Mail Stop 3-9 February 8, 2005
David Gao
Beijing Med-Pharm Corporation
1180 Main Street
Coventry, CT 06238
Re: Beijing Med-Pharm Corporation
Registration Statement on Form S-1
Filed January 11, 2005
File Number 333-121957
Dear Mr. Gao:
We have reviewed your filing and have the following comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation. In some of our comments, we may ask you to provide
us
with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not
raise additional comments.
The purpose of our review process is to assist you in your
compliance with the applicable disclosure requirements and to
enhance
the overall disclosure in your filing. We look forward to working
with you in these respects and welcome any questions you may have
about our comments or on any other aspect of our review. Feel
free
to call us at the telephone numbers listed at the end of this
letter.
General
1. We note that your common stock is quoted on the over-the-
counter
bulletin board. It appears that in order to be eligible to be
quoted
on the bulletin board you must be a reporting company. Please
provide us with an analysis explaining how you are quoted on the
bulletin board even though you are not a reporting company.
Prospectus Summary, page 2
2. Your summary currently emphasizes only your strategy and other
aspirations, and does not adequately describe your current
operations
and the risks and challenges you face. Please expand the
discussion
of your current business on page 1 and summarize the risk factors
on
page 3. Disclosing your history of losses and accumulated deficit
and quantifying amounts will help to further balance the
disclosure.
3. We note your disclosure regarding the Wanwei acquisition in the
last paragraph of the Overview. You should expand the disclosure
to
state how much you are going to pay for Wanwei and when you expect
to
close the acquisition. Also, you should disclose Wanwei`s working
capital and accumulated deficits as of September 30, 2004, as well
as
Wanwei`s losses for 2003 and the nine-month period ended September
30, 2004.
4. In the Strategy subsection, you state that you will pioneer a
new
business model by using your marketing arm to create demand for
products sold by your distribution arm. This does not appear to
be a
new business model. Please revise.
5. You state that you will have transparent financial reporting.
It
appears that by transparent, you mean reporting under the Exchange
Act. If that is all the transparency you are describing, amend
your
disclosure to state that Exchange Act reporting will be the extent
of
the transparency, or just say that you will file under the
Exchange
Act.
Summary Financial Data, page 4
6. Please state that the Summary Data does not include Wanwei.
Risk Factors, page 6
7. Where you lay out bullet points highlighting specific risk
factors, please elaborate on any problems you have faced in the
past
relating to those bullet points. Please note that in doing so,
your
resulting disclosure might become significant enough to warrant a
separate risk factor. We may have further comments on your
disclosure.
8. Consider creating a risk factor regarding shares eligible for
future sale. In this risk factor, you should disclose the number
of
shares:
* subject to registration rights;
* that are restricted securities within the meaning of Rule 144;
and
* that will be freely tradable, whether under Rule 144, pursuant
to a
registration statement on Form S-8, etc., 90 days and 180 days
after
the date of the prospectus.
9. You state in the first paragraph, "Additional risks and
uncertainties not presently known to us or that we currently
believe
to be immaterial may also harm our business and our financial
condition and results of operations." Please delete this sentence
and amend your disclosure to state that all material risks are
described in the risk factors section, and ensure that that
statement
is true.
We have a history of operating losses..., page 5
10. You state that you are subject to all of the risks that
businesses encounter in their early stages of development. Please
expand this risk factor and create new risk factors, if necessary,
to
describe all of the material risks to which you allude.
11. You state that you expect to incur significant and increasing
operating expenses and capital expenditures. Here, and in more
detail in MD&A, discuss and quantify the expenses and expenditures
you expect to incur. In MD&A, you should also discuss the
projected
timing of these expenditures.
We may be unable to acquire..., page 5
12. You state that you may be unable to satisfy the closing
conditions in the acquisition agreements. Please highlight any
closing conditions for which there exists doubt as to whether you
will be able to satisfy the condition.
We may continue to experience delays in product introduction...,
page
6
13. As to the Shuganyiyang delay, state how long the delay lasted
and
the reason the license was not received timely.
14. You state that your contracts with pharmaceutical owners and
manufacturers relating to some of the products in your product
portfolio have a limited duration and have minimum sales
requirements
that, if not met, could lead to termination or non-renewal of the
contract, or the ability of the manufacturer to render the
contract
non-exclusive. If you have failed to comply or do not believe you
will comply with any of these minimum sales requirements, and your
non-compliance would harm your operating results or business
materially, discuss the contract, the non-compliance and state
what
effect you anticipate the non-compliance will have.
If we complete the proposed acquisition of Wanwei..., page 6
15. Please state whether or not Wanwei has any agreements with
Wanhui
regarding the distribution of Glurenorm. If it does, state
whether
or not these contracts will continue after the acquisition, and
the
terms of the contracts. If they have provisions allowing for
termination for failure to meet sales goals, disclose in this risk
factor that Wanhui has terminated agreements with you for failing
to
meet such sales targets.
Our revenues may be substantially lower in 2004...page 6
16. You should expand this risk factor to state that your revenues
for the period ended September 30, 2004 were substantially lower
as a
result of the lost revenue mentioned, and if true, state that you
were not able to make up the lost revenue. Additionally, quantify
the decrease in revenue for the nine month period ended September
30,
2004 as compared to the nine months ended September 30, 2003.
17. We note that Wanhui accounted for 98% of your business in
2003,
and that same party is now selling you 80% of Wanwei. Is your
performance under the mentioned contract and your acquisition of
Wanwei in any way related? Please provide appropriate disclosure
elsewhere in the prospectus regarding your historical and present
relationship with Wanhui.
We may be unable to compete..., page 6
18. You state that many of your competitors have greater name
recognition and a larger customer base. Please name your most
relevant competitors to whom this description applies.
We may be unable to obtain additional capital when necessary ...,
page 7
19. Please state how long you expect your current resources to
last.
We may be unsuccessful in attracting..., page 7
20. Please name the key sales personnel you mention here.
21. If you have had problems attracting or retaining qualified
employees, please revise to describe the problems you have
experienced.
We may be unable to manage our growth..., page 8
22. This risk factor seems very generic to us in that it could
apply
to almost any company. Please amend this risk factor to discuss
the
risks growth poses to your company specifically, or delete it.
Because we have not been subject to the reporting requirements
....,
page 8
23. This risk factor is generic in that it appears to apply to
every
new reporting company. Please revise to tailor the risk factor
discussion to your company or delete it. For example, are you
aware
of any obstacles that may prevent you from implementing effective
internal controls?
We have been advised of a material weakness..., page 9
24. Please disclose each of the reportable conditions involving
your
internal and disclosure controls and discuss the potential effect
on
your financial statements. Also, state whether or not these
reportable conditions and the material weakness you mention have
been
rectified.
War or military or other actions..., page 9
25. This risk factor seems very generic to us in that it could
apply
to almost any company. Please amend this risk factor to discuss
the
risks growth poses to your company specifically, or delete it.
Investors may be unable to enforce..., page 10
26. Please expand this risk factor to explain under what
circumstances enforcing a judgment against you in a United States
court would be an issue.
We are a holding company..., page 10
27. You should note the historic losses of BMP China and Wanwei
here.
You should also state that if these losses continue, you will not
be
able to pay dividends or service any debt you may incur.
Fluctuations in the Chinese Renminbi ..., page 11
28. If the Chinese government controls the value of the Renminbi,
adjusting it periodically, so state.
The ability of our Chinese operating subsidiaries..., page 11
29. Quantify what 50% of BMP China`s registered capital was as of
the
most recent practicable date.
Wanwei may be unable to obtain renewal ..., page 13
30. If you there are doubts as to whether Wanwei will satisfy all
the
requirements necessary in order to obtain the renewal, please
revise
to describe these requirements.
Price control regulations..., page 14
31. Here, and in more detail in MD&A, please discuss current and
expected trends in pricing.
Collective tendering of pharmaceutical products ..., page 14
32. Please explain the term "collective tender."
Sales of substantial amounts of our common stock ..., page 15
33. Please identify the stockholder to which you refer.
If the ownership of our common stock..., page 15
34. In addition to the risks noted, please address more
prominently
the ways in which your concentrated ownership may also prevent or
frustrate attempts to replace or remove the current management.
We
note that the risk of management entrenchment may be as great, if
not
greater, than the risk of discouraging potential suitors.
Consider
revising the caption to this risk factor accordingly.
Our common stock may experience extreme price and volume..., page
15
35. Disclose the high and low stock prices for your common stock
as
reported on the OTC Bulletin Board over the last twelve months,
and
the average daily volume over the past four weeks.
As a stock quoted on the OTCBB..., page 16
36. Expand this risk factor to state that because of the penny
stock
restrictions, your stock price, and not just trading volume, may
be
adversely affected.
Selected Financial Data, page 20
37. Please provide five years of data as required by Item 302 of
Regulation S-K.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations
Critical Accounting Policies and Significant Judgments and
Estimates, page 22
General
38. Please note that Critical Accounting Polices should
supplement,
not duplicate, the description of accounting policies that are
disclosed in the notes to the financial statements. Please revise
your critical accounting policies which we believe should be
described as critical accounting "estimates" to disclose the
uncertainties involved in applying each principle and discuss the
variability that is reasonably likely to result from the
application.
For each policy identified, ensure that management has analyzed
and
disclosed to the extent possible the following factors:
a) How management arrived at the estimate;
b) How accurate management`s estimate/assumption has been in the
past;
c) Whether the estimate/assumption is reasonably likely to change
in
the future; and
d) Evaluate the sensitivity to change of critical accounting
policies.
Refer to Release 33-8350.
MD&A, page 21
39. Please revise your MD&A so that there is more focus on
analysis
as required by our recent MD&A Release No. 33-8350; 34-48960; FR-
72
(December 19, 2003). In that release, we explained that "MD&A
requires . . . an `analysis` of known material trends, events,
demands, commitments and uncertainties. MD&A should not be merely
a
restatement of financial statement information in a narrative
form. .
.. . A thorough analysis often will involve discussing both the
intermediate effects of those matters and the reasons underlying
those intermediate effects." For example, please discuss the
trends
regarding pricing and pricing controls on your business. If so,
how
will this affect the demand for your services and products?
Please
review your entire MD&A and revise accordingly. We may have
further
comments.
Results of Operations, page 23
40. In your discussion of net revenue, please discuss direct costs
and the reason for any changes in direct costs from period to
period.
41. We note that historically, Wanhui has accounted for a
significant
amount of your business. Please file your supply, master services
and other agreements with Wanhui as exhibits to the registration
statement.
Our Business, page 28
42. Currently, your business section consists mainly of a summary
of
your strategy and does not explain your business itself. You
should
expand the disclosure significantly to describe the operations in
which you are engaged currently and the markets into which you
sell.
We note that you have derived only $183,000 of revenue during the
first nine months of 2004. We may have further comments upon
reviewing the disclosure you will provide in response to this
comment.
43. Please revise the discussion throughout to clarify the
operations
in which you are currently engaged and the operations in which you
propose to engage. To the extent that you discuss future products
and services, or products and services you have not sold in the
last
12 months, provide their status and a timeframe for which you
anticipate selling these products and any anticipated development
and
marketing costs involved with the product or service. If you no
longer offer a particular product or service or have not provided
that product or service to client during the last 12 months, so
state. You should do this in each instance in which you discuss a
different product or service. We may have further comments after
reviewing your revised business section.
44. On page 28, you state that you have established relationships
with a number of independent representatives in China. If you
have
any agreements with any of these representatives which would be a
material contract within the meaning of Item 601(b)(10) of
Regulation
S-K, please file it as an exhibit to the registration statement.
45. Please explain the nature of these relationships in the
registration statement.
46. You state that the permit and certificate you will possess
after
acquiring Wanwei will provide you with a strategic advantage. We
do
not understand how this can be, given that over 5,400 companies
have
the certification. Please revise your disclosure.
Our Strategy and Solution, page 29
47. You state that you have an established track record of
registering and marketing western pharmaceuticals. Please provide
us
with materials and information supporting this assertion or delete
it.
48. You mention your 15 dealer relationships. Please describe the
scope of these relationships. Are they exclusive? Did you
generate
revenue from each of them in 2004? If so, how much? Do you have
agreements with any of these dealers that are required to be filed
as
exhibits to the registration statement?
49. You state that you will add further financial and human
resources. Please provide more detail in MD&A regarding your
plans.
Product Marketing, page 30
50. Please describe in more detail the actual activities in which
you
engage and how you are compensated for them. For instance, are
your
commissions calculated as a percentage of sales?
Clinical and Regulatory Services, 31
51. You state that your medical department`s staff has extensive
experience in conducting clinical trials and product registration.
Please state how many people make up this staff.
52. How do you secure expedited registration timetables for
clients?
Can anyone do this?
53. We note that you charge clients a fee for product registration
services. Please disclose your average fee from this type of
business during 2004.
54. Name all customers and partners from whom you derived 10% or
more
of your revenue during each of the last two years.
Our Product Portfolio, page 32
55. Name the manufacturers of Septopal 30, Septocoll E and Fem 7,
and
the owner of Shuganyiyang. Please file as exhibits to the
registration statement agreements with these parties, as required
by
Item 601(b)(10) of Regulation S-K.
56. If you anticipate any problems meeting the sales requirements
under any of these agreements, please consider including a
separate
risk factor discussion addressing the risk and potential
consequences.
57. Please disclose how you are compensated for the marketing and
promotional activities you furnish in connection with your
arrangements with each of these parties.
Competition, page 33
58. Please discuss competition as it pertains to each of your
proposed lines of business. Also, in each category, name your
most
significant competitors.
59.
Please name the limited number of competitors who provide a suite
of
services comparable to your prospective "end-to-end" offering.
Also,
amend the Summary to indicate that you are not the only party in
the
marketplace with such an offering.
Wanwei Business, page 35
60. State whether or not as part of its wholesale selling, Wanwei
actually takes title to the goods and books them as inventory.
61. State for whom Wanwei distributes the products listed, and the
terms of the agreements with those parties.
62. Do any of the agreements include provisions that allow for
termination in the event Wanwei is acquired?
Regulation of the Pharmaceutical Industry in China, page 36
63. Much of this discussion is generic, in that it could apply to
any
company in the your industry operating in China. Please make the
disclosure more specific to your company.
64. Please state whether or not you are currently in compliance
with
each of the laws, rules and regulations you mention in this
section.
Also, describe any incidence of noncompliance over the past three
years.
Employees, page 39
65. You state, "BMP China is required to contribute a portion of
its
employees` total salaries to the Chinese government`s social
insurance funds, including medical insurance, unemployment
insurance
and job injuries insurance, and a housing assistance fund, in
accordance with relevant regulations." Please quantify how much
this
has been historical and is expected to be going forward.
Properties, page 40
66. Please file the lease for your principal business and
executive
offices as an exhibit to the registration statement.
The Selling Stockholders, page 41
67. Please identify the natural person or persons who have voting
or
investment control over the securities that the various selling-
stockholder entities own.
Plan of Distribution, page 52
68. We note that some of the selling stockholders may be broker-
dealers. If these entities obtained these securities other than
as
compensation for underwriting services, then they will be deemed
to
be underwriters under the Securities Act. In that case, please
revise your disclosure to include any such parties as underwriters
in
the "plan of distribution" section and other sections of the
prospectus as appropriate.
69. If any of the selling stockholders are affiliates of broker-
dealers, they should be so identified. In addition, please revise
your disclosure to include the following representations:
* The selling stockholder purchased in the ordinary course of
business; and
* At the time of the purchase, the selling stockholder had no
agreements or understanding to distribute the securities.
If you are unable to make these statements in the prospectus as to
any of these selling stockholders, please revise the prospectus to
state the seller is an underwriter.
Management, page 54
70. Please disclose Mr. Wang`s business experience between 2000
and
2002.
Code of Ethics, page 57
71. Please file your code of ethics as an exhibit or tell
investors
how they may obtain or view a copy.
Principal Stockholders, page 66
72. Please name the natural persons who have sole or shared voting
and investment power for the shares beneficially owned by Abacus
Investments.
Description of Securities, page 37
73. Please disclose the date(s) on which the warrants expire.
Beijing-Med Pharm Corporation and Subsidiary
September 30, 2004 Financial Statements
Notes to the Financial Statements
5. Common Stock, page F-8
74. We note that in April 2004 you issued warrants to purchase an
aggregate of 400,000 shares. This appears to be inconsistent with
information you have disclosed on page II-2 that asserts the
warrants
were issued in March 2004. In addition, page II-2 does not
disclose
the warrant to purchase 173,913 shares of your common stock.
Please
revise or advise.
75.
Please tell us supplementally where and in what amounts you have
recorded in your financial statements the fair value of the
warrants
in the preceding comment as well as the 157,500 shares and 260,250
shares issued in February and April 2004, respectively.
9. Stock Based Compensation, page F-9
76. We note elsewhere in your filing that in February 2004, your
board of directors adopted a Stock Incentive Plan (page 60).
Please
enhance this disclosure to include the general description of this
plan, as required by paragraph 46 of SFAS 123.
Beijing Med-Pharm Market Calculating Co., Ltd.
December 31, 2003 Financial Statements
Financial Statements
Statement of Operations, page F-14
77. Please include a line item for cost of sales as required by
Rule
5-03(b) of Regulation S-X.
Note 1. Significant Accounting Policies
Reporting Entity, page F-16
78. Please disclose your functional currency for your foreign
operations. Supplementally provide us your analysis for your
functional currency addressing the items in Appendix A of FAS 52.
Revenue Recognition, F-16
79. We believe that your revenue recognition policy disclosure
could
be enhanced by providing greater detail regarding the specifics of
your revenue producing activities. We note that you provide a
wide
variety of marketing related services. While you appear to have
aggregated these services into one revenue category, it is unclear
whether each service has similar recognition policies. In light
of
this, please disclose all of the Company`s material revenue
producing
activities separately, and state the revenue recognition policy
for
each. Please expand your revenue recognition disclosure to
describe
the nature of your contracts, how and when revenue is recognized
for
your services, and how and when you receive payment for your
services. Include the significant terms of the agreements, such
as
contract duration, billing terms, termination provisions, etc.
Explain how the terms correlate to the revenue recognition policy.
Earning Per Share, page F-16
80. Please demonstrate the timing for when you start computing
earnings (loss) per share.
Note 4. Segment Information, page F-18
81. Please tell us why disclosure of the revenue for each of your
services and/or products is not required by paragraph 37 of FAS
131.
Note. 8 Subsequent Events, page F-19
Acquisition: page F-6
82. Please provide us supplementally a description of your
accounting
treatment of the January 2004 reverse merger with Just Great
Coffee,
Inc., and the February 2004 acquisition of BMP China and how your
treatment complies with FAS 141. In your response, for each of
these
transactions:
a) Identify the legal acquirer and acquiree and the entity who is
the
accounting acquirer and acquiree. Provide us an analysis
demonstrating why your conclusion as to the accounting acquirer by
addressing paragraph 17 of FAS 141.
b) Provide historical background (i.e. dates of incorporation) on
each of the two entities prior to the merger.
c) Identify the stockholders, and any other parties to the
entities
immediately before the acquisition.
Consider revising your disclosure accordingly and in addition,
ensure
that you`ve provided all the disclosures required by paragraphs 51
through 58 of FAS 141.
Beijing Wanwei Pharmaceutical Co., Ltd.
December 31, 2003 Financial Statements
Notes to the Financial Statements
1. Significant Accounting Policies
Reporting Entity, page F-33
83. Please provide the disclosures required by SAB Topic 1.B.
Allocation of Expenses and related disclosures in financial
statements of subsidiaries.
84. Please disclose your functional currency for your foreign
operations. Supplementally provide us your analysis for your
functional currency addressing the items in Appendix A of FAS 52.
Trade Accounts Receivable and Concentration of Credit Risk, page
F-33
85. Please disclose the amount of bad debt expense on the face of
your statements of operations as required by 5-03(b) of Regulation
S-
X. Tell us supplementally the reason for fluctuations in bad debt
expense from period to period.
86. Please provide to us supplementally, management`s
justification
for the increase in the allowance for doubtful accounts between
December 2001 and December 2002 and why the allowance did not
change
from December 31, 2002 to 2003. We note in each of the three years
the accounts receivable and sales have decreased.
Inventory, page F-33
87. Please provide to us supplementally, management`s
justification
for the increase in the allowance for obsolete inventory (109%)
between December 2002 and December 2003. Please include in your
response the facts and circumstances that led to the increase, and
consider any known trends or uncertainties that the change
implies.
Further, advise why you have not written any inventory off that
has
been provided for by this allowance.
Revenue Recognition, page F-33
88. Disclose the amount of shipping and handling costs included in
selling and marketing costs for each period presented as required
by
EITF 00-10.
Note 9 Major Customer, page F-36
89. Please disclose the amount of the sales and cost of sales and
any
other expenses with your parent on the face of the financial
statements as required by rule 4-08(k).
Beijing Med-Pharm Corporation and Subsidiary
Pro Forma Financial Statements
Notes to Unaudited Pro Forma Financial Statements, page F-42
90. Please enhance your pro forma adjustment disclosures by
ensuring
that they are detailed enough to understand your basis for the
adjustment and how the adjustment was computed. Refer to Rule 11-
02(b)(6) of Regulation S-X.
For example:
a) Note 2 - Pro forma Adjustments - Balance Sheet should reconcile
the $3,089,000 payable to be forgiven to the $4,896,502 shown in
the
pro forma balance sheet. Further, please present a reconciliation
to
the purchase price showing the allocation of the assets and
liabilities with more detail and description particularly of the
nature and amount of intangible assets acquired. Explain why a
deferred tax asset is acquired as shown on the pro forma balance
sheet.
b) Note 3 Pro forma - Statement of Operations should explain the
effects, if any, of acquiring the intercompany manufacturing
agreement where Beijing Wanwei Pharmaceutical Co. Ltd sells
product
manufactured by its parent, the Wanwei Group.
Recent Sales of Unregistered Securities, page II-2
91. As to your March 2004 sale of 8,695,652 shares of common stock
to
139 investors, supplementally, please tell us how this offering
was
conducted. How many potential investors were offered securities?
Did you have prior relationships with each of these offerees?
Provide your analysis as to whether or not there was a general
solicitation.
Exhibits
92. Please file all exhibits to the registration statement as soon
as
possible, preferably with your next amendment. We need ample to
review them before we can declare your filing effective.
* * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. We may have
additional comments after reviewing your amendment and responses
to
our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert this action as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please
provide
this request at least two business days in advance of the
requested
effective date and allow adequate time after the filing of any
amendment for further review before submitting a request for
acceleration.
You may contact Tabitha Akins at (202) 824-5547 or James
Rosenberg at (202) 942-1803 if you have questions regarding
comments
on the financial statements and related matters. Please contact
Michael Reedich at (202) 942-1815 or me at (202) 942-1840 with any
other questions.
Sincerely,
Jeffrey Riedler
Assistant Director
cc: Joanne Soslow, Esq.
Morgan, Lewis & Bockius
1701 Market Street
Philadelphia, PA 19103
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