ZHONGPIN INC.
21 CHANGSHE ROAD
CHANGGE CITY, HENAN PROVINCE
THE PEOPLE'S REPUBLIC OF CHINA
March 30, 2006
VIA EDGAR
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Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Ms. Tia Jenkins
Office of Emerging Growth Companies
Re: ZHONGPIN INC. (FORMERLY STRONG TECHNICAL, INC.)
CURRENT REPORT ON FORM 8-K
FILED ON FEBRUARY 2, 2006
FILE NO. 333-112111
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Ladies and Gentlemen:
In response to the Staff's letter dated March 16, 2006 relating to the
Current Report on Form 8-K, dated January 30, 2006 (the "Current Report"), of
Zhongpin Inc. (formerly known as Strong Technical, Inc.) ("we", "us" or "our
company"), we hereby file by EDGAR transmission (i) our responses to the Staff's
comments and (ii) an amendment on Form 8-K/A to the Current Report (the "Amended
Current Report"). The numbered responses below correspond to the numbered
paragraphs of the Staff's letter. Capitalized terms not otherwise defined in
this letter have the meanings ascribed to them in the Current Report.
RESPONSES
1. In response to this comment, we have revised the interim unaudited
financial statements of Henan Zhongpin Food Share Company Limited (as the
acquired business) for the three and nine months ended September 30, 2005 to
include the consolidated statements of income and cash flows for the comparable
periods of the preceding year. The revised financial statements are included in
the Amended Current Report.
2. In response to this comment, we have revised our pro forma
consolidated balance sheet and pro forma statement of income to reflect the
shares of common stock and preferred stock outstanding after giving effect to
the merger. Please note that we effected a one-for-35.349
Ms. Tia Jenkins
Securities and Exchange Commission
March 30, 2006
Page 2
reverse stock split on February 16, 2006. Pro-forma earnings per share have been
included to show the effects of the reverse split and a reconciliation of the
numerators and denominators used in earnings per share calculations has been
included. The revised pro forma consolidated balance sheet and pro forma
statement of income are included in the Amended Current Report.
3. In response to this comment, we have revised our pro forma
consolidated balance sheet to include a column that shows the immediate effect
of the issuance of our Series A convertible preferred stock and common stock
purchase warrants. The requested explanatory note has been included as Note 3 to
our unaudited pro forma consolidated financial statements.
4. Section 2 of the form of warrant attached as Exhibit 10.18 to the
Current Report does not allow for net cash settlement by our company. As a
result, we believe we correctly accounted for the warrants as equity in the
financial statements included in the Current Report.
The warrant provides that if the warrant holder delivers an exercise
form and we fail to timely deliver the warrant shares issuable pursuant to such
exercise form, we will be required to pay a penalty in cash. However, this
potential cash payment is not in settlement of the warrant. The last two
sentences of Section 2 of the warrant state that, in addition to our payment of
a cash penalty for failure to deliver the warrant shares, we shall "(2) at the
option of the Holder, either reinstate the number of the Warrant Shares for
which such exercise was not honored or deliver to the Holder the number of
shares of Common Stock that would have been issued had the Company timely
complied with its exercise and delivery obligations hereunder." Thus, there is
no provision for settlement of the warrants in cash under Section 2 of the
warrant. The warrants will either continue to exist as warrants or be settled by
the issuance and delivery of the underlying shares of common stock. Accordingly,
we believe we correctly accounted for the warrants as equity, rather than as a
liability.
5. After consultation with our independent accountants, we believe the
terms and conditions of the Series A convertible preferred stock (the "Series A
Preferred") are more akin to an equity instrument than a debt instrument. The
following is a summary of the relevant features of the Series A Preferred:
DIVIDENDS. The holders of the Series A Preferred are entitled to
receive, when and as declared by the Board of Directors, dividends in such
amounts as may be determined by the Board of Directors from time to time out of
funds legally available therefor. No dividends (other than those payable solely
in shares of common stock) will be paid to the holders of common stock until
there shall have been paid or declared and set apart during that fiscal year for
the holders of the Series A Preferred a dividend in an amount per share that the
holders would have received for the shares of common stock issuable upon
conversion of their shares of Series A Preferred.
Ms. Tia Jenkins
Securities and Exchange Commission
March 30, 2006
Page 3
PREFERENCE ON LIQUIDATION. In the event of merger, consolidation or
sale of all or substantially all of our assets or other liquidation, holders of
the Series A Preferred shall have a priority in payment over all other classes
of stock. In any of such events, the Series A Preferred would be entitled to
receive the greater of (i) the original purchase price of the Series A Preferred
or (ii) the amount the holder would receive if he converted all of his Series A
Preferred into shares of common stock.
VOTING. The holder of each share of Series A Preferred (i) shall be
entitled to the number of votes with respect to such share equal to the number
of shares of common stock into which such share of Series A Preferred could be
converted on the record date for the subject vote or written consent (or, if
there is no such record date, then on the date that such vote is taken or
consent is effective) and (ii) shall be entitled to receive notice of any
stockholders' meeting in accordance with our Bylaws.
APPOINT AND ELECT A DIRECTOR. So long as the number of shares of common
stock issuable upon conversion of the outstanding shares of Series A Preferred
is greater than 10% of the number of outstanding shares of common stock (on a
fully diluted basis), the holders of record of the shares of Series A Preferred,
exclusively and as a separate class, shall be entitled to elect one (1) of our
directors.
CONVERSION RIGHT. The holder may convert each share of Series A
Preferred into common stock at an initial conversion price of $0.113157 ($2.00
after giving effect to the reverse stock split). The conversion price will be
adjusted for stock dividends, stock splits and similar events.
AUTOMATIC CONVERSION. Each share of Series A Preferred will be
automatically converted into shares of common stock at the conversion price then
in effect if (i) we consummate an underwritten public offering of our common
stock for net proceeds to us of at least $30 million, (ii)(A) the closing price
of the common stock equals or exceeds $0.2828934 ($10 after giving effect to the
reverse stock split) for the twenty (20) consecutive-trading-day period ending
within two (2) days of the date on which we provide notice of such conversion
and (B) either a registration statement registering for resale the shares of
common stock issuable upon conversion of the Series A Preferred has been
declared effective and remains effective and available for resale for the twenty
(20)-day period, or Rule 144(k) under the Securities Act of 1933 is available
for the resale of such shares, or (iii) by consent of at least 67% of the
then-outstanding shares of Series A Preferred.
PROTECTIVE PROVISIONS. So long as at least 1,750,000 shares of Series A
Preferred are outstanding (subject to adjustment for stock splits, combinations
and the like), the holders of a majority of the outstanding Series A Preferred
shall be required (in addition to any consent or approval otherwise required by
law) for us to take certain actions, including (1) the liquidation, dissolution
or winding up of our company, (2) any amendment, alteration or repeal of any
Ms. Tia Jenkins
Securities and Exchange Commission
March 30, 2006
Page 4
provision of our certificate of incorporation so as to affect the rights,
preferences or privileges of the Series A Preferred, (3) the creation of a new
class of preferred stock or an increase in the number of shares of Series A
Preferred that can be issued, or (4) the purchase or redemption, or payment or
declaration of any dividend on, or the making of any distribution on, any
securities junior in priority to the Series A Preferred; or (5) making any
change in the size of our Board of Directors.
We believe the terms of our Series A Preferred are distinguishable from
the terms of the typical cumulative fixed-rate preferred stock. Furthermore, our
Series A Preferred has no provision for cash redemption except in the case of
liquidation, merger or consolidation, at which time common stockholders will
also be entitled to cash redemption. Our Series A Preferred is participating,
perpetual preferred stock that may be converted into shares of common stock at
the option of the holder and must be converted into common stock under certain
conditions. After taking such factors into consideration, it is the opinion of
management that our Series A Preferred is more akin to equity than debt.
Accordingly, we recorded no liability for the issuance of our Series A
Preferred.
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We acknowledge that (i) we are is responsible for the adequacy and
accuracy of the disclosure in our filings; (ii) Staff comments or changes to
disclosure in response to Staff comments do not foreclose the Commission from
taking any action with respect to our filings; and (iii) we may not assert any
Staff comments as a defense in any proceeding initiated by the Commission or any
person under the federal securities laws of the United States.
We believe that we have fully responded to the comments of the
Commission. If the Commission has any questions or further comments, we
respectfully request that such comments be directed to the undersigned. The
undersigned would welcome the opportunity to discuss such questions or comments
(or discuss further any of our responses) in advance of any written response of
the Commission.
Very truly yours,
/s/ Xianfu Zhu
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Xianfu Zhu
Chief Executive Officer
cc: Child, Van Wagoner & Bradshaw, PLLC
Pryor Cashman Sherman & Flynn LLP