to 30 provinces and regions in fiscal 2008.
|
·
|
An
increase of $0.3 million or approximately 806.12% in travel and
entertainment -non sales related expenses for the year ended June
30, 2008
as compared to the corresponding period of fiscal 2007. The increase
was
primarily due to increase in corporate executives’ and managers’
entertainment and travel related to public company related activities.
|
·
|
Other
selling, general and administrative expenses, which includes professional
fees, utilities, office supplies and expenses increased by $0.6 million
or
116.37% for the year ended June 30, 2008 as compared to the corresponding
period in fiscal 2008 primarily due to more professional fees, and
other
expenses related to being a publicly traded company in fiscal 2008.
|
|
Years Ended June 30,
|
||||||
|
2007
|
2006
|
|||||
Shipping
and handling
|
$
|
280
|
$
|
188
|
|||
Advertisement,
marketing and promotion spending
|
18,097
|
5,455
|
|||||
Travel
and entertainment- sales related
|
564
|
397
|
|||||
Depreciation
and amortization
|
280
|
182
|
|||||
Salaries,
commissions, wages and related benefits
|
5,789
|
1,114
|
|||||
Travel
and entertainment- non sales related
|
36
|
45
|
|||||
Other
|
533
|
514
|
|||||
Total
|
$
|
25,579
|
$
|
7,895
|
·
|
An
increase of $12.6 million or approximately 231.72% in advertising,
marketing and promotional spending for the year ended June 30, 2007
was
primarily due to increase in marketing and promotional activities
to
promote our products and brand name.
|
·
|
Travel
and entertainment sales related expenses increased by $0.2 million,
or
approximately 41.94%, for the year ended June 30, 2007 as compared
to the
corresponding period in fiscal 2006 was primarily due to the increase
in
our sales entertainment and sales travel related activities.
|
·
|
Shipping
and handling expenses increased by $0.1 million, or approximately
48.87%,
for the year ended June 30, 2007 as compared to the corresponding
period
of fiscal 2006, primarily because increase in sales volume in fiscal
year
2007.
|
·
|
Depreciation
and amortization increased by $0.1 million, or 53.76%, for the year
ended
June 30, 2007 as compared to the corresponding period of fiscal 2006,
primarily due to additional amortization expenses on the new patent
obtained in late fiscal 2007.
|
·
|
Salaries,
wages, commissions and related benefits increased by $4.7 million,
or
419.83%, for the year ended June 30, 2007 as compared to the corresponding
period of fiscal 2006. The increase was primarily due to increase
in
commission payments to sales representatives as well as an increase
in
number of employees and sales
representatives
|
·
|
Travel
and entertainment non sales related expenses were materially consistent
for the year ended June 30, 2007 as compared to the corresponding
period
of fiscal 2006.
|
·
|
Other
selling, general and administrative expenses, which includes professional
fees, utilities, office supplies and expenses were materially consistent
for the year ended June 30, 2007 as compared to the corresponding
period
in fiscal 2006.
|
·
|
In
November 2007, we raised $5,000,000 in gross proceeds through the
sale of
a convertible note. We received $4,645,592 in net proceeds after
deducting
placement agent discounts and commissions and payment of professional
and
other related expenses. Further detailed discussion regarding this
financing is provided in the footnotes to financial statements.
|
·
|
In
May 2008, we raised $30,000,000 in gross proceeds through the sale
of a
convertible note. We received $28,313,500 in net proceeds after deducting
placement agent discounts and commissions and payment of professional
and
other related expenses. Further detailed discussion regarding this
financing is provided in the footnotes to financial statements.
|
Payments Due by Period
|
||||||||||||||||
Total
|
Less than 1 year
|
1-3 Years
|
3-5
Years
|
5 Years
+
|
||||||||||||
In Thousands
|
||||||||||||||||
Contractual
Obligations:
|
||||||||||||||||
Bank
Indebtedness
|
$
|
8,615,395
|
$
|
8,615,395
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Research
and Development Obligations
|
$
|
11,562,575
|
$
|
4,377,000
|
$
|
5,252,400
|
$
|
1,933,175
|
$
|
-
|
||||||
Purchase
Obligations
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Total
Contractual Obligations:
|
$
|
20,177,970
|
$
|
12,992,395
|
$
|
5,252,400
|
$
|
1,933,175
|
$
|
-
|
1.
|
For
risks relating to our current corporate structure, see “Risk Factors—Risks
Associated with Doing Business in China.”
|
2.
|
Agreements
that provide us with effective control over Laiyang Jiangbo include
irrevocable powers of attorney, equity pledge agreements, purchase
options
and cooperation agreement. See “—Contractual Agreements with Laiyang
Jiangbo and Its Shareholders.”
|
3.
|
The
economic benefits and losses of Laiyang Jiangbo accrue to Laiyang
Jiangbo
pursuant to a business cooperation agreement. See “—Contractual Agreements
with Laiyang Jiangbo and Its
Shareholders.”
|