UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported) June 5,
2009
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SINOBIOMED
INC.
(Exact
name of registrant as specified in its charter)
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Delaware
(State
or other jurisdiction
of
incorporation
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333-128399
(Commission
File
Number)
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20-1945139
(IRS
Employer
Identification
No.)
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Room 4304, 43/F China
Resources Building
26 Harbour Road, Wan
Chai
Hong
Kong
(Address
of principal executive offices)
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HKSAR
(Zip
Code)
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Registrant's
telephone number, including area code 011-852-2511-0238
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Lane 4705, No. 58,
North Yang Gao Rd.
Pudong New Area
Shanghai, China
(Former
name or former address, if changed since last report)
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Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
[ ] Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR
240.14d-2(b))
[ ] Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CRF
240.13e-4(c))
ITEM
3.01 NOTICE OF DELISTING OR FAILURE TO SATISFY A CONTINUED LISTING
RULE OR STANDARD; TRANSFER OF LISTING
On May
20, 2009, our securities were dropped from the OTCBB to the Pink Sheets as a
result of us not filing our Form 10-K within the 30 day grace period after the
extended deadline for the filing of the Form 10-K.
ITEM
8.01 OTHER INFORMATION
We would
like to summarize our loss of value and subsequent desire to abandon our
majority owned subsidiary, Shanghai Wanxing Bio-Pharmaceuticals Co., Ltd. and
its subsidiary company, Shanghai Wanxing Bio-Science Cosmetic Co., Ltd.
(collectively referred to as the “Wanxing group”).
We
beneficially own 100% of Wanxin Bio-Technology Limited which in turn owns 100%
of Manhing Enterprises Limited, which owns 82% of Shanghai Wanxing
Bio-Pharmaceuticals Co., Ltd., and which owns 50.33% of Shanghai Wanxing
Bio-Science Cosmetic Co., Ltd.
Loss of control of Wanxing
group operations
The
actual management and operational control of the Wanxing group, situated in
Shanghai, is under the exclusive direction and control of Mr. Banjun Yang, who,
as of today, remains the ‘Chinese legal representative’ of record. In
China, the management & control of a company is under the sole
responsibility of its legal representative, which is also usually its General
Manager. Mr. Yang was the Chairman of the board and Chief Executive Officer of
Sinobiomed from January 12, 2007 until his resignation from those offices on
February 10, 2009. Prior to his resignation, significant
disagreements at the Board level resulted in the majority of the Board of
Directors losing confidence in Mr. Yang’s willingness to act in the best
interests of Sinobiomed. Mr. Yang is the sole director of Manhing
Enterprises Limited. In order to remove Mr. Yang as legal
representative of the Wanxing group, we would need to first replace him as
director of Manhing Enterprises Limited. Manhing would then have to
apply to the Chinese government to appoint a new legal
representative. This process would add additional costs and time, and
upon replacement we would still have to deal with uncooperative staff or no
staff at all due to Wanxing group’s inability to pay its staff; and therefore,
the ability of Sinobiomed to obtain appropriate information from the operations
of the Wanxing group would be extremely difficult if not
impossible.
With
majority equity voting control of the Wanxing group resting in us, it would seem
reasonable to assume that we, as 82% voting interest owner, would be able to
exercise control. In reality, following the filing of the September
30, 2008 financial quarter results, we have found it impossible to obtain any
meaningful financial, operational or technical information from the Wanxing
group. Almost all of our inquiries to Wanxing group staff were simply
noted and passed to the Wanxing group legal representative, Mr. Yang, for his
prior approval. Mr. Yang has become increasingly uncooperative with the
management of Sinobiomed over the intervening period and has resisted our
efforts to obtain information, resulting in significant delays and incomplete
answers. What we have encountered is that the employees and staff of
the Wanxing group show extreme loyalty to Mr. Yang and have been uncooperative
to any of our requests from our current management. This has established a
significant hurdle that our management believes will be extremely difficult if
not impossible to overcome because even if we eventually changed the ‘Chinese
legal representative’ of the Wanxing group, the employees would still remain
loyal to Mr. Yang and not assist the new ‘Chinese legal
representative’. There has not been sufficient funding nor manpower
to replace the legal representative and replace staff in Shanghai.
We note
that representatives of CITIC Guoan Beijing Electric Company, the 18% minority
shareholder of Shanghai Wanxing Bio-Pharmaceuticals Co., Ltd., have in the last
quarter of 2008 attempted to become actively involved in the management of the
Wanxing group. However, they have not been able to effectively assist
in any extent on providing the requisite information necessary for the
satisfactory conclusion of the audit for December 31, 2008 for the 10-K
filing.
Loss in value of Wanxing
group
The
employees of the Wanxing group have not been paid since late 2008, and
technically this is due to several factors: (1) our investors who know the
Wanxing group and Banjun Yang have not been willing to invest in us as long as
Mr. Yang remains the Chinese legal representative of the Wanxing group and the
staff remain loyal to Mr. Yang; and (2) any funding that has come in, has been
tightly monitored or not been sent to the Wanxing group as there is a high risk
of such funds being used for non-core activities.
With
non-payment of salaries at the Wanxing group, there has been significant
employee attrition as well as total lack of cooperation from remaining staff
when we have attempted to gather information for the purpose of preparing the
financial information and audit.
We
believe the Wanxing group currently has around approximately US$10,000,000 in
debt and its current operations are unable to service such debt or operational
expenses. The debt is overdue and the PRC banks are legally able to
foreclose on the land, plant and equipment which collateralizes such
debt.
Uncertain product and
clinical trial documentation
There
have been several inquiries of interest from larger, better capitalized
pharmaceutical companies, to partner with Wanxing group in bringing products
through clinical trials and subsequently, to market in both China and other
countries. Following deeper due diligence, our management and the pharmaceutical
companies have discovered that little if any, market studies have been performed
to ascertain potential market size and ability to capture meaningful market
share.
Further,
the Wanxing group product documentation from clinical trials is predominantly in
Chinese, making it difficult to transcribe into foreign markets due to the
voluminous data without incurring significant undue costs and without the
cooperation of Wanxing group management and appropriate staff members this task
would be futile.
Further investment in
clinical trials is outweighed by the risk and timing of commercial
application
Most of
the Wanxing group products are still a minimum of two to three years to
commercial application and still require millions of dollars in development
expense to reach State Food & Drug Administration approval in the PRC (“PRC
State FDA”). In our existing current financial position, there are
insufficient financial resources to pursue this given that there is no
continuity of scientific staff remaining at Wanxing group. In this
current situation, we believe the Wanxing group’s product pipeline offers
insufficient value without incurring a significantly undue expense in
development which in the end may not be finally approved by the PRC State
FDA.
Shanghai
Wanxing Bio-Science Cosmetic Co., Ltd., which represents the majority of the
sales volume of the Wanxing Group, is only 50.33% owned by Shanghai Wanxing
Bio-Pharmaceuticals Co., Ltd. and the sales volume has leveled off as of the
past several quarters because increased costs and competition has eroded market
share. In order to effectively grow the business, more funding is
needed to increase sales and marketing efforts and given the employee attrition
at the Wanxing group, morale has fallen off significantly as well.
Sale of Shanghai Wanxing
Bio-Science Cosmetic Co., Ltd.
We
believe that our only recourse is to attempt a sale of Shanghai Wanxing
Bio-Science Cosmetic Co., Ltd. Only 50.33% is owned by Shanghai
Wanxing Bio-Pharmaceuticals Co., Ltd., with the balance owned by Shanghai Haijiu
Industrial Development Co., Ltd as to 39.67% and Shanghai Shenglong Co., Ltd. as
to 10%, both of whom have expressed their unwillingness to part with their
respective interests. This presents further complications as any sale would
require a buyer who is looking for only slightly over a 50% interest, which is
not that appealing. In addition, we would incur increased costs and
undue delay in proceeding with the change of the ‘Chinese legal representative’
of Shanghai Wanxing Bio-Pharmaceuticals Co., Ltd., as such person would need to
execute any transfer documentation with governmental
authorities. Furthermore, as the accumulated debt exceeds the assets
of Shanghai Wanxing Bio-Pharmaceuticals Co., Ltd. by a large margin, any profit
from the sale of the cosmetic company would simply go toward payment of debt of
the Wanxing group, with no remaining proceeds to be realized by
Sinobiomed. We believe that after the proceeds of any possible sale
of the cosmetic company would be realized, Shanghai Wanxing Bio-Pharmaceuticals
Co., Ltd. would still be insolvent and unable to maintain itself as a going
concern.
Conclusion
Based on
the background of facts as previously outlined and summarized as
follows:
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Loss
of control of Wanxing operations;
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Loss
in value of Wanxing group;
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Uncertain
product and clinical trial documentation;
and
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Further
investment in clinical trials is outweighed by the risk and timing of
commercial application;
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we
believe that the Wanxing group will be unable to return to profitability in the
foreseeable future, and therefore, should be wound up or offered for sale to its
minority shareholder.
In
summary, as the current debt level of the Wanxing group outweighs the asset
value and the lack of adequate funding and significant uncertainty in bringing
the Wanxing products to commercial sale, our management has little option but to
elect to abandon the Wanxing group asset and pursue an alternative strategy of
possibly acquiring or merging in a profitable and cash flow positive business in
order to avoid any further decrease of shareholder value.
Based on
the above, our board of directors on June 5, 2009 has decided to abandon the
Wanxing group asset.
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
Dated: June
19, 2009
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SINOBIOMED
INC.
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By:
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/s/
Chris
Metcalf
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Name:
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Chris
Metcalf
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Title:
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Director
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