Unassociated Document
As
filed with the Securities and Exchange Commission on October 8,
2010
Registration
No. 333-163443
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
POST-EFFECTIVE
AMENDMENT No. 2 to
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
CHINA
MEDICINE CORPORATION
(Name
of registrant in its charter)
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Nevada
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5122
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51-0539830
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(State
or other jurisdiction
of
incorporation or
organization)
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(Primary
Standard Industrial
Classification
Code Number)
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(I.R.S.
employer
identification
number)
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2/F,
Guangri Tower
No.
9 Siyounan Road 1st Street
Yuexiu
District
Guangzhou,
China 510600
(8620)
8739-1718 and (8620) 8737-8212
(Address
and telephone number of principal executive offices)
United
Corporate Services, Inc.
202
South Minnesota Street
Carson
City, Nevada 89703
(800)
899-8648
(Name,
address and telephone number of agent for service)
Copies
to:
Elizabeth
Fei Chen, Esq.
Pryor
Cashman LLP
7
Times Square
New
York, NY 10036-6569
(212)
421-4100
Approximate
date of proposed sale to the public: As soon as practicable after this
Registration Statement becomes effective.
If any of
the securities being registered on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933
(“Securities Act”), check the following box. x
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
(Check
one):
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Large
accelerated filer ¨
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Accelerated
filer ¨
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Non-accelerated
filer ¨
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Smaller
reporting company x
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(Do not
check if a smaller reporting company)
The
registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
EXPLANATORY
NOTE
This
Post-Effective Amendment No. 2 to the Registration Statement on Form S-1 (File
No. 333-163443) (the “Registration Statement”) is being filed pursuant to the
undertakings in Item 17 of the Registration Statement to update and supplement
the information contained in the Registration Statement, as originally declared
effective by the Securities and Exchange Commission (the “Commission”) on
December 18, 2009 and as amended by Post-Effective Amendment No. 1 to Form S-1,
filed on January 12, 2010 and declared effective by the Commission on January
19, 2010, (A) to include the information contained in (i) our Annual Report on
Form 10-K, for the year ended December 31, 2009, filed on March 30, 2010; (ii)
our Definitive Proxy Statement on Form 14A, dated April 19, 2010, filed on April
19, 2010; (iii) our Current Reports on Form 8-K, dated April 30, 2010, filed on
May 3, 2010, dated May 13, 2010, filed on May 13, 2010, dated May 27, 2010,
filed on June 2, 2010, dated July 9, 2010, filed on July 9, 2010, and dated
August 12, 2010, filed on August 12, 2010; and (iv) our Quarterly Reports on
Form 10-Q, for the quarter ended March 31, 2010, filed on May 14, 2010, and for
the quarter ended June 30, 2010, filed on August 12, 2010, and (B) to make
certain other updating revisions to the information contained
herein.
No
additional securities are being registered. All filing fees payable
in connection with the registration of shares of our common stock and
the common stock issuable upon exercise of warrants to purchase shares of our
common stock were previously paid with the original filing of the Registration
Statement on December 2, 2009.
The
shares of our common stock which have been registered for resale under this
registration statement were previously registered pursuant to a registration
statement on Form SB-2 (No. 333-133283) (the “SB-2 Registration”)
which SB-2 Registration was withdrawn pursuant to a Post-Effective Amendment
filed with the Commission on December 2, 2009 as declared effective by the
Commission on December 22, 2009.
The
information in this prospectus is not complete and may be changed. The selling
stockholders may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities, and the selling stockholders are not
soliciting offers to buy these securities, in any state where the offer or sale
of these securities is not permitted.
Subject
to completion dated October 8, 2010
PROSPECTUS
1,627,129
shares of common stock
CHINA
MEDICINE CORPORATION
This
prospectus relates to the resale, from time to time, of up to 1,627,129 shares of our common
stock by the stockholders referred to throughout this prospectus as “selling
stockholders.” Of the total number of shares of our common
stock offered in this prospectus, 20,000 shares are issuable upon the exercise
of Series A common stock purchase warrants issued on February 8, 2006 which have
an exercise price of $1.70 per share and 1,376,315 shares are issuable upon the
exercise of Series B common stock purchase warrants issued on February 8, 2006
which have an exercise price of $2.43 per share. The Series A and
Series B common stock purchase warrants both expire on February 8,
2011. The remaining 230,814 shares of common stock offered in this
prospectus are shares of our common stock that were previously issued upon the
exercise of the Series A and Series B common stock purchase warrants but which
have not yet been resold.
Since the
filing of Post-Effective Amendment No. 1 to the Registration Statement,
1,026,474 Series A and Series B common stock purchase warrants were cashlessly
exercised in exchange for 486,179 shares of common stock, resulting in a
reduction in the number shares of common stock offered in this prospectus by
540,295. In addition, 826,806 shares of common stock that were
previous offered in this prospectus have been sold.
The
selling stockholders, and any of their pledgees, donees, assignees and
successors-in-interest, may offer all or part of their shares for resale from
time to time through public or private transactions, either at prevailing market
prices or at privately negotiated prices. We will not receive any of the
proceeds from sales of the shares by the selling
stockholders. However, if the warrants are exercised for cash, we
will receive the aggregate exercise price for those warrants. The
terms of the warrants require the holder to exercise for cash so long as there
is an effective registration statement covering the shares issuable
thereunder.
We have
paid all of the registration expenses incurred in connection with this offering
(totaling $36,110) and will pay all additional expenses for maintaining the
Registration Statement as current, but the selling stockholders will pay all of
the selling commissions, brokerage fees and related expenses. We have agreed to
indemnify the selling stockholders against certain liabilities, including
liabilities under the Securities Act.
Our
common stock is currently quoted on the Financial Industry Regulatory
Authority’s OTC Bulletin Board under the symbol “CHME.OB”. As of October 4,
2010, the last reported bid price of our common stock was $ 2.06 per share and
the last reported ask price was $ 2.50 per share.
Investing
in our common stock involves a high degree of risk. See the “Risk Factors” beginning on
page 7
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date
of this prospectus is October 8, 2010
TABLE
OF CONTENTS
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Page
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ABOUT
THIS PROSPECTUS
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1
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CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION CONTAINED
IN THIS PROSPECTUS
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1
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PROSPECTUS
SUMMARY
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RISK
FACTORS
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7
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USE
OF PROCEEDS
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8
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SELLING
STOCKHOLDERS
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9
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PLAN
OF DISTRIBUTION
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12
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DESCRIPTION
OF SECURITIES
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14
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INTERESTS
OF NAMED EXPERTS AND COUNSEL
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15
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LEGAL
MATTERS
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15
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MATERIAL
CHANGES
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16
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I INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
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16
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DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
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17
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WHERE
YOU CAN FIND MORE INFORMATION
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17
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PART
II. INFORMATION NOT REQUIRED IN PROSPECTUS
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II-1
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SIGNATURES
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II-7
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ABOUT
THIS PROSPECTUS
You
should rely only on the information contained in this prospectus. We have not
authorized anyone to provide you with information different from that contained
in this prospectus. The selling stockholders are offering to sell and seeking
offers to buy shares of our common stock only in jurisdictions where offers and
sales are permitted. You should assume that the information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or of any sale of our common
stock.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS AND OTHER
INFORMATION
CONTAINED IN THIS PROSPECTUS
This
prospectus contains some forward-looking statements. Forward-looking statements
give our current expectations or forecasts of future events. You can identify
these statements by the fact that they do not relate strictly to historical or
current facts. Forward-looking statements involve risks and uncertainties.
Forward-looking statements include statements regarding, among other things, (a)
our projected sales, profitability, and cash flows, and our projected expenses,
(b) our growth strategies, (c) anticipated trends in our industries, (d) our
future financing plans, (e) our anticipated needs for working capital, and (f)
potential future expansions and government approvals and other future actions.
They are generally identifiable by use of the words "may," "will," "should,"
"anticipate," "estimate," "plans," “potential," "projects," "continuing,"
"ongoing," "expects," "management believes," "we believe," "we intend" or the
negative of, or other variations on, these phrases or comparable terminology.
These statements may be found under "Management's Discussion and Analysis of
Financial Condition” and "Description of Business," which are incorporated
herein by reference to the Company’s Annual Report on Form 10-K, as well as in
this prospectus generally.
Any or
all of our forward-looking statements in this report may turn out to be
inaccurate. They can be affected by inaccurate assumptions we might make or by
known or unknown risks or uncertainties. Consequently, no forward-looking
statement can be guaranteed. Actual future results may vary materially as a
result of various factors, including, without limitation, the risks outlined
under "Risk Factors" and matters described in this prospectus generally. In
light of these risks and uncertainties, there can be no assurance that the
results anticipated in the forward-looking statements contained in this
prospectus will in fact occur. You should not place undue reliance on these
forward-looking statements.
Currency,
exchange rate, and “China” and other references
Unless
otherwise noted, all currency figures in this filing are in U.S. dollars.
References to "yuan" or "RMB" are to the Chinese yuan (also known as the
renminbi). According to the currency exchange website www.xe.com, on
October 4, 2010, $1.00 was equivalent to 6.692 yuan.
References
to the “PRC” or “China” are to the People’s Republic of China.
References
to the “OTC Bulletin Board,” are to the Financial Industry Regulatory
Authority’s, or FINRA’s, over-the-counter Bulletin Board, a securities quotation
service, which is accessible at the website www.otcbb.com. FINRA is the
successor entity of the National Association of Securities
Dealers.
PROSPECTUS
SUMMARY
The following summary highlights
certain material aspects of the offering for resale of common stock by the
selling stockholders covered by this prospectus but may not contain all of the
information that is important to you. You should read this summary together with
the more detailed information regarding our company, our common stock and our
financial statements and notes to those statements appearing elsewhere in this
prospectus, including the “Risk Factors”, before making an investment
decision. Except as otherwise specifically stated or unless the
context otherwise requires, the “Company,” “we,” “our” and “us” refer
collectively to (i) China Medicine Corporation (“China Medicine”), (ii) Konzern
Group Limited (“Konzern Group”), which is directly wholly-owned by China
Medicine (iii) Guangzhou Konzern Medicine Co., Ltd. (“Konzern”), a wholly-owned
subsidiary of Konzern Group; (iv) Guangzhou Co-win Bioengineering Co.,
Ltd., which is 70% owned by Konzern (“Co-win Bioengineering”); (v) Guangzhou
Konzern Bio-Technology Co., Ltd. (“Konzern Bio-Tech”), which is
directly wholly-owned by Konzern Group; (vi) Guangzhou LifeTech
Pharmaceuticals Co., Ltd. (“LifeTech”), which is directly wholly-owned by
Konzern Group, (vii) Guangzhou LifeTech Pharmaceutical & Technological
Ltd.(“LifeTech P&T”), which is directly wholly-owned by Konzern Group); and
(viii) Konzern US Holding Corporation, which is directly wholly-owned by
Konzern. Each of Konzern Group, Konzern, Co-win Bioengineering,
Konzern Bio-Tech, LifeTech, and LifeTech P&T is a limited liability company
organized under the laws of the People’s Republic of China
(“PRC”).
Through
Konzern, we distribute approximately 2,100 products in China. The products
include prescription and over-the-counter drugs, Chinese herbs, traditional
Chinese medicines made from Chinese herbs, nutritional supplements, dietary
supplements and medical instruments.
We also
entered the pharmaceutical manufacturing field in 2009, through
the acquisition of LifeTech. LifeTech holds 39
manufacturing approvals for its drugs, which include Traditional Chinese
Medicines and dried powder injections.
History
of the Company
We are a
Nevada corporation that was originally organized in Delaware on February 10,
2005, under the name Lounsberry Holdings III, Inc., for the purpose of acquiring
an operating business. Until February 2006, we were a shell company as that term
is defined by SEC rules.
Reverse
Acquisition
On
February 8, 2006, we acquired an operating business and ceased to be a shell
company by entering into a reverse merger transaction. In the reverse merger, we
acquired all of the equity of Konzern, a PRC distributor of pharmaceutical
products, in exchange for issuing 6,530,000 shares of common stock, representing
approximately 88.5% of our outstanding common stock, at such time, to the owners
of Konzern. Prior to July 25, 2000, Konzern was a state-owned
medicine distribution company located in the City of Guangzhou, China. On July
25, 2000, Konzern was privatized through a sale of all of its capital stock by a
PRC government-owned holding company.
As a
result of the reverse merger, beginning February 8, 2006, we have been engaged,
through our wholly-owned subsidiary Konzern, in pharmaceutical distribution in
the PRC. We serve as a holding company for Konzern.
Also on
February 8, 2006, in connection with the acquisition of Konzern, we entered
into:
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A
preferred stock purchase agreement (the “Preferred Stock Purchase
Agreement”) pursuant to which we issued 3,120,000 shares of Series A
preferred stock and warrants to purchase an aggregate of 7,389,476 shares
of common stock to the owners of Konzern in exchange for $3,900,000. Each
share of Series A preferred stock is convertible into one share of common
stock.
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A
stock redemption agreement with Capital Markets Advisory Group, LLC
("Capital Markets"), which was then our principal stockholder, pursuant to
which we purchased 928,000 shares of common stock from Capital Markets for
$167,602, and repaid $32,398 of debt to Capital Markets, using the
proceeds from the sale of the Series A preferred
stock.
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On May
10, 2006, we changed our name to China Medicine Corporation.
After
the Reverse Acquisition
On July
7, 2006, we formed. Co-Win, a PRC joint-venture company with Guangzhou Ji’nan
Science & Technology Industrial Group (“JSIG”) and Mr. Dongsheng Yao, to
develop applications for aflatoxin-detoxifizyme, or rADTZ, an enzyme designed to
eliminate a harmful toxin from food and animal feed. Co-Win is still a
development-stage company and has not undertaken significant operating
activities as of December 31, 2009. The PRC has granted three patents
to Co-Win related to rADTZ. Co-Win obtained patents for rADTZ in Australia,
South Africa and South Korea in 2008, patents for rADTZ in Russia and Mexico in
2009 and patents for rADTZ in the United States in 2010.
In
November 2006, we obtained approval from local government authorities for the
distribution of medical supplies and devices throughout Guangdong Province. We
began to sell and distribute medical supplies such as bandages and cotton swabs
in the first quarter of 2007.
Beginning
in 2007, the Guangdong government established an on-line bidding system (the
“Bidding System”) for medical distribution rights in Guangdong. We obtained the
rights to sell and distribute a total of 516 products through the Bidding System
in 2008. We obtained distribution rights for 661 products through the Bidding
System in 2009, which included renewals of the distribution rights for some of
the products that we had in 2008 and obtaining some new distribution
rights. We expect to renew or obtain rights for most of our existing
products in 2010 and expect the revenue from the sale of these products to
increase in 2010 from sales of products under distribution rights obtained
through the Bidding System.
In July
2008, we began to introduce to the U.S. market one of our products, a food
supplement called BeThin Tablets, which is designed for use as a weight-loss
aid. BeThin Tablets were developed by Konzern and manufactured by a Hong Kong
pharmaceutical manufacturer.
We are
also actively exploring the Hong Kong market for various products. We have
obtained trademark protection from the Hong Kong government for our Konzern and
BeThin trademarks and have registered with the Hong Kong Trade Development
Council to search for potential distributors in Hong Kong.
Recent
Developments
On May
20, 2009, Konzern Bio-Tech was incorporated with registered capital of
RMB500,000. Konzern Bio-Tech was established for the purpose of
engaging in research and development and utilizing funding and other support
available from the Chinese Government for domestic high technology companies.
Bio-Tech is still a development-stage company and has not undertaken significant
operating activities.
On June
10, 2009, we moved our legal domicile from Delaware to Nevada.
On
December 4, 2009, we acquired LifeTech which enhanced our business by adding a
research and development force and manufacturing facilities and by expanding our
sales channels and distribution network. This was accomplished by
Konzern entering into an Equity Ownership Transfer Agreement, dated October 26,
2009 (the “Transfer Agreement”) with Sinoform Limited, a company registered
under the laws of the British Virgin Islands (“Sinoform”), to acquire 100% of
Sinoform’s equity interests in LifeTech, a wholly-owned subsidiary of
Sinoform. Pursuant to the Transfer Agreement, on December 4, 2009
Sinoform transferred all of its equity interests in LifeTech for a cash payment
of RMB57,000,000 (approximately $8,344,800) in addition to the assumption of
RMB89,800,000 (approximately $13,146,720) of LifeTech’s outstanding bank
debt.
LifeTech
is a developer and manufacturer of pharmaceutical products with a focus on
vascular medicines, anti-inflammatory medicines, women’s health and other
general health traditional Chinese medicines. LifeTech was founded in
1992, and its corporate headquarters are located in Guangzhou,
China.
On
December 31, 2009, we entered into a Stock Subscription Agreement (the
“Subscription Agreement”) with OEP CHME Holdings, LLC, a Delaware limited
liability company (“OEP”), and Mr. Yang Senshan, our chief executive officer and
chairman of our board of directors, pursuant to which OEP agreed to purchase,
subject to satisfaction of certain closing conditions, 4,000,000
shares of our common stock, par value US$.0001 per share at $3.00 per
share and 1,920,000 shares of our redeemable convertible preferred stock, par
value $.0001 per share at $30.00 per share, for an aggregate purchase price of
$69,600,000. This transaction was completed on January 29, 2010
resulting in gross proceeds to the Company of $69,600,000 and net proceeds of
approximately $66,500,000 pursuant to the Subscription Agreement.
On
January 7, 2010, the Company established, in China under PRC law, its
wholly-owned subsidiary, Konzern Group, initially named Konzern Company
Limited. The registered capital of Konzern Group is approximately
$29.3 million of which $16 million has been contributed as of September 30,
2010.
On May
12, 2010, the Company completed the reorganization of its PRC subsidiaries such
that the PRC subsidiaries are now controlled by Konzern Group.
On June
30, 2010, our board of directors approved a stock repurchase program for up to
$2.0 million of our common stock. The program is valid through July
2011 and allows the Company to repurchase shares of the Company’s common stock
from time to time on the open market or in privately negotiated transactions. As
of October 4, 2010, the Company has repurchased 375,156 shares of common stock
for an aggregate cost of $901,223.
Business
Overview
We are a
distributor of pharmaceutical and medical products in the PRC, including
prescription and over-the-counter drugs, Chinese herbs, traditional Chinese
medicines made from Chinese herbs, nutritional supplements, dietary supplements,
and medical instruments. We are also engaged in proprietary research and
development with the aim of creating new pharmaceutical products and
intellectual property that we may sell in the future. In 2009, 99% of our total
revenues of approximately $64 million came from product sales and 1% came from
sales of intellectual property.
Through
our subsidiary, LifeTech, we also develop and manufacture vascular medicines,
anti-inflammatory medicines, women’s health and other general health traditional
Chinese medicines.
As of
December 31, 2009, we sell or distribute approximately 2,100 pharmaceutical and
medical products, including: (i) western and traditional Chinese medicine
(“TCM”) drugs and supplements (including prescription and over the counter
medicines), (ii) medical equipment and substances including herbs, and (iii)
dietary supplements. In 2009, western and TCM drugs and supplements accounted
for $61.44 million, or 94.9%, of total revenues. In 2009, revenue from sales of
medical equipment was $1.22 million or 1.9% of total revenues; revenue from
sales of dietary supplements was $0.99 million or 1.5% of total revenues, and
other revenue was $0.47 million or 0.7% of total revenues.
We also
sell or license medical technology that we own or develop. Our sales
of medical technology amounted to $0.63 million in 2009 or 1.0% of total
revenues.
We have
exclusive rights to nationwide distribution of seven products made by our
suppliers, which accounted for approximately 22.7% of our sales in fiscal year
2009 and 29.4% of our sales in fiscal year 2008. The most significant products
among them are Iopamidol Injection 370 and 300, prescription medicines that are
used for angiography and CT scanning. For the years ended December 31, 2009 and
2008, our total revenue from these products amounted to $8.9 million and $6.1
million respectively, which were 13.7% and 11.4% of our annual sales for the
years ended December 31, 2009 and 2008, respectively.
Our
customers are typically medical product wholesalers, hospitals, and retail drug
stores. Our five largest customers accounted for 45.0% of total sales for the
year ended December 31, 2009, compared to 37.9% for the corresponding period of
2008. Currently we have approximately 840 customers.
We
compete with large state-owned drug distributors that are better capitalized
than we are and that are entitled under PRC law to sell anesthesia products,
which we may not sell. We believe that our competitive advantages include having
our own research and development facilities, after-sale customer service, and
sole distribution rights to seven medical products, as well as price, service
and the ability to provide timely delivery.
Our
executive offices and Konzern Group’s executive offices are located at China
Medicine Corporation, 2/F, Guangri Tower, No. 9 Siyounan Road 1st Street, Yuexiu
District, Guangzhou, China 510600, and the telephone numbers are (8620)
8739-1718 and (8620) 8737-8212. Our website can be found at www.cmc621.com.
Neither the information nor any other content on our website or any other
Internet website is a part of this prospectus.
The
Offering
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Common
stock outstanding as of October 4, 2010
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23,712,061
(1)
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Common
stock being offered by us
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0
shares
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Total
remaining common stock that may be offered by selling stockholders in this
offering
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1,627,129
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Common
stock to be outstanding after the completion of the
offering
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25,339,190
(2)
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Use
of Proceeds
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We
will not receive any of the proceeds from the sale of shares by the
selling stockholders. However, if the outstanding warrants held by the
selling stockholders are exercised for cash, we will receive the net
proceeds of the issuance of the underlying stock at the exercise
price. The terms of those warrants require the holder to pay
the exercise price in cash (as opposed to by “cashless exercise”) if the
underlying shares of common stock are covered by an effective registration
statement. If the selling stockholders exercise all of their
outstanding warrants for cash at the current exercise prices, we would
issue 1,396,315 shares of common stock and receive $3,378,445 in proceeds
from the issuance. The selling stockholders may choose not to
exercise the remaining outstanding warrants for cash or at all. We will
use all proceeds from the exercise of warrants for working capital and
other general corporate purposes.
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Limitation
on Issuance of Common Stock:
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No
holder of our common stock purchase warrants can convert or exercise our
securities into common stock if such holder and its affiliates would then
own more than 4.9% of our outstanding common stock.
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Our
OTC Bulletin Board Trading Symbol
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CHME.OB
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Risk
Factors
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See
"Risk Factors" beginning on page 7 and other information included in this
prospectus for a discussion of factors you should consider before deciding
to invest in shares of our common
stock.
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(1)
Includes 230,814 shares which were previously issued to selling stockholders and
which are covered by the Registration Statement. Does not include the
1,396,315 shares of common stock issuable upon exercise of our outstanding
Series A and Series B warrants held by the selling stockholders. If those shares
of common stock, all of which are unissued as of October 4, 2010, are added to
the total number of shares of our common stock outstanding, the resulting total
number of shares would be 25,339,190.
(2)
Assumes prior exercise of all of our outstanding Series A and Series B warrants
to purchase common stock.
Selling
Stockholders
Some of
the selling stockholders acquired their shares in a private placement in
February 2006. Others acquired their shares in separate private
purchases of stock or as gifts from stockholders that originally acquired their
shares in the February 2006 private placement.
Plan
of Distribution
This
offering is not being underwritten. The selling stockholders, and any of their
pledgees, donees, assignees and successors-in-interest, may sell their shares
from time to time in privately negotiated transactions or in transactions on the
OTC Bulletin Board or other stock exchange on which the shares may be listed in
the future. The shares may be sold at market prices prevailing at the time of
sale, at prices related to the prevailing market prices, or at negotiated
prices. To the extent required, specific information about a particular sale
(such as the purchase price and public offering prices, the names of any broker
or dealer, and any applicable commission or discounts) will be described in an
accompanying prospectus. We intend to keep this prospectus current until all of
the common stock being offered under this prospectus is sold. The shares may be
offered pursuant to this prospectus so long as this prospectus is then current
under the rules of the SEC and we have not withdrawn the registration statement
of which this prospectus forms a part.
We will
pay all expenses of registration incurred in connection with this offering, but
the selling stockholders will pay all of the selling commissions, brokerage fees
and related expenses. We have agreed to indemnify the selling stockholders
against certain liabilities, including liabilities under the Securities Act of
1933, as amended (the “Securities Act”).
RISK
FACTORS
An
investment in our common stock involves a high degree of risk. You should
carefully consider the following information about these risks, together with
the other information contained in this prospectus and in the section entitled
“Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2009, as filed with the Commission on March 30, 2010, which
report is incorporated by reference into this prospectus, before investing in
our common stock. If any of the events anticipated by the risks described
therein or below occur, our results of operations and financial condition could
be adversely affected which could result in a decline in the market price of our
common stock, causing you to lose all or part of your
investment.
Our
new principal stockholder will have substantial control over us.
Upon the
consummation of the January 2010 private placement, OEP, now owns approximately
54 % of the total issued and outstanding shares of common stock on a fully
diluted basis. As a consequence, OEP will be able to exert a
significant degree of influence or actual control over our management and
affairs and will control matters requiring stockholder approval, including the
election of directors, a merger, consolidation or sale of all or substantially
all of our assets, and any other significant transaction. Specifically,
pursuant to the Subscription Agreement, OEP has the right to nominate one
non-independent director and four independent directors, reasonably acceptable
to Senshan Yang. The interests of this stockholder may not always coincide with
your interests or the interests of our other stockholders. For
instance, this concentration of ownership may have the effect of delaying or
preventing a change in control of the Company otherwise favored by our other
stockholders.
A
few of our stockholders control a significant percentage of our common
stock.
Over 27%
of our outstanding common stock is owned by the former owners of Konzern,
Senshan Yang, our chief executive officer and a director, Minhua Liu, our
executive vice president and a director, and Junhua Liu, the brother of Minhua
Liu. They presently have sufficient voting power to influence the election of
the directors and the approval of transactions requiring stockholder approval
and any action by stockholder consent without a stockholders' meeting. There is
no guarantee that their judgment will be the same as yours on important matters
affecting the Company, including whether to make acquisitions, be acquired by
another company, authorize new shares of stock, and maintain or dismiss members
of management.
The
sale of our common stock in this offering may depress our stock
price.
Pursuant
to this offering, the selling stockholders may sell up to 1,627,129 shares or
our common stock, or approximately 6.9% of our outstanding common stock as of
October 4, 2010. These sales of a substantial number of shares of our common
stock in the public market, or the perception that such sales may occur, could
adversely affect the price of our common stock. We cannot predict the effect, if
any, that market sales of those shares of common stock or the availability of
those shares of common stock for sale will have on the market price of our
common stock.
USE
OF PROCEEDS
We will
not receive any of the proceeds from any sales by the selling stockholders of
their common stock. The terms of the warrants allow the holder to pay
the exercise price by cash, or by “cashless exercise” if there is no effective
registration statement covering the resale of the underlying shares of common
stock. If there is such a registration statement, the holder must
exercise the warrants for cash. If the selling stockholders exercise
any of the outstanding warrants to purchase a total of 1,396,315 shares of our
common stock for cash, we will receive the proceeds from the issuance of that
stock at the exercise price. In April 2007, the exercise price of our
Series A warrants was reduced from $1.75 to $1.70 per share and the exercise
price of our Series B warrants was reduced from $2.50 to $2.43 per share because
we missed certain performance targets set forth in the securities purchase
agreement we entered into with private investors on February 8,
2006.
The
maximum total exercise price of (i) our outstanding Series A warrants is
approximately $34,000 which we will receive only if all of the warrants are
exercised for cash at their current exercise price which is $1.70 per share and
(ii) our outstanding Series B warrants is approximately $ 3.34 million, which we
will receive only if all of the warrants are exercised at their current exercise
price for cash which is $2.43 per share. Any proceeds we receive from
the exercise of the warrants will be used for working capital and general
corporate purposes. We cannot assure you that any of the warrants
will be exercised or if exercised, that such exercise will be for
cash.
The
holders of our warrants have cashless exercise rights, which provide them with
the ability to receive common stock with a value equal to the appreciation in
the stock price over the exercise price of the warrants being exercised. This
right was not exercisable during the first six months that the warrants were
outstanding and thereafter if the underlying shares are covered by an effective
registration statement. To the extent that the holders of the warrants exercise
this right, we will not receive proceeds from such exercise. As of October 4,
2010, 358,948 Series A warrants and 1,152,948 Series B warrants have been
exercised cashlessly to purchase an aggregate of 670,542 shares of our common
stock.
SELLING
STOCKHOLDERS
The
following table sets forth the names of the selling stockholders, the number of
shares of common stock owned beneficially by each of the selling stockholders as
of October 4, 2010 and the number of shares of our common stock that may be
offered by the selling stockholders as of October 4, 2010 pursuant to this
prospectus. The table and the other information contained under the
captions "Selling Stockholders" and "Plan of Distribution" have been prepared
based upon information furnished to us by or on behalf of the selling
stockholders.
|
Name
|
|
No. of
Shares
Beneficially
owned
|
|
|
No. of
Shares
Being
offered
|
|
|
No. of
shares
beneficially
owned
after the
offering
(5)
|
|
|
Percentage
of class
|
|
|
Barron
Partners, LP(1)
|
|
|
1,596,483 |
|
|
|
1,562,233 |
|
|
|
34,250 |
|
|
|
* |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ray
and Amy Rivers, JTWOS
|
|
|
53,571 |
|
|
|
3,821 |
(2)(3)(4) |
|
|
49,750 |
|
|
|
* |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JMG
Capital Partners LP
|
|
|
21,075 |
|
|
|
21,075 |
|
|
|
— |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant
Strategies Fund, LLC (3)
|
|
|
20,000 |
|
|
|
20,000 |
|
|
|
— |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rivers
Family Foundation (4)
|
|
|
15,000 |
|
|
|
15,000 |
|
|
|
— |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wake
Forest University(4)
|
|
|
5,000 |
|
|
|
5,000 |
|
|
|
— |
|
|
|
|
% |
(1) Mr.
Andrew B. Worden, president of the general partner of Barron Partners LP, has
sole voting and dispositive power over the shares beneficially owned by Barron
Partners.
(2) Ray
and Amy Rivers, Steve Mazur, and William M. Denkin sold warrants to purchase an
aggregate of 189,000 shares of common stock (63,000 shares each), 94,500 of
which were purchased by JMG Capital Partners LP, and 94,500 of which were
purchased by JMG Triton Offshore Fund, Ltd.
(3) Ray
and Amy Rivers and Steve Mazur each sold warrants to purchase 10,000 shares of
Common Stock to Warrant Strategies Fund, LLC.
(4) Ray
and Amy Rivers made gifts of 15,000 shares and 5,000 shares, respectively, to
the Rivers Family Foundation and Wake Forest University.
(5) We do
not know when or in what amounts a selling stockholder may offer shares for
sale. The selling stockholders might not sell any or all of the
shares offered by this prospectus. Because the selling stockholders
may offer all or some of the shares pursuant to this offering, and because there
are currently no agreements, arrangements or understandings with respect to the
sale of any of the shares, we cannot estimate the number of the shares that will
be held by the selling stockholders after completion of the
offering. However, for purposes of this table, we have assumed that,
after completion of the offering, none of the shares covered by this prospectus
will be held by the selling stockholders.
None of
the selling stockholders holds, or within the past three years has held, any
position, office or material relationship with us or any of our predecessors or
affiliates.
The
shares of common stock being offered by Barron Partners LP and Ray and Amy
Rivers (as joint tenants with right of survivorship) represent the shares of
common stock issuable upon exercise of the warrants that were issued to them in
the February 2006 private placement, or represent outstanding shares of common
stock that were previously issued to them upon exercise of such
warrants. See "Selling Stockholders - February 2006 Private
Placement" for information relating to the shares of common stock issuable to
them.
None of
the selling stockholders are broker-dealers. Ray Rivers is an employee of a
broker-dealer, CRT Capital LLC. Although Mr. Rivers does not have an
ownership or control relationship with, and is not an officer, director, member
or partner of, the broker-dealer, Mr. Rivers may, nonetheless, be deemed to be
an affiliate of the broker-dealer. Such Selling stockholder who may be deemed to
be an affiliate and an employee of a broker-dealer purchased his shares in the
ordinary course and at the time of purchasing the securities he had no
agreements or understandings, directly or indirectly, with any person to
distribute the securities.
The
Preferred Stock Purchase Agreement provides that the warrants cannot be
exercised to the extent that the number of shares of common stock held by the
selling stockholder and his affiliates after such conversion or exercise would
exceed 4.9% of the outstanding common stock. Beneficial ownership is determined
in the manner provided in Section 13(d) of the Securities Exchange Act of 1934
and Regulation 13d-3 of the SEC thereunder. This provision, which cannot be
modified, limits the ability of the holders of the warrants to exercise their
warrants. Based on our 23,712,061 shares of common stock outstanding
on October 4, 2010, Barron Partners and Ray and Amy Rivers may not exercise
warrants if the conversion or exercise would result in their owning more than
1,161,891 shares of common stock at any one time. This limitation applies
separately to each of these selling stockholders. As the number of shares of
common stock increases, whether upon conversion of Series A preferred stock or
exercise of warrants or for any other reason, the number of shares that may be
issued under this limitation will increase. In the event that any holder of
warrants issued in the February 2006 private placement transfers its or his
warrants, the transferee, if it is not an affiliate of the transferor, would be
subject to a separate 4.9% limitation.
February
2006 Private Placement
In
February 2006, pursuant to the Preferred Stock Purchase Agreement, we issued to
Barron Partners LP, Ray and Amy Rivers (as joint tenants with right of
survivorship), Steve Mazur and William M. Denkin an aggregate of 3,120,000
shares of Series A preferred stock, and warrants to purchase an aggregate of
7,389,476 shares of common stock for an aggregate consideration of
$3,900,000. The following table sets forth, for each of the
purchasers in the February 2006 private placement, the number of shares of
common stock issuable upon conversion of such purchaser’s Series A preferred
stock, upon exercise of such purchaser’s warrants, and upon conversion of all
Series A preferred stock warrants held by such purchaser, together with the
purchase price paid by such purchaser. There is no additional consideration
payable upon conversion of the Series A preferred stock. As of
October 4, 2010, Messrs. Mazur and Denkin no longer own any shares of the
Company’s Series A preferred stock, common stock or warrants to purchase common
stock.
|
Name
|
|
Shares of
Common
Stock
Issuable
upon
conversion
of Series A
preferred
stock
|
|
|
Shares of
common
stock
issuable
upon
exercise
of Series
A
warrants
|
|
|
Shares of
common
stock
issuable
upon
exercise
of Series
B
warrants
|
|
|
Total
number
of shares
of
common
stock
|
|
|
Amount of
investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barron
Partners
|
|
|
2,640,000 |
|
|
|
3,126,316 |
|
|
|
3,126,316 |
|
|
|
8,892,632 |
|
|
$ |
3,300,000 |
|
|
Ray
and Amy Rivers (jointly)
|
|
|
160,000 |
|
|
|
189,474 |
|
|
|
189,474 |
|
|
|
538,948 |
|
|
$ |
200,000 |
|
|
Steve
Mazur
|
|
|
160,000 |
|
|
|
189,474 |
|
|
|
189,474 |
|
|
|
538,948 |
|
|
$ |
200,000 |
|
|
William
M. Denkin
|
|
|
160,000 |
|
|
|
189,474 |
|
|
|
189,474 |
|
|
|
538,948 |
|
|
$ |
200,000 |
|
Pursuant
to the Preferred Stock Purchase Agreement relating to the issuance of the Series
A preferred stock and warrants in the February 2006 private
placement:
|
|
·
|
We
are required to appoint and maintain a board consisting of such number of
independent directors that would result in a majority of our directors
being independent directors, an audit committee composed solely of
independent directors and a compensation committee having a majority of
independent directors. Our failure to meet these requirements on a
continuing basis may result in our incurring liquidated damages payable
either in cash or by the issuance of additional shares of Series A
preferred stock. Although we did not meet the required deadline for having
independent directors, nevertheless because we have elected independent
directors who comprise a majority of the board, as well as all of the
members of the audit committee and the compensation committee, the
investors waived our failure to be in compliance when initially required.
This waiver would not apply to any subsequent failure to continue to meet
this requirement.
|
|
|
·
|
We
and the investors entered into a registration rights agreement pursuant to
which we agreed to file, within 60 days after the closing, the
registration statement of which this prospectus is a part. Since the
closing was on February 8, 2006, we were required to file the registration
statement by April 10, 2006 and have the registration statement declared
effective by August 8, 2006. The registration statement was
filed on April 13, 2006 and was declared effective on October 17,
2006. We are required to issue 1,025 shares of Series A
preferred stock for each day of the delay in filing and each day after the
required effective date. As a result we are required to issue
3,225 shares of Series A preferred stock for the delay in filing the
initial registration statement and an additional 71,750 shares of Series A
preferred stock for the 70 days between August 8, 2006 and October 17,
2006, the original effective date of the Registration
Statement. We are also required to issue 1,025 shares of
preferred stock for each day that we failed to keep this registration
statement current and effective, with certain limited exceptions. At
September 30, 2010, we have accrued $44,003 in respect of this
obligation.
|
|
|
·
|
The
investors have the right to participate in any future private placements,
other than exempt issuances, as such term is defined in the Preferred
Stock Purchase Agreement.
|
|
|
·
|
We
are required to elect a chief financial officer who is familiar with both
the conduct of business in China and the SEC's rules and regulations
relating to accounting, financial statements and accounting controls
within fifteen days after closing. We believe that we are in compliance
with this provision.
|
|
|
·
|
With
certain limited exceptions, if we issue stock at a purchase price (or
warrants or convertible securities at an exercise or conversion price)
which is less than conversion price of the preferred stock (the
“Conversion Price”) or the exercise price of the warrants (the “Exercise
Price”), the Conversion Price and the Exercise Price, as the case may be,
will be reduced to such lower price. Any change in the
Conversion Price automatically results in an adjustment in the conversion
ratio of the Series A preferred stock. The initial conversion
price of the Series A preferred stock was $1.25 and the initial conversion
ratio was one share of common stock for each share of Series A preferred
stock.
|
PLAN
OF DISTRIBUTION
This
offering is not being underwritten. The selling stockholders and any of their
pledgees, donees, assignees and successors-in-interest may, from time to time,
sell any or all of their shares of common stock on any stock exchange, market or
trading facility on which our shares are traded or in private transactions.
These sales may be made at fixed or negotiated prices. To the extent required,
specific information about a particular sale (such as the purchase price and
public offering prices, the names of any broker or dealer, and any applicable
commission or discounts) will be described in an accompanying
prospectus.
There is
a limited public market for our common stock. Our common stock is
currently quoted on FINRA’s Over-the-Counter Bulletin Board.
We were
required to keep this prospectus current until the earlier of February 8, 2009
or such time as all of the common stock being offered under this prospectus is
sold. The selling stockholders may offer the common stock pursuant to this
prospectus so long as this prospectus is current under the rules of the SEC and
we have not withdrawn the registration statement of which this prospectus forms
a part.
Subject
to the foregoing, the selling stockholders may use any one or more of the
following methods when selling or otherwise transferring
shares:
|
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
|
·
|
block
trades in which a broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
|
·
|
sales
to a broker-dealer as principal and the resale by the broker-dealer of the
shares for its account;
|
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
|
·
|
privately
negotiated transactions, including
gifts;
|
|
|
·
|
covering
short sales made after the date of this
prospectus;
|
|
|
·
|
pursuant
to an arrangement or agreement with a broker-dealer to sell a specified
number of such shares at a stipulated price per
share;
|
|
|
·
|
a
combination of any such methods of sale;
and
|
|
|
·
|
any
other method of sale permitted pursuant to applicable
law.
|
The
selling stockholders acquired their shares pursuant to the Preferred Stock
Purchase Agreement and may also sell shares pursuant to Rule 144 or Rule 144A
under the Securities Act, if available, rather than pursuant to this
prospectus.
The
holders of our Series A and Series B warrants may not exercise them for our
common stock if that would result in the holder and his or its affiliates
beneficially owning more than 4.9% of our common stock. Because of the
limitation whereby Barron Partners LP and Ray and Amy Rivers cannot hold more
than 4.9% of our stock at one time, there is a limit on the number of shares
that any of them may sell at any time. For information on the selling
shareholder limitation, see “Selling Stockholders” in this
prospectus.
Broker-dealers
engaged by the selling stockholders may arrange for other brokers dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
selling stockholders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved.
A selling
stockholder may from time to time pledge or grant a security interest in some or
all of the shares or common stock or warrant owned by them and, if the selling
stockholder defaults in the performance of the secured obligations, the pledgees
or secured parties may offer and sell the shares of common stock from time to
time under this prospectus, or under an amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of
1933.
In
connection with the sale of our common stock or interests therein, the selling
stockholders may enter into hedging transactions with broker-dealers or other
financial institutions which may in turn engage in short sales of our common
stock in the course of hedging the positions they assume. The selling
stockholders may, after the date of this prospectus, also sell shares of our
common stock short and deliver these securities to close out their short
positions, or loan or pledge their common stock to broker-dealers that in turn
may sell these securities. The selling stockholders may also enter into option
or other transactions with broker-dealers or other financial institutions or the
creation of one or more derivative securities which require the delivery to such
broker-dealer or other financial institution of shares offered by this
prospectus, which shares such broker-dealer or other financial institution may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction).
The
selling stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus.
In the event of a transfer by a selling stockholder of the warrants or the
common stock issuable upon conversion of the warrants other than a transfer
pursuant to this prospectus or Rule 144 of the SEC, we may amend or supplement
this prospectus in order to name the transferee as a selling
stockholder.
The
selling stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. The selling stockholders have informed us
that they do not have any agreement or understanding, directly or indirectly,
with any person to distribute the common stock.
Because
the selling stockholders may be deemed to be "underwriters" within the meaning
of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act. Federal securities laws, including
Regulation M, may restrict the timing of purchases and sales of our common stock
by the selling stockholders and any other persons who are involved in the
distribution of the shares of common stock pursuant to this
prospectus.
We are
required to pay all fees and expenses incident to the registration of the
shares. We have agreed to indemnify the selling stockholders against certain
losses, claims, damages and liabilities, including liabilities under the
Securities Act.
DESCRIPTION
OF SECURITIES
We are
authorized to issue 90,000,000 shares of common stock, par value $.0001 per
share, and 10,000,000 shares of preferred stock, par value $.0001 per
share. As of the date of this prospectus, we have 23,712,061 shares
of common stock outstanding and no shares of Series A preferred stock
outstanding.
Common
Stock
Holders
of common stock are entitled to one vote for each share held on all matters
submitted to a vote of stockholders and do not have cumulative voting rights.
Accordingly, holders of a majority of the shares of common stock entitled to
vote in any election of directors may elect all of the directors standing for
election. Holders of common stock are entitled to receive proportionately any
dividends as may be declared by our board of directors, subject to any
preferential dividend rights of outstanding preferred stock. Pursuant to the
certificate of designation relating to the Series A preferred stock, we are
prohibited from paying dividends on our common stock while Series A preferred
stock is outstanding. As of October 4, 2010, there are no shares of
series A preferred stock outstanding, therefore the dividend restriction is not
currently applicable. Upon our liquidation, dissolution or winding
up, the holders of common stock are entitled to receive proportionately our net
assets available after the payment of all debts and other liabilities and
subject to the prior rights of any outstanding preferred stock. Holders of
common stock have no preemptive, subscription, redemption or conversion rights.
Our outstanding shares of common stock are fully paid and non-assessable. The
rights, preferences and privileges of holders of common stock are subject to,
and may be adversely affected by, the rights of the holders of shares of
redeemable convertible preferred stock and shares of any other series of
preferred stock that we may designate and issue in the future.
Common
Stock Purchase Warrants
In
connection with our February 2006 private placement, we issued Series A warrants
to purchase 3,694,738 shares of common stock at an exercise price of $1.75 per
share and Series B warrants to purchase 3,694,738 shares of common stock at an
exercise price of $2.50 per share. On April 23, 2007, the exercise price of the
Series A warrants was reduced to $1.70 per share and the exercise price of the
Series B warrants was reduced to $2.43 per share, representing reductions of 3%
in each case. These reductions in exercise price were made under a
Waiver and Amendment entered into between the Company and the initial investors
in the private placement. The Waiver and Amendment cancelled and replaced an
adjustment provision contained in the warrants, which provided that the exercise
price of our warrants would have been reduced by approximately 23% because the
Company did not meet a 2006 pre-tax income-per-share target of $0.40 per share.
The warrants are not subject to any further adjustment based on the Company’s
financial results.
The
warrants also provide that, with certain exceptions, if the Company issues
common stock at a price, or warrants or other convertible securities with an
exercise or conversion price, which is less than the exercise price of the
warrants, the exercise price of the warrants will be reduced to the sales price,
exercise price or conversion price, as the case may be, of such other
securities.
The
holders of the warrants have cashless exercise rights, which provide them with
the ability to receive common stock with a value equal to the appreciation in
the stock price over the exercise price of the warrants being exercised. This
right was not exercisable during the first six months that the warrants were
outstanding, and it is not exercisable thereafter if the underlying shares are
subject to an effective registration statement. To the extent that
the holders of the warrants exercise using a cashless exercise, we will not
receive proceeds from such exercise.
INTEREST
OF NAMED EXPERTS AND COUNSEL
Neither
our independent public accountant, Frazer Frost, LLP , nor our counsel passing
upon the validity of the securities offered under this prospectus, Pryor Cashman
LLP, will receive a direct or indirect interest in us, was hired on a contingent
basis, or has been a promoter, underwriter, voting trustee, director, officer,
or employee of ours.
LEGAL
MATTERS
The
validity of the shares of common stock offered through this prospectus has
been passed on by Pryor Cashman LLP.
MATERIAL
CHANGES
There
have been no material changes in our affairs that have occurred since the end of
the latest fiscal year for which audited financial statements were included in
the latest Form 10-K and that have not been described in a Form 10-Q or Form 8-K
filed under the Exchange Act.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The SEC
allows us to “incorporate by reference” the information we file with them, which
means that we can disclose important information to you by referring you to
those documents instead of having to repeat the information in this prospectus.
The information incorporated by reference is considered to be part of this
prospectus. We incorporate by reference the documents listed below:
Our
Annual Report on Form 10-K, for the year ended December 31, 2009, filed on March
30, 2010;
Our
Definitive Proxy Statement on Form 14A, dated April 19, 2010, filed on April 19,
2010;
Our
Current Report on Form 8-K, dated April 30, 2010, filed on May 3,
2010;
Our
Current Report on Form 8-K, dated May 13, 2010, filed on May 13,
2010;
Our
Quarterly Report on Form 10-Q, for the quarter ended March 31, 2010, filed on
May 14, 2010;
Our
Current Report on Form 8-K, dated May 27, 2010, filed on June 2,
2010;
Our
Current Report on Form 8-K, dated July 9, 2010, filed on July 9,
2010;
Our
Current Report on Form 8-K, dated August 12, 2010, filed on August 12, 2010;
and
Our
Quarterly Report on Form 10-Q, for the quarter ended June 30, 2010, filed on
August 12, 2010.
We will
provide to each person, including any beneficial owner, to whom a prospectus is
delivered, a copy of any or all of the reports or documents that have been
incorporated by reference in the prospectus contained in the registration
statement but not delivered with the prospectus. We will provide these reports
or documents upon written or oral request and at no cost to the requester. You
can request copies of such document if you call or write us at the following
address or telephone number: Secretary, China Medicine Corporation, 2/F, Guangri
Tower, No. 9 Siyounan Road 1st Street, Yuexiu District, Guangzhou, China 510600,
by telephone at (8620) 8739-1718. The reports or documents that have
been incorporated by reference are also available on our website which can be
found at http://www.cmc621.com/InvestorRelations/newinfo.php?id=429&typeid=%2033.
Unless
specifically stated elsewhere in this prospectus, the information contained on,
or accessible through, our website is not incorporated by reference into this
registration statement.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES
ACT LIABILITIES
Our
articles of incorporation provide for the indemnification and/or exculpation of
our directors, officers, employees, agents and fiduciaries to the maximum extent
provided, and under the terms provided, by the laws and decisions of the courts
of the state of Nevada, and by any additional applicable federal or state law or
court decisions. Besides the foregoing, we have not entered into any agreements
under which we have assumed such an indemnity obligation.
Insofar
as indemnification of our directors, officers and controlling persons for
liabilities arising under the Securities Act of 1933 (the "Act") may be
permitted pursuant to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by us of expenses incurred or paid by a director, officer or controlling
person in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, we will, unless in the opinion of our counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by us is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
WHERE
YOU CAN FIND MORE INFORMATION
We file
annual, quarter and periodic reports, proxy statements and other information
with the Commission using the Commission's EDGAR system. The Commission
maintains a web site that contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the
Commission using EDGAR. The address of that site is
http//www.sec.gov.
You may
also inspect these documents and copy information from them at the Commission's
offices at public reference room at 100 F Street, NE, Washington, D.C. 20549.
You may obtain information on the operation of the public reference room by
calling the SEC at 1-800-SEC-0330.
We have
filed a registration statement with the Commission relating to the offering of
the shares. The registration statement contains information which is not
included in this prospectus. You may inspect or copy the registration statement
at the Commission's public reference facilities or its website.
You
should rely only on the information contained in this prospectus. We have not
authorized any person to provide you with any information that is
different.
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution
The
expenses of the registration, all of which have been paid by the Company, are as
follows:
|
Item
|
|
Amount
|
|
|
SEC
filing fee
|
|
$
|
493
|
|
|
Printing
and submission for filing
|
|
$
|
1,249
|
|
|
Legal
expenses
|
|
$
|
24,868
|
|
|
Accounting
Expenses
|
|
$
|
9,500
|
|
|
Total
|
|
$
|
36,110
|
|
Item
14. Indemnification of Officers and Directors
Section
78.7502 of the Nevada Revised Statutes (the "Nevada Law") permits a corporation
to indemnify any of its directors, officers, employees and agents against costs
and expenses arising from claims, suits and proceedings if such persons acted in
good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Notwithstanding the foregoing, in an action by or in the right of the
corporation, no indemnification may be made in respect of any claim, issue or
matter, as to which such person is adjudged to be liable to the corporation
unless a court of competent jurisdiction determines that in view of all the
circumstances of the case, indemnification would be appropriate. The
indemnification provisions of the Nevada Law expressly do not exclude any other
rights a person may have to indemnification under any bylaw, among other
things.
Article
VIII of the Company's certificate of incorporation provides that the directors
shall not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, or (ii) for the payment of distributions to
stockholders in violation of Nevada Law.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, offices or controlling persons of the Company, pursuant
to the foregoing provisions, or otherwise, the Company has been advised that, in
the opinion of the Commission, such indemnification is against public policy as
expressed in the Securities Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the Company will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
The
Company may purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee, agent or fiduciary against any liability
asserted against such person and incurred by him or her in any such capacity, or
arising out of such persons' status as such.
Item
15. Recent Sales of Unregistered Securities
During
the last three years, we have issued unregistered securities to the persons,
described below. None of these transactions involved any
underwriters, underwriting discounts or commissions, except as specified below,
or any public offering, and the registrant believes that each transaction was
exempt from the registration requirements of the Securities Act of 1933 by
virtue of Section 4(2) thereof and/or Regulation D promulgated thereunder,
unless otherwise indicated below.
On May
27, 2009, we granted 70,000 Series C warrants with an exercise price of $0.85 to
a third party in exchange for investor relations
services.
In
September 2009, we issued 53,397 shares of common stock to Steve Mazur upon the
cashless exercise of 179,474 Class A warrants.
On
December 15, 2009, we issued 130,966 shares of common stock to Ray and Amy
Rivers, as joint tenants with right of survivorship, upon the cashless exercise
of 179,474 Series A warrants and 126,474 Series B
warrants.
On
January 13, 2010, we issued 225,001 shares of common stock to Barron Partners LP
upon the cash exercise of 225,001 Class B warrants.
On
January 21, 2010, we issued 42,143 shares of common stock to William Denkin and
53,299 shares of common stock to Steve Mazur upon the cashless exercise of
100,000 and 126,474 Series B warrants, respectively.
On
January 15 and January 25, 2010, we issued total 80,000 shares of common stock
to JMG Triton Offshore Fund and JMG Capital Partners upon the cash exercise of
Class B warrants.
On
January 25, 2010, we issued 390,737 shares of common stock to Barron Partners LP
upon the cashless exercise of 800,000 Class B warrants.
On
January 29, 2010, we issued 4,000,000 shares of common stock and 1,920,000
shares of redeemable convertible preferred stock to OEP CHME Holdings, LLC
pursuant to the Subscription Agreement.
On March
13, 2010, we issued 53,380 shares of common stock to CCG Investor Relations upon
the cashless exercise of 70,000 Class C warrants.
On March
12 and March 18, 2010, we issued an aggregate 109,000 shares of common stock to
JMG Triton Offshore Fund and JMG Capital Partners upon the cash exercise of
Class B warrants.
On March
18, 2010, we issued 26,474 shares of common stock to Mr. William M.
Denkin upon the cash exercise of Class B warrants.
On May
11, 2010, we issued 2,666,667 shares of common stock to OEP CHME Holdings, LLC
upon the conversion of 266,666.7 shares of redeemable convertible preferred
stock. On July 15, 2010, we issued an additional 666,667 shares of common stock
to OEP CHME Holdings, LLC upon the conversion of 66,666.7 shares of redeemable
convertible preferred stock. These transactions were exempt from
registration pursuant to Section 3(a)(9) of the Securities Act.
On
September 6, 2010, we issued 232,000 shares of common stock to Peak Capital
Advisory Limited as compensation for certain consulting
services.
Item
16. Exhibits
Exhibit
No. Description
|
Exhibit
No.
|
|
Description
|
|
|
|
|
|
2.1
|
|
Exchange
Agreement dated as of February 8, 2006, among China Medicine Corporation
and the former stockholders of Konzern(1)
|
|
|
|
|
|
2.2
|
|
Agreement
and Plan of Merger dated as of May 2009 between China Medicine
Corporation (Delaware) and China Medicine Corporation (Nevada)
(2)
|
|
|
|
|
|
3.1
|
|
Certificate
of incorporation (2)
|
|
|
|
|
|
3.2
|
|
By-laws
(2)
|
|
|
|
|
|
4.1
|
|
Certificate
of Designation for the Series A Convertible Preferred
Stock(1)
|
| |
|
|
|
4.2
|
|
Form
of warrant issued to investors in the February 2006 private
placement(1)
|
|
|
|
|
|
4.3
|
|
Form
of common stock certificate(3)
|
|
|
|
|
|
4.4
|
|
Form
of preferred stock certificate (4)
|
|
|
|
|
|
4.5
|
|
Certificate
of Designation, Rights and Preferences for the Redeemable Convertible
Preferred Stock (5)
|
|
|
|
|
|
5.1
*
|
|
Opinion
of Pryor Cashman LLP
|
|
|
|
|
|
10.1
|
|
Preferred
Stock Purchase Agreement dated February 8, 2006, between the Registrant
and the investors in the February 2006 private
placement(1)
|
|
|
|
|
|
10.2
|
|
Registration
Rights Agreement dated February 8, 2006, between the Registrant and the
investors in the February 2006 private placement(1)
|
|
|
|
|
|
10.3
|
|
Registration
rights provisions pursuant to the Stock Exchange
Agreement(1)
|
|
|
|
|
|
10.4
|
|
2006
Long-term incentive plan(1)
|
|
|
|
|
|
10.5
|
|
Equity
Ownership Transfer Agreement dated October 26, 2009, between Guangzhou
Konzern Pharmaceutical Co., LTD and Sinoform Limited
(6)
|
|
|
|
|
|
10.6
|
|
Stock
Subscription Agreement dated December 31, 2009, among China Medicine
Corporation, Yang Senshan, and OEP CHME Holdings, LLC
(7)
|
|
|
|
|
|
21.1
|
|
List
of Subsidiaries
|
|
|
|
|
|
23.1
|
|
Consent
of Frazer Frost, LLP
|
|
|
|
|
|
23.2
*
|
|
Consent
of Pryor Cashman LLP (included in Exhibit 5.1)
|
|
|
|
|
|
24.1
|
|
Power
of Attorney (included in the signature page of this Registration
Statement)
|
* Previously filed with the
Commission
(1) Filed
as an exhibit to the Company's Current Report on Form 8-K which was filed with
the Commission on February 14, 2006, and incorporated herein by
reference.
(2) Filed
as an exhibit to the Company's Definitive Proxy Statement on Form 14A, which was
filed with the Commission on May 5, 2009, and incorporated herein by
reference.
(3) Filed
as an exhibit to the Company’s Annual Report on Form 10-KSB, which was filed
with the Commission on April 3, 2007, and incorporated herein by
reference.
(4) Filed
as an exhibit to the Company's Annual Report on Form 10-KSB which was filed with
the Commission on March 31, 2006, and incorporated herein by
reference.
(5) Filed
as an exhibit to the Company's Current Report on Form 8-K which was filed with
the Commission on February 2, 2010.
(6) Filed
as an exhibit to the Company's Current Report on Form 8-K which was filed with
the Commission on October 30, 2009, and incorporated herein by
reference.
(7) Filed
as an exhibit to the Company's Current Report on Form 8-K which was filed with
the Commission on January 7, 2010, and incorporated herein by
reference.
Item
17. Undertakings
(a) The
undersigned registrant hereby undertakes:
1. To
file, during any period in which it offers or sells securities, a post-effective
amendment to this registration statement to:
i.
Include any prospectus required by section 10(a)(3) of the Securities
Act;
ii.
Reflect in the prospectus any facts or events which, individually or together,
represent a fundamental change in the information in the registration statement;
and notwithstanding the forgoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospects
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in the volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
iii.
include any additional or changed material information on the plan of
distribution.
2. For
determining liability under the Securities Act, to treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide
offering.
3. To
file a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
4. Each
prospectus filed pursuant to Rule 424(b) as part of a registration statement
relating to an offering, other than registration statements relying on Rule 430B
or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be
part of and included in the registration statement as of the date it is first
used after effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration statement
will, as to a purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in any such
document immediately prior to such date of first use.
(b) The
undersigned registrant hereby undertakes to deliver or cause to be delivered
with the prospectus, to each person to whom the prospectus is sent or given, the
latest annual report to security holders that is incorporated by reference in
the prospectus and furnished pursuant to and meeting the requirements of Rule
14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X are not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
SIGNATURES
Pursuant
to the requirement of the Securities Act of 1933, the registrant has duly caused
this Post-Effective Amendment No. 2 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of
Guangzhou in the People's Republic of China on this 8th day of October,
2010.
CHINA
MEDICINE CORPORATION
|
By:
|
/s/ Senshan Yang
|
|
Dated: October
8, 2010
|
|
Senshan
Yang
Chief
Executive Officer
(Principal
Executive Officer)
|
|
|
We, the
undersigned officers and directors of China Medicine Corporation, a Nevada
corporation, hereby severally and individually constitute and appoint Senshan
Yang, Chief Executive Officer, as our true and lawful attorney-in-fact for the
undersigned, in any and all capacities, with full power of substitution, to sign
any and all amendments to the Registration Statement (including post-effective
amendments), and to file the same with exhibits thereto and other documents in
connection therewith, with the Commission, granting unto said attorney-in-fact,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact, may lawfully do or cause to be done
by virtue of this appointment.
Pursuant
to the requirements of the Securities Act of 1933, this Post-Effective Amendment
No. 2 to Registration Statement was signed by the following persons in the
capacities and on the dates indicated.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/ Senshan Yang
|
|
Chief
Executive Officer and Chairman of
the
Board of Directors
|
|
October
8, 2010
|
|
Senshan
Yang
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
|
|
/s/ Fred W. Cheung
|
|
Chief
Financial Officer
|
|
October 8,
2010
|
|
Fred
W. Cheung
|
|
(Principal
Financial Officer and Principal
Accounting
Officer)
|
|
|
|
|
|
|
|
|
|
/s/ Minhua Liu
|
|
Director
|
|
October
8, 2010
|
|
Minhua
Liu
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Rachel Gong
|
|
Director
|
|
October
8, 2010
|
|
Rachel
Gong
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Ryan J. Shih
|
|
Director
|
|
October
8 , 2010
|
|
Ryan
J. Shih
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Daniel Shih
|
|
Director
|
|
October
8, 2010
|
|
Daniel
Shih
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Sean Shao
|
|
Director
|
|
October
8, 2010
|
|
Sean
Shao
|
|
|
|
|
|
|
|
|
|
|
| |
|
Director
|
|
|
|
Ian
Robinson
|
|
|
|
|