SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [x]
Filed by a party other than the Registrant [ ]
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Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
DRAGON PHARMACEUTICAL INC.
(Name of Registrant as Specified In Its Charter)
---------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
_______________________________
2) Aggregate number of securities to which transaction applies:
_______________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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5) Total fee paid: ___________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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4) Date Filed: ___________________________________________
DRAGON PHARMACEUTICAL INC.
650 West Georgia Street, Suite 310
Vancouver, British Columbia
Canada V6B 4N9
Telephone (604) 669-8817
To Our Shareholders:
You are cordially invited to attend the annual meeting of the shareholders
of Dragon Pharmaceutical Inc. to be held at 10:00 a.m. local time, on May 11,
2006 at our principal executive office located at 650 West Georgia Street, Suite
310, Vancouver, British Columbia V6B 4N9.
At the meeting, you will be asked to:
o elect eight nominees as members of the Board of Directors to serve
until their successors are elected and qualified; and
o approve the adjournment of the annual meeting for any permitted
reason, including, if necessary, to solicit additional proxies in the
event that there are not sufficient votes at the time of the annual
meeting to approve the proposal.
We hope you plan to attend the annual shareholders' meeting. However,
whether or not you plan to attend the meeting in person, in order that we may be
assured of a quorum we urge you to sign and return the enclosed proxy in the
postage-paid envelope provided as promptly as possible.
/s/ Yanlin Han
--------------------------------------
Yanlin Han,
April 11, 2006 Chairman of the Board
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DRAGON PHARMACEUTICAL INC.
650 West Georgia Street, Suite 310
Vancouver, British Columbia
Canada V6B 4N9
Telephone (604) 669-8817
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 11, 2006
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of Dragon
Pharmaceutical Inc. (the "Company"), a Florida corporation, will be held at our
principal executive office located at 650 West Georgia Street, Suite 310,
Vancouver, British Columbia V6B 4N9, on May 11 , 2006 at 10:00 a.m. local time,
for the purpose of considering and acting on the following proposal:
1. Elect eight nominees as members of the Board of Directors to serve until
their successors are elected and qualified; and
2. Approve the adjournment of the annual meeting for any permitted reason,
including, if necessary, to solicit additional proxies in the event that
there are not sufficient votes at the time of the annual meeting to approve
the proposal.
Only shareholders of record at the close of business on April 11, 2006, are
entitled to receive notice of and to vote at the meeting. Shareholders are
invited to attend the meeting in person.
Please sign and date the accompanying proxy card and return it promptly in
the enclosed postage-paid envelope whether or not you plan to attend the meeting
in person. If you attend the meeting, you may vote in person if you wish, even
if you previously have returned your proxy card. The proxy may be revoked at any
time prior to its exercise. If your shares are held in the name of a bank,
broker or other fiduciary, please follow the instructions on the voting
instruction card furnished by the shareholder of record. Remember, your vote is
important so please act as promptly as possible.
By Order of the Board of Directors
April 11, 2006 Maggie Deng, Secretary
3
DRAGON PHARMACEUTICAL INC.
650 West Georgia Street, Suite 310
Vancouver, British Columbia
Canada V6B 4N9
Telephone (604) 669-8817
-----------------------
PROXY STATEMENT
-----------------------
We, Dragon Pharmaceutical Inc., (the "Company") are furnishing this proxy
statement to you in connection with our 2006 annual meeting to be held on May
11, 2006, at 10:00 a.m. local time at our principal executive office located at
650 West Georgia Street, Suite 310, Vancouver, British Columbia V6B 4N9, and at
any adjournment thereof.
A copy of the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2005, accompanies this Proxy Statement. These proxy materials were
first mailed to shareholders on or about April 13, 2006.
At the annual meeting, shareholders will be asked to:
o Elect the eight nominees as members of the Board of Directors to serve
until their successors are elected and qualified; and
o Approve the adjournment of the annual meeting for any permitted
reason, including, if necessary, to solicit additional proxies in the
event that there are not sufficient votes at the time of the annual
meeting to approve the proposal.
The enclosed proxy is solicited on behalf of our board of directors and may
be revocable by you at any time before the voting of such proxy. All properly
executed proxies delivered pursuant to this solicitation will be voted at the
meeting and in accordance with instructions, if any.
Unless the context otherwise requires, all references to the "Company,"
"we," "us," and "our" refer to Dragon Pharmaceutical Inc. and its subsidiaries.
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QUESTIONS AND ANSWERS
ABOUT THE MEETING AND VOTING
The following are some questions that you, as a shareholder of Dragon, may
have regarding matters being considered at the annual shareholders' meeting and
the answers to those questions.
What is the purpose of the Annual Meeting?
The purpose of the annual meeting is to allow you to vote on the election
for directors.
Who is entitled to vote?
Only shareholders of record at the close of business on April 11, 2006 (the
Record Date), are entitled to vote at the meeting, or any postponements or
adjournments of the meeting.
What are the Board's recommendations on the proposals?
The Board recommends a vote FOR each of the nominees for director.
How do I vote?
Sign and date each proxy card you receive and return it in the
postage-prepaid envelope enclosed with your proxy materials. If you are a
registered shareholder and attend the meeting, you may deliver your completed
proxy card in person.
If your shares are held by your broker or bank, in "street name," you will
receive a form from your broker or bank seeking instructions as to how your
shares should be voted. If you do not instruct your broker or bank how to vote,
your broker or bank will vote your shares if it has discretionary power to vote
on a particular matter.
Who will count the votes?
Our Secretary will count the votes and act as the inspector of election.
Our transfer agent, Computershare Trust Company of Canada, will count the
proxies and provide this information at the time of the meeting.
What shares are included on the proxy card(s)?
The shares on your proxy card(s) represent ALL of your shares. If you do
not return your proxy card(s), your shares will not be voted.
What does it mean if I get more than one proxy card?
If your shares are registered differently and are in more than one account,
you will receive more than one proxy card. Sign and return all proxy cards to
ensure that all your shares are voted. We encourage you to have all accounts
registered in the same name and address (whenever possible). You can accomplish
this by contacting our transfer agent, Computershare Trust Company of Canada
((604) 661-9400), or, if your shares are held in "street name," by contacting
the broker or bank who holds your shares.
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How many shares can vote?
There were 62,878,004 shares of common stock issued and outstanding as of
the Record Date. Every shareholder is entitled to one vote for each share of
common stock held.
What is a "quorum"?
A "quorum" is a majority of the outstanding shares entitled to vote and
attending the meeting. They may be presented in person or represented by proxy.
For the purposes of determining a quorum, shares held by brokers or nominees for
which we receive a signed proxy will be treated as present even if the broker or
nominee does not have discretionary power to vote on a particular matter or if
instructions were never received from the beneficial owner. These shares are
called "broker non-votes." Abstentions will be counted as present for quorum
purposes.
What do I need to do now?
After you have carefully read this proxy statement, indicate on your proxy
card how you want your shares voted, then sign and mail the proxy card in the
enclosed postage-prepaid return envelope marked "Proxy" as soon as possible so
that your shares may be represented and voted at the meeting.
Can I change my vote after I have mailed my signed proxy card?
Yes. There are three ways for you to revoke your proxy and change your
vote. First, you may send a written notice to our secretary stating that you
would like to revoke your proxy. Second, you may complete and submit a new proxy
card. Third, you may vote in person at the meeting.
What is required to approve the proposal?
For the election of the directors, once a quorum has been established, the
nominees who receive the plurality of votes will be elected as our directors.
If a broker indicates on its proxy that it does not have discretionary
authority to vote on a particular matter, the affected shares will be treated as
not present and not entitled to vote with respect to that matter, even though
the same shares may be considered present for quorum purposes and may be
entitled to vote on other matters.
What happens if I withhold my vote?
Proxies marked "withheld" will be counted as shares present for the purpose
of determining the presence of a quorum, but for purposes of determining the
outcome of a proposal, shares represented by such proxies will not be treated as
affirmative votes.
If my shares are held by a broker, will the broker vote my shares for me?
Your broker will vote your shares according to the instructions you provide
to your broker about how to vote. You should instruct your broker how to vote
your shares in accordance with the directions your broker provides. If you do
not instruct your broker how to vote, your broker will vote your shares if it
has discretionary power to vote on a particular matter. Failure to provide
instructions to your broker on items that the broker does not have discretionary
power to vote will result in your shares not being voted.
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How will we solicit proxies?
The enclosed proxy is solicited on behalf of our board of directors. We
will distribute this proxy statement and solicit votes. The cost of soliciting
proxies, which will be conducted by mail, will be borne by us. These costs will
include the expense of preparing and mailing proxy solicitation materials for
the meeting and reimbursements paid to brokerage firms and others for their
reasonable out-of-pocket expenses for forwarding proxy solicitation materials to
shareholders. Proxies may also be solicited in person, by telephone, or by
facsimile by our directors, officers and employees without additional
compensation.
Whom should I contact with questions or to obtain additional copies of this
proxy statement?
Dragon Pharmaceutical Inc.
650 West Georgia Street, Suite 310
Vancouver, British Columbia
Canada V6B 4N9
Attention: Secretary
Telephone: 1-877-388-3784
Stock Ownership of Directors, Executive Officers and Principal Shareholders
The following table shows the amount of our common stock (symbol: TSE:DDD;
OTCBB:DRUG; Berlin, Frankfurt and XETRA: DRP) beneficially owned (unless
otherwise indicated) by each shareholder known by us to be the beneficial owner
of more than 5% of our common stock, by each of our executive officers and
directors and the executive officers and directors as a group. Except as
otherwise indicated, all information is as of April 11, 2006.
Shares
Beneficially Owned(1)
----------------------------
Name & Address of Beneficial Owner Number Percent
---------------------------------- --------------- ---------
Yanlin Han
Chief Executive Officer and Director 31,651,403(2) 50.3%
c/o 650 West Georgia Street, Suite 310
Vancouver, British Columbia
Canada V6B 4N9
Zhanguo Weng
Vice President, China Operation and Director 9,200,401(3) 14.6%
c/o 650 West Georgia Street, Suite 310
Vancouver, British Columbia
Canada V6B 4N9
Xuemei Liu
Director 4,650,200(4) 7.4%
c/o 650 West Georgia Street, Suite 310
Vancouver, British Columbia
Canada V6B 4N9
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Shares
Beneficially Owned(1)
----------------------------
Name & Address of Beneficial Owner Number Percent
---------------------------------- --------------- ---------
Alexander Wick,
Director 1,300,000(5) 2.1%
Yiu Kwong Sun,
Director 1,100,000(6) 1.7%
Peter Mak,
Director 200,000(7) 0.3%
Heinz Frey,
Director 200,000(7) 0.3%
Jin Li,
Director 200,000(7) 0.3%
Maggie Deng
Chief Operating Officer 400,000(7) 0.6%
Garry Wong
Chief Financial Officer 420,000(7) 0.7%
All directors and executive officers
as a group (10 persons) 49,322,004(8) 78.4%
----------------------------------
(1) Except as otherwise indicated, we believe that the beneficial owners of the
common stock listed above, based on information furnished by such owners or
publicly available, have sole investment and voting power with respect to
such shares, subject to community property laws where applicable.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock subject
to options or warrants currently exercisable, or exercisable within sixty
days, are deemed outstanding for purposes of computing the percentage
ownership of the person holding such option or warrants, but are not deemed
outstanding for purposes of computing the percentage ownership of any other
person.
(2) Includes options to purchase 500,000 shares.
(3) Includes options to purchase 300,000 shares.
(4) Includes options to purchase 400,000 shares.
(5) Includes options to purchase 1,000,000 shares.
(6) Includes 400,000 shares of common stock subject to options exercisable
within sixty days. Also includes 600,000 shares of common stock owned by
Yukon Health Enterprise for which Mr. Sun serves as director and officer.
(7) Represents options exercisable within sixty days.
(8) Includes options and warrants to acquire 4,020,000 shares of common stock.
PROPOSAL 1--ELECTION OF DIRECTORS
Our Certificate of Incorporation sets forth the range in number of
directors between one and eleven with the exact number to be determined by the
Board of Directors within this range. The Board has set the number of directors
at eight.
The nominees for directors are Mr. Yanlin Han, Mr. Zhanguo Weng, Ms. Xuemei
Liu, Dr. Alexander Wick, Ph.D., Dr. Yiu Kwong Sun, M.D., Mr Peter Mak, Mr. Heinz
Frey and Mr. Jin Li. The following indicates the age, principal occupation or
employment for at least the last five years and affiliation with the Company, if
any, for each nominee as director.
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Mr. Yanlin Han, age 43, is the Chief Executive Officer and the Chairman of
the Board of Director of Dragon, positions he assumed in January 2005. He has
been the Chairman of Oriental Wave and responsible for the overall strategic
planning and direction of Oriental Wave starting the date he founded the
company. Mr. Han has over 20 years of experience in the pharmaceutical industry
in many positions like material buyer, product sales and manager for state-own
companies in China and has very extensive sales and production management
experience in China. He founded his private company named Shanxi Tongling
Pharmaceutical Company in 1994, which became the vehicle to acquire state-own
pharmaceutical companies through bankruptcy process or contractual management
agreements. Mr. Han set up a joint venture with a large Indian pharmaceutical
company to produce pharmaceutical intermediates with mass fermentation
technology. Mr. Han also serves as the Vice-President of Shanxi Province Foreign
Investment Enterprise Association and Vice-President of Datong City Trade
Council. Mr. Han graduated from Shanxi Institute of Economic Management in 1986.
Mr. Zhanguo Weng, age 51, had been a Director of the Company since January
2005. Mr. Weng is the Vice President, China Operation, a Director of Dragon and
the Vice President of the Company, responsible for the overall daily operations
of Shanxi Weiqida. Mr. Weng has over 25 years of experience in pharmaceutical
industry including being the General Manager for Shanxi Tongzhen Pharmaceutical
Co. Ltd. from August 1997 to January 2002 and Superintendent for Datong No. 2
Pharmaceutical Factory from June 1992 to August 1997. He graduated from the
Business Administration faculty of Shanxi Broadcasting University in 1986 and
has also participated the Senior Program of MBA (Pharmaceutical Line) of
People's University of China for two years.
Ms. Xuemei Liu, age 37, has been a Director of the Company since January
2005. Ms. Liu is currently the Chairman of Tera Science & Technology Development
Co. Ltd. which engages in a wide range of investment projects in real estate
development, coal trading and media and publishing industry. Prior to her
present position as Chairman of Tera Science & Technology Development Co. Ltd.,
Ms. Liu was the vice general manager of Beijing Chemical Baifeng Investment
Corporation Futures Broker Company from 1996 to 1999. Ms. Liu graduated from
Beijing University with a Bachelor degree in 1996 and graduated from the
Graduate School of the Chinese Academy of Social Sciences with a Master degree
in 1998.
Dr. Alexander Wick, Ph.D., age 68, has been a Director of Dragon since 1998
and was the President from 2002 until his resignation on February 2, 2006. Dr.
Wick holds a doctorate degree in synthetic organic chemistry from the Swiss
Federal Institute of Technology and has completed post-doctoral studies at
Harvard University. He has had leading positions in the pharmaceutical research
departments of F. Hoffmann-La Roche in the United States and Switzerland and
Synthelabo in France (Director of Chemical Research and Development) for over 25
years in the field of antibiotics, prostaglandius, vitamins, cardiovascular CNS
and AIDS. In 1995 he created the fine chemicals company Sylachim S.A., a 100%
subsidiary of Synthelabo, active in chemical intermediates and API's for the
world's largest pharmaceutical companies (turnover of over 100 million Euros)
and was its President until its acquisition by the German conglomerate mg
Technologies (Dynamit-Nobel GmbH) in 2001.
Dr. Yiu Kwong Sun, M.D., age 62, has been a Director of Dragon since 1999.
Dr. Sun graduated from the University of Hong Kong Faculty of Medicine in 1967.
He is a Founding Fellow of the Hong Kong College of Family Physicians and a
Fellow of the Hong Kong Academy of Medicine. Since 1995, he has served as the
Chairman of the Dr. Sun Medical Centre Limited, which has been operating a
network of medical centers in Hong Kong and China for the past 20 years. He is
also the Administration Partner of United Medical Practice, which manages a
large network of medical facilities throughout Hong Kong and Macau. Dr. Sun has
been a member of the Dr. Cheng Yu Tung Fellowship Committee of Management of the
University of Hong Kong Faculty of Medicine since 1997.
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Mr. Peter Mak, age 45, is a fellow of the Chartered Association of
Certified Accountants in UK as well as a fellow of the Hong Kong Institute of
Certified Public Accountant. Mr. Mak was formerly the Managing Partner of Arthur
Andersen Southern China and also formerly a partner of Arthur Andersen
Worldwide. Through his twenty years of accounting and financial practices, Mr.
Mak has extensive knowledge and experience in Chinese and international
accounting standards. He is also Chief Financial Officer of New Dragon Asia
Corp. whose shares are registered under the Securities Exchange Act of 1934.
Mr. Heinz Frey, age 68, graduated from University of Berne, Switzerland in
1966, has 30 years of experience in the telecommunication industry, security
manufacturing and service industry. He has broad experience in the management of
various sizes of companies with global presence, financing and controlling of
international companies, leading development, production, sales and finance
departments. He is also a board member of various companies.
Mr. Jin Li, age 39, is currently a senior advisor of Phycos International
Co., Ltd. Prior to joining Phycos, he was a partner at the international law
firm, Linklaters. Mr. Li studied biochemistry at Peking University in China and
received his Master of Science degree in Biochemistry from the University of
Michigan and his doctoral degree from Law School of University of Columbia. He
has more than ten years of experience in international IPOs, M&A and business
transactions.
Recommendation of the Board
THE BOARD OF DIRECTORS RECOMMENDS SHAREHOLDERS VOTE "FOR" EACH OF THE
NOMINEES LISTED ABOVE.
Information Concerning Board Compensation, Meetings and Committees
Directors are not routinely compensated for their services. However, from
time to time, Board members are awarded stock options as determined by the
Board. The exercise price of the options is based on the fair market value of
the underlying shares of common stock at the time of grant. No directors receive
any cash compensation during 2005. At a directors meeting held on January 12,
2005, Ms. Liu, Dr. Sun and Dr. Wick were granted options to purchase 200,000,
200,000, and 400,000 shares of common stock, respectively, at $1.18 per share
which represented the closing per share price as of that date. At a directors
meeting held on September 30, 2005, Mr. Han, Mr. Weng, Ms. Liu, Dr. Wick,, Dr.
Sun, Mr. Mak, Mr. Frey and Mr. Li were granted options to purchase 500,000,
300,000, 200,000, 400,000, 200,000, 200,000, 200,000 and 200,000 shares of
common stock, respectively, at $0.74 per share which represented the closing per
share price as of that date.
At the Annual Meeting of shareholders held in August 2005, Messr. Han, Sun,
Weng, and Wick and Ms. Liu were elected as directors. Messr. Han and Weng and
Ms. Liu were originally elected to the Board effective January 12, 2005 in
connection with the Share Purchase Agreement between the Company and Oriental
Wave. We do not have a formal policy regarding the attendance of our directors
at annual or special meetings of shareholders, but we encourage directors to
attend such meetings. Messrs. Han and Weng and Dr. Wick directors attended the
last annual meeting of shareholders. Effective September 30, 2005, Messrs. Mak,
Frey and Li were appointed to the Board.
The Board of Directors met seven times during fiscal 2005. Mr. Yanlin Han,
Mr. Zhanguo Weng attended all 7 meetings, Dr. Alexander Wick and Dr Yiu Kwong
Sun attended 6 meetings, Ms Xuemei Liu attended 4 meetings, while Mr. Peter Mak,
Dr. Heinz Frey and Mr. Jin Li attended the 1 meeting after their election.
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Prior to September 30, 2005, the Board did not have an audit committee and
with that function being handled by the entire Board. Effective September 30,
2005, concurrent with the appointment of Messrs Mak, Frey and Li , the Board
established an audit committee solely consisting of these newly appointed
directors. The Audit Committee is comprised solely of independent directors (as
defined in the NASD rules) and meets at least quarterly with the Company's
management and independent auditors to, among other things, review the results
of the annual audit and quarterly reviews and discuss the financial statements,
recommend to the Board the independent auditors to be retained and receive and
consider the auditors' comments as to controls, adequacy of staff and management
performance and procedures in connection with audit and financial controls. The
Audit Committee met two times during the last year. A copy of the audit
committee's charter is posted on the Company's website www.dragonbiotech.com.
Director Mak is deemed by the Company to be an "audit committee financial
expert." Director Mak has an understanding of generally accepted auditing
principles (GAAP) and has the ability and experience to prepare, audit, evaluate
and analyze financial statements which present the breadth and level of
complexity of issues that the Company reasonably expects to be raised by the its
financial statements. Director Mak acquired these attributes as Chief Financial
Officer of a public company and as a former partner to a former international
accounting firm.
In addition, effective September 30, 2005, the Board formed a compensation
committee consisting of Ms Liu and Messrs. Sun and Li. The Compensation
Committee acts on executive compensation policies and procedures and other
compensation-related items that are corporate in nature. The Compensation
Committee is comprised solely of independent directors (as defined in the NASD
rules) and met one time during the last year.
The Board does not have a nominating committee. However, all of our directors
participate in the consideration of director nominees. Candidates may come to
the board's attention through current directors, management, shareholders or
other persons. Candidates are evaluated at regular or special meetings of the
board and may be considered at any point during the year. The board may take
such measures that it considers appropriate in connection with its evaluation of
a candidate, including candidate interviews, inquiry of the person recommending
the candidate, engagement of an outside search firm to gather additional
information, or reliance on the knowledge of the members of the board or
management.
We do not have a policy with regard to the consideration of any director
candidates recommended by security holders. However, the board will review
correspondence and other communications it receives from security holders and,
therefore, is of the view that it is appropriate for us not to have such a
policy. The board will consider candidates recommended by security holders and
will do so upon their receipt of information that includes the candidates name
and qualifications. Information regarding any potential candidates and other
information shareholder may wish to communicate to the Board may be delivered to
Secretary of Dragon, 1055 West Hastings Street, Suite 1900, Vancouver, British
Columbia V6E 2E9.
Audit Committee Report
In accordance with Securities Exchange Commission regulations, the
following is the Audit Committee Report. Such report is not deemed to be filed
with the Securities Exchange Commission.
This section will not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any other filing
under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended, except to the extent we specifically incorporate this
information by reference, and will not otherwise be deemed filed under such
Acts.
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The audit committee oversees the financial reporting process for us on
behalf of the board of directors. In fulfilling its oversight responsibilities,
the audit committee reviewed the annual financial statements included in the
annual report filed with the Securities and Exchange Commission as well as the
unaudited financial statements filed with our quarterly reports.
In accordance with Statements on Accounting Standards (SAS) No. 61,
discussions were held with management and the independent auditors regarding the
acceptability and the quality of the accounting principles used in the reports.
These discussions included the clarity of the disclosures made therein, the
underlying estimates and assumptions used in the financial reporting, and the
reasonableness of the significant judgments and management decisions made in
developing the financial statements. In addition, the audit committee has
discussed with the independent auditors their independence from us and our
management, including the matters in the written disclosures required by
Independence Standards Board Standard No. 1.
The audit committee has also met and discussed with our management, and our
independent auditors, issues related to the overall scope and objectives of the
audits conducted, the internal controls used by us, and the selection of our
independent auditors. In addition, the audit committee discussed with the
independent auditors, with and without management present, the specific results
of audit investigations and examinations and the auditor's judgments regarding
any and all of the above issues.
Pursuant to the reviews and discussions described above, the audit
committee recommended to our board of directors that the audited financial
statements be included in our annual report on Form 10-KSB for the fiscal year
ended December 31, 2005, filed with the Securities and Exchange Commission.
By the Board of Directors
Mr. Peter Mak, Mr. Heinz Frey and Mr. Jin Li
Compensation Committee Interlocks and Insider Participation
At December 31, 2005, the Compensation Committee consisted of Ms. Xuemei
Liu, Chairman, Mr. Yiu Kwong Sun and Mr. Jin Li. None of the members of the
Compensation Committee served as an officer or employee of the Company or
entered into any transaction or relationship with the Company other than serving
as Director.
Code of Ethics
The Company has adopted a Code of Ethics that is applicable to the
officers, directors and employees of the Company, including the Company's
principal executive officer, principal financial officer, principal accounting
officer, controller, or persons performing similar functions. The Code of Ethics
is available on the Company's website at www.dragonbiotech.com. Amendments to
and waivers from the Code of Ethics will also be disclosed on the Company's
website.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 ("Exchange Act")
requires the Company's directors and executive officers and persons who own more
than 10% of a registered class of the Company's equity securities to file
reports of beneficial ownership and changes in beneficial ownership with the
Securities and Exchange Commission ("Commission"). The rules promulgated by the
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Commission under Section 16(a) of the Exchange Act require those persons to
furnish the Company with copies of all reports filed with the Commission
pursuant to Section 16(a).
Based solely upon a review of Forms 3 and Forms 4 furnished to the Company
pursuant to Rule 16(a)(3)(e) during the year ended December 31, 2005, the
Company believes that all directors, executive officers and beneficial owners of
more than 10% of the common stock have filed with the Commission on a timely
basis all reports required to be filed under Section 16(a) of the Exchange Act
Executive Officers of Dragon
The names, ages and backgrounds for at least the past five years for each
person who served as an executive officer during the past fiscal year is as
follows:
Name Position Age Period
---- -------- --- ------
Yanlin Han Chairman and Chief
Executive Officer 43 January 2005 - present
Dr. Alexander Wick President 68 September 2002-January 6,
Director 2006
September 1998-present
Zhanguo Weng Vice President,
China Operations 51 January 2005 - present
Maggie Deng Chief Operating Officer 39 January 2005 - present
Garry Wong Chief Financial Officer 35 January 2005 - present
Mr. Yanlin Han. See "Election of Directors."
Mr. Zhanguo Weng. See "Election of Directors."
Ms. Maggie Deng is the Chief Operating Officer of the Company, holding
bachelor degree from Tsinghua University in China. Ms. Deng has over 10 years of
experience working in or with public companies as investment banker, mainly on
IPOs and secondary offering for Chinese companies on domestic stock exchange as
well as international ones. Ms. Deng was the senior manager of China
International Capital Corporation, a Morgan Stanley joint venture investment
banking firm in China, from 1998 to 2001. Ms. Deng moved to Canada in 2001 and
held a position of Assistant to President in a start-up biotech company in
Vancouver.
Mr. Garry Wong, CFA is the Chief Financial Officer of the Company since
January 2005. Prior to his current position, Mr. Wong served as our Executive
Assistant to President and CEO from February 2002 to January 2005. Before
joining the Company, Mr. Wong was a team member of the Global Mergers and
Acquisitions Group at Nortel Networks since 1996. He managed and executed
transactions consisted of acquisitions, divestitures, equity investments,
spin-offs, public market listing and joint ventures, and occurred in Europe,
North America, Asia and the Middle East. Mr. Wong is a Chartered Financial
Analyst who received an International MBA degree from York University with
double majors in Corporate Finance and Greater China studies and a Bachelor
degree in Business Administration from University of Hong Kong.
13
The following table sets forth the compensation for fiscal years 2005,
2004, and 2003 for our Chief Executive Officer and for each executive officer
who received compensation in excess of $100,000 during the 2005 fiscal year.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
------------------------------------- ------------------------------------------------------
Awards Payout
-------------------------- ----------
Other Annual Restricted Securities LTIP All Other
Bonus Compensation Stock Underlying Payout Compensation
Year Salary ($) ($) Award(s) Options (#) ($) ($)
----- ------ ------- --------------- ----------- -------------- ---------- ----------------
Yanlin Han 2005 $156,263 -0- -0- -0- 500,000 -0- -0-
C.E.O.
Alexander Wick 2005 $0 (1) -0- -0- -0- 800,000 -0- -0-
President 2004 $0 (1) -0- -0- -0- -0- -0- -0-
2003 $0 (1) -0- -0- -0- 200,000 -0- -0-
Maggie Deng
C.O.O 2005 $104,175 -0- -0- -0- 400,000 -0- -0-
Garry Wong
C.F.O. 2005 $106,654 -0- -0- -0- 400,000 -0- -0-
-----------------------------------------------------------------------------------------------------------------------
(1) Dr. Wick was appointed Chief Executive Officer and President in September
2002 and resigned as Chief Executive Officer on January 12, 2005 and as
President on February 2, 2006. He was not paid for his services, but was
reimbursed for expenses he incurred in the course of performing his duties
for us. He received an option to purchase 200,000 shares of common stock at
$0.68 per share in 2003 and options to purchase 400,000 shares of common
stock at $1.18 per share and 400,000 shares of common stock at $0.74 per
share in 2005.
Employment Agreements
The Company has no employment agreements.
14
Equity Compensation Plan Information
Our shareholders approved a share option plan at our Annual Meeting held on
December 18, 2001, authorizing 4,500,000 shares for issuance under the plan. At
our Annual Meeting held on August 12, 2005, our shareholders approved another
share option plan authorizing the issuance of a further 15,000,000 shares. The
following table provides aggregate information as of December 31, 2005 with
respect to all compensation plans (including individual compensation
arrangements) under which equity securities are authorized for issuance.
----------------------------- -------------------------- --------------------------- --------------------------
A B C
----------------------------- -------------------------- --------------------------- --------------------------
Number of securities
remaining available for
future issuance under
Number of securities to equity compensation
be issued upon exercise Weighted-average exercise plans (excluding
of outstanding options, price of outstanding securities reflected in
Plan Category and warrants options, and warrants column A)
----------------------------- -------------------------- --------------------------- --------------------------
Equity compensation plans 6,437,500 $0.92 12,786,500
approved by security holders
----------------------------- -------------------------- --------------------------- --------------------------
Equity compensation plans
not approved by 0 0 0
security holders
----------------------------- -------------------------- --------------------------- --------------------------
Total 6,437,500 $0.92 12,786,500
----------------------------- -------------------------- --------------------------- --------------------------
Certain Relationships and Related Transactions
During the past two years, we have been a party to transactions involving
certain of our directors or executive officers. See also Notes 4, 7 and 21(b) to
our financial statements.
On April 4, 2004, we entered into an agreement with Dr. Longbin Liu, a
former director, and his affiliate to settle the amount owing to us from his
acquisition of the Hepatitis B Vaccine Project as well as cancellation of the
Patent and Project Development agreements between the parties. Under the terms
of the settlement agreement, the G-CSF, Insulin and Hepatitis B Projects,
including the rights of ownership and development obligations would revert to
Dr. Liu.
In exchange, Dr Liu agreed to pay us the $3,710,000 in principal and
interest owing under the Hepatitis B Project as well as reimburse us $1,330,000
that had been paid previously under the Patent and Project Development
agreements. All amounts were due December 31, 2004 and the warrants granted to
Dr. Liu under the Patent Development agreement were cancelled. Dr. Liu has
agreed to provide 2,600,000 common shares of the Company, to be held in escrow,
as security for the amounts owing.
Dr. Liu did not repay the amounts owing on December 31, 2004 and forfeited
the 2,231,000 common shares of the Company that were held in escrow for as
security for the amount owing. These shares, which were subsequently cancelled
15
by the Company, were valued at $2,606,486 and resulted in the Company realizing
a recovery of $2,106,486 of the amount that had been written-down in prior
years.
Dr. Liu is still indebted to the Company in the amount of approximately
$2.48 million with this debt accruing interest at the rate of 6% per annum. This
debt is carried on the Company's books at $100. The Board is considering what
steps, if any, it intends to take against Dr. Liu.
Subsequent to December 31, 2005, the Company entered into an Assignment and
Assumption agreement that, effective February 2, 2006, sold all of the Company's
right, title and interest in its Development and Manufacturing Agreement dated
October 31, 2003 between the Company and Polymun Scientific Immunubiological
Forschung EmGH ("Polymun") to AS Biotech AG. As a result of the Agreement, the
Company disposed of the cell line, and all applicable obligations relating,
thereto, being developed for the Company to enter the European market. The cell
line was sold to AS Biotech AG, a Swiss company controlled by Dr. Alexander
Wick, a Director of the Company who was also the President of the Company prior
to the transaction. The cell line had a carrying value of $265,000 and was sold
for $1 million and the assumption of all liabilities under the agreement.
RELATIONSHIP WITH INDEPENDENT AUDITORS
For the year ended December 31, 2005, Moore Stephens, until their
resignation on May 5, 2005, and Ernst & Young were engaged by us to provide
non-audit services. For the year ended December 31, 2004 Webb and Company were
engaged by Oriental Wave to provide non-audit services During the years ended
December 31, 2005 and 2004, the following fees were paid for services provided
by Ernst & Young and Moore Stephens and by Webb and Company.
As the acquisition of Oriental Wave Holdings Ltd was deemed to be a
reverse-take-over transaction, Oriental Wave is considered to be the parent
company for accounting purposes, The independent accountant for Oriental Wave
for the year ended December 31, 2004 was Webb & Company P.A.
For the year ended December 31, 2005, Moore Stephens and Ernst & Young were
engaged by us to provide non-audit services. For the year ended December 31,
2004 Webb and Company were engaged by Oriental Wave to provide non-audit
services. During the years ended December 31, 2005 and 2004, the following fees
were paid for services provided by Ernst & Young and Moore Stephens and by Webb
and Company.
Audit Fees. The aggregate fees paid for the annual audit of financial
statements included in our Annual Report for the year ended December 31, 2005
and 2004 and the review of our quarterly reports for such years, amounted to
approximately $210,000 paid to Ernst & Young and $174,800 paid to Webb &
Company, respectively.
Audit Related Fees. For the years ended December 31, 2005 and 2004 we paid
$Nil and $Nil to Ernst & Young and Webb and Company for other audit related
fees.
Tax Fees. For the year ended December 31, 2005 and 2004, we paid no fees to
Ernst & Young and Webb and Company for tax fees.
All Other Fees. For the years ended December 31, 2005 and 2004, we paid no
fees to Ernst & Young and Webb and Company for any non-audit services.
The above-mentioned fees are set forth as follows in tabular form:
16
2005 2004
Audit Fees $210,000 $174,800
Audit Related Fees -0- -0-
Tax Fees -0- -0-
All Other Fees -0- -0-
Audit Committee Approval of Audit and Non-Audit Services of Independent
Accountants
The Audit Committee approves all audit and non-audit services provided by
the independent auditors. These services may include audit services,
audit-related services, tax services and other services. The independent
accountants and management are required to periodically report to the Audit
Committee regarding the extent of services provided by the independent
accountants, and the fees for the services performed to date. No non-audit
services were provided by our independent accountants in 2005.
17
A representatives of Ernst & Young LLP will be present at the Annual
Meeting to respond to appropriate questions from the shareholders and will be
given the opportunity to make a statement should they desire to do so.
PROPOSALS OF SHAREHOLDERS
To be considered for inclusion in Dragon's Proxy Statement and form of
proxy for next year's annual meeting, shareholder proposals must be delivered to
the Secretary of Dragon, 650 West Georgia Street, Suite 310, Vancouver, British
Columbia, Canada V6B 4N9, no later than 5:00 p.m. on December 12, 2006. However,
if the date of next year's annual meeting is set more than 30 days from the date
of this year's meeting, the notice must be received by the Secretary in a
reasonable time before we mail our proxy statement. All proposals must meet the
requirements of Rule 14a-8 of the Exchange Act.
For any proposal that is not submitted for inclusion in next year's proxy
statement (as described in the preceding paragraph) but is instead sought to be
presented directly at next year's annual meeting, SEC rules permit management to
vote proxies in its discretion if Dragon (a) receives notice of the proposal
before the close of business on February 25, 2007, and advises shareholders in
the next year's proxy statement about the nature of the matter and how
management intends to vote on such matter, or (b) does not receive notice of the
proposal prior to the close of business on February 25, 2007.
Notices of intention to present proposal at the 2007 Annual Meeting should
be addressed to Dragon, 650 West Georgia Street, Suite 310, Vancouver, British
Columbia V6B 4N9, Attention: Secretary. Dragon reserves the right to reject,
rule out of order, or take other appropriate action with respect to any proposal
that does not comply with these and other applicable requirements.
ANNUAL REPORT TO SHAREHOLDERS
The Annual Report on Form 10-KSB for the fiscal year ended December 31,
2005, including audited financial statements, was mailed to the shareholders
concurrently with this proxy statement, but such report is not incorporated in
this proxy statement and is not deemed to be a part of the proxy solicitation
material. The Form 10-KSB and all other periodic filings made with the
Securities and Exchange Commission are available on the Company's website at
www.dragonpharma.com.
WHERE YOU CAN FIND MORE INFORMATION
Dragon files annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any reports, statements or other information that Dragon files at the
Commission's public reference rooms at 100 F Street, NE, Washington, D.C.,
20549. Please call the Commission at (800) SEC-0330 for further information on
the public reference rooms. The Commission also maintains an Internet World Wide
Web site at "http://www.sec.gov" at which reports, proxy and information
statements and other information regarding Dragon are available.
11
OTHER BUSINESS
Dragon does not know of any business to be presented for action at the
meeting other than those items listed in the notice of the meeting and referred
to herein. If any other matters properly come before the meeting or any
adjournment thereof, it is intended that the proxies will be voted by the proxy
holders in accordance with their best business judgment.
By Order of the Board of Directors
/s/ Maggie Deng
-------------------------------------
Maggie Deng, Secretary
19
PROXY
ANNUAL GENERAL MEETING OF SHAREHOLDERS OF Dragon Pharmaceutical Inc. (the
"Company")
TO BE HELD AT 310-650 West Georgia Street, Vancouver, BC, Canada on May 11,
Thursday, 2006, AT 10:00 AM
The undersigned registered shareholder ("Registered Shareholder") of the Company
hereby appoints, Jin Li, a Director of the Company, or failing this person,
Maggie Deng, Secretary of the Company, or in the place of the foregoing,
______________________________ as proxyholder for and on behalf of the
Registered Shareholder with the power of substitution to attend, act and vote
for and on behalf of the Registered Shareholder in respect of all matters that
may properly come before the Meeting of the Registered Shareholders of the
Company and at every adjournment thereof, to the same extent and with the same
powers as if the undersigned Registered Shareholder were present at the said
Meeting, or any adjournment thereof.
The Registered Shareholder hereby directs the proxyholder to vote the securities
of the Company registered in the name of the Registered Shareholder as specified
herein.
Resolutions (For full detail of each item, please see the enclosed Notice of
Meeting and Information Circular). Please indicate your voting preference by
marking an "X" in the space provided.
------ ------------------------------------------------ ----------- ------------
For Withhold
------ ------------------------------------------------ ----------- ------------
1. To elect as director, Mr. Yanlin Han
------ ------------------------------------------------ ----------- ------------
2. To elect as Director, Mr. Zhanguo Weng
------ ------------------------------------------------ ----------- ------------
3. To elect as Director, Ms. Xuemei Liu
------ ------------------------------------------------ ----------- ------------
4. To elect as Director, Dr. Alexander Wick
------ ------------------------------------------------ ----------- ------------
5. To elect as Director, Dr. Yiu Kwong Sun
------ ------------------------------------------------ ----------- ------------
6. To elect as Director, Mr. Peter Mak
------ ------------------------------------------------ ----------- ------------
7. To elect as Director, Mr. Heinz Frey
------ ------------------------------------------------ ----------- ------------
8. To elect as Director, Mr. Jin Li
------ ------------------------------------------------ ----------- ------------
------ ------------------------------------------------ ----------- ------------
For Against
------ ------------------------------------------------ ----------- ------------
9 To approve the adjournment of the annual meeting
------ ------------------------------------------------ ----------- ------------
The undersigned Registered Shareholder hereby revokes any proxy previously given
to attend and vote at said Meeting.
SIGN HERE: _____________________________ DATE: _________________
Please Print Name: _____________________________
THIS PROXY FORM IS NOT VALID UNLESS IT IS SIGNED. SEE IMPORTANT INFORMATION AND
INSTRUCTIONS ON REVERSE
INSTRUCTIONS FOR COMPLETION OF PROXY
1. This Proxy is solicited by the Management of the Company.
2. This form of proxy ("Instrument of Proxy") must be signed by you, the
Registered Shareholder, or by your attorney duly authorized by you in
writing, or, in the case of a corporation, by a duly authorized officer or
representative of the corporation; and if executed by an attorney, officer,
or other duly appointed representative, the original or a notarial copy of
the instrument so empowering such person, or such other documentation in
support as shall be acceptable to the Chairman of the Meeting, must
accompany the Instrument of Proxy.
3. If this Instrument of Proxy is not dated in the space provided, authority
is hereby given by you, the Registered Shareholder, for the proxyholder to
date this proxy seven (7) calendar days after the date on which it was
mailed to you, the Registered Shareholder, by Computershare.
4. A Registered Shareholder who wishes to attend the Meeting and vote on the
resolutions in person, may simply register with the scrutineers before the
Meeting begins.
5. A Registered Shareholder who is not able to attend the Meeting in person
but wishes to vote on the resolutions, may do the following:
(a) appoint one of the management proxyholders named on the Instrument of
Proxy, by leaving the wording appointing a nominee as is (i.e. do not
strike out the management proxyholders shown and do not complete the
blank space provided for the appointment of an alternate proxyholder).
Where no choice is specified by a Registered Shareholder with respect
to a resolution set out in the Instrument of Proxy, a management
appointee acting as a proxyholder will vote in favour of each matter
identified on this Instrument of Proxy and for the nominees of
management for directors and auditor as identified in this Instrument
of Proxy;
OR
(b) appoint another proxyholder, who need not be a Registered Shareholder
of the Company, to vote according to the Registered Shareholder's
instructions, by striking out the management proxyholder names shown
and inserting the name of the person you wish to represent you at the
Meeting in the space provided for an alternate proxyholder. If no
choice is specified, the proxyholder has discretionary authority to
vote as the proxyholder sees fit.
6. The securities represented by this Instrument of Proxy will be voted or
withheld from voting in accordance with the instructions of the Registered
Shareholder on any poll of a resolution that may be called for and, if the
Registered Shareholder specifies a choice with respect to any matter to be
acted upon, the securities will be voted accordingly. Further, the
securities will be voted by the appointed proxyholder with respect to any
amendments or variations of any of the resolutions set out on the
Instrument of Proxy or matters which may properly come before the Meeting
as the proxyholder in its sole discretion sees fit.
If a Registered Shareholder has submitted an Instrument of Proxy, the Registered
Shareholder may still attend the Meeting and may vote in person. To do so, the
Registered Shareholder must record his/her attendance with the scrutineers
before the commencement of the Meeting and revoke, in writing, the prior votes.
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To be represented at the Meeting, this proxy form must be received at the office
of Computershare no later than forty eight (48) hours (excluding Saturdays,
Sundays and holidays) prior to the time of the Meeting, or adjournment thereof
or may be accepted by the Chairman of the Meeting prior to the commencement of
the Meeting. The mailing address is:
Computershare Investor Services
Proxy Dept. 100 University Avenue 9th Floor
Toronto Ontario M5J 2Y1
Fax: Within North America: 1-866-249-7775 Outside North America: (416) 263-9524
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