SEC Company Response from GFR PHARMACEUTICALS INC (CIK 0001096294) — Nov 18, 2005
GFR PHARMACEUTICALS INC (CIK 0001096294)
Date: Nov. 18, 2005 · CIK: 0001096294 · Accession: 0000939802-05-000842
AI Filing Summary & Sentiment
File numbers found in text: 000-27959
Letter
RE: GFR PHARMACEUTICALS, INC. FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 2004 COMMISSION FILE #: 0-27959
GFR PHARMACEUTICALS, INC. SUITE11405 - 201A STREET MAPLE RIDGE, BRITISH COLUMBIA V2X 0Y3
November 18, 2005
VIA EDGAR
Securities and Exchange Commission Division of Corporate Finance 450 Fifth Street, N.W. Washington, D.C. 20549-0406 Attention: Linda Cvrkel, Branch Chief
Ladies and Gentlemen;
We have received your comments to our Form 10-KSB for the year ended December 31, 2005 and thank for your review to assist and enhance the overall disclosure in our Exchange Act filings. We supplementally respond to all your comments as follows:
FORM 10-KSB
Item 6. Management's Discussion and Analysis
Results of Operations, page 8
1. We acknowledge your response to prior comment 5 regarding the correction of the error. Please expand your disclosure to address the following:
o Provide introductory disclosure of the effects of the restatement in MD&A. o Please have Robison, Hill & Co. revise their report to include an explanatory paragraph to note that the financial statements have been restated. o Revise Note 1 to your financial statements to clarify that the restatement reduced net income by $311,182 and disclose the related per share amounts. o Please tell us if you considered the impact of the restatement on your disclosures under Item 307 of Regulation S-B. Please tell us why you continue to believe that your disclosure controls and procedures were effective after considering the fact that the financial statements were required to be restated.
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o Please disclose any changes in internal control over financial reporting to correct the problem that resulted in the restatement. Please refer to Item 308(c) of Regulation S-B. o Please refer to the requirement to file an Item 4.02 Form 8-K when previously issued financial statements can no longer be relied upon because of an error in the financial statements.
RESPONSE:
o We have included an introductory paragraph disclosing the effects of the restatement in MD&A. o Robison, Hill & Co. have revised their report to include an explanatory paragraph regarding the restatement of the financial statements. o We have added disclosure to Note 1 to clarify the reduction to net income of $311,182 and the related per share amounts. o We have modified our disclosure to state that disclosure controls and procedures were not effective. o We have added disclosure regarding changes to internal control over financial reporting. o We will file an 8-K to report item 4.02 due to the restatement of our financial statements. We have attached a draft to this response.
2. After the correction of the error, it appears that you still had a material increase in net gains resulting from foreign currency transactions in 2004. Please expand your disclosure to discuss the reason for the increase in the net foreign currency transaction gains in 2004. We note that net foreign currency transaction gains during the six months ended June 30, 2005 are material. Please tell us whether the error that resulted in the restatement was corrected before you filed your 2005 10-QSBs.
RESPONSE: We have expanded our disclosure to discuss the increase in net gains resulting from foreign currency transactions and the reasons for the increase in 2004
We did not correct the error prior to filing the 10-QSB's. Please see the proposed revisions to our 10-QSB's for 1st and 2nd quarter.
3. Please expand your disclosure in response to prior comment 6 to clarify why the net operating loss carry forwards utilized in 2004 were significantly higher than 2003. Please explain to us why your net operating loss carry forwards were not utilized in 2003.
RESPONSE: We have recalculated the reconciliation from book to tax based on the net income per the restatement. The effective tax rates per book are now 22% for 2004 compared to 48% for 2003. We have added disclosure to Item 6. Managements Discussion and Analysis regarding the drop in effective tax rates and disclosed that the primary difference between book and tax is a timing difference for depreciation deductions between book and tax.
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Critical Accounting Policies, page 9
4. Your proposed disclosures in response to prior comment 7 appear to be a reiteration of the accounting policies included in the notes to your financial statements. Please revise your disclosures to discuss only your critical accounting estimates and not all of your accounting policies. Please refer to Financial Reporting Release 72 for guidance on disclosure of critical accounting estimates.
RESPONSE: We have revised or disclosure to discuss only our critical accounting policies.
Item 12. Certain Relationships and Related Transactions, page 17
5. We note your responses to comment 9. Please file as exhibits the agreements underlying each of the transactions discussed in this section.
RESPONSE: We will file the agreements as exhibits to the amended 10-KSB. We have included a draft of the exhibits in this response.
6. Please expand the first paragraph to state how the $253,409 accounts payable to Richard Pierce arose; the second paragraph to disclose how the promissory note arose or for what you used the proceeds from the loan, as may be applicable; and the fourth paragraph to describe the amount, nature, and age of the equipment leased from Mr. Pierce. Also, please disclose the cost to Mr. Pierce of the equipment he has leased to the company.
RESPONSE: We have added the requested disclosure.
7. In the third paragraph, you state "the MONTHLY rent charge is approximately $50,000 ($60,000 Canadian) PER YEAR" (emphasis added). Please clarify whether the stated rent amount is a monthly or a yearly amount.
RESPONSE: We have clarified that the $50,000 is the yearly amount.
Item 13. Exhibit and Reports on Form 8-K, page 18
8. We note that in response to comment 4, you plan to file the lease agreements with your amended Form 10-KSB, and you have included them in the draft amendment. Please include in your exhibit index a reference to these exhibits and to all other exhibits you will file with your amendment.
RESPONSE: We have referenced the exhibits in the index.
Consolidated Financial Statements, page F-1
Notes to Consolidated Financial Statements, page F-7
9. We reiterate our prior comment 10. Please tell us why you have not included the disclosures required by paragraph 38 of SFAS 131.
RESPONSE: We did not include geographic information as in our view it did not appear material in amount due to the fact that there were only two sales made to customers outside Canada in 2004 and zero sales in 2003. However, to satisfy SFAS 131 paragraph 38 we have now added the requested disclosure.
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Signatures, page 20
10. We note the revisions you made pursuant to comment 8. Please add the title of "director" to caption accompanying Mr. Pierce's signature.
RESPONSE: We have added the title of "director" to the caption accompanying Mr. Pierce's signature.
Respectfully Submitted,
/s/ Richard Pierce
Richard Pierce,
President and C.E.O.
Show Raw Text
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GFR PHARMACEUTICALS, INC.
SUITE11405 - 201A STREET
MAPLE RIDGE, BRITISH COLUMBIA V2X 0Y3
November 18, 2005
VIA EDGAR
Securities and Exchange Commission
Division of Corporate Finance
450 Fifth Street, N.W.
Washington, D.C. 20549-0406
Attention: Linda Cvrkel, Branch Chief
RE: GFR PHARMACEUTICALS, INC.
FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 2004
COMMISSION FILE #: 0-27959
Ladies and Gentlemen;
We have received your comments to our Form 10-KSB for the year ended
December 31, 2005 and thank for your review to assist and enhance the overall
disclosure in our Exchange Act filings. We supplementally respond to all your
comments as follows:
FORM 10-KSB
Item 6. Management's Discussion and Analysis
Results of Operations, page 8
1. We acknowledge your response to prior comment 5 regarding the correction of
the error. Please expand your disclosure to address the following:
o Provide introductory disclosure of the effects of the restatement in
MD&A.
o Please have Robison, Hill & Co. revise their report to include an
explanatory paragraph to note that the financial statements have been
restated.
o Revise Note 1 to your financial statements to clarify that the
restatement reduced net income by $311,182 and disclose the related per
share amounts.
o Please tell us if you considered the impact of the restatement on your
disclosures under Item 307 of Regulation S-B. Please tell us why you
continue to believe that your disclosure controls and procedures were
effective after considering the fact that the financial statements were
required to be restated.
Page 1
<PAGE>
o Please disclose any changes in internal control over financial
reporting to correct the problem that resulted in the restatement.
Please refer to Item 308(c) of Regulation S-B.
o Please refer to the requirement to file an Item 4.02 Form 8-K when
previously issued financial statements can no longer be relied upon
because of an error in the financial statements.
RESPONSE:
o We have included an introductory paragraph disclosing the
effects of the restatement in MD&A.
o Robison, Hill & Co. have revised their report to include an
explanatory paragraph regarding the restatement of the
financial statements.
o We have added disclosure to Note 1 to clarify the reduction to
net income of $311,182 and the related per share amounts.
o We have modified our disclosure to state that disclosure
controls and procedures were not effective.
o We have added disclosure regarding changes to internal control
over financial reporting.
o We will file an 8-K to report item 4.02 due to the restatement
of our financial statements. We have attached a draft to this
response.
2. After the correction of the error, it appears that you still had a material
increase in net gains resulting from foreign currency transactions in 2004.
Please expand your disclosure to discuss the reason for the increase in the net
foreign currency transaction gains in 2004. We note that net foreign currency
transaction gains during the six months ended June 30, 2005 are material. Please
tell us whether the error that resulted in the restatement was corrected before
you filed your 2005 10-QSBs.
RESPONSE: We have expanded our disclosure to discuss the increase in net
gains resulting from foreign currency transactions and the
reasons for the increase in 2004
We did not correct the error prior to filing the 10-QSB's.
Please see the proposed revisions to our 10-QSB's for 1st and
2nd quarter.
3. Please expand your disclosure in response to prior comment 6 to clarify why
the net operating loss carry forwards utilized in 2004 were significantly higher
than 2003. Please explain to us why your net operating loss carry forwards were
not utilized in 2003.
RESPONSE: We have recalculated the reconciliation from book to tax based
on the net income per the restatement. The effective tax rates
per book are now 22% for 2004 compared to 48% for 2003. We
have added disclosure to Item 6. Managements Discussion and
Analysis regarding the drop in effective tax rates and
disclosed that the primary difference between book and tax is
a timing difference for depreciation deductions between book
and tax.
Page 2
<PAGE>
Critical Accounting Policies, page 9
4. Your proposed disclosures in response to prior comment 7 appear to be a
reiteration of the accounting policies included in the notes to your financial
statements. Please revise your disclosures to discuss only your critical
accounting estimates and not all of your accounting policies. Please refer to
Financial Reporting Release 72 for guidance on disclosure of critical accounting
estimates.
RESPONSE: We have revised or disclosure to discuss only our critical
accounting policies.
Item 12. Certain Relationships and Related Transactions, page 17
5. We note your responses to comment 9. Please file as exhibits the agreements
underlying each of the transactions discussed in this section.
RESPONSE: We will file the agreements as exhibits to the amended 10-KSB.
We have included a draft of the exhibits in this response.
6. Please expand the first paragraph to state how the $253,409 accounts payable
to Richard Pierce arose; the second paragraph to disclose how the promissory
note arose or for what you used the proceeds from the loan, as may be
applicable; and the fourth paragraph to describe the amount, nature, and age of
the equipment leased from Mr. Pierce. Also, please disclose the cost to Mr.
Pierce of the equipment he has leased to the company.
RESPONSE: We have added the requested disclosure.
7. In the third paragraph, you state "the MONTHLY rent charge is approximately
$50,000 ($60,000 Canadian) PER YEAR" (emphasis added). Please clarify whether
the stated rent amount is a monthly or a yearly amount.
RESPONSE: We have clarified that the $50,000 is the yearly amount.
Item 13. Exhibit and Reports on Form 8-K, page 18
8. We note that in response to comment 4, you plan to file the lease agreements
with your amended Form 10-KSB, and you have included them in the draft
amendment. Please include in your exhibit index a reference to these exhibits
and to all other exhibits you will file with your amendment.
RESPONSE: We have referenced the exhibits in the index.
Consolidated Financial Statements, page F-1
Notes to Consolidated Financial Statements, page F-7
9. We reiterate our prior comment 10. Please tell us why you have not included
the disclosures required by paragraph 38 of SFAS 131.
RESPONSE: We did not include geographic information as in our view it
did not appear material in amount due to the fact that there
were only two sales made to customers outside Canada in 2004
and zero sales in 2003. However, to satisfy SFAS 131 paragraph
38 we have now added the requested disclosure.
Page 3
<PAGE>
Signatures, page 20
10. We note the revisions you made pursuant to comment 8. Please add the title
of "director" to caption accompanying Mr. Pierce's signature.
RESPONSE: We have added the title of "director" to the caption
accompanying Mr. Pierce's signature.
Respectfully Submitted,
/s/ Richard Pierce
Richard Pierce,
President and C.E.O.
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Proposed 8K Filing
UNITES STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) SEPTEMBER 23, 2005
------------------
GFR PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
NEVADA 000-27959 77-0517964
--------------------------------------------------------------------------------
(State or other jurisdiction Commission (I.R.S. Employer
of incorporation or organization) file number Identification No.)
Suite 11405 - 201A Street, Maple Ridge, British Columbia V2X 0Y3
(Address of principal executive office) Zip/Postal Code
Issuer's telephone number: (604) 460-8440
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instructions A.2. Below):
[] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[] Pre-commencement communications pursuant to Rule 13e4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Item 4.02(a) Non-Reliance on Previously Issued Financial Statements or a
Related Audit Report or Completed Interim Review
Restatement and non-reliance
On September 23, 2005, our independent auditors, Robison, Hill & Co., informed
us that they had discovered and error in our financial statements for the year
ended December 31, 2004.
Following our discussion with Robison, Hill & Co., we determined that the
December 31, 2004 financial statements should be restated to reflect the
correction of this error as well as the financial statements for the quarters
ended March 31, 2005 and June 30, 2005.
On the date hereof, GFR Pharmaceuticals, Inc. is filing an amendment to its
Annual Report on Form 10-KSB for the year ended December 31, 2004, to amend and
restate financial statements and other financial information for the year 2004.
We are also filing on the date hereof, ammendments to the Quarterly Reports of
Form 10-QSB for the quarters ended March 31, 2005 and June 30, 2005.
We are filing these amendments to correct an error relating to the translation
of our financial statements from Canadian dollars to U.S. dollars for reporting
purposes. The error impacts the year ended December 31, 2004 and the quarters
ended March 31, 2005 and June 30, 2005, but has no effect on the financial
statements issued in prior fiscal years. The restatement corrects an error
within the currency translation adjustment, which should be reported in the
equity section of the balance sheet, but was reported in error in the income
statement. The impact of the restatement reduced net income by $311,113, net of
tax and reduced earnings per share from $0.38 to $0.10 for the year ended
December 31, 2004. The restatements for the quarters reduced net income by
$109,806, net of tax and reduced earnings per share from $0.13 to $0.03 for the
period ended March 31, 2005, and reduced net income by $93,104, net of tax and
reduced earnings per share from $0.12 to $0.03 for the period ended June 30,
2005.
In light of the restatement, readers should no longer rely on our previously
filed financial statements and other financial information for the year ended
December 31, 2004 and the quarters ended March 31, 2005 and June 30, 2005.
We have discussed the matters disclosed in this current report on Form 8-K with
Robison, Hill and Co.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GFR PHARMACEUTICALS, INC.
(Registrant)
Date: November 18, 2005
/s/ Richard Pierce
Richard Pierce,
President, C.E.O. and Director
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Proposed Form 10-KSB/A
U.S. Securities and Exchange Commission
Washington, Dc 20549
FORM 10-KSB/A
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
-----------------
Commission file number 000-27959
GFR Pharmaceuticals, Inc.
-------------------------
(Name of small business issuer in its charter)
Nevada 77-0517964
--------------------------------- -----------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
Suite 11405 - 201A Street, Maple Ridge, British Columbia V2X 0Y3
(Address of principal executive office) Zip/Postal Code
Issuer's telephone number: (604) 460-8440
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes (
X ) NO ( ).
Check here if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. ( X )
Issuer's revenues for its most recent fiscal year, were $5,859,763 .
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