10QSB/A 1 wwbt10qsbamarch05.htm WORLDWIDE 10QSB/A MARCH 05 Worldwide 10QSB/A March 05
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


Form 10-QSB/A


[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934: For the quarterly period: March 31, 2005

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934  For the transition period from _______ to _______

01-06914
Commission File Number


Worldwide Biotech & Pharmaceutical Company
(Name of small business issuer in its charter)

 
Delaware
  
59-0950777
(State or other jurisdiction of Incorporation)
  
(IRS Employer Identification Number)
 

 
110 Sarasota Quay, Suite B, Sarasota, Florida 34236 
941-365-2521
(Address of principal executive offices)  
(Issuer’s telephone number)


Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

The number of shares outstanding of each of the Issuer’s classes of common equity, as of the latest practicable date: As of April 30, 2005, there were 35,257,102 shares of the common stock issued and outstanding.


-1-

FORM 10-QSB
QUARTERLY PERIOD ENDED March 31, 2005



INDEX

   
Page No.
     
PART 1.
FINANCIAL INFORMATION
  
     
 
3
     
 
3
     
   
 
4
     
   
 
5
     
   
 
6
     
 
7
     
 
11
     
 
16
     
PART II.
 
     
 
18
     
 
18
     
 
18
     
 
18
     
 
18
     
 
18
     
 
19


-2-


This Quarterly Report on Form 10-QSB/A of Worldwide Biotech & Pharmaceutical Company for the fiscal quarter ended March 31, 2005 is being filed for the purpose of

·  
revising certain disclosures and accounting treatment related to 1,400,000 shares of common stock and 3,000,000 warrants that were incorrectly valued. We initially valued these equity instruments using the fair value at date of grant and was amortizing the value over the service period. Since these shares and warrants are earned over the term of the agreement and are subject to forfeiture, the Company revised its financial statements and has accounted for these under variable accounting. Accordingly, the Company records at fair value the unearned shares and warrants each period through the term of the agreement or release from escrow.
·  
to reflect the Company as a development stage enterprise as defined under paragraph 8 and 9 of SFAS 7.

This report on Form 10QSB/A supercedes in its entirety the previously filed Quarterly Report for March 31, 2005.


-3-


Item 1. Financial Statements
 
WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARY
  
(A DEVELOPMENT STAGE COMPANY)
  
CONSOLIDATED BALANCE SHEET
RESTATED - SEE NOTE 2
  
March 31, 2005
  
(Unaudited)
  
       
ASSETS
  
       
CURRENT ASSETS:
        
    Cash and cash equivalents
  
$
766,635
  
    Marketable securities
    
229,553
 
    Prepayments and other current assets
    
219,444
 
        Total Current Assets
    
1,215,632
 
PROPERTY AND EQUIPMENT (Net of accumulated depreciation of $122,982)
    
2,159,954
 
OTHER ASSET, net
    
524,421
 
    Other asset, net
    
524,421
 
         
        Total Other Asset
    
524,421
 
        Total Assets
  
$
3,900,007
  
LIABILITIES AND STOCKHOLDERS' EQUITY
         
CURRENT LIABILITIES:
        
    Loans payable
  
$
1,811,594
  
    Current portion of mortgages payable
    
27,847
 
    Accounts payable
    
609,558
 
    Due to related parties
    
238,092
 
    Other current liabilities
    
51,093
 
        Total Current Liabilities
    
2,738,184
 
MORTGAGES PAYABLE, less current portion
    
248,057
 
STOCKHOLDERS' EQUITY:
        
    Common stock ($.001 Par Value; 90,000,000 Shares Authorized;
        
         35,257,102 shares issued and outstanding)
    
35,257
 
    Additional paid-in capital
        
    Additional paid-in capital
    
7,061,728
 
    Deficit accumulated during development stage
    
(5,760,304
)
    Less: Accumulated other comprehensive loss
    
(422,915
)
        Total Stockholders' Equity
    
913,766
 
        Total Liabilities and Stockholders' Equity
  
$
3,900,007
  
See notes to consolidated financial statements

-4-


 
(A DEVELOPMENT STAGE COMPANY)
  
CONSOLIDATED STATEMENTS OF OPERATIONS
RESTATED - SEE NOTE 2
  
(Unaudited)
  
       
For the Period
 
           
from November 26,
  
   
For the Three Months Ended
 
2001 (inception) to
 
   
March 31,
  
March 31,
  
   
2005
  
2004
  
2005
  
NET REVENUES
  
$
-
  
$
-
  
$
-
  
OPERATING EXPENSES:
                    
    Research and development
    
55, 075
    
25,763
    
694,935
  
    Professional fees
    
28, 861
    
44,776
    
685,556
  
    Stock-based compensation
    
1,259,522
    
-
    
3,088,115
  
    General and administrative
    
73,037
    
52,865
    
1,208,690
  
        Total Operating Expenses
    
1,416,495
    
123,404
    
5,677,296
  
LOSS FROM OPERATIONS
    
(1,416,495
  )  
(123,404
)
  
(5,677,296
)
OTHER INCOME (EXPENSES):
                    
    Interest income
    
2,809
    
-
    
28,056
  
    Interest expense
    
(47,031
  )  
(8,375
)
  
(273,270
)
    Other income
    
-
    
-
    
116,094
  
    Realized gain on sale of marketable securities
    
-
    
46,112
    
46,112
  
        Total Other Expenses
    
(44,222
  )  
37,737
    
(83,008
)
NET LOSS
  
$
(1,460,717
  )
$
(85,667
)
$
(570,304
)
NET LOSS PER COMMON SHARE - BASIC AND DILUTED:
            
    Net loss per common share
  
$
(0.04
  )
$
(0.00
)
$
(0.17
)
    Weighted Common Shares Outstanding - basic and diluted
    
35,257,102
    
33,600,000
    
33,722,145
  

See notes to consolidated financial statements

-5-


WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARY
  
(A DEVELOPMENT STAGE COMPANY)
  
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
RESTATED - SEE NOTE 2
  
For the Years Ended December 31, 2005 and 2004
  
               
Deficit
     
Accumulated
     
   
Common Stock, $.001 Par Value
 
Additional
 
Accumulated During
      
Other
 
Total
 
   
Number of
     
Paid-in
 
Development
  
Deferred
 
Comprehensive
 
Stockholders'
 
   
Shares
 
Amount
 
Capital
 
Stage
  
Compensation
 
Loss
 
Equity
  
                               
Balance, December 31, 2001
    
33,600,000
 
$
33,600
  
$
4,803,159
  
$
(1,403,291
)
$
-
  
$
-
  
$
3,433,468
  
                                             
Other comprehensive loss:
                                            
Net loss
                
-
   
(429,666
)
              
(429,666
)
Comprehensive loss - change in unrealized loss on
                                            
marketable securities-net of taxes of $0
                            
(304
)
  
(304
)
  
(304
)
                                             
Total comprehensive loss
    
-
   
-
   
-
   
-
   
-
   
-
   
(429,970
)
                                             
Balance, December 31, 2002
    
33,600,000
 
$
33,600
  
$
4,803,159
  
$
(1,832,957
)
$
-
  
$
(304
)
$
3,003,498
  
                                             
Other comprehensive loss:
                                            
Net loss
                
-
   
(767,664
)
              
(767,664
)
Comprehensive loss - change in unrealized loss on
                                            
marketable securities-net of taxes of $0
                            
-
   
(227,128
)
  
(227,128
)
                                             
Total comprehensive loss
    
-
   
-
           
-
   
-
   
(994,792
)
                                             
Balance, December 31, 2003
    
33,600,000
   
33,600
   
4,803,159
   
(2,600,621
)
  
-
   
(227,432
)
  
2,008,706
 
                                             
Issuance of common stock pursuant to share exchange agreement
    
1,057,102
   
1,057
   
(16,182
)
  
-
   
-
   
-
   
(15,125
)
                                             
Issuance of common shares for services
    
600,000
   
600
   
779,400
   
-
   
-
   
-
   
780,000
 
                                             
Valuation of contingently issuable shares
    
-
   
-
   
151,667
   
-
   
-
   
-
   
151,667
 
                                             
Value attributable to grant of stock warrants
    
-
   
-
   
84,162
   
-
   
-
   
-
   
84,162
 
                                             
Other comprehensive loss:
                                            
Net loss
    
-
   
-
   
-
   
(1,698,966
)
  
-
   
-
   
(1,698,966
)
Comprehensive loss - change in unrealized loss on
                                            
marketable securities-net of taxes of $0
    
-
   
-
   
-
   
-
   
-
   
(98,763
)
  
(98,763
)
                                             
Total comprehensive loss
    
-
   
-
           
-
   
-
   
(1,797,729
)
                                             
Balance, December 31, 2004
    
35,257,102
   
35,257
   
5,802,206
   
(4,299,587
)
  
-
   
(326,195
)
  
1,211,681
 
                                             
Issuance of common shares for services
    
-
   
-
   
-
   
-
   
-
   
-
   
-
 
                                             
Valuation of contingently issuable shares
    
-
   
-
   
828,334
   
-
   
-
   
-
   
828,334
 
                                             
Value attributable to grant of stock warrants
    
-
   
-
   
431,188
   
-
   
-
   
-
   
431,188
 
                                             
Other comprehensive loss:
                                            
Net loss
    
-
   
-
   
-
   
(1,460,717
)
  
-
   
-
   
(1,460,717
)
Comprehensive loss - change in unrealized loss on
                                            
marketable securities-net of taxes of $0
    
-
   
-
   
-
   
-
   
-
   
(96,720
)
  
(96,720
)
                                             
Total comprehensive loss
    
-
   
-
   
-
   
-
   
-
   
-
   
(1,557,437
)
                                             
Balance, March 31, 2005
    
35,257,102
 
$
35,257
  
$
7,061,728
  
$
(5,760,304
)
$
-
  
$
(422,915
)
$
913,766
  
See notes to consolidated financial statements

-6-


WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARY
  
( A DEVELOPMENT STAGE COMPANY)
  
CONSOLIDATED STATEMENTS OF CASH FLOWS
RESTATED - SEE NOTE 2
  
(Unaudited)
  
           
For the Period
 
       
From November 26,
  
   
For the Three Months Ended
 
2001 (inception) to
 
   
March 31,
  
March 31,
  
   
2005
  
2004
  
2005
  
CASH FLOWS FROM OPERATING ACTIVITIES:
                    
Net Loss
  
$
(1,460,717
)
$
(85,667
)
$
(5,760,304
)
Adjustments to reconcile net loss to net cash used in
                    
operating activities:
                    
Depreciation and amortization
    
17,396
   
12,516
   
154,661
 
Stock-based compensation
    
1,259,522
   
-
   
3,323,944
 
Gain on sale of marketable securities
    
-
   
(46,154
)
  
(46,154
)
Changes in assets and liabilities:
                    
Prepayments and other current assets
    
(166,281
)
  
(26,953
)
  
(219,444
)
Accounts payable
    
74,623
   
(448
)
  
609,558
 
Other current liabilities
    
34,748
   
11,836
   
35,968
 
NET CASH USED IN OPERATING ACTIVITIES
    
(240,709
)
  
(134,870
)
  
(1,901,771
)
CASH FLOWS FROM INVESTING ACTIVITIES:
                    
Proceeds from sale of marketable securities
    
-
   
120,919
   
120,919
 
Investment in marketable securities
    
-
   
-
   
(725,514
)
Capital expenditures
    
(264,661
)
  
(402,782
)
  
(2,314,545
)
NET CASH FLOWS USED IN INVESTING ACTIVITIES
    
(264,661
)
  
(281,863
)
  
(2,919,140
)
CASH FLOWS FROM FINANCING ACTIVITIES (USED IN):
                    
Capital contributions
    
-
   
-
   
3,788,166
 
Proceeds from loans payable
    
-
   
-
   
1,892,223
 
Proceeds from related party advances
    
238,092
   
-
   
238,092
 
Payments on loans payable
    
(525
)
  
(555
)
  
(605,120
)
Proceeds from mortgages payable
    
-
   
-
   
293,563
 
Payments on mortgages payable
    
(12,976
)
  
-
   
(17,659
)
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
224,591
   
(555
)
  
5,589,265
 
EFFECT OF EXCHANGE RATE CHANGES IN CASH
    
(261
)
  
(1,457
)
  
(1,719
)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
(281,040
)
  
(418,745
)
  
766,635
 
CASH AND CASH EQUIVALENTS - beginning of period
    
1,047,675
   
1,342,437
   
-
 
CASH AND CASH EQUIVALENTS - end of period
  
$
766,635
  
$
923,692
  
$
766,635
  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
                    
Cash paid for:
                    
 Interest
  
$
47,031
  
$
8,375
  
$
273,270
  
 Income taxes
  
$
-
  
$
-
  
$
-
  
Non-cash investing and financing activities:
                    
 Acquisition of land rights for loan payable
  
$
-
  
$
-
  
$
524,491
  


-7-

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, the financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and such adjustments are of a normal recurring nature. These consolidated financial statements should be read in conjunction with the financial statements for the year ended December 31, 2004 and notes thereto contained in the Report on Form 10-KSB of Worldwide Biotech & Pharmaceutical Company (“our Company" or the “Company”) as filed with the Securities and Exchange Commission (the “Commission”). The results of operations for the three months ended March 31, 2005 are not necessarily indicative of the results for the full fiscal year ending December 31, 2005.

The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP"). The consolidated financial statements of the Company include the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated.

The Company

Worldwide Biotech & Pharmaceuticals Company, formerly Sun City Industries, Inc., (the “Company” or “Worldwide”) (a development stage company) was incorporated in Delaware in 1961 as Sun City Dairy Products, Inc., successor to a business founded in 1949. The Company operated as a holding company for various wholly owned subsidiaries that were engaged primarily in the food service marketing and distribution business.
On February 2, 1998, the Company and its prior subsidiaries filed a petition for Relief and Reorganization under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Florida (case no. 98-20679). In March 1998, the bankruptcy proceedings were converted to Chapter 7 for liquidation of the Company’s business. As a result of the conversion of the Company’s reorganization, to a case under Chapter 7, the Company’s properties were transferred to a United States Trustee on April 9, 1998 and the Company terminated its business operations. During 1998, the Bankruptcy Trustee disposed of substantially all of the assets of the Company and its subsidiaries. On June 27, 2003, the U.S. Bankruptcy Court completed the sale of the Sun City corporate shell entity.

On April 20, 2004, as amended on August 3, 2004 and effective December 16, 2004, under an Agreement and Plan of Reorganization, the Company issued 33,600,000 shares of the Company's common stock for the acquisition of all of the outstanding capital stock of Yangling Daiying Biological Engineering Co., Ltd. (“Daiying”), a company incorporated in November 2001 in Shaanxi Province, China. For financial accounting purposes, the exchange of stock will be treated as a recapitalization of Worldwide with the former shareholders of the Company retaining 1,057,102 or approximately 5% of the outstanding stock.

Additionally, as part of the Merger, the Company amended its Articles of Incorporation, whereby it has changed its name to Worldwide Biotech & Pharmaceuticals Company. Further, the Company’s prior management resigned their respective positions with the Company and was replaced by management of Daiying.

-8-

Daiying is a biotech company that develops, manufactures, and markets diagnostic reagents, HV (Hepatitis C Viruses), medicines, vaccines and gene carriers.

Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reporting amounts of revenues and expenses during the reported period. Significant estimates in 2005 and 2004 include the estimated useful lives of property and equipment and the valuation of marketable securities. Actual results could differ from those estimates.

Marketable securities

Marketable securities consist of investments in equity of publicly traded and non-public domestic companies and are stated at market value based on the most recently traded price of these securities at March 31, 2005. All marketable securities are classified as available for sale at March 31, 2005. Unrealized gains and losses, determined by the difference between historical purchase price and the market value at each balance sheet date, are recorded as a component of Accumulated Other Comprehensive Income in Stockholders’ Equity. Realized gains and losses are determined by the difference between historical purchase price and gross proceeds received when the marketable securities are sold.

Net income (loss) per share

Basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during each period. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. Diluted loss per common share is not presented because it is anti-dilutive due to the Company’s net loss. Basic and dilutive EPS does not include the effect of the 1,400,000 contingently returnable shares (see Note 4 -Stockholders’ Deficit) as they are not considered outstanding for EPS purposes. At March 31, 2005, there were warrants to purchase 3,000,000 shares of common stock, which could potentially dilute future earnings per share.

Stock-based compensation

The Company accounts for stock options issued to employees in accordance with the provisions of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. As such, compensation cost is measured on the date of grant as the excess of the current market price of the underlying stock over the exercise price. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company adopted the disclosure provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” and SFAS 148, “Accounting for Stock-Based Compensation -Transition and Disclosure”, which permits entities to provide pro forma net income (loss) and pro forma earnings (loss) per share disclosures for employee stock option grants as if the fair-valued based method defined in SFAS No. 123 had been applied. The Company accounts for stock options and stock issued to non-employees for goods or services in accordance with the fair value method of SFAS 123.

-9-

Revenue recognition

The Company follows the guidance of the Securities and Exchange Commission’s Staff Accounting Bulletin 104 for revenue recognition.  In general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured.  The Company has not recognized any revenue.

Foreign currency translation

Transactions and balances originally denominated in U.S. dollars are presented at their original amounts. Transactions and balances in other currencies are converted into U.S. dollars in accordance with Statement of Financial Accounting Standards (SFAS) No. 52, "Foreign Currency Translation," and are included in determining net income or loss.

For foreign operations with the local currency as the functional currency, assets and liabilities are translated from the local currencies into U.S. dollars at the exchange rate prevailing at the balance sheet date. Revenues and expenses are translated at weighted average exchange rates for the period to approximate translation at the exchange rates prevailing at the dates those elements are recognized in the financial statements. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive loss.

The reporting currency is the U.S. dollar. The functional currency of the Company's Chinese subsidiary, Daiying, is the local currency. The financial statements of the subsidiaries are translated into United States dollars using year-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs, and expenses. Net gains and losses resulting from foreign exchange transactions are included in the consolidated statements of operations and were not material during the periods presented because the Chinese dollar (RMB) fluctuates with the United States dollar. The cumulative translation adjustment and effect of exchange rate changes on cash at March 31, 2005 and 2003 was not material. As of March 31, 2005, the exchange rate for the Chinese Renminbi (RMB) was $1 US for 8.28 RMB.

Concentration of Credit Risk
 
The Company’s financial instruments consist primarily of cash, which is invested in money market accounts, marketable securities and accounts payable. The Company considers the book value of these instruments to be indicative of their respective fair value. The Company places its temporary cash investments with high credit quality institutions to limit its exposure.

NOTE 2 - RESTATEMENT OF 2005

For the three months ending March 31, 2005, the Company revised certain accounting treatment and disclosure related to 1,400,000 shares of common stock and 3,000,000 warrants that were incorrectly valued. The Company initially valued these equity instruments using the fair value at date of grant and was amortizing the value over the service period. Since these shares and warrants are earned over the term of the agreement and are subject to forfeiture, the Company revised its financial statements and has accounted for these under variable accounting. Accordingly, the Company records at fair value the unearned shares and warrants each period through the term of the agreement or release from escrow. The adjustments to the financial statements for the adjustments were as follows:

-10-

1. Balance Sheet:

a) Additional paid-in capital increased by $485,405 to $7,061,728 from $6,576,323 and deferred compensation decreased by $504,973 related to the revaluation of warrants and common stock under the variable method of accounting.
 
b) The Company’s deficit accumulated during development stage increased by $990,378 related to the revaluation of warrants and common stock under the variable method of accounting in the current period and for the year ended December 31, 2004.

2. Statement of Operations:

a) Stock-based compensation expense increased by $754,549 and related to the revaluation of warrants and common stock under the variable method of accounting in the current period. Net loss increased by $754,549 to $1,460,717 from $706,168. Additionally, the Company added a column to the statement of operations to reflect cumulative net losses since inception.

3. Statement of Cash Flows:

a) For the three months ended March 31, 2005, net loss increased by $754,549 to $1,460,717 from $706,168 and stock-based compensation increased by $754,549. Additionally, the Company added a column to the statement of cash flows to reflect cumulative cash flow activity since inception.
 
NOTE 3 - OTHER ASSET

On May 15, 2002, the Company entered into an agreement with the Chinese government, whereby the Company acquired for $556,085 the rights to use certain land until May 14, 2052. The Company is amortizing this land use right over the contract period of 50 years. For the three months ended March 31, 2005 and 2004, amortization expense amounted to $2,932 and $466, respectively.

NOTE 4 - RELATED PARTY TRANSACTIONS

Due to related party

The Chief Executive Officer and a shareholder, from time to time, provided advances to the Company for operating expenses. These advances are short-term in nature and non-interest bearing. The amount due to these related parties at March 31, 2005 was $238,092.

NOTE 5 - STOCKHOLDERS’ EQUITY

Common stock

In 2004, in connection with a consulting agreement, the Company issued into escrow 1,400,000 shares of the Company's common stock, subject to the following restrictions and contingencies: These common shares will be held in escrow to be released to the consultant upon completion of a funding of $4 million within 4 months of the effective date of a Registration Statement on Form SB-2 filed with the Securities and Exchange Commission. Consultant shall not participate directly or indirectly in the distribution of securities but instead will only introduce the Company to potential debt or equity funding sources. If during the four month period the consultant does not complete the funding, all rights, title and interest in such shares will be forfeited and the shares will be cancelled. Since these shares are earned over the term of the agreement and are subject to forfeiture, the Company has accounted for these under variable accounting. Accordingly, the Company records at fair value the unearned shares each period through the term of the agreement. For the three months ended March 31, 2005, the Company has recognized stock compensation and additional paid-in capital of $828,333, respectively. On April 4, 2005, the Company issued and released to this consultant all 1,400,000 shares of common stock under the provision in the consulting agreement which is quoted as: “If a loan commitment is obtained with current rates and terms the company is obligated to take it but if refused by China Biotech the shares and warrants will be considered earned".


-11-

Warrants

On December 14, 2004, in connection with a consulting agreement, the Company granted 3,000,000 warrants to purchase 3,000,000 shares of common stock as follows: 500,000 must be exercised at an exercise price of $.75 per share with 4 months of the effective date of the Registration Statement on Form SB-2, 800,000 at $1.50 per share within 6 months of the same date, 900,000 at $2.50 per share within 9 months of the same date, and 800,000 at $3.50 per share within 12 months of the same date. The fair value of this warrant grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions dividend yield of -0- percent; expected volatility of 112 percent; risk-free interest rate of 4.50 percent and an expected holding periods ranging from 4 months to one year.

Since these warrants are earned over the term of the agreement and are subject to forfeiture, the Company has accounted for these under variable accounting method pursuant to EITF 96-18. Accordingly, the Company records at fair value the calculated value of the warrants earned at the end of each period until the warrants are earned. For the three months ended March 31, 2005, the Company has recognized additional stock compensation and additional paid in capital of $431,188, respectively. The above aggregate stock-based consulting expense of $431,188 may increase or decrease under the variable accounting method until such time as the warrants are earned. On April 4, 2005, the Company settled with the consultant and the warrants were deemed earned.

A summary of the status of the Company's outstanding stock warrants granted for services as of March 31, 2005 and changes during the period is as follows:
 
 
 
  
Weighted
  
 
      
Average
  
 
      
Exercise
  
 
  
Shares
 
Price
  
Outstanding at December 31, 2004
    
-
 
$
-
  
Granted    
    
3,000,000
   
2.28
  
Exercised    
    
-
   
-
 
Forfeited    
    
-
   
-
 
 
              
Outstanding at March 31, 2005
    
3,000,000
 
$
2.28
  
               
Warrants exercisable at end of year  
    
-
 
$
-
 
               
Weighted-average fair value of warrants
              
granted during the Period
    
2005
        
 
              
   
$
2.28
        

-12-
The following information applies to all warrants outstanding at March 31, 2005:
 
 
      
Warrants Outstanding  
  
Warrants Exercisable 
  
 
      
Weighted
             
 
      
Average
 
Weighted
 
 
  
Weighted
  
 
      
Remaining
 
Average
 
 
  
Average
  
 
      
Contractual
 
Exercise
 
 
  
Exercise
  
Range of Exercise Prices
 
Shares
 
Life (Years)
 
Price
 
Shares
 
Price
  
$0.75
    
500,000
   
0.34
 
$
0.75
    
0
   
-
  
 $1.50 
    
800,000
    
0.50
  
$
1.50
    
0
   
-
  
$2.50
    
900,000
    
0.75
  
$
2.50
    
0
   
-
  
$3.50
   
800,000
   
1.00
 
$
3.50
    
0
   
-
  
 
                                
 
    
3,000,000
                          

 
(a) Political risk

Currently, PRC is in a period of growth and is openly promoting business development in order to bring more business into PRC. Additionally PRC allows a Chinese corporation to be owned by a United States corporation. If the laws or regulations are changed by the PRC government, the Company's ability to operate the PRC subsidiaries could be affected.
 
(b) Key personnel risk

The Company’s future success depends on the continued services of executive management in China. The loss of any of their services would be detrimental to the Company and could have an adverse effect on business development. The Company does not currently maintain key-man insurance on their lives. Future success is also dependent on the ability to identify, hire, train and retain other qualified managerial and other employees. Competition for these individuals is intense and increasing.

-13-
Item 2. Management’s Discussion and Analysis or Plan of Operation

The following analysis of our results of operations and financial condition should be read in conjunction with the financial statements of Worldwide Biotech & Pharmaceutical Company for the year ended December 31, 2004 and notes thereto contained in Report on Form 10-KSB of Worldwide Biotech & Pharmaceutical Company as filed with the Securities and Exchange Commission.

This report on Form 10-QSB contains forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in the forward-looking statements and from historical results of operations. Among the risks and uncertainties which could cause such a difference are those relating to our dependence upon certain key personnel, our ability to manage our growth, our success in implementing the business strategy, our success in arranging financing where required, and the risk of economic and market factors affecting us or our customers. Many of such risk factors are beyond our control.

Plan of Operation

We intend to become a supplier of HCV virus for our internal needs and for sale to third parties, such as research institutions and pharmaceutical companies. We intend to continue to develop and refine our ELISA kit and Rapid Test products and produce those products for sale. We will need to pursue our marketing plans to insure both recognition of our product and to create demand. We will continue to develop, refine and pursue patents on our Traditional Chinese Medicine (TCM) products. However, in order to facilitate the transition from a company focused on research and development to a company that produces and sells its products and services will be dependent upon our ability to raise additional capital during the next twelve months. We will pursue capital raising either through conventional loans from various financial institutions or through an offering of our shares after the filing of a registration statement with the Securities and Exchange Commission. We anticipate that in order to finance our business plans and accomplish our goals, we will need to raise approximately $15,000,000 from the second quarter of year 2005 to the end of year 2006. We expect to finish the filing of a registration statement with the Securities and Exchange Commission by the end of the third quarter of 2005. The capital raise is intended to be accomplished largely through conventional loans from Chinese banks with our current property as the collateral before the registration statement is effective. We intend to utilize these funds for production ($1.4 million for year 2005 and $2.44 million for year 2006), R & D ($0.3 million for year 2005 and $0.73 million for year 2006), administration ($0.55 million for year 2005 and $1.77 million for year 2006), acquisitions and mergers of various companies that will foster and promote our business objectives ($7.8 million for year 2006). At present, based upon our current cash position, it is estimated that we can meet our expenses as they currently exist for the next 16 months if we are able to negotiate extensions of certain outstanding loans. There are two loans currently outstanding that will be due this year, $604,040 due on May 28, 2005 and $1,207,554 due in July 2005. We anticipate that we will be able to negotiate a one-year extension on each of these loans, but this has not yet been accomplished. We expect that our expenses for current operations will be similar to that of last year where we spent $684,149. Accordingly, based upon current operations, we can sustain ourselves for a little over 7 months.

For the last two years through December 31, 2004 and through March 31, 2005, we have expended approximately $375,000 on research and product development, and $2,023,155 on plant and equipment. Based upon our current financial condition, we can satisfy our current cash requirements for 7 months.

Additionally, the Company is in negotiations with two companies for a potential acquisition.

-14-
Summary of Product Research

During this period of time, we will continue product research and development including optimizing the cell culture system to provide HCV particles to facilitate biology, pathology and immunology research through sales to non-competitive research organizations focused on products non-core to the companies business models and/or license or sell to others for small molecule drug discovery and complex-epitope diagnostics. We plan to develop our next generation diagnostic kit with superior sensitivity and specificity using confrontational epitopes of the Company’s antigen and corresponding specific antibodies, optimize its in-vitro drug screening, start screening some known anti-viral medicine, compound libraries, peptide libraries and extracts of TCM for discovering specific anti-HCV drugs and develop vaccine for HCV based on the Company’s intact HCV virus.

No Expected Equipment Purchase or Change in Number of Employees

We expect if we are able to raise additional funds, we will purchase additional equipment, otherwise, we will not. Further, we do not expect any significant change in the number of employees unless we accomplish a merger with another company.

Critical Accounting Policies

A summary of significant accounting policies is included in Note 1 to the audited financial statements included Form 10-KSB as filed with the Securities and Exchange Commission for the year ended June 30, 2004. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about the company's operating results and financial condition.

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We record property and equipment at cost. Depreciation and amortization are provided using the straight-line method over the estimated economic lives of the assets, which are from five to ten years. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred.

We account for stock options issued to employees in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. As such, compensation cost is measured on the date of grant as the excess of the current market price of the underlying stock over the exercise price. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. We adopted the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" and SFAS 148, "Accounting for Stock-Based Compensation -Transition and Disclosure", which permits entities to provide pro forma net income (loss) and pro forma earnings (loss) per share disclosures for employee stock option grants as if the fair-valued based method defined in SFAS No. 123 had been applied. We account for stock options and stock issued to non-employees for goods or services in accordance with the fair value method of SFAS 123.

-15-
Results of Operations

Three months ended March 31, 2005 compared to three months ended March 31, 2004

Since the Company was formed in November 2001, it has not earned any revenues and has incurred a net loss since its inception of $5,760,304 through March 31, 2005.

Operating Expenses

For the three months ended March 31, 2005, total operating expenses were $1,416,495 as compared to $123,404 for the three months ended March 31, 2004, an increase of $1,293,091, or approximately 1,048%.

Included in this increase was:

·  
For the three months ended March 31, 2005, we incurred research and development expense of $55,075 compared to $25,763 for the three months ended March 31, 2004, an increase of $29,312 or 114%. The increase was due to an increase in amounts of materials consumed in our product development.
·  
For the three months ended March 31, 2005, we incurred professional fees of $28,861 as compared to $44,776 for the three months ended March 31, 2004, a decrease of $15,915 or 35.5%. The decrease was due to a decrease in amounts paid to various consultants and professionals related to our patents and related legal matters.
·  
Stock-based compensation expense increased to $1,259,522 for the three months ended March 31, 2005 from $0 for the three months ended March 31, 2004. The increase in stock-based compensation expense was attributable to the valuation of issuable common shares and warrants under the variable method of accounting.
·  
For the three months ended March 31, 2005, general and administrative expenses were $73,037 as compared to $52,865 for the three months ended March 31, 2004, an increase of $20,172, or approximately 38%. In the 2005 period, we incurred additional marketing fees, travel-related expenses and other administrative expenses due to the continued implementation of our business plan.

For the three months ended March 31, 2005, interest expense was $47,031 as compared to $8,375 for the three months ended March 31, 2004 and was related to an increase in borrowings.

For the three months ended March 31, 2004, we recorded a gain on sale of marketable securities of $46,112 as compared to $0 for the three months ended March 31, 2005.

As a result of these factors, we reported a net loss of $1,460,717 or $.04 per share for the three months ended March 31, 2005, as compared to a net loss of $85,667 or $.00 per share for the three months ended March 31, 2004.
-16-
LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2005, we had cash and cash equivalents of $766,635.

Net cash used in operating activities for the three months ended March 31, 2005 was $240,709 as compared to net cash used in operating activities of $134,870 for the three months ended March 31, 2004. For the three months ended March 31, 2005, we used cash to fund our loss of $1,460,717 and to fund prepayments and other current assets of $166,281 offset by non-cash items such as depreciation and amortization of $17,396 and stock-based compensation of $1,259,522, increases in accounts payable of $74,623 and increases in other current liabilities of $34,748. For the three months ended March 31, 2004, we used cash to fund our loss of $85,667, to fund prepayments and other current assets of $26,953, to repay accounts payable of $448 and had a gain on the sale of marketable securities of $46,154 offset by a non-cash item of depreciation and amortization of $12,516, and increases in other current liabilities of $11,836.

Net cash used in investing activities for the three months ended March 31, 2005 was $264,661 as compared to net cash used in investing activities for the three months ended March 31, 2004 of $281,863. For the three months ended March 31, 2005, we used cash for capital expenditures of $264,661. For the three months ended March 31, 2004, we used cash for capital expenditures of $402,782 offset by cash provided from the sale of marketable securities of $120,919.
Net cash provided by financing activities for the three months ended March 31, 2005 was $224,591 as compared to net cash used in financing activities for the three months ended March 31, 2004 of $555. For the three months ended March 31, 2005, we received net proceeds of $238,092 from related party advances offset by the repayment of loans and mortgages payable of $13,501.
We currently have no material commitments for capital expenditures.
We are not aware of any known trends, events or uncertainties that have, or reasonably likely to have material impact on this short-term or long-term liquidity. We have no internal source of liquidity at the present time and do not generate revenue from sales, however, we intend to pursue internal sources of liquidity as explained above, through registration of various shares of stock on a registration statement to be filed with the Securities & Exchange Commission, or through traditional means of obtaining funds through various financial institutions. We are in need of additional funds to meet various anticipated capital expenditures which include research and development for drug-screening system for anti-HCV drugs and HBV vaccines, production of products for release into the market, mergers of companies that would align the Company’s business plans, and various funds to market our technology and products to create interest in the market place. We will need to raise funds either through traditional sources of financing or through the sale of stock to meet these commitments.

There are a number of trends, ventures, and uncertainties that are reasonably expected to have material impact on the net sales, revenues or income for continued operations. Presently, we have no income from operations. We will be unable to pursue continued research, development, production, and marketing of our product line in the event it is unable to raise sufficient funds to meet these expenses. There is no assurance that we will be able to raise sufficient funds to meet these goals. Further, we are subject to government regulation with regard to obtaining SFDA (Chinese FDA) approval for the new products, which at the present has not been accomplished. There may be delays in obtaining approval from the SFDA which would prevent us from production and/or marketing of these products. Further, we are not protected in all of its intellectual property rights and failure to do so, may allow others to infringe upon the patent.

Currently, the Peoples Republic of China is in a period of growth and is constantly promoting business development in order to bring more business into China. Additionally, a Chinese corporation can be owned by a United States corporation, however, the laws and regulations of China are subject to change and in the event said change occurs, it may affect the ability of Company to operate in the Peoples Republic of China.

The Company’s future success depends on the continued services of its executive management currently in place. The loss of any of their services could be detrimental to the Company and could have an adverse affect on business development. Future success is also dependent on the ability to identify, hire, train, or retain other qualified employees. Competition for these individuals is intense and increasing.

-17-
Going Concern

The report from of our independent registered public accounting firm on our audited financial statements at December 31, 2004 contains an explanatory paragraph regarding doubt as to our ability to continue as a going concern. While a significant portion of our net loss for fiscal 2004 is non-cash, we do not presently generate sufficient revenue to fund our operations. The Company's limited financial resources have prevented it from aggressively advertising or developing its product to achieve consumer recognition. In order to sustain our current operations and satisfy our current obligations, as well as to obtain sales of our products and services we will require funds for working capital. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern.

Off Balance Sheet Arrangements
The Company has no off balance sheet arrangements for the period ending March 31, 2005.
Impact of Recently Issued Accounting Pronouncements
In November 2004, Financial Accounting Standards Board issued statement of Financial Accounting Standard No. 151, “Inventory Costs.” The new statement amends Accounting Research Bulletin No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material. This statement requires that those items be recognized as current-period charges and requires that allocation of fixed production overheads to the cost of conversion be based on the normal capacity of the production facilities. This statement is effective for fiscal years beginning after June 15, 2005. We do not expect adoption of this statement to have a material impact on our financial condition or results of operations.
In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment.” This statement replaces FASB Statement No. 123 and supersedes APB Opinion No. 25. Statement No. 123(R) will require the fair value of all stock option awards issued to employees to be recorded as an expense over the related vesting period. The statement also requires the recognition of compensation expense for the fair value of any unvested stock option awards outstanding at the date of adoption. We do not expect the adoption of this statement to have a material impact on our financial condition or results of operations.
 
Item 3. Controls and Procedures

Our Chief Executive Officer and Acting Chief Financial Officer (collectively, the "Certifying Officers") are responsible for establishing and maintaining disclosure controls and procedures for us. Based upon such officers' evaluation of these controls and procedures as of a date as of the end of the period covered by this Quarterly Report, and subject to the limitations noted hereinafter, the Certifying Officers have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in this Quarterly Report is accumulated and communicated to management, including our principal executive officers as appropriate, to allow timely decisions regarding required disclosure.

The Certifying Officers have also indicated that there were no significant changes in our internal controls or other factors that could significantly affect such controls subsequent to the date of their evaluation, and there were no corrective actions with regard to significant deficiencies and material weaknesses.

Our management, including each of the Certifying Officers, does not expect that our disclosure controls or our internal controls will prevent all error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control. The design of any systems of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of these inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.


-18-


Item 1. Legal Proceedings

None

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

None

Item 5. Other Information

None

Item 6. Exhibits

The exhibits included in this report are indicated below.

 
 
-19-
 

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.

Worldwide Biotech & Pharmaceutical Company

Date: November 14, 2005                /s/ Wenxia Guo
------------------------------------
Wenxia Guo
Chief Executive Officer, Director
(Principal Executive Officer)

Date: November 14, 2005                                       /s/ Peiyi Tian
-----------------------------------
Peiyi Tian
VP, Treasurer, CFO, Director
(Principal Financial and Accounting Officer)

Date: November 14, 2005                              /s/ JianJun Liu
-----------------------------------
JianJun Liu, Director

Date: November 14, 2005                             /s/ Huimin Zhang
------------------------------------
Huimin Zhang, Director


-20-