Revenues.
For the
nine months ended September 30, 2009, we had revenues of $22,844,099 as compared
to revenues of $17,215,807 for the nine months ended September 30, 2008, an
increase of approximately 32.7%. Our revenues tend to be seasonal whereby
the third quarter, fourth quarter, second quarter and first quarter have
historically trended to represent our largest to smallest revenue quarters,
respectively.
Revenues — Veterinary
Medications.
Revenues from sales of our veterinary medications
product line increased from $11,389,155 for the nine months ended September 30,
2008 to $14,999,173 for the nine months ended September 30, 2009, for an
increase of $3,610,018 or 31.7%. The increase in veterinary
medication sales was primarily due to our increased utilization of our 2007
veterinary medicine facility expansion of 200% and increased sales efforts. We
were able to utilize this capacity expansion as our customers increased the use
of products for the treatment of livestock and poultry diseases during the nine
months ended September 30, 2009. $1,232,307 of this increase was a result of the
sales of new products during the nine months ended September 30, 2009.
Approximately $4,600,000 or 20% and $1,900,000 or 8.3% of total
revenue resulted from the sale of Praziquantel tablets which treats
schistosomiasis during the nine months ended September 30, 2009 and 2008,
respectively.
Revenues — Micro-Organism.
Revenues
from sales of our micro-organism product line increased from $4,352,781 for
the nine months ended September 30, 2008 to $5,815,280 during the nine
months ended September 30, 2009, for an increase of $1,462,499 or 33.6%. The
increase of $1,462,499 was the result of increased sales efforts of our
probiotics micro-organism products during the nine months ended September 30,
2009.
Revenues — Feed
Additives.
Revenues from sales of our feed additives product
line increased from $784,161 for the nine months ended September 30, 2008
to $1,003,628 for the nine months ended September 30, 2009, for an increase
of $219,467 or 28.0%. The increase of $219,467 was the result of increased
sales efforts of our multi-enzyme feed additive products during the earlier half
of 2009.
Revenues — Vaccines
. Revenues
from sales of our vaccines product line increased from $689,710 for the
nine months ended September 30, 2008 to $1,026,018 for the nine months
ended September 30, 2009, for an increase of $336,308 or 48.8%. This increase
was a result of an increase in customer demand of our vaccine products during
the nine months ended September 30, 2009. We are presently operating at full
production capacity for our vaccine product line and therefore cannot
significantly increase sales until we expand our production capabilities which
we presently have underway and anticipate completion at the end of this
year.
Cost
of Sales
Cost of Sales.
For
the nine months ended September 30, 2009, we had cost of sales, which consists
of raw materials, direct labor, and manufacturing overhead, of $11,012,672 as
compared to cost of sales of $8,329,025 the nine months ended September 30,
2008, an increase of approximately 32.2% as a result of our overall sales
increase of 32.7%.
Cost of Sales — Veterinary
Medications.
Cost of sales of our veterinary medications
product line increased from $6,607,869 for the nine months ended September 30,
2008 to $8,938,770 for the nine months ended September 30, 2009, for an
increase of $2,330,901 or approximately 35.3%. This increase was mainly due
to the corresponding increase in veterinary medication sales.
Cost of
Sales — Micro-Organism.
Cost of sales of our
micro-organism product line increased from $1,305,793 for the nine months
ended September 30, 2008 to $1,560,588 for the nine months ended September 30,
2009, for an increase of $254,795 or approximately 19.5%. This increase was
mainly due to a corresponding increase in micro-organism
sales.
Cost of Sales — Feed
Additives.
Cost of sales of our feed additives product
line increased from $339,578 for the nine months ended September 30, 2008
to $404,349 for the nine months ended September 30, 2009, for an increase of
$64,771 or 19.1%. The increase was primarily due to an increase in feed additive
sales during the nine months ended September 30, 2009.
Cost of
Sales — Vaccines.
Cost of sales of our vaccines
product line increased from $75,785 for the nine months ended September 30,
2008 to $108,965 for the nine months ended September 30, 2009, for an
increase of $33,180 or 43.8%. This increase was the result of an
increase of vaccine product sales during the nine months ended September 30,
2009. We are presently operating at full production capacity for our vaccine
product line and therefore cannot significantly increase sales until we expand
our production capabilities which we presently have underway and anticipate
completion at the end of this year.
Operating
Expenses
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
Amount
|
|
|
Percentage of
total revenue
|
|
|
Amount
|
|
|
Percentage of
total revenue
|
|
|
Gross
Profit
|
|
$
|
11,831,427
|
|
|
|
51.8
|
%
|
|
$
|
8,886,782
|
|
|
|
51.6
|
%
|
|
Operating
Expenses
|
|
$
|
3,906,305
|
|
|
|
17.1
|
%
|
|
$
|
2,633,003
|
|
|
|
15.3
|
%
|
|
Selling
Expenses
|
|
$
|
1,204,653
|
|
|
|
5.3
|
%
|
|
$
|
1,042,267
|
|
|
|
6.1
|
%
|
|
General
and Administrative Expenses
|
|
$,
|
1,818,920
|
|
|
|
8.0
|
%
|
|
$
|
1,220,796
|
|
|
|
7.1
|
%
|
|
Research
and Development Costs
|
|
$
|
882,732
|
|
|
|
3.9
|
%
|
|
$
|
369,940
|
|
|
|
2.1
|
%
|
|
Income
from Operations
|
|
$
|
7,925,122
|
|
|
|
34.7
|
%
|
|
$
|
6,253,779
|
|
|
|
36.3
|
%
|
Selling
Expenses
. Selling expenses, which consist of commissions,
advertising and promotion expenses, freight charges, and salaries, totaled
$1,042,267 for the nine months ended September 30, 2008 as compared to
$1,204,653 for the nine months ended September 30, 2009, an increase of
approximately 15.6%. This increase is the result of our increased sales during
the nine months ended September 30, 2009.
General and Administrative
Expenses
. General and administrative expenses totaled
$1,818,920 for the nine months ended September 30, 2009, as compared to
$1,220,796 for the nine months ended September 30, 2008, an increase of
approximately 49.0%. General and administrative expenses are primarily legal,
accounting and other professional fees that we incurred as a U.S. public
company. Our increase in general and administrative expenses was a result of
costs incurred during the third quarter of 2009 relating to costs surrounding
our financing as well as increased investor relations costs. We anticipate that
our general and administrative expenses will increase due to the increasing
costs of being a U.S. public company, including, but not limited to, our annual
NASDAQ Capital Market fees, fees related to investor relations and costs of
complying with Sarbanes-Oxley.
Research and Development
Costs
. Research and development costs, which consist of
salaries, professional fees, and technical support fees, totaled $882,732 for
the nine months ended September 30, 2009, as compared to $369,940 for the nine
months ended September 30, 2008, an increase of approximately 138.6%. This
increase is primarily attributable to increased research and development
activities from developing veterinary vaccines. We anticipate that our research
and development costs will continue to increase as we continue improve existing
products and develop new products.
Liquidity
For
the nine months ended September 30, 2009, cash used in operating activities was
$7,198 compared to cash used of $296,134 for the same period in
2008. For the nine months ended September 30, 2009, net cash used in
operating activities other than net income was primarily due to an increase
of $1,481,662 in accounts receivable, $1,029,920 in inventory, a decrease of
accrued expenses of $473,576, a decrease in taxes payable of $482,933, and a
decrease in accounts payable of $378,263. However, this decrease was offset by a
decrease of $2,669,020 in inventory deposits. Collectively this decreased cash
used in operating activities by $1,177,334 for the nine months ended September
30, 2009 as compared to the nine months ended September 30, 2008. For the nine
months ended September 30, 2009, inventories increased by $4,534,194 as a result
of the company carrying additional raw materials inventory to produce finished
goods in the fourth quarter. For the nine months ended September 30, 2008, the
decrease in cash used in operating activities was a result of (a) bulk purchases
of certain raw materials for anticipated production of both existing and new
products in the fourth quarter of fiscal 2008, (b) increased prepayments to
certain suppliers to ensure low purchase price of certain raw materials, and (c)
an increase in accounts receivable offset by an increase in taxes
payable.
We used
$3,565,681 in cash flows for investing activities for the nine months ended
September 30, 2009, as compared to using $915,534 for investing activities
for the nine months ended September 30, 2008. The net cash used in investing
activities for the nine months ended September 30, 2009 was a result of payments
made towards ongoing construction projects and plant and equipment of
$2,980,086, purchase of an intangible asset of 1,172,720, and
net loans
made to third parties and raw material suppliers of $2,124,057
offset by
refunds of long term prepayments of $2,711,182 previously made by the Company.
The cash used in investing activities for the nine months ended September 30,
2008 was primarily the result of purchases of plant and equipment of $1,622,813
offset by a repayment of a loan of $688,176.
Cash
generated by financing activities was $17,864,129 for the nine months ended
September 30, 2009 as compared to $1,078,455 for the nine months ended September
30, 2008. Cash generated by financing activities for the nine months ended
September 30, 2009 was the result of the financing that the Company completed on
June 30, 2009. Cash provided by financing activities for the nine months ended
September 30, 2008 was the result of advances from shareholders and shareholder
loans.
As of
September 30, 2009, we had cash of $14,796,990. Our total current assets were
$36,183,942, and our total current liabilities were $3,780,370, which resulted
in a net working capital of $32,403,572. Management believes that we have the
ability to meet cash requirements for our operations in order to continue as a
going concern, including sufficient cash flows to meet our obligations on a
timely basis in the foreseeable future, provided that we can continue to
maintain profitable operations and our net working capital remains
liquid.
Capital
Resources
During
the nine months ended September 30, 2009 we completed a public offering of
3,220,000 shares of our common stock at a price of $6.49 per share resulting in
net proceeds of 18,411,496. However, if we are to acquire another business or
further expand our operations, we may need additional capital.
Plan
of Operations
Over the
next 12 months, we plan to continue to market and sell our current products and
to develop new products.
In 2003,
we received approval from the State Council of China to expand our production
facilities and construct a new GMP standard plant. We have invested $10,500,000
(RMB 82,000,000) into this project, which is our Huxian plant, including
approximately $9,700,000 for the facilities and $800,000 for working capital.
The construction work commenced in 2005, and we completed the veterinary
medicine facility and the building that houses quality control, research and
development and administration during 2007, both of which are fully operational.
The remaining facilities of the Huxian plant are expected to be completed by the
latter part of 2009. We anticipate that the new plant will generate
sufficient cash flows; thus, management has concluded that there is no
impairment loss on the construction-in-progress.
We
believe that Xian Tianxing will be developing new products including animal
immunization products, non-pathogenic micro-organisms for the cure and
prevention of livestock disease, complex enzyme preparations as animal feed
additives, and several new veterinary medicine products within the next 12
months.
Contractual
Obligations and Off-Balance Sheet Arrangements
Contractual
Obligations
|
|
|
Payments Due by Period
|
|
|
Contractual Obligations
|
|
Total
|
|
|
Less than
1 year
|
|
|
1 – 3 years
|
|
3 – 5 years
|
|
|
More than
5 years
|
|
|
R&D
Project Obligation
|
|
$
|
676,778
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
Operating
Lease Obligations
|
|
|
292,997
|
|
|
|
59,296
|
|
|
|
94,299
|
|
|
|
70,006
|
|
|
|
69,396
|
|
|
Total
|
|
$
|
969,775
|
|
|
$
|
736,074
|
|
|
$
|
94,299
|
|
|
$
|
70,006
|
|
|
$
|
69,396
|
|
During
the first quarter of 2008, Xian Tianxing entered into an agreement with
Northwestern Agricultural Technology University to jointly work on a research
and development project regarding the application of nano-technology in the
prevention of a major milk cow disease. The total projected budget for this
project is approximately $574,000 (RMB 4 million), which we would pay in
installments as the stages of the project are completed. We expect this project
to be completed in one year. The research and development expense for this
project was approximately $117,272 (RMB 800,000) as of September 30,
2009. We also made $366,750 (RMB 2,500,000) of prepayments for the
purchase of specific raw materials for the project. We anticipate that the
remaining $89,978 (RMB 620,000) will be spent during the remainder of
2009.
During
2008, Xian Tianxing contracted with Shanxi Shenzhou Bio-pharmaceuticals
Technology Company to jointly work on a R&D project with a contracted amount
of approximately $308,000. As of September 30, 2009, the Company
incurred approximately $308,000 (RMB2,100,000) expenses relating to this
project. This project is estimated to be completed in 2009.
During
the third quarter of 2009, Xian Tianxing contracted with the Fourth Military
Medical University to jointly work on a R&D project with a contracted amount
of approximated $880,200(RMB 6,000,000). As of September 30, 2009, the Company
incurred approximately $293,180 (RMB2,000,000) expenses relating to this
project.
Exchange
Rate
Xian
Tianxing maintains its books and records in Renminbi (“RMB”), the lawful
currency of China. In general, for consolidation purposes, we translate Xian
Tianxing’s assets and liabilities into US Dollars using the applicable exchange
rates prevailing at the balance sheet date, and the statement of income is
translated at average exchange rates during the reporting period. Adjustments
resulting from the translation of Xian Tianxing’s financial statements are
recorded as accumulated other comprehensive income.
The
exchange rates used to translate amounts in RMB into US Dollars for the purposes
of preparing the consolidated financial statements or otherwise stated in
this Quarterly Report were as follows:
|
|
|
September 30, 2009
|
|
December 31, 2008
|
|
September 30, 2008
|
|
|
|
|
|
|
|
|
|
Assets
and liabilities
|
|
USD0.1467:RMB1
|
|
USD0.1467:RMB1
|
|
USD0.1463:RMB1
|
|
|
|
|
|
|
|
|
|
Statements
of operations and cash flows for the period/year ended
|
|
USD0.14659:RMB1
|
|
USD0.14415:RMB1
|
|
USD0.1434:RMB1
|
No
representation is made that RMB amounts have been, or would be, converted into
US$ at the above rates.
Off-Balance
Sheet Arrangements
As of the
date of this Quarterly Report, we do not have any outstanding financial
guarantees or commitments to guarantee the payment obligations of any third
parties. We have not entered into any derivative contracts that are indexed to
our shares and classified as stockholder’s equity or that are not reflected in
our consolidated financial statements. Furthermore, we do not have any retained
or contingent interest in assets transferred to an unconsolidated entity that
serves as credit, liquidity or market risk support to such entity. We do not
have any variable interest in any unconsolidated entity that provides financing,
liquidity, market risk or credit support to us or engages in leasing, hedging or
research and development services with us.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not
Applicable
ITEM
4. CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
As of
September 30, 2009, we carried out an evaluation, under the supervision and with
the participation of our management, including our chief executive officer and
our chief financial officer, of the effectiveness of the design and operation of
our disclosure controls and procedures. Based on the foregoing, our chief
executive officer and chief financial officer concluded that our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934) were not effective.
Remediation of Material Weaknesses in
Internal Control over Financial Reporting
In our
annual report on Form 10-K for the year ended December 31, 2008, we reported
certain material weaknesses involving control activities,
specifically:
|
1.
|
Accounting
and Finance Personnel Weaknesses
- The current accounting
staffs are relatively inexperienced, and require substantial training so
as to meet with the higher demands necessary to fulfill the requirements
of U.S. GAAP-based reporting and SEC rules and
regulations.
|
|
2.
|
Lack of
Internal Audit Function
- The Company lacks qualified
resources to perform the internal audit functions properly. The Company
lacked an internal audit department, which rendered the Company
ineffective in preventing and detecting control lapses and errors in the
accounting of certain key areas like revenue recognition, purchase
approvals, inter-company transactions, cash receipt and cash disbursement
authorizations, inventory safeguard and proper accumulation for cost of
products, in accordance with the appropriate costing method used by the
Company.
|
The
Company’s management has identified the steps necessary to address the material
weaknesses described above, as follows:
We expect
that we will satisfactorily address the control deficiencies and material
weaknesses relating to these matters by the end of our fiscal year ending
December 31, 2009, although there can be no assurance that compliance will be
achieved in this time frame.
Management,
including our chief executive officer and our chief financial officer, does not
expect that our disclosure controls and internal controls will prevent errors
and omissions, even as the same are improved to address any deficiencies and/or
weaknesses. A control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the objectives of the
control system are met. Over time, controls may become inadequate because of
changes in conditions or deterioration in the degree of compliance with policies
or procedures. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and errors and omissions, if any, within the Company have
been detected. These inherent limitations include the realities that judgments
in decision-making can be faulty, and that breakdowns can occur because of
simple error or mistake. Additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more people, or by
management override of the control.
Our
financial reporting process includes extensive procedures we undertake in order
to obtain assurance regarding the reliability of our published financial
statements, notwithstanding the material weaknesses in internal control. We
expanded our review of accounting for business combinations to help compensate
for our material weaknesses in order to provide assurance that the financial
statements are free of material inaccuracies or omissions of material fact. As a
result, management, to the best of its knowledge, believes that (i) this report
does not contain any untrue statements of a material fact or omits any material
fact and (ii) the financial statements and other financial information included
in this report have been prepared in conformity with U.S. GAAP and fairly
present in all material aspects our financial condition, results of operations,
and cash flows.
Changes
in Internal Control over Financial Reporting
Except
for the remedial actions taken as described above, there were no changes in our
internal control over financial reporting (as defined in Rule 13a-15(f) of the
Securities Exchange Act of 1934) during the quarter ended September 30, 2009
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
PART
II. OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
The
following discussion discusses all known or anticipated material legal
proceedings commenced by or against us. Occasionally we may be named
as a party in claims and legal proceedings arising out of the normal course of
our business. These claims and legal proceedings may relate to contractual
rights and obligations, employment matters, or to other matters relating to our
business and operations.
Other
than the matter discussed below, we are not aware of any material pending legal
proceedings involving us.
Andrew Chien v. Skystar
Bio-Pharmaceutical Company, et. al.
(US District Court, District of
Connecticut, Case No. 3:2007cv00781). Andrew Chien filed suit against the
Company, R. Scott Cramer, Steve Lowe, David Wassung and Weibing Lu in United
States District Court for the District of Connecticut, alleging causes of action
for violation of Sections 10(b) and 20(a) of the Exchange Act. On July 17, 2008,
in a decision that is now published, the Court granted defendants' motion to
dismiss and subsequently dismissed the lawsuit, entering judgment on behalf of
the defendants. Additionally, on February 5, 2009, the Court ruled in
favor of defendants' motion for sanctions, finding the action filed by Mr. Chien
to have been entirely frivolous, and to have constituted a "substantial"
violation of Federal Rule of Civil Procedure Rule 11, and imposed significant
monetary sanctions on both Mr. Chien and his former attorney. As part
of the basis for imposing sanctions on Mr. Chien personally, the Court
specifically found that Mr. Chien had knowledge of facts directly contradicting
the allegations of his complaint, as evident in internet postings he made on
online message boards. Mr. Chien subsequently filed motions seeking
to "re-open" this case, and to recuse the judge in the case, but both motions
were denied.
Andrew Chien v. Skystar
Bio-Pharmaceutical Company, et. al.
(formerly Superior Court, State of
Connecticut, Case No. NNH-CV-09-5025938-S, now U.S. District Court, District of
Connecticut, Case No. 3:09-CV-00149 (MRK)). Andrew Chien, proceeding pro se,
filed another lawsuit against the Company, Scott Cramer, Steve Lowe, David
Wassung and Weibing Lu in Connecticut Superior Court, alleging causes of action
similar to those alleged in his federal complaint described above as well as
state law causes of action. The case was removed to the U.S. District Court,
District of Connecticut, and assigned to the same judge in the related federal
case already dismissed. On June 8, 2009, the Court granted defendants’ motion to
dismiss this action in its entirety, and denied Mr. Chien’s motion to further
amend his complaint.
ITEM
1A. RISK FACTORS
You
should carefully consider the risks described below together with all of the
other information included in this report before making an investment decision
with regard to our securities. The statements contained in or incorporated into
this offering that are not historic facts are forward-looking statements that
are subject to risks and uncertainties that could cause actual results to differ
materially from those set forth in or implied by forward-looking statements. If
any of the following risks actually occurs, our business, financial condition or
results of operations could be harmed. In that case, the trading price of our
common stock could decline, and you may lose all or part of your
investment.
Risks
Relating to Our Business
Our
relatively limited operating history makes it difficult to evaluate our future
prospects and results of operations.
We have a
relatively limited operating history. Xian Tianxing, the variable interest
entity through which we operate our business, commenced operations in 1997 and
first achieved profitability in the quarter ended September 30, 1999.
Accordingly, you should consider our future prospects in light of the risks and
uncertainties typically experienced by companies such as ours in evolving
industries such as the bio-pharmaceutical industry in China. Some of these risks
and uncertainties relate to our ability to:
|
|
·
|
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;
|
|
|
·
|
raise sufficient capital to
sustain and expand our
business;
|
|
|
·
|
maintain effective control of our
costs and expenses;
|
|
|
·
|
respond to changes in our
regulatory environment;
|
|
|
·
|
respond to competitive market
conditions;
|
|
|
·
|
manage risks associated with
intellectual property
rights;
|
|
|
·
|
attract, retain and motivate
qualified personnel;
|
|
|
·
|
upgrade our technology to support
additional research and development of new products;
and
|
|
|
·
|
maintain or improve our position
as one of the market leaders in
China.
|
If we are
unsuccessful in addressing any of these risks and uncertainties, our business
may be materially and adversely affected.
If
we fail to obtain additional financing we will be unable to execute our business
plan.
Despite
our recent financing, we may need additional funds to build new production
facilities; pursue further research and development; obtain regulatory
approvals; file, prosecute, defend and enforce our intellectual property rights;
and market our products. Should such needs arise, we intend to seek additional
funds through public or private equity or debt financing, strategic transactions
and/or from other sources.
There are
no assurances that future funding will be available on favorable terms or at
all. If additional funding is not obtained, we will need to reduce, defer or
cancel development programs, planned initiatives or overhead expenditures, to
the extent necessary. The failure to fund our capital requirements would have a
material adverse effect on our business, financial condition and results of
operations.
Our
business will be materially and adversely affected if our collaborative
partners, licensees and other third parties over whom we are very dependent fail
to perform as expected.
Due to
the complexity of the process of developing bio-pharmaceuticals, our core
business depends on arrangements with bio-pharmaceutical institutes, corporate
and academic collaborators, licensors, licensees and others for the research,
development, clinical testing, technology rights, manufacturing, marketing and
commercialization of our products. We have various research collaborations and
outsource other business functions. Our license agreements could obligate us to
diligently bring potential products to market, make substantial milestone
payments and royalties and incur the costs of filing and prosecuting patent
applications. There are no assurances that we will be able to establish or
maintain collaborations that are important to our business on favorable terms,
or at all. We could enter into collaborative arrangements for the development of
particular products that may lead to our relinquishing some or all rights to the
related technology or products. A number of risks arise from our dependence on
collaborative agreements with third parties. Product development and
commercialization efforts could be adversely affected if any collaborative
partner:
|
|
·
|
terminates or suspends its
agreement with us;
|
|
|
·
|
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
|
|
|
·
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otherwise fails to meet its
contractual obligations.
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Our
collaborative partners could pursue other technologies or develop alternative
products that could compete with the products we are developing.
Our
products will be adversely affected if we are unable to protect proprietary
rights or operate without infringing the proprietary rights of
others.
The
profitability of our products will depend in part on our ability to obtain and
maintain patents and licenses and preserve trade secrets, and the period our
intellectual property remains exclusive. We must also operate without infringing
the proprietary rights of third parties and without third parties circumventing
our rights. The patent positions of bio-pharmaceutical and biotechnology
enterprises, including ours, are uncertain and involve complex legal and factual
questions for which important legal principles are largely unresolved. For
example, no consistent policy has emerged regarding the breadth of biotechnology
patent claims that are granted by the U.S. Patent and Trademark Office or
enforced by the U.S. federal courts. In addition, the scope of the originally
claimed subject matter in a patent application can be significantly reduced
before a patent is issued. The biotechnology patent situation outside the U.S.
is even more uncertain, is currently undergoing review and revision in many
countries, and may not protect our intellectual property rights to the same
extent as the laws of the U.S. Because patent applications are maintained in
secrecy in some cases, we cannot be certain that we or our licensors are the
first creators of inventions described in our pending patent applications or
patents or the first to file patent applications for such
inventions.
Other
companies may independently develop similar products and design around any
patented products we develop. We cannot assure you that:
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any of our patent applications
will result in the issuance of
patents;
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we will develop additional
patentable products;
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the patents we have been issued
will provide us with any competitive
advantages;
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the patents of others will not
impede our ability to do business;
or
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third parties will not be able to
circumvent our patents.
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A number
of pharmaceutical, biotechnology, research and academic companies and
institutions have developed technologies, filed patent applications or received
patents on technologies that may relate to our business. If these technologies,
applications or patents conflict with ours, the scope of our current or future
patents could be limited or our patent applications could be denied. Our
business may be adversely affected if competitors independently develop
competing technologies, especially if we do not obtain, or obtain only narrow,
patent protection. If patents that cover our activities are issued to other
companies, we may not be able to obtain licenses at a reasonable cost, or at
all; develop our technology; or introduce, manufacture or sell the products we
have planned.
Patent
litigation is becoming widespread in the biotechnology industry. Such litigation
may affect our efforts to form collaborations, to conduct research or
development, to conduct clinical testing or to manufacture or market any
products under development. There are no assurances that our patents would be
held valid or enforceable by a court or that a competitor’s technology or
product would be found to infringe our patents in the event of patent
litigation. Our business could be materially affected by an adverse outcome to
such litigation. Similarly, we may need to participate in interference
proceedings declared by the U.S. Patent and Trademark Office or equivalent
international authorities to determine priority of invention. We could incur
substantial costs and devote significant management resources to defend our
patent position or to seek a declaration that another company’s patents are
invalid.
Much of
our know-how and technology may not be patentable, though it may constitute
trade secrets. There are no assurances that we will be able to meaningfully
protect our trade secrets. We cannot assure you that any of our existing
confidentiality agreements with employees, consultants, advisors or
collaborators will provide meaningful protection for our trade secrets, know-how
or other proprietary information in the event of any unauthorized use or
disclosure. Collaborators, advisors or consultants may dispute the ownership of
proprietary rights to our technology, for example by asserting that they
developed the technology independently.
Difficulties
in manufacturing our products could have a material adverse effect on our
profitability.
Before
our products can be profitable, they must be produced in commercial quantities
in a cost-effective manufacturing process that complies with regulatory
requirements, including China’s Good Manufacturing Practice (GMP), production
and quality control regulations. If we cannot arrange for or maintain
commercial-scale manufacturing on acceptable terms, or if there are delays or
difficulties in the manufacturing process, we may not be able to conduct
clinical trials, obtain regulatory approval or meet demand for our
products.
Failure
or delays in obtaining an adequate amount of raw material or other supplies
would materially and adversely affect our revenue
Production
of our products could require raw materials which are scarce or which can be
obtained only from a limited number of sources. If we are unable to obtain
adequate supplies of such raw materials, the development, regulatory approval
and marketing of our products could be delayed.
Our ability to
generate more revenue would be adversely affected if we need more clinical
trials or take more time to complete our clinical trials than we have
planned.
Clinical
trials vary in design by factors including dosage, end points, length, and
controls. We may need to conduct a series of trials to demonstrate the safety
and efficacy of our products. The results of these trials may not demonstrate
safety or efficacy sufficiently for regulatory authorities to approve our
products. Further, the actual schedules for our clinical trials could vary
dramatically from the forecasted schedules due to factors including changes in
trial design, conflicts with the schedules of participating clinicians and
clinical institutions, and changes affecting product supplies for clinical
trials.
We rely
on collaborators, including academic institutions, governmental agencies and
clinical research organizations, to conduct, supervise, monitor and design some
or all aspects of clinical trials involving our products. Since these trials
depend on governmental participation and funding, we have less control over
their timing and design than trials we sponsor. Delays in or failure to commence
or complete any planned clinical trials could delay the ultimate timelines for
our product releases. Such delays could reduce investors’ confidence in our
ability to develop products, likely causing the price of our common stock to
decrease.
If
we are unable to obtain the regulatory approvals or clearances that are
necessary to commercialize our products, we will have less revenue than
expected.
China and
other countries impose significant statutory and regulatory obligations upon the
manufacture and sale of bio-pharmaceutical products. Each regulatory authority
typically has a lengthy approval process in which it examines pre-clinical and
clinical data and the facilities in which the product is manufactured.
Regulatory submissions must meet complex criteria to demonstrate the safety and
efficacy of the ultimate products. Addressing these criteria requires
considerable data collection, verification and analysis. We may spend time and
money preparing regulatory submissions or applications without assurances as to
whether they will be approved on a timely basis or at all.
Our
product candidates, some of which are currently in the early stages of
development, will require significant additional development and pre-clinical
and clinical testing prior to their commercialization. These steps and the
process of obtaining required approvals and clearances can be costly and
time-consuming. If our potential products are not successfully developed, cannot
be proven to be safe and effective through clinical trials, or do not receive
applicable regulatory approvals and clearances, or if there are delays in the
process:
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the commercialization of our
products could be adversely
affected;
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any competitive advantages of the
products could be diminished;
and
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revenues or collaborative
milestones from the products could be reduced or
delayed.
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Governmental
and regulatory authorities may approve a product candidate for fewer indications
or narrower circumstances than requested or may condition approval on the
performance of post-marketing studies for a product candidate. Even if a product
receives regulatory approval and clearance, it may later exhibit adverse side
effects that limit or prevent its widespread use or that force us to withdraw
the product from the market.
Any
marketed product and its manufacturer, including us, will continue to be subject
to strict regulation after approval. Results of post-marketing programs may
limit or expand the further marketing of products. Unforeseen problems with an
approved product or any violation of regulations could result in restrictions on
the product, including its withdrawal from the market and possible civil
actions.
In
manufacturing our products we will be required to comply with applicable good
manufacturing practices regulations, which include requirements relating to
quality control and quality assurance, as well as the maintenance of records and
documentation. We cannot comply with regulatory requirements, including
applicable good manufacturing practice requirements, we may not be allowed to
develop or market the product candidates. If we or our manufacturers fail to
comply with applicable regulatory requirements at any stage during the
regulatory process, we may be subject to sanctions, including fines, product
recalls or seizures, injunctions, refusal of regulatory agencies to review
pending market approval applications or supplements to approve applications,
total or partial suspension of production, civil penalties, withdrawals of
previously approved marketing applications and criminal
prosecution.
Competitors
may develop and market bio-pharmaceutical products that are less expensive, more
effective or safer, making our products obsolete or uncompetitive.
Some of
our competitors and potential competitors have greater product development
capabilities and financial, scientific, marketing and human resources than we
do. Technological competition from biopharmaceutical companies and biotechnology
companies is intense and is expected to increase. Other companies have developed
technologies that could be the basis for competitive products. Some of these
products have an entirely different approach or means of accomplishing the
desired curative effect than products we are developing. Alternative products
may be developed that are more effective, work faster and are less costly than
our products. Competitors may succeed in developing products earlier than us,
obtaining approvals and clearances for such products more rapidly than us, or
developing products that are more effective than ours. In addition, other forms
of treatment may be competitive with our products. Over time, our technology or
products may become obsolete or uncompetitive.
Our
revenue will be materially and adversely affected if our products are unable to
gain market acceptance.
Our
products may not gain market acceptance in the agricultural community. The
degree of market acceptance of any product depends on a number of factors,
including establishment and demonstration of clinical efficacy and safety,
cost-effectiveness, clinical advantages over alternative products, and marketing
and distribution support for the products. Limited information regarding these
factors is available in connection with our products or products that may
compete with ours.
To
directly market and distribute our bio-pharmaceutical products, we or our
collaborators require a marketing and sales force with appropriate technical
expertise and supporting distribution capabilities. We may not be able to
further establish sales, marketing and distribution capabilities or enter into
arrangements with third parties on acceptable terms. If we or our partners
cannot successfully market and sell our products, our ability to generate
revenue will be limited.
Our
operations and the use of our products could subject us to damages relating to
injuries or accidental contamination and thus reduce our earnings or increase
our losses.
Our
research and development processes involve the controlled use of hazardous
materials. We are subject to federal, provincial and local laws and regulations
governing the use, manufacture, storage, handling and disposal of such materials
and waste products. The risk of accidental contamination or injury from handling
and disposing of such materials cannot be completely eliminated. In the event of
an accident involving hazardous materials, we could be held liable for resulting
damages. We are not insured with respect to this liability. Such liability could
exceed our resources. In the future we could incur significant costs to comply
with environmental laws and regulations.
If
we were sued for product liability, we could face substantial liabilities that
may exceed our resources.
We may be
held liable if any product we develop, or any product which is made using our
technologies, causes injury or is found unsuitable during product testing,
manufacturing, marketing, sale or use. These risks are inherent in the
development of agricultural and bio-pharmaceutical products. We currently do not
have product liability insurance. If we cannot obtain sufficient insurance
coverage at an acceptable cost or otherwise protect against potential product
liability claims, the commercialization of products that we develop may be
prevented or inhibited. If we are sued for any injury caused by our products,
our liability could exceed our total assets, whether or not we are
successful.
We
have no business liability or disruption insurance coverage and therefore we are
susceptible to catastrophic or other events that may disrupt our
business.
The
insurance industry in China is still at an early stage of development. Insurance
companies in China offer limited business insurance products. We do not have any
business liability or disruption insurance coverage for our operations in China.
Any business disruption, litigation or natural disaster may result in our
incurring substantial costs and the diversion of our resources.
We
will be unsuccessful if we fail to attract and retain qualified
personnel.
We depend
on a core management and scientific team. The loss of any of these individuals
could prevent us from achieving our business objective of commercializing our
product candidates. Our future success will depend in large part on our
continued ability to attract and retain other highly qualified scientific,
technical and management personnel, as well as personnel with expertise in
clinical testing and government regulation. We face competition for personnel
from other companies, universities, public and private research institutions,
government entities and other organizations. If our recruitment and retention
efforts are unsuccessful, our business operations could suffer.
Downturn
in the global economy may slow domestic growth in China, which in turn may
affect our business.
Due to
the global downturn in the financial markets, China may not be able to maintain
its recent growth rates mainly due to the lack of demand of exports to countries
that are in recessions. Although we do not presently export any of our products,
our earnings may become unstable if China’s domestic growth slows significantly
and the demand for meats and poultry declines.
Risks
Related to Our Corporate Structure
Chinese
laws and regulations governing our businesses and the validity of certain of our
contractual arrangements are uncertain. If we are found to be in violation, we
could be subject to sanctions. In addition, changes in such Chinese laws and
regulations may materially and adversely affect our business.
There are
substantial uncertainties regarding the interpretation and application of
Chinese laws and regulations, including, but not limited to, the laws and
regulations governing our business, or the enforcement and performance of our
contractual arrangements with our affiliated Chinese entity, Xian Tianxing, and
its stockholders. We are considered a foreign person or foreign invested
enterprise under Chinese law. As a result, we are subject to Chinese law
limitations on foreign ownership of Chinese companies. These laws and
regulations are relatively new and may be subject to change, and their official
interpretation and enforcement may involve substantial uncertainty. The
effectiveness of newly enacted laws, regulations or amendments may be delayed,
resulting in detrimental reliance by foreign investors. New laws and regulations
that affect existing and proposed future businesses may also be applied
retroactively.
The
Chinese government has broad discretion in dealing with violations of laws and
regulations, including levying fines, revoking business and other licenses and
requiring actions necessary for compliance. In particular, licenses and permits
issued or granted to us by relevant governmental bodies may be revoked at a
later time by higher regulatory bodies. We cannot predict the effect of the
interpretation of existing or new Chinese laws or regulations on our businesses.
We cannot assure you that our current ownership and operating structure would
not be found in violation of any current or future Chinese laws or regulations.
As a result, we may be subject to sanctions, including fines, and could be
required to restructure our operations or cease to provide certain services. Any
of these or similar actions could significantly disrupt our business operations
or restrict us from conducting a substantial portion of our business operations,
which could materially and adversely affect our business, financial condition
and results of operations.
We
may be adversely affected by complexity, uncertainties and changes in Chinese
regulation of bio-pharmaceutical business and companies, including limitations
on our ability to own key assets.
The
Chinese government regulates the bio-pharmaceutical industry including foreign
ownership of, and the licensing and permit requirements pertaining to, companies
in the bio-pharmaceutical industry. These laws and regulations are relatively
new and evolving, and their interpretation and enforcement involve significant
uncertainty. As a result, in certain circumstances it may be difficult to
determine what actions or omissions may be deemed to be a violation of
applicable laws and regulations. Issues, risks and uncertainties relating to
Chinese government regulation of the bio-pharmaceutical industry include the
following:
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we only have contractual control
over Xian Tianxing. We do not own it due to the restriction of foreign
investment in Chinese businesses;
and
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uncertainties relating to the
regulation of the bio-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.
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The
interpretation and application of existing Chinese laws, regulations and
policies and possible new laws, regulations or policies have created substantial
uncertainties regarding the legality of existing and future foreign investments
in, and the businesses and activities of, bio-pharmaceutical businesses in
China, including our business.
In
order to comply with Chinese laws limiting foreign ownership of Chinese
companies, we conduct our bio-pharmaceutical business through Xian Tianxing by
means of contractual arrangements. If the Chinese government determines that
these contractual arrangements do not comply with applicable regulations, our
business could be adversely affected.
The
Chinese government restricts foreign investment in bio-pharmaceutical businesses
in China. Accordingly, we operate our business in China through Xian Tianxing, a
Chinese joint stock company. Xian Tianxing holds the licenses and approvals
necessary to operate our bio-pharmaceutical business in China. We have
contractual arrangements with Xian Tianxing and its stockholders that allow us
to substantially control Xian Tianxing. We cannot assure you, however, that we
will be able to enforce these contracts.
Although
we believe we comply with current Chinese regulations, we cannot assure you that
the Chinese government would agree that these operating arrangements comply with
Chinese licensing, registration or other regulatory requirements, with existing
policies or with requirements or policies that may be adopted in the future. If
the Chinese government determines that we do not comply with applicable law, it
could revoke our business and operating licenses, require us to discontinue or
restrict our operations, restrict our right to collect revenues, require us to
restructure our operations, impose additional conditions or requirements with
which we may not be able to comply, impose restrictions on our business
operations or on our customers, or take other regulatory or enforcement actions
against us that could be harmful to our business.
Our
contractual arrangements with Xian Tianxing and its stockholders may not be as
effective in providing control over these entities as direct
ownership.
Since
Chinese law limits foreign equity ownership in bio-pharmaceutical companies in
China, we operate our business through Xian Tianxing. We have no equity
ownership interest in Xian Tianxing and rely on contractual arrangements to
control and operate such businesses. These contractual arrangements may not be
as effective in providing control over Xian Tianxing as direct ownership. For
example, Xian Tianxing could fail to take actions required for our business
despite its contractual obligation to do so. If Xian Tianxing fails to perform
under their agreements with us, we may have to rely on legal remedies under
Chinese law, which may not be effective. In addition, we cannot assure you that
either of Xian Tianxing’s stockholders will act in our best
interests.
Because
we rely on the consulting services agreement with Xian Tianxing for our revenue,
the termination of this agreement will severely and detrimentally affect our
continuing business viability under our current corporate
structure.
We are a
holding company and do not have any assets or conduct any business operations
other than the contractual arrangements between Sida and Xian Tianxing. As a
result, we currently rely entirely for our revenues on dividends payments from
Sida after it receives payments from Xian Tianxing pursuant to the consulting
services agreement which forms a part of the contractual arrangements between
Sida and Xian Tianxing. The consulting services agreement may be terminated by
written notice of Sida or Xian Tianxing in the event that: (a) one party causes
a material breach of the agreement, provided that if the breach does not relate
to a financial obligation of the breaching party, that party may attempt to
remedy the breach within 14 days following the receipt of the written notice;
(b) one party becomes bankrupt, insolvent, is the subject of proceedings or
arrangements for liquidation or dissolution, ceases to carry on business, or
becomes unable to pay its debts as they become due; (c) Sida terminates its
operations; (d) Xian Tianxing’s business license or any other license or
approval for its business operations is terminated, cancelled or revoked; or (e)
circumstances arise which would materially and adversely affect the performance
or the objectives of the agreement. Additionally, Sida may terminate the
consulting services agreement without cause.
Because
neither we nor our direct and indirect subsidiaries own equity interests of Xian
Tianxing, the termination of the consulting services agreement would sever our
ability to continue receiving payments from Xian Tianxing under our current
holding company structure. While we are currently not aware of any event or
reason that may cause the consulting services agreement to terminate, we cannot
assure you that such an event or reason will not occur in the future. In the
event that the consulting services agreement is terminated, this may have a
severe and detrimental effect on our continuing business viability under our
current corporate structure, which in turn may affect the value of your
investment.
Members
of Xian Tianxing’s management have potential conflicts of interest with us,
which may adversely affect our business and your ability for
recourse.
Weibing
Lu, our Chief Executive Officer, is also the Chief Financial Officer and
Chairman of the Board of Directors of Xian Tianxing. Mr. Wei Wen, who is Xian
Tianxing’s Vice-General Manager and Director, is a member of Skystar’s board of
directors. Conflicts of interests between their respective duties to our company
and Xian Tianxing may arise. As our directors and executive officer (in the case
of Mr. Lu), they have a duty of loyalty and care to us under U.S. and Cayman
Islands law when there are any potential conflicts of interests between our
company and Xian Tianxing. We cannot assure you, however, that when conflicts of
interest arise, every one of them will act completely in our interests or that
conflicts of interests will be resolved in our favor. For example, they may
determine that it is in Xian Tianxing’s interests to sever the contractual
arrangements with Sida, irrespective of the effect such action may have on us.
In addition, any one of them could violate his or her legal duties by diverting
business opportunities from us to others, thereby affecting the amount of
payment Xian Tianxing is obligated to remit to us under the consulting services
agreement.
Our board
of directors is comprised of a majority of independent directors (including two
based in the United States). These independent directors may be in a position to
deter and counteract the actions of our officers or non-independent directors
that are against our interests, as the independent directors do not have any
position with, or interests in, our affiliate entities, and should therefore not
have any conflicts of interests such as those potentially of our officers and
directors who are management members of Xian Tianxing. Additionally, the
independent directors have fiduciary duties to act in our best interests, and
failure on their part to do so may subject them to personal liabilities for
breach of such duties. We cannot, however, give any assurance as to how the
independent directors will act. Further, if we or the independent directors
cannot resolve any conflicts of interest between us and those of our officers
and directors who are management members of Xian Tianxing, we would have to rely
on legal proceedings, which could result in the disruption of our
business.
In the
event that you believe that your rights have been infringed under the securities
laws or otherwise as a result of any one of the circumstances described above,
it may be difficult or impossible for you to bring an action against Xian
Tianxing or our officers or directors who are members of its management, the
majority of whom reside within China. Even if you are successful in bringing an
action, the laws of China may render you unable to enforce a judgment against
the assets of Xian Tianxing and its management, all of which are located in
China.
Risks
Related to Doing Business in China
Adverse
changes in economic and political policies of the Chinese government could have
a material adverse effect on the overall economic growth of China, which could
adversely affect our business.
Substantially
all of our business operations are conducted in China. Accordingly, our results
of operations, financial condition and prospects are subject to a significant
degree to economic, political and legal developments in China. China’s economy
differs from the economies of most developed countries in many respects,
including with respect to the amount of government involvement, level of
development, growth rate, control of foreign exchange and allocation of
resources. While the Chinese economy has experienced significant growth in the
past 20 years, growth has been uneven across different regions and among various
economic sectors of China. The Chinese government has implemented various
measures to encourage economic development and guide the allocation of
resources. Some of these measures benefit the overall Chinese economy, but may
also have a negative effect on us. For example, our financial condition and
results of operations may be adversely affected by government control over
capital investments or changes in tax regulations that are applicable to us.
Since early 2004, the Chinese government has implemented certain measures to
control the pace of economic growth. Such measures may cause a decrease in the
level of economic activity in China, which in turn could adversely affect our
results of operations and financial condition.
If
Chinese law were to phase out the preferential tax benefits currently being
extended to foreign invested enterprises and “new or high-technology
enterprises” located in a high-tech zone, we would have to pay more taxes, which
could have a material and adverse effect on our financial condition and results
of operations.
Under
Chinese laws and regulations, a foreign invested enterprise may enjoy
preferential tax benefits if it is registered in a high-tech zone and also
qualifies as “new or high-technology enterprise”. As a foreign invested
enterprise as well as a certified “new or high-technology enterprise” located in
a high-tech zone in Xian, the Company has been approved as a new technology
enterprise and under Chinese Income Tax Laws, it is entitled to a preferential
tax rate of 15%. If the Chinese law were to phase out preferential tax benefits
currently granted to “new or high-technology enterprises” and technology
consulting services, we would be subject to the standard statutory tax rate,
which currently is 25%, and we would be unable to obtain business tax refunds
for our provision of technology consulting services. Loss of these preferential
tax treatments could have a material and adverse effect on our financial
condition and results of operations.
Xian
Tianxing is subject to restrictions on making payments to us.
We are a
holding company incorporated in Nevada and do not have any assets or conduct any
business operations other than our indirect investments in our affiliated entity
in China, Xian Tianxing. As a result of our holding company structure, we rely
entirely on payments from Xian Tianxing under our contractual arrangements. The
Chinese government also imposes controls on the conversion of the Chinese
currency, Renminbi (RMB), into foreign currencies and the remittance of
currencies out of China. We may experience difficulties in completing the
administrative procedures necessary to obtain and remit foreign currency. See
“Government control of currency conversion may affect the value of your
investment.” Furthermore, if our affiliated entity in China incurs debt on their
own in the future, the instruments governing the debt may restrict their ability
to make payments. If we are unable to receive all of the revenues from our
operations through these contractual or dividend arrangements, we may be unable
to pay dividends on our ordinary shares.
Uncertainties
with respect to the Chinese legal system could adversely affect us.
We
conduct our business primarily through our affiliated Chinese entity, Xian
Tianxing. Our operations in China are governed by Chinese laws and regulations.
We are generally subject to laws and regulations applicable to foreign
investments in China and, in particular, laws applicable to wholly foreign-owned
enterprises. The Chinese legal system is based on written statutes. Prior court
decisions may be cited for reference but have limited precedential
value.
Since
1979, Chinese legislation and regulations have significantly enhanced the
protections afforded to various forms of foreign investments in China. However,
China has not developed a fully integrated legal system and recently enacted
laws and regulations may not sufficiently cover all aspects of economic
activities in China. In particular, because these laws and regulations are
relatively new, and because of the limited volume of published decisions and
their nonbinding nature, the interpretation and enforcement of these laws and
regulations involve uncertainties. In addition, the Chinese legal system is
based in part on government policies and internal rules (some of which are not
published on a timely basis or at all) that may have a retroactive effect. As a
result, we may not be aware of our violation of these policies and rules until
some time after the violation. In addition, any litigation in China may be
protracted and result in substantial costs and diversion of resources and
management attention.
You
may experience difficulties in effecting service of legal process, enforcing
foreign judgments or bringing original actions in China based on United States
or other foreign laws against us, our management or the experts named in the
prospectus.
We
conduct substantially all of our operations in China and substantially all of
our assets are located in China. In addition, all of our senior executive
officers reside within China. As a result, it may not be possible to effect
service of process within the United States or elsewhere outside China upon our
senior executive officers, including with respect to matters arising under U.S.
federal securities laws or applicable state securities laws. Moreover, our
Chinese counsel has advised us that China does not have treaties with the United
States or many other countries providing for the reciprocal recognition and
enforcement of judgment of courts.
Governmental
control of currency conversion may affect the value of your
investment.
The
Chinese government imposes controls on the convertibility of RMB into foreign
currencies and, in certain cases, the remittance of currency out of China. We
receive substantially all of our revenues in RMB. Under our current structure,
our income is primarily derived from payments from Xian Tianxing. Shortages in
the availability of foreign currency may restrict the ability of our Chinese
subsidiaries and our affiliated entity to remit sufficient foreign currency to
pay dividends or other payments to us, or otherwise satisfy their foreign
currency denominated obligations. Under existing Chinese foreign exchange
regulations, payments of current account items, including profit distributions,
interest payments and expenditures from trade-related transactions, can be made
in foreign currencies without prior approval from China State Administration of
Foreign Exchange by complying with certain procedural requirements. However,
approval from appropriate government authorities is required where RMB is to be
converted into foreign currency and remitted out of China to pay capital
expenses such as the repayment of bank loans denominated in foreign currencies.
The Chinese government may also at its discretion restrict access in the future
to foreign currencies for current account transactions. If the foreign exchange
control system prevents us from obtaining sufficient foreign currency to satisfy
our currency demands, we may not be able to pay dividends in foreign currencies
to our stockholders.
Fluctuation
in the value of RMB may have a material adverse effect on your
investment.
The value
of RMB against the U.S. dollar and other currencies may fluctuate and is
affected by, among other things, changes in political and economic conditions.
Our revenues and costs are mostly denominated in RMB, while a significant
portion of our financial assets are denominated in U.S. dollars. We rely
entirely on fees paid to us by our affiliated entity in China. Any significant
fluctuation in the value of RMB may materially and adversely affect our cash
flows, revenues, earnings and financial position, and the value of, and any
dividends payable on, our stock in U.S. dollars. For example, an appreciation of
RMB against the U.S. dollar would make any new RMB denominated investments or
expenditures more costly to us, to the extent that we need to convert U.S.
dollars into RMB for such purposes. An appreciation of RMB against the U.S.
dollar would also result in foreign currency translation losses for financial
reporting purposes when we translate our U.S. dollar denominated financial
assets into RMB, as RMB is our reporting currency.
We
face risks related to health epidemics and other outbreaks.
Our
business could be adversely affected by the effects of an epidemic outbreak,
such as the SARS epidemic in April 2004. Any prolonged recurrence of such
adverse public health developments in China may have a material adverse effect
on our business operations. For instance, health or other government regulations
adopted in response may require temporary closure of our production facilities
or of our offices. Such closures would severely disrupt our business operations
and adversely affect our results of operations. We have not adopted any written
preventive measures or contingency plans to combat any future outbreak of SARS
or any other epidemic.
Risks
Related to an Investment in Our Securities
To
date, we have not paid any cash dividends and no cash dividends are expected to
be paid in the foreseeable future.
We do not
anticipate paying cash dividends on our common stock in the foreseeable future
and we may not have sufficient funds legally available to pay dividends. Even if
the funds are legally available for distribution, we may nevertheless decide not
to pay any dividends. We intend to retain all earnings for our
operations.
The
NASDAQ Capital Market may delist our common stock from trading on its exchange,
which could limit investors’ ability to effect transactions in our common stock
and subject us to additional trading restrictions.
Our
common stock is listed on the NASDAQ Capital Market. We cannot assure you that
our common stock will continue to be listed on the NASDAQ Capital Market in the
future. If the NASDAQ Capital Market delists our common stock from
trading on its exchange, we could face significant material adverse consequences
including:
|
|
a limited availability of market
quotations for our common
stock;
|
|
|
a limited amount of news and
analyst coverage for our company;
and
|
|
|
a decreased ability to issue
additional securities or obtain additional financing in the
future.
|
Our
common shares are thinly traded and, you may be unable to sell at or near ask
prices or at all if you desire to liquidate your shares.
We cannot
predict the extent to which an active public market for our common stock will
develop or be sustained.
Although
our common shares commenced trading on the NASDAQ Capital Market on June 26,
2009, our common shares have historically been sporadically or “thinly traded”,
meaning that the number of persons interested in purchasing our common shares at
or near bid prices at any given time may be relatively small or non-existent.
This situation is attributable to a number of factors, including the fact that
we are a small company which is relatively unknown to stock analysts, stock
brokers, institutional investors and others in the investment community that
generate or influence sales volume, and that even if we came to the attention of
such persons, they tend to be risk-averse and would be reluctant to follow an
unproven company such as ours or purchase or recommend the purchase of our
shares until such time as we became more seasoned and viable. As a consequence,
there may be periods of several days or more when trading activity in our shares
is minimal or non-existent, as compared to a seasoned issuer which has a large
and steady volume of trading activity that will generally support continuous
sales without an adverse effect on share price. We cannot give you any assurance
that a broader or more active public trading market for our common stock will
develop or be sustained, or that current trading levels will be
sustained.
The
market price for our common stock is particularly volatile given our status as a
relatively small company with a small and thinly traded “float” that could lead
to wide fluctuations in our share price. The price at which you purchase our
common stock may not be indicative of the price that will prevail in the trading
market. You may be unable to sell your common stock at or above your purchase
price if at all, which may result in substantial losses to
you.
The
market for our common shares is characterized by significant price volatility
when compared to seasoned issuers, and we expect that our share price will
continue to be more volatile than a seasoned issuer for the indefinite future.
The volatility in our share price is attributable to a number of factors. First,
as noted above, our common shares are sporadically and/or thinly traded. As a
consequence of this lack of liquidity, the trading of relatively small
quantities of shares by our stockholders may disproportionately influence the
price of those shares in either direction. The price for our shares could, for
example, decline precipitously in the event that a large number of our common
shares are sold on the market without commensurate demand, as compared to a
seasoned issuer which could better absorb those sales without adverse impact on
its share price. Secondly, we are a speculative or “risky” investment due to our
fluctuating level of revenues or profits to date and uncertainty of future
market acceptance for our current and potential products. As a consequence of
this enhanced risk, more risk-averse investors may, under the fear of losing all
or most of their investment in the event of negative news or lack of progress,
be more inclined to sell their shares on the market more quickly and at greater
discounts than would be the case with the stock of a seasoned issuer. The
following factors may add to the volatility in the price of our common shares:
actual or anticipated variations in our quarterly or annual operating results;
adverse outcomes; the termination of our contractual agreements with Xian
Tianxing; and additions or departures of our key personnel, as well as other
items discussed under this “Risk Factors” section, as well as elsewhere in this
report. Many of these factors are beyond our control and may decrease the market
price of our common shares, regardless of our operating performance. We cannot
make any predictions or projections as to what the prevailing market price for
our common shares will be at any time, including as to whether our common shares
will sustain their current market prices, or as to what effect that the sale of
shares or the availability of common shares for sale at any time will have on
the prevailing market price.
Volatility
in our common share price may subject us to securities litigation.
The
market for our common stock is characterized by significant price volatility
when compared to seasoned issuers, and we expect that our share price will
continue to be more volatile than a seasoned issuer for the indefinite future.
In the past, plaintiffs have often initiated securities class action litigation
against a company following periods of volatility in the market price of its
securities. We may, in the future, be the target of similar litigation.
Securities litigation could result in substantial costs and liabilities and
could divert management’s attention and resources.
Our
corporate actions are substantially controlled by our management stockholders
and affiliated entities.
As of
November 12, 2009, our management and their affiliated entities own
approximately 17.0% of our outstanding common shares, representing approximately
17.0% of our voting power. These stockholders, acting individually or as a
group, could exert substantial influence over matters such as electing directors
and approving mergers or other business combination transactions. In addition,
because of the percentage of ownership and voting concentration in these
principal stockholders and their affiliated entities, elections of our board of
directors will generally be within the control of these stockholders and their
affiliated entities. While all of our stockholders are entitled to vote on
matters submitted to our stockholders for approval, the concentration of shares
and voting control presently lies with these principal stockholders and their
affiliated entities. As such, it would be difficult for stockholders to propose
and have approved proposals not supported by management. There can be no
assurances that matters voted upon by our officers and directors in their
capacity as stockholders will be viewed favorably by all stockholders of the
company.
The
elimination of monetary liability against our directors, officers and employees
under Nevada law and the existence of indemnification rights to our directors,
officers and employees may result in substantial expenditures by our company and
may discourage lawsuits against our directors, officers and
employees.
Our
articles of incorporation do not contain any specific provisions that eliminate
the liability of our directors for monetary damages to our company and
stockholders, however we are prepared to give such indemnification to our
directors and officers to the extent provided by Nevada law. We also have
contractual indemnification obligations under our employment agreements with our
chief executive officer, chief financial officer and certain of our directors.
The foregoing indemnification obligations could result in our company incurring
substantial expenditures to cover the cost of settlement or damage awards
against directors and officers, which we may be unable to recoup. These
provisions and resultant costs may also discourage our company from bringing a
lawsuit against directors and officers for breaches of their fiduciary duties,
and may similarly discourage the filing of derivative litigation by our
stockholders against our directors and officers even though such actions, if
successful, might otherwise benefit our company and
stockholders.
Legislative
actions, higher insurance costs and potential new accounting pronouncements may
impact our future financial position and results of operations.
There
have been regulatory changes, including the Sarbanes-Oxley Act of 2002, and
there may potentially be new accounting pronouncements or additional regulatory
rulings that will have an impact on our future financial position and results of
operations. The Sarbanes-Oxley Act of 2002 and other similar rule changes are
likely to increase general and administrative costs and expenses. Additionally,
we currently maintain directors’ and officers insurance (“D&O Insurance”) as
we are contractually obligated to do so. In light of the high claims rates in
recent years, we expect that the premium for such insurance will increase.
Further, there could be changes in certain accounting rules. These and other
potential changes could materially increase the expenses we report under
generally accepted accounting principles, and adversely affect our operating
results.
Past
company activities prior to the reverse merger may lead to future liability for
the company.
Prior to
our acquisition of Skystar Cayman in November 2005, we were engaged in
businesses unrelated to our current operations. Although the prior business
owners provided certain indemnifications against any loss, liability, claim,
damage or expense arising out of or based on any breach of or inaccuracy in any
of their representations and warranties made regarding such acquisition, any
liabilities relating to such prior business against which Skystar is not
completely indemnified may have a material adverse effect on
Skystar.
The
market price for our stock may be volatile.
The
market price for our stock may be volatile and subject to wide fluctuations in
response to factors including the following:
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actual or anticipated
fluctuations in our quarterly operating
results;
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changes in financial estimates by
securities research
analysts;
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|
conditions in bio-pharmaceutical
and agricultural markets;
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|
changes in the economic
performance or market valuations of other bio-pharmaceutical
companies;
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|
announcements by us or our
competitors of new products, acquisitions, strategic partnerships, joint
ventures or capital
commitments;
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addition or departure of key
personnel;
|
|
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|
fluctuations of exchange rates
between RMB and the U.S.
dollar;
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|
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|
intellectual property litigation;
and
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general economic or political
conditions in China.
|
In
addition, the securities market has from time to time experienced significant
price and volume fluctuations that are not related to the operating performance
of particular companies. These market fluctuations may also materially and
adversely affect the market price of our stock.
We
may need additional capital, and the sale of additional shares or other equity
securities could result in additional dilution to our stockholders.
We
believe that our current cash and cash equivalents, anticipated cash flow from
operations and the net proceeds from our recent financing will be sufficient to
meet our anticipated cash needs for the foreseeable future. We may, however,
require additional cash resources due to changed business conditions or other
future developments, including any investments or acquisitions we may decide to
pursue. If our resources are insufficient to satisfy our cash requirements, we
may seek to sell additional equity or debt securities or obtain a credit
facility. The sale of additional equity securities could result in additional
dilution to our stockholders. The incurrence of indebtedness would result in
increased debt service obligations and could result in operating and financing
covenants that would restrict our operations. We cannot assure you that
financing will be available in amounts or on terms acceptable to us, if at
all.
If
we fail to maintain an effective system of internal controls, we may not be able
to accurately report our financial results or prevent fraud.
We are
subject to reporting obligations under the U.S. securities laws. The SEC, as
required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules
requiring every public company to include a management report on such company’s
internal controls over financial reporting in its annual report, which contains
management’s assessment of the effectiveness of our internal controls over
financial reporting. In addition, an independent registered public accounting
firm must attest to and report on management’s assessment of the effectiveness
of our internal controls over financial reporting. Our management may conclude
that our internal controls over our financial reporting are not effective.
Moreover, even if our management concludes that our internal controls over
financial reporting are effective, our independent registered public accounting
firm may still decline to attest to our management’s assessment or may issue a
report that is qualified if it is not satisfied with our controls or the level
at which our controls are documented, designed, operated or reviewed, or if it
interprets the relevant requirements differently from us. Our reporting
obligations as a public company will place a significant strain on our
management, operational and financial resources and systems for the foreseeable
future. Effective internal controls, particularly those related to revenue
recognition, are necessary for us to produce reliable financial reports and are
important to help prevent fraud. As a result, our failure to achieve and
maintain effective internal controls over financial reporting could result in
the loss of investor confidence in the reliability of our financial statements,
which in turn could harm our business and negatively impact the trading price of
our stock. Furthermore, we anticipate that we will incur considerable costs and
use significant management time and other resources in an effort to comply with
Section 404 and other requirements of the Sarbanes-Oxley Act.
Shares
eligible for future sale may adversely affect the market.
From time
to time, certain of our stockholders may be eligible to sell all or some of
their shares of common stock by means of ordinary brokerage transactions in the
open market pursuant to Rule 144, promulgated under the Securities Act, subject
to certain limitations. In general, pursuant to amended Rule 144, non-affiliate
stockholders may sell freely after six months subject only to the current public
information requirement (which disappears after one year). Affiliates may sell
after six months subject to the Rule 144 volume, manner of sale (for equity
securities), current public information and notice requirements. Of the
approximately 6.97 million shares of our common stock outstanding as of
November 12, 2009, approximately 4.91 million shares are, or will be,
freely tradable without restriction, as of November 12, 2009. Any substantial
sale of our common stock pursuant to Rule 144 may have a material adverse effect
on the market price of our common stock.
The
issuance of our series “A” preferred stock may subject us to certain claims by
the holder of series “A” preferred shares as well as indemnification obligations
to the directors who authorized the issuance.
In 2001,
2,000,000 shares of our series “A” preferred stock were issued to a corporation
wholly owned by our then Chief Executive Officer and director for services
purportedly rendered by him. The resolutions of the board of directors approving
such issuance stated that the series “A” preferred shares carries a “super
voting power of five.” No certificate of designation was ever filed with the
Nevada Secretary of State for these shares and we do not believe any certificate
evidencing such shares was issued by any transfer agent. As a result, the board
of directors believes that the issuance was not valid under Nevada law and thus
has adopted resolutions that resolve voiding all outstanding shares of the
series “A” preferred stock and barring any re-issuance or authorization of our
series “A” preferred stock unless such matter was submitted to a vote of our
shareholders and approved by a disinterested vote of a majority of each class of
our outstanding stock. We therefore intend to omit all reference to the status
of having issued 2,000,000 series “A” preferred shares in future filings with
the Securities and Exchange Commission as soon as the resolutions as adopted by
the board of directors are implemented.
Notwithstanding
our position on this matter, our former Chief Executive Officer may potentially
assert claims against us or the directors who authorized the issuance, in law or
equity, for the proper issuance or reissuance of those shares. In a lawsuit, he
may assert any number of legal or equitable theories in a forum with proper
jurisdiction over the matter, but the substance would likely rest on whether he
is entitled to the shares or, alternatively, whether he should be entitled to
some form of damage payment from the Company for the services that he
purportedly rendered to our company. In the event of any legal action, adequate
insurance coverage may not be available to us to cover the cost of litigation,
indemnification of any of our officers or directors named in such action or of
any award or other resolution. If a court were to order the issuance of any
shares of series “A” preferred stock, such shares could increase the total
number of our shares outstanding and thereby dilute the interests of our other
shareholders in our company, could control a significant voting interest in our
company and possess other rights determined by a court which we are unable to
predict.
The
eventual development, outcome and cost of legal proceedings are by their nature
uncertain and subject to many factors, including but not limited to, the
discovery of facts not presently known to us or determinations by judges, juries
or other finders of fact which do not accord with our evaluation of the merits
or facts of the case. As a result, we can provide no assurance that we will
succeed against any such challenge or as to the results if it were ever
made.
Should we
fail to prevail in our defense of such a claim, we may be subject to restitution
or other forms of monetary damages, the amount of which is difficult to
determine but may take into consideration the then and current fair market value
of the series “A” preferred shares. Additionally, although the directors who
authorized the issuance of the series “A” preferred shares are no longer members
of our board of directors, we may nevertheless be obligated in certain
circumstances to indemnify and defend these directors.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
None
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
None
ITEM
5. OTHER INFORMATION
None
ITEM
6. EXHIBITS
EXHIBIT
INDEX
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Exhibit
Number
|
|
Description
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|
2.1
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|
Share
Purchase Agreement by and between The Cyber Group Network, Inc. and Howard
L. Allen and Donald G. Jackson (stockholders of Hollywood Entertainment
Network, Inc.) dated May 12, 2000
(1)
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|
2.2
|
|
Plan
of Merger Agreement between The Cyber Group Network Corp. and CGN
Acquisitions Corporation dated December 7, 2000
(2)
|
|
2.3
|
|
Share
Exchange Agreement between The Cyber Group Network Corporation, R. Scott
Cramer, Steve Lowe, David Wassung and Skystar Bio-Pharmaceutical, and the
Skystar Stockholders dated September 20, 2005
(3)
|
|
3.1
|
|
Charter
of The Cyber Group Network Corporation as filed with the State of
Nevada
(4)
|
|
3.2
|
|
Certificate
of Amendment and Certificate of Change
(5)
|
|
3.3
|
|
Certificate
of Amendment to Increase Number of Authorized Shares of Common Stock
(13)
|
|
3.4
|
|
Amended
and Restated Bylaws of Skystar Bio-Pharmaceutical Company
(14)
|
|
3.5
|
|
Certificate
of Designation of Series B Convertible Preferred Stock
(4)
|
|
3.6
|
|
Certificate
of Change
(16)
|
|
4.1
|
|
Form
of Common Stock Certificate
(19)
|
|
4.2
|
|
Form
of Class A Convertible Debenture
(6)
|
|
4.3
|
|
Form
of Class B Convertible Debenture
(6)
|
|
4.4
|
|
Form
of Class A Warrant
(6)
|
|
4.5
|
|
Form
of Class B Warrant
(6)
|
|
4.6
|
|
Form
of Common Stock Purchase Option granted to the representative of the
underwriters
(19)
|
|
10.1
|
|
Form
of Securities Purchase Agreement, dated as of February 26, 2007 by and
among the Company and the Purchasers
(6)
|
|
10.2
|
|
Form
of Registration Rights Agreement, dated as of February 26, 2007 by and
among the Company and the Purchasers
(6)
|
|
10.3
|
|
Form
of Company Principal Lockup Agreement in connection with the Securities
Purchase Agreement dated as of February 26, 2007
(6)
|
|
10.4
|
|
Form
of the Amendment, Exchange and Waiver Agreement between Skystar
Bio-Pharmaceutical Company and the Participating Purchasers dated November
9, 2007
(7)
|
|
10.5
|
|
Form
of the Amendment and Waiver Agreement between Skystar Bio-Pharmaceutical
Company and two institutional and accredited investors dated March 31,
2008
(10)
|
|
10.6
|
|
Form
of 6-month Lock-up Agreement
(15)
|
|
10.7
|
|
Consulting
Services Agreement between Skystar Bio-Pharmaceutical (Cayman) Holdings,
Co., Ltd. (“Skystar Cayman”) and Xian Tianxing Bio-Pharmaceutical Co.,
Ltd. (“Xian Tianxing”) dated October 28, 2005
(4)
|
|
10.8
|
|
Equity
Pledge Agreement among Skystar Cayman, Xian Tianxing and Xian Tianxing’s
Majority Stockholders dated October 28, 2005
(4)
|
|
10.9
|
|
Operating
Agreement among Skystar Cayman, Xian Tianxing, Xian Tianxing’s Majority
Stockholders, and Weibing Lu dated October 28, 2005
(4)
|
|
10.10
|
|
Proxy
Agreement among Skystar Cayman, Xian Tianxing, Xian Tianxing’s Majority
Stockholders and Weibing Lu dated October 28, 2005
(4)
|
|
10.11
|
|
Option
Agreement among Skystar Cayman, Xian Tianxing, Xian Tianxing Majority
Stockholders and Weibing Lu dated October 28, 2005
(4)
|
|
10.12
|
|
Amendment
to Consulting Services Agreement among Skystar Cayman, Xian Tianxing and
Sida Biotechnology (Xian) Co., Ltd. (“Sida”) dated March 10, 2008
(8)
|
|
10.13
|
|
Amendment
to Equity Pledge Agreement among Skystar Cayman, Xian Tianxing, Xian
Tianxing’s Majority Stockholders, and Sida dated March 10, 2008
(8)
|
|
10.14
|
|
Agreement
to Transfer of Operating Agreement among Skystar Cayman, Xian Tianxing,
Xian Tianxing’s Majority Stockholders, Weibing Lu and Sida dated March 10,
2008
(8)
|
|
10.15
|
|
Designation
Agreement among Skystar Cayman, Xian Tianxing, Xian Tianxing’s Majority
Stockholders, Weibing Lu and Sida dated March 10, 2008
(8)
|
|
10.16
|
|
Agreement
to Transfer of Option Agreement among Skystar Cayman, Xian Tianxing, Xian
Tianxing Majority Stockholders, Weibing Lu and Sida dated March 10,
2008
(8)
|
|
10.17
|
|
Employment
Agreement with Weibing Lu dated May 5, 2008
(11)
|
|
10.18
|
|
Loanout
Agreement with Worldwide Officers, Inc. with respect to the services of
Bennet Tchaikovsky, our Chief Financial Officer, dated May 5, 2008
(18)
|
|
10.19
|
|
Form
of Director Offer Letter with Mr. Qiang Fan and Mr. Winston Yen
(14)
|
|
10.20
|
|
Form
of Director Offer Letter with Mr. Chengtun Qu and Mr. Shouguo Zhao
(14)
|
|
10.21
|
|
Form
of Amendment to Loanout Agreement with Wordwide Officers, Inc
(17)
|
|
10.22
|
|
Form
of Director Offer Letter with Mr. Mark D. Chen
(17)
|
|
31.1
|
|
Section
302 Certification by the Corporation’s Chief Executive
Officer*
|
|
31.2
|
|
Section
302 Certification by the Corporation’s Chief Financial
Officer*
|
|
32.1
|
|
Section
906 Certification by the Corporation's Chief Executive
Officer*
|
|
32.2
|
|
Section
906 Certification by the Corporation's Chief Financial
Officer*
|
|
99.1
|
|
Legal
Opinion from Allbright Law Offices regarding, among other things, the
contractual arrangements Skystar Cayman entered into with Xian Tianxing
and its stockholders, dated November 3, 2005
(12)
|
|
99.2
|
|
Legal
Opinion from Allbright Law Offices regarding the transfer of the
contractual arrangements from Skystar Cayman to Sida, dated April 29,
2008
(12)
|
|
99.3
|
|
Lease
Agreement between Xian Tianxing and Weibing Lu dated June 1, 2007
(9)
|
|
99.4
|
|
Lease
Agreement between Shanghai Siqiang Biotechnological Co., Ltd. and Weibing
Lu dated June 17, 2007
(12)
|
|
99.5
|
|
Summary
of Research Arrangement between Shanghai Poultry Verminosis Institute and
Xian Tianxing
(12)
|
|
99.6
|
|
Cooperation
Agreement between Shaanxi Microbial Institute and Xian Tianxing
(12)
|
*
Filed herewith.
(1)
Incorporated by reference from the
Registrant’s Current Report on Form 8-K filed on June 1,
2000.
(2)
Incorporated by reference from the
Registrant’s Current Report on Form 8-K/A filed on January 12,
2001.
(3)
Incorporated by reference from the
Registrant’s Current Report on Form 8-K filed on September 26,
2005.
(4)
Incorporated by reference from the
Registrant’s Current Report on Form 8-K filed on November 14,
2005.
(5)
Incorporated by reference from the
Registrant’s Annual Report on Form 10-KSB filed on April 17,
2006.
(6)
Incorporated by reference from the
Registrant’s Current Report on Form 8-K filed on March 5,
2007.
(7)
Incorporated by reference from the
Registrant’s Current Report on Form 8-K filed on December 11,
2007.
(8) Incorporated
by reference from the Registrant’s Current Report on Form 8-K filed on March 11,
2008.
(9)
Incorporated by reference from the
Registrant’s Annual Report on Form 10-K filed on April 2,
2008.
(10)
Incorporated by reference from the
Registrant’s Current Report on Form 8-K filed on April 23,
2008.
(11)
Incorporated by reference from the
Registrant’s Current Report on Form 8-K filed on May 7,
2008.
(12)
Incorporated by reference from the
Registrant’s Registration Statement on Form S-1/A filed on June 26,
2008.
(13)
Incorporated by reference from the
Registrant’s Current Report on Form 8-K filed on July 14,
2008.
(14)
Incorporated by reference from the
Registrant’s Current Report on Form 8-K filed on July 15,
2008.
(15)
Incorporated by reference from the
Registrant’s Registration Statement on Form S-1/A filed on November 28,
2008.
(16)
Incorporated by reference from the
Registrant’s Current Report on Form 8-K filed on May 18,
2009.
(17)
Incorporated by reference from the
Registrant’s Current Report on Form 8-K filed on May 27,
2009.
(18)
Incorporated by reference from the
Registrant’s Registration Statement on Form S-1/A filed on June 2,
2009.
(19)
Incorporated by reference from the
Registrant’s Registration Statement on Form S-1/A filed on June 26,
2009.
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
November
16, 2009
|
SKYSTAR
BIO-PHARMACEUTICAL COMPANY
|
|
|
|
|
|
By:
|
/s/
Weibing Lu
|
|
|
|
Weibing
Lu
Chief
Executive Officer
(Principal
Executive Officer)
|
|
|
|
|
|
By:
|
/s/
Bennet P. Tchaikovsky
|
|
|
|
Bennet
P. Tchaikovsky
Chief
Financial Officer
(Principal
Financial and Accounting
Officer)
|