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, 2010
OR
¨
TRANSITION REPORT PURS
UANT 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 incorporation or
organization)
|
|
(IRS
Employer 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
¨
|
Accelerated filer
¨
|
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
¨
No
x
State the
number of shares outstanding of each of the issuer's classes of common stock, as
of the latest practicable date.
Number of
Shares of Common Stock, Par Value $0.001 Per Share, Outstanding as of June 30,
2010
BIO-BRIDGE
SCIENCE, INC.
FORM
10-Q
TABLE OF
CONTENTS
|
|
|
|
Page
|
PART
I.
|
|
FINANCIAL
INFORMATION
|
|
|
|
|
|
|
|
Item
1.
|
|
Financial
Statements
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets as of June 30, 2010 (unaudited) and December
31, 2009
|
|
3
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Operations for the three-month and
six-month periods ended June 30, 2010 and 2009 (unaudited)
|
|
4
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Changes in Equity for the six-month period
ended June 30, 2010 (unaudited)
|
|
5
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows for the six-month periods
ended June 30, 2010 and 2009 (unaudited)
|
|
6
|
|
|
|
|
|
|
|
Notes
to the Unaudited Condensed Consolidated Financial
Statements
|
|
7
|
|
|
|
|
|
Item
2.
|
|
Management's
Discussion and Analysis of Financial Conditions and Results of
Operation
|
|
14
|
|
|
|
|
|
Item
3.
|
|
Quantitative
and Qualitative Disclosure About Market Risk
|
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19
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|
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|
Item
4.
|
|
Controls
and Procedures
|
|
20
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|
|
|
PART II.
|
|
OTHER
INFORMATION
|
|
|
|
|
|
|
|
Item
1.
|
|
Legal
Proceedings
|
|
21
|
|
|
|
|
|
Item
1A.
|
|
Risk
Factors
|
|
21
|
|
|
|
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|
Item
2.
|
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
|
21
|
|
|
|
|
|
Item
3.
|
|
Defaults
Upon Senior Securities
|
|
21
|
|
|
|
|
|
Item
4.
|
|
Submission
of Matters to a Vote of Security Holders
|
|
21
|
|
|
|
|
|
Item
5.
|
|
Other
Information
|
|
21
|
|
|
|
|
|
Item
6.
|
|
Exhibits
|
|
21
|
|
|
|
|
|
SIGNATURES
|
|
21
|
|
|
|
EXHIBIT
INDEX
|
|
22
|
PART
I - FINANCIAL INFORMATION
Item 1.
Financial
Statements
BIO-BRIDGE
SCIENCE, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
June
30,
|
|
|
December
31,
|
|
|
|
20
10
|
|
|
200
9
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
815,284
|
|
|
$
|
1,481,851
|
|
Accounts
receivable, net
|
|
|
220,674
|
|
|
|
471,236
|
|
Inventories
|
|
|
897,117
|
|
|
|
589,730
|
|
Trading
securities, at fair value
|
|
|
-
|
|
|
|
162,044
|
|
Prepaid
expenses and other current assets
|
|
|
47,399
|
|
|
|
62,663
|
|
Total
Current Assets
|
|
|
1,980,474
|
|
|
|
2,767,524
|
|
|
|
|
|
|
|
|
|
|
Property and
equipment, net
|
|
|
3,427,307
|
|
|
|
3,465,302
|
|
Land
use right, net
|
|
|
512,083
|
|
|
|
522,510
|
|
Intangible
assets
|
|
|
219,677
|
|
|
|
219,677
|
|
Goodwill
|
|
|
243,24
8
|
|
|
|
243,248
|
|
Total
Long-term Assets
|
|
|
4,402,315
|
|
|
|
4,450,737
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
6,382,789
|
|
|
$
|
7,218,261
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND EQUITY
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
188,583
|
|
|
$
|
161,122
|
|
Accrued
expenses and other payables
|
|
|
110,828
|
|
|
|
144,795
|
|
Payable
for leasehold and equipment purchases
|
|
|
-
|
|
|
|
273,558
|
|
Payable
to contractors
|
|
|
-
|
|
|
|
42,471
|
|
Due
to director
|
|
|
21,023
|
|
|
|
15,183
|
|
Advances
from director
|
|
|
300,000
|
|
|
|
-
|
|
Derivative
liabilities
|
|
|
196,068
|
|
|
|
377,013
|
|
Total
Current Liabilities
|
|
|
816,502
|
|
|
|
1,014,142
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value, 5,000,000 shares authorized, 0 and 4,000,000
shares issued and outstanding, respectively
|
|
|
-
|
|
|
|
4,000
|
|
Common
stock, $0.001 par value, 100,000,000 shares authorized, 45,070,245 and
40,819,285 shares issued and outstanding, respectively
|
|
|
45,070
|
|
|
|
40,819
|
|
Additional
paid-in capital
|
|
|
18,400,717
|
|
|
|
16,475,947
|
|
Preferred
stock dividend, payable in common shares
|
|
|
-
|
|
|
|
74,200
|
|
Subscription
receivable
|
|
|
(210,325
|
)
|
|
|
(210,325
|
)
|
Stock
to be issued
|
|
|
210,000
|
|
|
|
248,140
|
|
Accumulated
other comprehensive income
|
|
|
292,325
|
|
|
|
261,948
|
|
Accumulated
deficit
|
|
|
(14,058,051
|
)
|
|
|
(11,678,908
|
)
|
Total
Bio-Bridge Science, Inc. shareholders’ equity
|
|
|
4,679,736
|
|
|
|
5,215,821
|
|
|
|
|
|
|
|
|
|
|
NONCONTROLLING
INTERESTS
|
|
|
886,551
|
|
|
|
988,298
|
|
|
|
|
|
|
|
|
|
|
Total
Equity
|
|
|
5,566,287
|
|
|
|
6,204,119
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND EQUITY
|
|
$
|
6,382,789
|
|
|
$
|
7,
218
,261
|
|
See
accompanying notes to the condensed consolidated financial
statements.
BIO-BRIDGE
SCIENCE, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
146,506
|
|
|
$
|
174,895
|
|
|
$
|
206,871
|
|
|
$
|
439,024
|
|
Cost
of goods sold
|
|
|
(107,934
|
)
|
|
|
(121,469
|
)
|
|
|
(145,444
|
)
|
|
|
(283,728
|
)
|
Gross
profit
|
|
|
38,572
|
|
|
|
53,426
|
|
|
|
61,427
|
|
|
|
155,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development costs
|
|
|
43,423
|
|
|
|
46,840
|
|
|
|
131,989
|
|
|
|
79,652
|
|
Selling
and distribution expenses
|
|
|
27,850
|
|
|
|
61,621
|
|
|
|
68,219
|
|
|
|
90,962
|
|
General
and administrative expenses
|
|
|
476,155
|
|
|
|
290,872
|
|
|
|
2,336,120
|
|
|
|
499,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(508,856
|
)
|
|
|
(345,907
|
)
|
|
|
(2,474,901
|
)
|
|
|
(514,723
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(2,248
|
)
|
|
|
(23
|
)
|
|
|
(3,051
|
)
|
|
|
(297
|
)
|
Unrealized
gain on trading securities
|
|
|
-
|
|
|
|
22,816
|
|
|
|
6,741
|
|
|
|
19,186
|
|
Gain
on sale of trading securities
|
|
|
1,890
|
|
|
|
-
|
|
|
|
1,890
|
|
|
|
-
|
|
Change
of fair value of derivative liability
|
|
|
4,890
|
|
|
|
1,055,141
|
|
|
|
4,913
|
|
|
|
1,226,418
|
|
Dividend
income
|
|
|
1,181
|
|
|
|
3,799
|
|
|
|
4,718
|
|
|
|
8,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) before income taxes
|
|
|
(503,143
|
)
|
|
|
735,826
|
|
|
|
(2,459,690
|
)
|
|
|
738,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit
(provision) for income taxes
|
|
|
-
|
|
|
|
3,216
|
|
|
|
-
|
|
|
|
(17,751
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
|
(503,143
|
)
|
|
|
739,042
|
|
|
|
(2,459,690
|
)
|
|
|
720,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) attributable to noncontrolling
interests
|
|
|
(62,222
|
)
|
|
|
(7,968
|
)
|
|
|
(101,747
|
)
|
|
|
26,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) attributable to Bio-Bridge Science,
Inc.
|
|
|
(440,921
|
)
|
|
|
747,010
|
|
|
|
(2,357,943
|
)
|
|
|
694,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock dividends
|
|
|
-
|
|
|
|
(90,000
|
)
|
|
|
(21,200
|
)
|
|
|
(145,550
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) attributable to common shareholders
|
|
$
|
(440,921
|
)
|
|
$
|
657,010
|
|
|
$
|
(2,379,143
|
)
|
|
$
|
548,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per share, attributable to common shareholders,
basic
|
|
$
|
(0.01
|
)
|
|
$
|
0.02
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.02
|
|
Net
income (loss) per share, attributable to common shareholders,
diluted
|
|
$
|
(0.01
|
)
|
|
$
|
0.0
2
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
45,070,245
|
|
|
|
35,124,855
|
|
|
|
44,333,203
|
|
|
|
35,073,219
|
|
Weighted
average shares outstanding, diluted
|
|
|
45,070,245
|
|
|
|
39,725,066
|
|
|
|
44,333,203
|
|
|
|
42,004,564
|
|
See
accompanying notes to the condensed consolidated financial
statement
BIO-BRIDGE
SCIENCE, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For
The Six Months Ended June 30, 2010
(Unaudited)
|
|
Common Stock
|
|
|
Preferred Stock
|
|
|
Preferred Stock
Dividend
Payable in
|
|
|
Additional
Paid-in
|
|
|
Accumulated
Other
Comprehensive
|
|
|
Common
Stock To
|
|
|
Subscriptions
|
|
|
Accumulated
|
|
|
Non
controlling
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Common Shares
|
|
|
Capital
|
|
|
Income
|
|
|
Be Issued
|
|
|
Receivable
|
|
|
Deficit
|
|
|
Interest
|
|
|
Total
|
|
BALANCE
December 31, 2009
|
|
|
40,819,285
|
|
|
$
|
40,819
|
|
|
|
4,000,000
|
|
|
$
|
4,000
|
|
|
$
|
74,200
|
|
|
$
|
16,475,947
|
|
|
$
|
261,948
|
|
|
$
|
248,140
|
|
|
$
|
(210,325
|
)
|
|
$
|
(11,678,908
|
)
|
|
$
|
988,298
|
|
|
$
|
6,204,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual
of preferred stock dividend
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,200
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(21,200
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment
of preferred stock dividend through issuance of common
shares
|
|
|
180,000
|
|
|
|
180
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(95,400
|
)
|
|
|
95,220
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of vested options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
93,644
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
93,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of warrants issued to directors
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,521,805
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,521,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common shares
|
|
|
70,960
|
|
|
|
71
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
38,069
|
|
|
|
-
|
|
|
|
(38,140
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extinguishment
of derivative recorded as contribution to capital
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
176,032
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
176,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of 4,000,000 shares of preferred stock into 4,000,000 shares of common
stock
|
|
|
4,000,000
|
|
|
|
4,000
|
|
|
|
(4,000,000
|
)
|
|
|
(4,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation gain
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,377
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,357,943
|
)
|
|
|
(101,747
|
)
|
|
|
(2,459,690
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE
June
30, 2010 (Unaudited)
|
|
|
45,070,245
|
|
|
$
|
45,070
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
18,400,717
|
|
|
$
|
292,325
|
|
|
$
|
210,000
|
|
|
$
|
(210,325
|
)
|
|
$
|
(14,058,051
|
)
|
|
$
|
886,551
|
|
|
$
|
5,566,287
|
|
See
accompanying notes to the condensed consolidated financial
statement
BIO-BRIDGE
SCIENCE, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Six
Months Ended
|
|
|
|
June 30
, 20
10
|
|
|
June 30
, 200
9
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(2,459,690
|
)
|
|
$
|
720,940
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
199,483
|
|
|
|
10,133
|
|
Amortization
of land use right
|
|
|
10,427
|
|
|
|
9,222
|
|
Fair
value of vested options
|
|
|
93,644
|
|
|
|
-
|
|
Fair
value of warrants issued to directors
|
|
|
1,521,805
|
|
|
|
-
|
|
Gain
on sale of trading securities
|
|
|
1,890
|
|
|
|
-
|
|
Unrealized
loss on trading securities
|
|
|
(6,741
|
)
|
|
|
(19,186
|
)
|
Change
in fair value of derivative liability
|
|
|
(4,913
|
)
|
|
|
(1,226,418
|
)
|
Change
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
250,562
|
|
|
|
(101,8340
|
)
|
Inventories
|
|
|
(307,387
|
)
|
|
|
1,211
|
|
Prepaid
expense and other assets
|
|
|
15,264
|
|
|
|
(15,500
|
)
|
Accounts
payable
|
|
|
27,461
|
|
|
|
10,562
|
|
Accrued
expenses and other payables
|
|
|
(33,967
|
)
|
|
|
(90,846
|
)
|
Payable
to contractors
|
|
|
(42,471
|
)
|
|
|
(71,927
|
)
|
Net
cash used in operating activities
|
|
|
(738,413
|
)
|
|
|
(741,782
|
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Increase
in construction in progress
|
|
|
-
|
|
|
|
(44,288
|
)
|
Purchase
of property and equipment
|
|
|
(161,488
|
)
|
|
|
(359,223
|
)
|
Payable
for leasehold and equipment purchases
|
|
|
(273,558
|
)
|
|
|
-
|
|
Proceeds
from sale of trading securities
|
|
|
170,675
|
|
|
|
-
|
|
Net
cash used in investing activities
|
|
|
(264,371
|
)
|
|
|
(403,511
|
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of common stock
|
|
|
-
|
|
|
|
1,145,370
|
|
Advances
from director
|
|
|
300,000
|
|
|
|
-
|
|
Due
to director
|
|
|
5,840
|
|
|
|
(19,878
|
)
|
Net
cash provided by financing activities
|
|
|
305,840
|
|
|
|
1,125,492
|
|
|
|
|
|
|
|
|
|
|
NET
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(696,944
|
)
|
|
|
(19,801
|
)
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
30,377
|
|
|
|
1,871
|
|
Cash
and cash equivalents, beginning of period
|
|
|
1,481,851
|
|
|
|
1,486,252
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
815,284
|
|
|
$
|
1,468,322
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Income
taxes paid
|
|
$
|
-
|
|
|
$
|
46,897
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
NON-CASH FLOW INVESTING AND FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Conversion
of shares of preferred stock into shares of common stock
|
|
$
|
4,000
|
|
|
$
|
-
|
|
Extinguishment
of derivative recorded as contribution to capital
|
|
$
|
176,032
|
|
|
$
|
-
|
|
Accrual
of preferred stock dividend payable in common stock
|
|
$
|
21,200
|
|
|
$
|
145,550
|
|
Payment
of preferred stock dividend in shares of common stock
|
|
$
|
95,400
|
|
|
$
|
-
|
|
See
accompanying notes to the condensed consolidated financial
statements.
BIO-BRIDGE
SCIENCE, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS
OF JUNE 30, 2010
NOTE
1 - BASIS OF PRESENTATION
The
accompanying unaudited condensed consolidated financial statements of Bio Bridge
Science Inc. and Subsidiaries (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 the 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, 2009 was
derived from the audited consolidated financial statements included in the
Company's Annual Report on Form 10-K filed with the SEC on March 31, 2010. These
interim financial statements should be read in conjunction with that
report.
NOTE
2 - ORGANIZATION AND PRINCIPAL ACTIVITIES
Bio-Bridge
Science, Inc ("the Company") was incorporated in the State of Delaware on
October 26, 2004. 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 ("BBS"), a Cayman Islands corporation,
in exchange for 29,971,590 shares of its common stock, and as a result, BBS
became a wholly owned subsidiary of Bio-Bridge Science, Inc. The acquisition was
accounted for as a reverse merger (recapitalization) with BBS deemed to be the
accounting acquirer, and the Company the legal acquirer.
BBS was
incorporated in the Cayman Islands on February 11, 2002. At the time
of the exchange, BBS held a 100% interest in Bio-Bridge Science (Beijing) Corp.
("Bio-Bridge Beijing"), a wholly-foreign funded enterprise of the People's
Republic of China ("PRC") which was established on May 20, 2002. Bio Bridge
Beijing is currently engaged in the development and commercialization of
several vaccine candidates in the PRC, such as HIV-PV vaccine I, cervical cancer
vaccine, and colon cancer vaccine.
On July
31, 2008, the Company acquired 51 percent of the outstanding capital interest of
Bio-Bridge Xinheng Baide Biotechnology Co., Ltd. (“Bio-Bridge XBB”). The primary
operations of Bio-Bridge XBB are the manufacturing and distribution of bovine
serum products, which are used in research and production of
pharmaceuticals and veterinary medicines.
In June
of 2009, the Company entered into an equity joint venture contract to purchase
51 percent of Bio-Bridge JRS Biosciences (Beijing) Co., Ltd. (“Bio-Bridge JRS”).
On October 16, 2009 the joint venture received a business license to do
business in the PRC and began its startup activities.
Going
Concern
The
accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. As reflected in
the accompanying consolidated financial statements, the Company had a net loss
of $2,459,690 and used cash in operations of $738,413 for the six months ended
June 30, 2010, and had an accumulated deficit of $14,058,051 as of June 30,
2010. These factors raise substantial doubt about the Company’s
ability to continue as a going concern, which is dependent upon the Company’s
ability to raise additional funds to implement its business plan. The
consolidated financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.
Based on
our current operating plan, we believe that we have sufficient cash and cash
equivalents to last approximately through July 2011. 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 July
2011. Additional financing, whether through public or private equity or debt
financing, arrangements with stockholders or other sources to fund operations,
may not be available, or if available, may be on terms unacceptable to us. Our
ability to maintain sufficient liquidity is dependent on our ability to raise
additional capital. If we issue additional equity securities to raise funds, the
ownership percentage of our existing stockholders would be reduced. New
investors may demand rights, preferences or privileges senior to those of
existing holders of our common stock. Debt incurred by us would be senior to
equity in the ability of debt holders to make claims on our assets. The terms of
any debt issued could impose restrictions on our operations. If adequate funds
are not available to satisfy either medium or long-term capital requirements,
our operations and liquidity could be materially adversely affected and we could
be forced to cut back our operations.
NOTE
3 - SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of
Bio-Bridge Science Inc. and our wholly owned subsidiaries, Bio-Bridge Science
Corp., Bio-Bridge Beijing, Bio-Bridge Science Holding Co., Bio-Bridge Science
(HK), Co. and our 51% owned subsidiaries Bio-Bridge XBB and Bio-Bridge
JRS. Intercompany accounts and transactions have been eliminated in
consolidation.
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.
Revenue
Recognition
The
Company recognizes revenue from the sales of products in accordance with
Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin ("SAB") No.
104, when persuasive evidence of an order arrangement exists, delivery has
occurred, the sales price is fixed or determinable and collectibility is
reasonably assured. Generally, these criteria are met at the time the
product is shipped to customers when title and risk of loss have
transferred.
Accounts
receivables are recognized and carried at original invoiced amount less an
allowance for any uncollectible accounts. The Company uses the aging method to
estimate the valuation allowance for anticipated uncollectible receivable
balances. Under the aging method, bad debts determined by management
are based on historical experience as well as the current economic climate and
are applied to customers' balances categorized by the number of months the
underlying invoices have remained outstanding. The
valuation allowance balance is adjusted to the amount computed as a result
of the aging method. When facts subsequently become available to
indicate that an adjustment to the allowance should be made, this is recorded as
a change in estimate in the current year. As of June 30, 2010 and December 31,
2009, accounts receivable were net of allowances of $51,540 and $40,037,
respectively.
Intangible
Assets and Goodwill
As
required by guidance issued by the Financial Accounting Standards Board
(“FASB”), management performs impairment tests of goodwill and indefinite-lived
intangible assets whenever an event occurs or circumstances change that indicate
impairment has more likely than not occurred. Also, management performs
impairment testing of goodwill and indefinite-lived intangible assets at least
annually.
Goodwill
is related to the Company's acquisition of Bio-Bridge XBB on July 31,
2008. Goodwill and other intangible assets are accounted for in
accordance with guidance issued by the FASB on goodwill and other intangible
assets. Under this guidance, goodwill is not amortized. Rather,
goodwill is assessed for impairment at least annually. The Company
tests goodwill by using a two-step process. In the first step, the
fair value of the reporting unit is compared with the carrying amount of the
reporting unit, including goodwill. If the carrying amount of the
reporting unit exceeds its fair value, goodwill is considered impaired and a
second step is performed to measure the amount of impairment loss, if
any. Based on management’s assessment, there were no indicators of
impairment of recorded goodwill at June 30, 2010.
Intangible
assets subject to amortization are related to technology for producing cell
culture medium contributed to Bio-Bridge JRS by a noncontrolling
interest. In accordance with guidance issued by the FASB on
accounting for the impairment and disposal of long-lived assets, the Company
reviews intangible assets subject to amortization at least annually to determine
if any adverse conditions exist or a change in circumstances has occurred that
would indicate impairment or a change in the remaining useful
life. If the carrying value of an asset exceeds its undiscounted cash
flows, the Company writes down the carrying value of the intangible asset to its
fair value in the period identified. If the carrying value of assets
is determined not to be recoverable, the Company records an impairment loss
equal to the excess of the carrying value over the fair value of the
assets. The Company’s estimate of fair value is based on the best
information available, in the absence of quoted market prices. The
Company generally calculates fair value as the present value of estimated future
cash flows that the Company expects to generate from the asset using a
discounted cash flow income approach as described above. If the
estimate of an intangible asset’s remaining useful life is changed, the Company
amortizes the remaining carrying value of the intangible asset prospectively
over the revised remaining useful life. The discounted cash flow valuation
methodology and calculations will be used in 2010 impairment
testing. The Company’s first measurement period will be in the third
quarter of 2010.
Impairment
of Long-Lived Assets
Authoritative
guidance issued by the FASB establishes guidelines regarding when impairment
losses on long-lived assets, which include property and equipment, should be
recognized, and how impairment losses should be measured.
Management
regularly reviews property, equipment and other long-lived assets for possible
impairment. This review occurs quarterly, or more frequently if
events or changes in circumstances indicate the carrying amount of the asset may
not be recoverable. If there is indication of impairment, then
management prepares an estimate of future cash flows (undiscounted and without
interest charges) expected to result from the use of the asset and its eventual
disposition. If these cash flows are less than the carrying amount of
the asset, an impairment loss is recognized to write down the asset to its
estimated fair value. Management’s assumptions about cash flows and
discount rates require significant judgment. There were no
indications of impairment based on management’s assessment at June 30,
2010. Factors we consider important that could trigger an impairment
review include significant underperformance relative to historical or projected
future operating results, significant changes in the manner of the use of our
assets or the strategy for our overall business, and significant negative
industry or economic trends.
Derivative
Financial Instruments
The
Company evaluates all of its financial instruments to determine if such
instruments are derivatives or contain features that qualify as embedded
derivatives. For derivative financial instruments that are accounted for as
liabilities, the derivative instrument is initially recorded at its fair value
and is then re-valued at each reporting date, with changes in the fair value
reported in the condensed consolidated statements of operations. For stock-based
derivative financial instruments, the Company uses the Black-Scholes-Merton
option pricing models to value the derivative instruments at inception and on
subsequent valuation dates. The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as
equity, is evaluated at the end of each reporting period.
Financial
Assets and Liabilities Measured at Fair Value.
The
Company reports fair value measurements in accordance with
authoritative guidance issued by the FASB. Fair value is defined in the
authoritative guidance as the price that would be received to sell an asset or
paid to transfer a liability in the principal or most advantageous market for
the asset or liability in an orderly transaction between market participants at
the measurement date. A fair value hierarchy was established, which prioritizes
the inputs used in measuring fair value into three broad levels as
follows:
Level 1—Quoted
prices in active markets for identical assets or liabilities.
Level 2—Inputs,
other than the quoted prices in active markets, are observable either directly
or indirectly.
Level 3—Unobservable
inputs based on the Company's assumptions.
The
Company is required to use observable market data if such data is available
without undue cost and effort.
The
following table presents certain investments and liabilities of the Company’s
financial assets measured and recorded at fair value on the Company’s
consolidated balance sheets on a recurring basis and their level within the fair
value hierarchy as of June 30, 2010:
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Fair
value of options and warrants
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
196,068
|
|
|
$
|
196,068
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
196,068
|
|
|
$
|
196,068
|
|
Foreign
Currency Translation
The
accompanying consolidated financial statements are presented in United States
dollars. The functional currency of the Company is the Renminbi (RMB). Equity
accounts of the consolidated financial statements are translated into United
States dollars from RMB at their historical exchange rates when the equity
transactions occurred. Assets and liabilities are translated at the exchange
rates as of balance sheet date. Income and expenditures are translated at the
average of the exchange rates at beginning of the financial year and at
balance sheet date.
|
|
2010
|
|
|
200
9
|
|
US$
to RMB exchange rate on January 1,
|
|
|
6.8282
|
|
|
|
6.8359
|
|
|
|
|
|
|
|
|
|
|
US$
to RMB exchange rate on June 30,
|
|
|
6.7909
|
|
|
|
6.8319
|
|
|
|
|
|
|
|
|
|
|
Average
US$ to RMB exchange rate for the six months ended June 30,
|
|
|
6.8251
|
|
|
|
6.8339
|
|
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.
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:
|
|
Three
months ended June 30,
|
|
|
Six
months ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Net income (loss) attributable to Bio-Bridge Science, Inc.
|
|
$
|
(440,921
|
)
|
|
$
|
747,010
|
|
|
$
|
(2,357,943
|
)
|
|
$
|
694,234
|
|
Foreign currency translation gain (loss)
|
|
$
|
28,791
|
|
|
$
|
2,
758
|
|
|
$
|
30,377
|
|
|
$
|
1,871
|
|
Comprehensive income
(loss)
|
|
$
|
(412,130
|
)
|
|
$
|
749,768
|
|
|
$
|
(2,327,566
|
)
|
|
$
|
696,105
|
|
Research
and Development
Research
and development costs are expensed as incurred. For the three months ended June
30, 2010 and 2009, research and development expenses totaled $43,423 and
$46,840, respectively. For the six months ended June 30, 2010 and 2009, research
and development expenses totaled $131,989 and 79,652, respectively.
Income
(loss) Per Share
Basic
income (loss) per share is computed by dividing income (loss) available to
common shareholders by the weighted average number of common shares outstanding
during the period. The diluted earnings per share calculation gives effect to
all potentially dilutive common shares outstanding during the period using
the treasury stock method. Common equivalent shares consist of shares
issuable upon the exercise of stock options or warrants. As of June
30, 2010, common stock equivalents were composed of options convertible
into 3,631,500 shares of the Company's common stock and warrants
convertible into 8,814,943 shares of the Company's common stock. For the
three and six month periods ended June 30, 2010, respectively, common equivalent
shares have been excluded from the calculation of loss per share as their effect
is anti-dilutive.
As of
June 30, 2009, common stock equivalents were composed of options convertible
into 2,297,000 shares of the Company's common stock and warrants convertible
into 8,864,943 shares of the Company's common stock. The following is
a reconciliation of the numerator and denominator used in the calculation of
basic and diluted earnings per share for the three and six months ended June 30,
2009:
|
|
For the three
months ended
June 30,
|
|
|
For the six
months ended
June 30,
|
|
|
|
200
9
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
N
umerator
|
|
|
|
|
|
|
Net
Income attributable to common shareholders for per-share
calculation
|
|
$
|
657,010
|
|
|
$
|
548,684
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding-basic
|
|
|
35,124,855
|
|
|
|
35,073,219
|
|
Effect
of dilutive instruments:
|
|
|
|
|
|
|
|
|
Options
|
|
|
600,211
|
|
|
|
1,469,940
|
|
Warrants
|
|
|
-
|
|
|
|
1,461,405
|
|
Convertible
preferred stock
|
|
|
4,000,000
|
|
|
|
4,000,000
|
|
Weighted
average shares outstanding-basic and diluted
|
|
$
|
39,725,066
|
|
|
$
|
42,004,564
|
|
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. Stock-based compensation is measured at the grant date, based on the
fair value of the award, and is recognized as expense over the requisite service
period. Options vest and expire according to terms established at the grant
date. For the three and six month periods ended June 30, 2010, stock-based
compensation totaled $46,822 and $93,644, respectively.
Concentrations
Financial
instruments, which potentially subject the Company to concentrations of credit
risk, consist principally of cash and unsecured trade accounts
receivable.
Cash
denominated in Renminbi (“RMB”) with a US dollar equivalent of $365,751 and
$1,258,137 at June 30, 2010 and December 31, 2009, respectively, was held in
accounts at financial institutions located in the PRC. In addition,
the Company maintains funds in bank accounts in the US which at times may exceed
the federally insured balance of $250,000. The Company and its
subsidiaries have not experienced any losses in such accounts and do not believe
the cash is exposed to any significant risk.
For the
three and six-month periods ended June 30, 2010, approximately 84% and 76%,
respectively, of the Company’s sales were to customers located in China,
compared to approximately 93% and 92% for the three and six
month periods ended June 30, 2009, respectively. For the six
months ended June 30, 2010, one customer accounted for 35% of total
sales. At June 30, 2010, four customers accounted for 91% of
accounts receivable (30%, 27%, 24%, and 10%, respectively).
Advances
from Director
During
the three months ended June 30, 2010, one of the Company’s directors advanced
$300,000 to the Company in anticipation of making an equity investment.
The terms of the equity investment are currently being negotiated as of
the date of the issuance of this 10-Q. The advances are non-interest
bearing, unsecured, and due on demand.
Recent
Accounting Pronouncements
In April
2010, the FASB issued new accounting guidance to clarify that an employee
share-based payment award with an exercise price denominated in the currency of
a market in which a substantial portion of the entity's equity securities trades
should not be considered to contain a condition that is not a market,
performance, or service condition. Therefore, an entity would not classify such
an award as a liability if it otherwise qualifies as equity. The
amendments are effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2010. The Company does
not expect adoption of this standard will have an effect on our
consolidated results of operation or our financial position.
In
April 2010, the Financial Accounting Standards Board (FASB) issued new
accounting guidance in applying the milestone method of revenue recognition to
research or development arrangements. Under this guidance management may
recognize revenue contingent upon the achievement of a milestone in its
entirety, in the period in which the milestone is achieved, only if the
milestone meets all the criteria within the guidance to be considered
substantive. This standard is effective on a prospective basis for research and
development milestones achieved in fiscal years, beginning on or after
June 15, 2010. Early adoption is permitted; however, adoption of this
guidance as of a date other than January 1, 2011 will require the Company
to apply this guidance retrospectively effective as of January 1, 2010 and
will require disclosure of the effect of this guidance as applied to all
previously reported interim periods in the fiscal year of adoption. As the
Company plans to implement this standard prospectively, the effect of this
guidance will be limited to future transactions. The Company does not expect
adoption of this standard to have a material impact on its financial position or
results of operations as it has no material research and development
arrangements which will be accounted for under the milestone
method.
In
January 2010, the FASB issued new accounting guidance which requires new
disclosures regarding transfers in and out of Level 1 and Level 2 fair value
measurements, as well as requiring presentation on a gross basis of information
about purchases, sales, issuances and settlements in Level 3 fair value
measurements. The guidance also clarifies existing disclosures regarding level
of disaggregation, inputs and valuation techniques. The new guidance is
effective for interim and annual reporting periods beginning after
December 15, 2009. Disclosures about purchases, sales, issuances
and settlements in the roll forward of activity in Level 3 fair value
measurements are effective for fiscal years beginning after December 15,
2010. As this guidance requires only additional disclosure, there
should be no impact on the consolidated financial statements of the Company upon
adoption.
In
October 2009, a new accounting consensus was issued for
multiple-deliverable revenue arrangements. This consensus amends existing
revenue recognition accounting standards. This consensus provides accounting
principles and application guidance on whether multiple deliverables exist, how
the arrangement should be separated and the consideration allocated. This
guidance eliminates the requirement to establish the fair value of undelivered
products and services and instead provides for separate revenue recognition
based upon management’s estimate of the selling price for an undelivered item
when there is no other means to determine the fair value of that undelivered
item. Previously the existing accounting consensus required that the fair value
of the undelivered item be the price of the item either sold in a separate
transaction between unrelated third parties or the price charged for each item
when the item is sold separately by the vendor. Under the existing accounting
consensus, if the fair value of all of the elements in the arrangement was not
determinable, then revenue was deferred until all of the items were delivered or
fair value was determined. This new approach is effective prospectively for
revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010. The Company is in the process of
evaluating whether the adoption of this standard will have a material effect on
its financial position, results of operations or cash flows.
In June
2009, the FASB issued authoritative guidance on consolidation of variable
interest entities. The new guidance is intended to improve financial
reporting by requiring additional disclosures about a company’s involvement in
variable interest entities. This new guidance is effective for fiscal
years and interim periods beginning after November 15, 2009. The
Company adopted this guidance effective January 1, 2010, and it had no impact on
the consolidated financial statements of the Company.
Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the Securities Exchange Commission (the
"SEC") did not or are not believed by management to have a material impact on
the Company's present or future consolidated financial statements.
NOTE
4 - INVENTORIES
Inventories
consist of the following at:
|
|
June 30
,
2010
|
|
|
December
31,
2009
|
|
|
|
(Unaudited)
|
|
|
|
|
Raw
materials
|
|
$
|
251,159
|
|
|
|
205,968
|
|
Finished
goods
|
|
|
645,958
|
|
|
|
383,762
|
|
Total
inventories
|
|
$
|
897,117
|
|
|
|
589,730
|
|
NOTE 5
- 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 had 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 2007,
the Company sold 4,000,000 shares of Series A Convertible Preferred Stock with
warrants to purchase 3,000,000 shares of common stock for $0.75 per unit, or
$3,000,000 in aggregate. The preferred stock earned dividends at 12%
annually, in common shares of the Company valued at $1.00 per share, payable
semiannually in arrears. The preferred stock dividend was cumulative and
non-participating.
The
3,000,000 warrants issued with the preferred stock in 2007 expired on January
30, 2010. Also on January 30, 2010, holders of 4,000,000 shares of
the Company’s convertible preferred stock elected to convert the preferred
shares into shares of the Company’s common stock on a one-for-one
basis. Effective January 30, 2010, the preferred shares were
converted, common shares were issued, and the accrual of the preferred stock
dividend was discontinued.
At
December 31, 2009, the Company had recorded a derivative liability of $176,032
related to the 3,000,000 warrants and conversion feature of the preferred
stock. Upon expiration of the warrants and notification of conversion
of the preferred shares, the derivative liability related to these instruments
was extinguished and recorded as a contribution to capital.
NOTE 6
- STOCK OPTION AND WARRANTS
At June
30, 2010, stock options outstanding were as follows:
|
|
Number of Options
|
|
|
Weighted Average
Exercise Price
|
|
Outstanding
at January 1, 2010
|
|
|
3,731,500
|
|
|
$
|
0.45
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
(100,000
|
)
|
|
|
0.47
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at June 30, 2010
|
|
|
3,631,500
|
|
|
$
|
0.45
|
|
The
following table summarizes information about stock options outstanding as of
June 30, 2010:
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
|
|
|
3,631,500
|
|
|
$
|
0.45
|
|
|
6.53
|
|
|
|
3,168,840
|
|
|
$
|
0.44
|
|
Information
relating to stock options at June 30, 2010 summarized by exercise price is
as follows:
Option Outstanding
|
|
Options Exercisable
|
|
Exercise price
per Share
|
|
Number of
shares
|
|
Remaining
life (years)
|
|
Exercise
price
|
|
|
Number of
Shares
|
|
|
Weighted average
exercise price
|
|
$
|
0.001
|
|
|
400,000
|
|
5.58
|
|
$
|
0.001
|
|
|
|
400,000
|
|
|
$
|
0.00
|
|
$
|
0.001
|
|
|
20,000
|
|
2.00
|
|
$
|
0.001
|
|
|
|
20,000
|
|
|
$
|
0.00
|
|
$
|
0.001
|
|
|
3,000
|
|
9.05
|
|
$
|
0.001
|
|
|
|
3,000
|
|
|
$
|
0.00
|
|
$
|
0.47
|
|
|
740,000
|
|
9.05
|
|
$
|
0.47
|
|
|
|
465,000
|
|
|
$
|
0.07
|
|
$
|
0.50
|
|
|
1,277,000
|
|
5.50
|
|
$
|
0.50
|
|
|
|
1,277,000
|
|
|
$
|
0.21
|
|
$
|
0.52
|
|
|
240,000
|
|
9.05
|
|
$
|
0.52
|
|
|
|
115,000
|
|
|
$
|
0.02
|
|
$
|
0.55
|
|
|
600,000
|
|
5.58
|
|
$
|
0.55
|
|
|
|
600,000
|
|
|
$
|
0.11
|
|
$
|
0.50
|
|
|
351,500
|
|
9.47
|
|
$
|
0.50
|
|
|
|
288,840
|
|
|
$
|
0.02
|
|
$
|
0.001 to 0.55
|
|
|
3,631,500
|
|
2.00
to 9.47
|
|
$
|
0.45
|
|
|
|
3,168,840
|
|
|
$
|
0.44
|
|
The
aggregate intrinsic value of 3,631,500 options outstanding and 3,168,840 options
exercisable as of June 30, 2010 were $321,672 and $295,081, 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,
2010.
Common
Stock Warrants
On January 20, 2010,
Company issued warrants to three companies controlled by two directors to
purchase 3,000,000 shares of common stock at $1.00 per share with a term of five
years. We recorded the fair value of the warrants to purchase 3,000,000
shares of common stock as compensation cost. The fair value of five-year warrant
issued to these three companies was $1,521,805 at the grant date, which was
determined using the Black-Scholes-Merton valuation method, using the
following assumptions: no expected dividend yield; a risk-free interest rate of
1.62%; an expected life of 5 years; and an estimated volatility of 191 percent
based on recent history of the stock price in the industry. The total of
$1,521,805 was charged to compensation cost at the date the warrants were
granted.
At June
30, 2010, warrants outstanding were as follows:
|
|
Number of
Shares
Under Warrants
|
|
|
Weighted Average
Exercise Price
|
|
Warrants
outstanding at January 1, 2009
|
|
|
8,814,943
|
|
|
$
|
0.95
|
|
Warrants
granted
|
|
|
3,000,000
|
|
|
$
|
1.00
|
|
Warrants
expired
|
|
|
(3,000,000
|
)
|
|
$
|
1.00
|
|
Warrants
outstanding and exercisable at June 30, 2010
|
|
|
8,814,943
|
|
|
$
|
0.95
|
|
The
following table summarizes information about warrants outstanding at June 30,
2010:
Warrants Outstanding and Exercisable
|
|
Number of Shares
Under Warrants
|
|
Exercise Price
|
|
Expiration Date
|
|
Weighted Average
Exercise Price
|
|
183,334
|
|
$
|
0.75
|
|
June
4, 2011
|
|
$
|
0.02
|
|
183,333
|
|
$
|
1.20
|
|
June
4, 2013
|
|
$
|
0.02
|
|
1,724,138
|
|
$
|
0.725
|
|
July
2, 2012
|
|
$
|
0.14
|
|
1,724,138
|
|
$
|
1.10
|
|
July
2, 2013
|
|
$
|
0.22
|
|
1,000,000
|
|
$
|
0.725
|
|
July
9, 2012
|
|
$
|
0.08
|
|
1,000,000
|
|
$
|
1.10
|
|
July
9, 2013
|
|
$
|
0.12
|
|
3,000,000
|
|
$
|
1.00
|
|
January
20, 2015
|
|
$
|
0.34
|
|
8,814,943
|
|
$
|
0.75
to 1.20
|
|
|
|
$
|
0.95
|
|
The
aggregate intrinsic value of 8,814,943 warrants outstanding and exercisable
as of June 30, 2010 was zero.
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:
o
|
our
ability to finance our activities and maintain our financial
liquidity;
|
o
|
our
ability to attract and retain qualified, knowledgeable
employees;
|
o
|
our
ability to complete product
development;
|
o
|
our
ability to obtain regulatory approvals to conduct clinical
trials;
|
o
|
our
ability to design and market new products
successfully;
|
o
|
our
failure to acquire new customers in the
future;
|
o
|
deterioration
of business and economic conditions in our markets;
and
|
o
|
intensely
competitive industry conditions.
|
In this
document, the words "we," "our," "ours," and "us" refers to Bio-Bridge Science,
Inc. and our wholly owned subsidiaries, including Bio-Bridge Science (Beijing)
Co. Ltd., a Wholly-Foreign Owned Enterprise of the People's Republic of China
("Bio-Bridge Beijing"), Bio-Bridge Science Corporation, a Cayman Islands
corporation, Bio-Bridge Science Holding Co. Ltd, a Cayman Islands corporation,
Bio-Bridge Science(HK) CO. Ltd, a Hong Kong company, Xinheng Baide Biotechnology
Co. Ltd. (“Bio-Bridge XBB”), a Chinese company, and Bio-Bridge JRS
Biosciences (Beijing) Co., Ltd (“Bio-Bridge JRS”), a Chinese
company.
OVERVIEW
Bio-Bridge
Science, Inc. is a biotechnology company whose subsidiaries are focused on the
commercial development of HIV-PV Vaccine I, HPV vaccine, colon cancer vaccine,
mucosal adjuvant and manufacture and sales of vaccine production-related
materials. Subsidiary Bio-Bridge Beijing is conducting our vaccine
development, subsidiary Bio-Bridge XBB sells bovine serum, and subsidiary
Bio-Bridge JRS is producing powdered cell culture medium for sales in the near
future.
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.
Plans
of Operation
Vaccine
Development
The
vaccine development is being undertaken by our 100% owned subsidiary, Bio-Bridge
Beijing. The pre-clinical testing of HIV-PV Vaccine I on laboratory animals was
completed by the Beijing Institute of Radiation Medicine in June 2006 and showed
encouraging results. To produce the HIV vaccine for clinical trials, we have
built a GMP-compliant facility in Beijing. We have purchased and installed the
laboratory equipment and the facility is operating well. Our HIV vaccine is
being produced and quality control procedures are being established to meet SFDA
standards. We plan to apply to China's State Food and Drug
Administration for approval to conduct clinical trials of HIV-PV Vaccine I at
the end of this year. The clinical trial for preventive vaccine will last 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 and that of HPV vaccine by early 2011. We expect to enter
clinical trials of colon cancer vaccine in the second half of 2011. The 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 all 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 run 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 potential acquisition
activities in China. We estimate that our capital requirements for the next
twelve months will be as follows:
o
|
approximately
$1.25 million for working capital and general corporate
needs;
|
o
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approximately
$0.5 million for HIV vaccine Phase I clinical trial and its preparatory
work;
|
o
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approximately
$1.0 million for pre-clinical trials on colon cancer vaccine and HPV
vaccine.
|
We expect
that the therapeutic vaccine can be brought to market in three years and the
preventive vaccine can be brought to market in five to seven years after SFDA
approval of clinical trials on these vaccines, independent on raising funds to
complete development of the vaccines. As of June 30, 2010, our cash and cash
equivalents and trading securities position was $817,643. Although we
raised capital in 2008 and 2009 in private placements, we will still need to
raise additional funds through the public or private sales of our securities,
taking loans, or a combination of the foregoing to meet 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
rights and laboratory facility could be used as collateral for borrowing. If we
fail to obtain other financing in the next 12 months, either through an offering
of our securities or by obtaining additional loans, we may be unable to develop
our planned projects as scheduled and may be forced to scale back.
Distribution
of Xinhua Surgical Instruments
We signed
an exclusive agency agreement with Xinhua Surgical Instruments Co. Ltd. to
distribute its products in the United States at the end of 2005. We are
currently seeking collaboration with distributors and developing markets for
Xinhua instruments. Inventory has been purchased, imported, and is
stocked at our corporate headquarters. A website was developed for business
to consumer and business to business sales of Xinhua products. We
have been pursuing marketing initiatives such as, advertising online through
Google Adwords and other sites, as well as, through traditional methods
like direct mail and sales calls. Additionally, we have been
participating and responding to bid requests and requests for quotations from
government, educational, and business organizations.
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 vaccine candidates by providing us with
operating cash flows, lower cost for materials used in our vaccine
production, a skilled work force pool in vaccine production, and
distribution channels. We believe these companies will be complementary to us
and make us more competitive.
On July
31, 2008, the Company completed the acquisition of Hohhot Xinheng Baide
Biotechnology Co. Ltd., (“XHBD”), in which the Company purchased 51% of the
outstanding capital interests of XHBD for RMB 6 million (approximately US$
881,000). XHBD was incorporated on May 17, 2006 under the laws of the
People’s Republic of China (“PRC”) as a limited company. XHBD is located in the
city of Hohhot in Inner Mongolia, China. The primary operations of the Company
are the manufacture and distribution of bovine serum products, which
are used in research and production of vaccines. We completed the 51%
acquisition of Xinheng Baide on July 31, 2008 and its operations are included in
our consolidated financial statements beginning August 1, 2008.
At July 1, 2009, XHBD changed its
name to Bio-Bridge Xinheng Baide (Inner Mongolia) Biotechnology Co. Ltd.
(“Bio-Bridge XBB”).
At August
20, 2009, Bio-Bridge XBB purchased a land use rights at LeSheng Economic
Park District, Helingeer City, Inner Mongolia. The land area is 4.7 acres
(approximately 18,933 square meters) and its cost was $166,290. The land will be
used for the planned future manufacturing facility and headquarters for
Bio-Bridge XBB.
Joint
Venture
On June
9, 2009, Bio-Bridge Science (HK) Co., Ltd., a wholly-owned subsidiary of
Bio-Bridge Science, Inc. entered into an equity joint venture contract with JR
Scientific Inc., a California based manufacturer of classical and custom cell
culture medium and sera products, and several other investors to form a new cell
culture medium joint venture in Beijing, China. The company invested RMB
5,100,000 (approximately US$732,000) in cash in the joint venture for 51% of the
equity and JRS contributed certain technology for 15% of the
equity. The balance of the equity was purchased by other investors,
including 11% by China Diamond, an entity controlled by Trevor Roy, one of our
directors.
On
October 16, 2009, Bio-Bridge Science Inc. received a business license from the
Beijing Administration for Industry and Commerce of the PRC indicating approval
of the formation of Bio-Bridge JRS Biosciences (Beijing) Co., Ltd. (“Bio-Bridge
JRS”). Bio-Bridge JRS was officially established at the end of October
2009.
The plant
was fitted-out and major equipment has been purchased and installed. The fit-out
is currently being enhanced to ensure that the facility is rated for all-year
production, including conditions of extreme cold, heat, and humidity (the
unmodified fit-out would have been able to produce only 6-8 months per year).
The major production technology is being transferred from JRS to the JV
technicians and the technicians are producing cell culture medium samples.
The produced samples are being tested for their quality before sales. We expect
that Bio-Bridge JRS will begin to formally produce and sell cell culture medium
and related products at the 4
th
quarter
of 2010.
Results
of Operation
Three-Month
Period Ended June 30, 2010 and June 30, 2009
For the
three months ended June 30, 2010, we had revenues of $146,506. The cost of
revenue was $107,934, which was 74% of the total revenue. During the
three-month period ended June 30, 2009, we had revenues of $174,895. The cost of
revenue was $121,469, which was 69% of the total revenue. The
decrease in revenue was due to the season factor for selling bovine serum. The
5% increase in cost of revenue is mostly due to the price increase in raw
material serum.
For the
three months ended June 30, 2010, research and development expenses were
$43,423, as compared to $46,840 for the three-month period ended June 30,
2009. The difference is immaterial in management’s perspective.
For the
three months ended June 30, 2010, general and administrative expenses were
$476,155 as compared to $290,872 for the three-month period ended June 30, 2009.
The increase of $185,283 is mainly due to an increase in depreciation expense
after putting our laboratory facility into service in mid-2009, and an increase
in expenses of vested stock options.
For the
three months ended June 30, 2010, selling and distribution expenses were
$27,850 as compared to $61,621 for the three-month period ended June 30, 2009.
The decrease of $33,771 is due primarily to the decrease in the selling and
distribution expenses of Bio-Bridge XBB.
For the
three months ended June 30, 2010, interest expense was $2,248 as compared
to interest expense of $23 for the three-month period ended June 30, 2009. The
increase of $2,225 is due primarily to fluctuations in foreign exchange in our
subsidiaries in China.
Net loss
for the three months ended June 30, 2010 was $503,143 as compared to a net
income of $739,042 for the three-month period ended June 30, 2009. The decrease
of $1,242,185 in net income is primarily due to the decrease in gain on
derivative liability fair value, which was $1,055,141 for the three months ended
June 30, 2009, compared to $4,890 for the three months ended June 30,
2010.
Six-Month
Period Ended June 30, 2010 and June 30, 2009
During
the six-month period ended June 30, 2010, we had revenues of $206,871. The cost
of revenue was $145,444, which was 70% of the total revenue. During
the six-month period ended June 30, 2009, we had revenues of $439,024. The cost
of revenue was $283,728, which was 65% of the total revenue. The decrease in
revenue was due to the season factor for selling bovine serum. The 5% increase
in cost of revenue is mostly due to the price increase in raw material
serum.
For the
six-month period ended June 30, 2010, research and development expenses were
$131,989, as compared to $79,652 for the six-month period ended June 30, 2009.
The increase of $52,337 is due to the increase of the pre-clinical trial
development of our vaccine candidates in 2010.
For the
six-month period ended June 30, 2010, general and administrative expenses were
$2,336,120 as compared to $499,405 for the six-month period ended June 30, 2009.
The increase of $1,836,715 is mainly due to the compensation cost for issuing
common stock warrants to two directors, which was $1,521,805, an increase in
depreciation expense after putting our laboratory facility into service in
mid-2009, and the increase in expenses of vested stock options.
For the
six-month period ended June 30, 2010, selling and distribution expenses were
$68,219 as compared to $90,962 for the six-month period ended June 30, 2009. The
decrease of $22,743 is due primarily to decreases in selling expenses of
Bio-Bridge XBB.
For the
six-month period ended June 30, 2010, interest expense was $3,051 as compared to
interest expense of $297 for the six-month period ended June 30, 2008. The
increase of $2,754 is due primarily to fluctuations in foreign exchange in our
subsidiaries in China.
Net loss
for the six-month period ended June 30, 2010 was $2,459,690 as compared to a net
income of $720,940 for the six-month period ended June 30, 2009. This
decrease of $3,180,630 in net income is partly due to the compensation cost for
issuing common stock warrants two directors, which was $1,521,805, and partly
due to the decrease in gain on derivative liability fair value, which was
$1,226,418 for the six months ended June 30, 2009, compared to $4,913 for the
six months ended June 30, 2010.
Liquidity
and Capital Resources
Our
principal sources of liquidity are cash and cash equivalent balances, which was
$815,284 at June 30, 2010.
Net cash
used in operating activities was $738,413 for the six months ended June 30, 2010
and $741,782 for the six months ended June 30, 2009. The decrease was due
primarily to the decrease in cash used to pay off accrued expenses and
payables.
Net cash
used in investing activities was $264,371 for the six months ended June 30, 2010
and $403,511 for the six months ended June 30, 2009. This change was
primarily due to the decrease in fixed assets purchases.
Net cash
provided by financing activities was $305,815 for the six months ended June 30,
2010 compared to $1,125,492 for the six months ended June 30, 2009. This
decrease was mainly due to the decrease in the proceeds from issuance of common
stock.
To date,
our operations have been funded through issuances of our common stock and
preferred stock whereby we raised an aggregate $8,365,888 from inception through
June 30, 2010.
Based on
our current operating plan, we believe that we have sufficient cash and cash
equivalents to last approximately through July 2011. 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 July
2011. 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.
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.
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.
Revenue
Recognition
The
Company recognizes revenue from the sales of products in accordance with
Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin ("SAB") No.
104, when persuasive evidence of an order arrangement exists, delivery has
occurred, the sales price is fixed or determinable and collectibility is
reasonably assured. Generally, these criteria are met at the
time the product is shipped to customers when title and risk of loss have
transferred.
Accounts
Receivable
Accounts
receivables are recognized and carried at original invoiced amount less an
allowance for any uncollectible accounts. The Company uses the aging method to
estimate the valuation allowance for anticipated uncollectible receivable
balances. Under the aging method, bad debts determined by management
are based on historical experience as well as the current economic climate and
are applied to customers' balances categorized by the number of months the
underlying invoices have remained outstanding. The
valuation allowance balance is adjusted to the amount computed as a result
of the aging method. When facts subsequently become available to
indicate that an adjustment to the allowance should be made, this is recorded as
a change in estimate in the current year.
Stock-Based
Compensation
The
Company periodically issues stock options and warrants to employees and
non-employees in non-capital raising transactions, for services, and for
financing costs. The Company accounts for stock option and warrant grants issued
and vesting to employees based on the authoritative guidance provided by the
Financial Accounting Standards Board (“FASB”). The Company accounts for stock
option and warrant grants issued and vesting to non-employees in accordance with
the authoritative guidance of the FASB 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.
Non-employee share-based compensation charges generally are amortized over the
vesting period on a straight-line basis. In certain circumstances where there
are no future performance requirements by the non-employee, option grants are
immediately vested and the total share-based compensation charge is recorded in
the period of the measurement date.
The fair
value of Bio-Bridge’s common stock option grants are estimated using the
Black-Scholes-Merton option pricing model, which uses certain assumptions
related to risk-free interest rates, expected volatility, expected life of the
common stock options, and future dividends. Compensation expense is recorded
based upon the value derived from the Black-Scholes option pricing model, and
based on actual experience. The assumptions used in the Black-Scholes-Merton
option pricing model could materially affect compensation expense recorded in
future periods.
Impairment
Of Long-Lived Assets, Goodwill and Intangible Assets
We review
long-lived assets whenever events or changes in circumstances indicate the
carrying amount of an asset may not be recoverable in accordance with the
authoritative guidance provided by the FASB. Our long-lived assets, such
as property and equipment, are reviewed for impairment when events and
circumstances indicate that depreciable or amortizable long lived assets might
be impaired and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amount of those assets. When specific assets
are determined to be unrecoverable, the cost basis of the asset is reduced to
reflect the current value.
We use
various assumptions in determining the current fair value of these assets,
including future expected cash flows and discount rates, as well as other fair
value measurements. Our impairment loss calculations require us to apply
judgment in estimating future cash flows, including forecasting useful lives of
the assets and selecting the discount rate that reflects the risk inherent in
future cash flows. If actual results are not consistent with our
assumptions and judgments used in estimating future cash flows and asset fair
values, we may be exposed to future impairment losses that could be material to
our results.
Inventory
Valuation
Inventories
are stated at the lower of cost or market. Market is defined as
current replacement cost, except that market should not exceed the net
realizable value and should not be less than net realizable value reduced by an
allowance for an approximately normal profit margin. The cost of inventories is
determined by using the first-in, first-out method. We perform a monthly
analysis of our inventory balances to determine if the carrying amount of
inventories exceeds their net realizable value. Our determination of estimated
net realizable value is based on customer orders, market trends and historical
pricing. If the carrying amount exceeds the estimated net realizable value, the
carrying amount is reduced to the estimated net realizable value.
Derivative
Financial Instruments
The
Company evaluates all of its financial instruments to determine if such
instruments are derivatives or contain features that qualify as embedded
derivatives. For derivative financial instruments that are accounted for as
liabilities, the derivative instrument is initially recorded at its fair value
and is then re-valued at each reporting date, with changes in the fair value
reported in the condensed consolidated statements of operations. For stock-based
derivative financial instruments, the Company uses both the Black-Scholes-Merton
option pricing models to value the derivative instruments at inception and on
subsequent valuation dates. The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as
equity, is evaluated at the end of each reporting period. The Company
does not use derivative instruments to hedge exposures to cash flow, market or
foreign currency risks.
Recent
Accounting Pronouncements
In April
2010, the FASB issued new accounting guidance to clarify that an employee
share-based payment award with an exercise price denominated in the currency of
a market in which a substantial portion of the entity's equity securities trades
should not be considered to contain a condition that is not a market,
performance, or service condition. Therefore, an entity would not
classify such an award as a liability if it otherwise qualifies as equity.
The amendments are effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2010. The Company does
not expect adoption of this standard will have a material on its
consolidated financial position or results of operations.
In
April 2010, the Financial Accounting Standards Board (FASB) issued new
accounting guidance in applying the milestone method of revenue recognition to
research or development arrangements. Under this guidance management may
recognize revenue contingent upon the achievement of a milestone in its
entirety, in the period in which the milestone is achieved, only if the
milestone meets all the criteria within the guidance to be considered
substantive. This standard is effective on a prospective basis for research and
development milestones achieved in fiscal years, beginning on or after
June 15, 2010. Early adoption is permitted; however, adoption of this
guidance as of a date other than January 1, 2011 will require the Company
to apply this guidance retrospectively effective as of January 1, 2010 and
will require disclosure of the effect of this guidance as applied to all
previously reported interim periods in the fiscal year of adoption. As the
Company plans to implement this standard prospectively, the effect of this
guidance will be limited to future transactions. The Company does not expect
adoption of this standard to have a material impact on its financial position or
results of operations as it has no material research and development
arrangements which will be accounted for under the milestone
method.
In
January 2010, the FASB issued new accounting guidance which requires new
disclosures regarding transfers in and out of Level 1 and Level 2 fair value
measurements, as well as requiring presentation on a gross basis of information
about purchases, sales, issuances and settlements in Level 3 fair value
measurements. The guidance also clarifies existing disclosures regarding level
of disaggregation, inputs and valuation techniques. The new guidance is
effective for interim and annual reporting periods beginning after
December 15, 2009. Disclosures about purchases, sales, issuances
and settlements in the roll forward of activity in Level 3 fair value
measurements are effective for fiscal years beginning after December 15,
2010. As this guidance requires only additional disclosure, there
should be no impact on the consolidated financial statements of the Company upon
adoption.
In
October 2009, a new accounting consensus was issued for
multiple-deliverable revenue arrangements. This consensus amends existing
revenue recognition accounting standards. This consensus provides accounting
principles and application guidance on whether multiple deliverables exist, how
the arrangement should be separated and the consideration allocated. This
guidance eliminates the requirement to establish the fair value of undelivered
products and services and instead provides for separate revenue recognition
based upon management’s estimate of the selling price for an undelivered item
when there is no other means to determine the fair value of that undelivered
item. Previously the existing accounting consensus required that the fair value
of the undelivered item be the price of the item either sold in a separate
transaction between unrelated third parties or the price charged for each item
when the item is sold separately by the vendor. Under the existing accounting
consensus, if the fair value of all of the elements in the arrangement was not
determinable, then revenue was deferred until all of the items were delivered or
fair value was determined. This new approach is effective prospectively for
revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010. The Company is in the process of
evaluating whether the adoption of this standard will have a material effect on
its financial position, results of operations or cash flows.
In June
2009, the FASB issued authoritative guidance on consolidation of variable
interest entities. The new guidance is intended to improve financial
reporting by requiring additional disclosures about a company’s involvement in
variable interest entities. This new guidance is effective for fiscal
years and interim periods beginning after November 15, 2009. The
Company adopted this guidance effective January 1, 2010, and it had no impact on
the consolidated financial statements of the Company.
Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the Securities Exchange Commission (the
"SEC") did not or are not believed by management to have a material impact on
the Company's present or future consolidated financial statements.
Commitments
Royalty
and License Arrangements
Liang
Qiao, M.D., our co-founder and chief executive officer, is one of the two
co-inventors of our core technology that was assigned to Loyola University
Chicago in April 2001. Under an agreement with Loyola University Chicago, we
have 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, 2010, we had not generated any
revenues from the sale of any products under development, nor had we received
any revenues from sublicenses.
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-K we filed with the SEC on March 31, 2010.
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.
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/s/ Dr. Liang Qiao
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Dated:
8/16/2010
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By:
Dr. Liang Qiao
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Chief
Executive Officer
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EXHIBIT
INDEX
3.1(i)*
|
|
Certificate
of incorporation of the registrant, as currently in
effect
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3.1(ii)*
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Bylaws
of the registrant, as currently in effect
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3.1(iii)**
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Certificate
of Designation of Series A Preferred Stock
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31.1
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Certification
of Chief Executive Officer
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31.2
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Certification
of Chief Financial Officer
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32.1
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Section
1350 Certifications of Chief Executive Officer and Chief Financial
Officer
|
*
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.
Bio Bridge Science (CE) (USOTC:BGES)
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