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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED March 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 FOR THE TRANSITION PERIOD FROM  TO
 Commission file number 000-51409
 BEIJING MED-PHARM CORPORATION
 (Exact name of registrant as specified in its charter)
 Delaware
    
    20-0434726(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 600 W. Germantown Pike, Suite 400Plymouth Meeting, Pennsylvania
    
    19462(Address of principal executive offices)
    
    (Zip Code)
 (610 ) 940-1675
(Registrants telephone number, including area code)
 þ o
  o o þ
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##### Table of Contents



BEIJING MED-PHARM CORPORATION
INDEX
 Page No.Part I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)Condensed Consolidated Balance Sheets as of March 31, 2007 (Unaudited) and December 31, 2006
    
    
    3Condensed Consolidated Statements of Operations (Unaudited) for the three months ended
March 31, 2007 and 2006
    
    
    4Condensed Consolidated Statements of Stockholders Equity (Unaudited) for the three
months ended March 31, 2007
    
    
    5Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended
March 31, 2007 and 2006
    
    
    6Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results Of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    18Item 4. Controls and Procedures
    
    
    19Part II OTHER INFORMATIONItem 1A. Risk Factors
    
    
    20Item 6. Exhibits
    
    
    21SIGNATURESCertificate of the Chief Executive OfficerCertificate of the Chief Financial OfficerCertificate of the Chief Executive Officer, required by Rule 13a-14(b)Certificate of the Chief Financial Officer, required by Rule 13a-14(b)
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PART I. FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 BEIJING MED-PHARM CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)March31,
    
    
    December31,2007
    
    
    2006AssetsCurrent Assets:Cash and Cash Equivalents
    
    $
    14,322,405
    
    
    $
    15,330,606Restricted Cash
    
    
    108,000
    
    
    
    108,000Accounts Receivable, net of allowance for doubtful accounts of $0
    
    
    7,422,248
    
    
    
    7,237,167Inventory, net of allowance for obsolescence of $0
    
    
    2,734,918
    
    
    
    1,969,547Other Receivables
    
    
    196,638
    
    
    
    350,151VAT Receivable
    
    
    556,361
    
    
    
    597,119Prepaid Expenses and Other Current Assets
    
    
    679,779
    
    
    
    597,439Total Current Assets
    
    
    26,020,349
    
    
    
    26,190,029Restricted Cash
    
    
    157,000
    
    
    
    157,000Property and Equipment, net
    
    
    423,104
    
    
    
    312,594Investments, at Cost
    
    
    129,564
    
    
    
    128,205Intangible Assets, net of accumulated amortization
    
    
    664,805
    
    
    
    728,722Total Assets
    
    $
    27,394,822
    
    
    $
    27,516,550Liabilities and Stockholders EquityCurrent Liabilities:Notes Payable
    
    $
    117,378
    
    
    $
    117,378Related Party Notes Payable
    
    
    513,950
    
    
    
    548,422Accounts Payable
    
    
    6,988,628
    
    
    
    6,063,956Accounts Payable Wanhui Group
    
    
    
    
    
    
    214,227Deferred Revenue
    
    
    118,255
    
    
    
    18,159Accrued Payroll
    
    
    373,532
    
    
    
    533,290Accrued Professional Fees
    
    
    126,145
    
    
    
    140,349Accrued Taxes and related expenses
    
    
    86,490
    
    
    
    85,603Accrued Social Welfare and related expenses
    
    
    206,250
    
    
    
    204,134Accrued Contract Allowance
    
    
    467,375
    
    
    
    462,581Accrued Other
    
    
    547,023
    
    
    
    442,172Total Current Liabilities
    
    
    9,545,026
    
    
    
    8,830,271Notes Payable, long term
    
    
    88,147
    
    
    
    126,495Total Liabilities
    
    $
    9,633,173
    
    
    $
    8,956,766Stockholders Equity:Common Stock, $.001 Par Value; 50,000,000 Shares Authorized;
26,641,191 and 26,522,868 Shares Issued and Outstanding as of
March 31, 2007 and December 31, 2006, respectively
    
    $
    26,641
    
    
    $
    26,523Additional Paid in Capital
    
    
    29,368,666
    
    
    
    28,039,112Common Stock Warrants
    
    
    5,891,499
    
    
    
    6,371,332Accumulated Deficit
    
    
    (17,651,989
    )
    
    
    (15,964,418
    )Accumulated Other Comprehensive Income
    
    
    126,832
    
    
    
    87,235Total Stockholders Equity
    
    
    17,761,649
    
    
    
    18,559,784Total Liabilities and Stockholders Equity
    
    $
    27,394,822
    
    
    $
    27,516,550
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BEIJING MED-PHARM CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
 For the three months ended March 31,2007
    
    
    2006Net Revenues
    
    $
    5,685,435
    
    
    $
    4,722,784Cost of Sales
    
    
    5,224,645
    
    
    
    4,552,105Gross Margin
    
    
    460,790
    
    
    
    170,679Sales and Marketing Expenses
    
    
    421,347
    
    
    
    308,332General and Administration Expenses
    
    
    1,858,511
    
    
    
    1,399,937Total Operating Expenses
    
    
    2,279,858
    
    
    
    1,708,269Loss From Operations
    
    
    (1,819,068
    )
    
    
    (1,537,590
    )Other Income (Expense):Interest Income
    
    
    150,331
    
    
    
    50,144Interest (Expense)
    
    
    (18,834
    )
    
    
    (16,387
    )Total Other Income
    
    
    131,497
    
    
    
    33,757Loss Before Provision For Income Taxes
    
    
    (1,687,571
    )
    
    
    (1,503,833
    )Provision For Income Taxes
    
    
    
    
    
    
    33,863Net Loss
    
    $
    (1,687,571
    )
    
    $
    (1,537,696
    )Basic and Fully-Diluted Loss Per Share
    
    $
    (0.06
    )
    
    $
    (0.07
    )Basic and Fully-Diluted Weighted-average Shares Outstanding
    
    
    26,588,464
    
    
    
    21,892,783
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BEIJING MED-PHARM CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (Unaudited)
 AccumulatedOtherComprehensiveCommon Stock
    
    
    
    
    
    
    Common
    
    
    
    
    
    
    Income Foreign
    
    
    TotalNumber
    
    
    $.001 Par
    
    
    Additional
    
    
    Stock
    
    
    Accumulated
    
    
    Currency
    
    
    Stockholdersof Shares
    
    
    Value
    
    
    Paid-in Capital
    
    
    Warrants
    
    
    Deficit
    
    
    Translation
    
    
    EquityBalance as of December 31, 2006
    
    
    26,522,868
    
    
    $
    26,523
    
    
    $
    28,039,112
    
    
    $
    6,371,332
    
    
    $
    (15,964,418
    )
    
    $
    87,235
    
    
    $
    18,559,784Stock-Based Compensation
    
    
    
    
    
    
    
    
    
    
    316,028
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    316,028Common Stock Warrants IssuanceWarrant Exercise
    
    
    118,323
    
    
    
    118
    
    
    
    1,013,526
    
    
    
    (479,833
    )
    
    
    
    
    
    
    
    
    
    
    533,811Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,687,571
    )
    
    
    
    
    
    
    (1,687,571
    )Other Comprehensive LossForeign Currency Translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,597
    
    
    
    39,597Total Comprehensive Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,647,974
    )Balance as of March 31, 2007
    
    
    26,641,191
    
    
    $
    26,641
    
    
    $
    29,368,666
    
    
    $
    5,891,499
    
    
    $
    (17,651,989
    )
    
    $
    126,832
    
    
    $
    17,761,649
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BEIJING MED-PHARM CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 For the three months ended March 31,2007
    
    
    2006Cash Flows from Operating Activities:Net Loss
    
    $
    (1,687,571
    )
    
    $
    (1,537,696
    )Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities:Depreciation and amortization of Property and Equipment
    
    
    25,974
    
    
    
    13,868Amortization of Intangible Assets
    
    
    63,917
    
    
    
    64,582Stock-Based Compensation
    
    
    316,028
    
    
    
    287,378Loss on Disposal of Asset
    
    
    6,507
    
    
    
    Increase in Accounts Receivable
    
    
    (185,081
    )
    
    
    (172,320
    )(Increase) Decrease in Inventory
    
    
    (765,371
    )
    
    
    152,333Decrease in Other Receivables
    
    
    153,513
    
    
    
    28,703Decrease in Value Added Tax Receivable
    
    
    40,758
    
    
    
    26,966(Increase) Decrease in Prepaid Expenses and Other Current Assets
    
    
    (82,340
    )
    
    
    102,928Increase (Decrease) in Accounts Payable
    
    
    924,672
    
    
    
    (951,310
    )Increase in Deferred Revenue
    
    
    100,096
    
    
    
    Decrease in Accrued Payroll
    
    
    (159,758
    )
    
    
    (74,759
    )Decrease in Accrued Professional Fees
    
    
    (14,204
    )
    
    
    (51,084
    )Increase in Accrued Taxes and related expenses
    
    
    887
    
    
    
    Increase in Accrued Social Welfare and related expenses
    
    
    2,116
    
    
    
    Increase in Contract Allowances
    
    
    4,794
    
    
    
    2,787Increase in Accrued Other
    
    
    104,851
    
    
    
    178,767Net Cash Used in Operating Activities
    
    
    (1,150,212
    )
    
    
    (1,928,857
    )Cash Flows from Investing Activities:Acquisition payment due to Wanwei Group
    
    
    (214,227
    )
    
    
    Acquisition of Property and Equipment
    
    
    (142,991
    )
    
    
    (117,611
    )Net Cash Used In Investing Activities
    
    
    (357,218
    )
    
    
    (117,611
    )Cash Flows from Financing Activities:Net Proceeds from Exercise of Warrants
    
    
    533,811
    
    
    
    875,916Payments on Note Payable
    
    
    (72,821
    )
    
    
    (36,166
    )Net Cash Provided by Financing Activities
    
    
    460,990
    
    
    
    839,750Effect of exchange rate changes on cash
    
    
    38,239
    
    
    
    10,500Net Decrease in Cash and Equivalents
    
    
    (1,008,201
    )
    
    
    (1,196,218
    )Cash and Equivalents, Beginning
    
    
    15,330,606
    
    
    
    6,905,911Cash and Equivalents, Ending
    
    $
    14,322,405
    
    
    $
    5,709,693Supplemental Disclosure of Cash Flow Information:Cash Paid During the Years for:Income Taxes
    
    $
    0
    
    
    $
    50,290Interest
    
    
    25,533
    
    
    
    20,791
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BEIJING MED-PHARM CORPORATION AND SUBSIDIARIES
 
 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 1. Basis of Presentation:
  Earnings Per Share:
 New Accounting Policy: Accounting for Uncertainty in Income Taxes Accounting for Contingencies Accounting for Income Taxes
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Reclassifications:
 2. Acquisition:
  3. Segment Information:
     Three months ended March 31, (unaudited)
    
    2007
    
    
    2006Pharmaceutical distribution
    
    $
    5,685,435
    
    
    $
    4,714,185Sales and Marketing
    
    
    
    
    
    
    8,599Sales and Marketing intersegment
    
    
    101,529
    
    
    
    35,072Eliminations
    
    
    (101,529
    )
    
    
    (35,072
    )Total Revenues
    
    $
    5,685,435
    
    
    $
    4,722,784
 Three months ended March 31, (unaudited)
    
    2007
    
    
    2006Pharmaceutical distribution
    
    $
    (221,339
    )
    
    $
    (132,857
    )Sales and Marketing
    
    
    (460,791
    )
    
    
    (392,405
    )Corporate
    
    
    (1,231,248
    )
    
    
    (980,227
    )Eliminations
    
    
    94,310
    
    
    
    (32,101
    )Total Operating Loss
    
    $
    (1,819,068
    )
    
    $
    (1,537,590
    )
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4. Shareholders Equity
  Three months ended March 31,
    
    2007
    
    
    2006Weighted average basic shares
    
    
    26,588,464
    
    
    
    21,892,783
  Three months ended March 31,
    
    2007
    
    
    2006Number of shares
    
    
    2,030,684
    
    
    
    1,884,615Range of exercise price
    
    $
    1.15$7.95
    
    
    $
    1.15$2.25
 5. Stock-Based Compensation:
   3
Months Ended March 31,2007
    
    2006Expected life (years)
    
    
    5.0
    
    
    
    3.0Risk-free interest rate
    
    
    5.15
    %
    
    
    5.00
    %Expected Volatility
    
    
    78.83
    %
    
    
    90.00
    %Expected Dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
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Weighted-Weighted-
    
    
    AverageAverage
    
    
    RemainingExercise
    
    
    Contractual
    
    
    AggregatePrice
    
    
    Term
    
    
    IntrinsicOptions
    
    
    per Share
    
    
    (in years)
    
    
    ValueOutstanding on January 1, 2007
    
    
    2,103,000
    
    
    $
    2.08
    
    
    
    
    
    
    
    Granted
    
    
    40,000
    
    
    
    7.95
    
    
    
    
    
    
    
    Outstanding on March 31, 2007
    
    
    2,143,000
    
    
    $
    2.18
    
    
    
    7.78
    
    
    $
    4,682,150Exercisable on March 31, 2007
    
    
    1,143,003
    
    
    $
    1.59
    
    
    
    7.36
    
    
    $
    1,812,084
   Weighted-AverageNonvested Shares
    
    Shares
    
    Grant-Date Fair ValueNonvested at January 1, 2007
    
    
    1,147,175
    
    
    
    1.92Granted
    
    
    40,000
    
    
    
    5.32Vested
    
    
    (187,178
    )
    
    
    1.78Non-vested at March 31, 2007
    
    
    999,997
    
    
    
    2.08
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ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion should be read in conjunction with the Consolidated Financial
Statements and notes thereto contained herein and in conjunction with the financial statements and
notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31,
2006, filed with the SEC on March 26, 2007.
 Forward-Looking Statements
  Overview
  
    
    pre-market entry analysis;
    
    clinical trial management;
    
    product registration;
    
    market research;
    
    pharmaceutical marketing to physicians, hospitals and other healthcare providers; and
    
    pharmaceutical distribution.
  
    
    western medicines;
    
    traditional Chinese medicines;
    
    bio-chemical medicines; and
    
    medical applications.
  11




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12




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Our Opportunity
   Our Strategy and Solution
  
    
    combine our market development sources with market fulfillment services;
    
    use our marketing arm to create demand for products that we offer
exclusively through our distribution arm on a national basis in China;
    
    grow both internally and through strategic acquisitions of product
marketing and distribution rights and of other distributors; and
    
    provide an experienced management team and transparent financial
reporting through the reports that we are required to file as a reporting
company under the Securities Exchange Act of 1934, as amended, or the
Exchange Act.
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Our Product Portfolio
  
    
    Propess. Propess vaginal insert, or Propess, is a
vaginal insert used to ripen the cervix in preparation
for childbirth when labor is induced. The manufacturer
of Propess is Cytokine PharmaSciences, Inc., or
Cytokine. We entered into an agreement with Cytokine in
August 2005 to market and distribute Propess in China.
We began marketing Propess and recorded revenues with
respect to this product during the first six months of
2006.
    
    Anpo. Anpo, or ritodrine hydrochloride, is a
muscle relaxant available in both injectable and oral
forms, and is used for managing pre-term labor. In July
2006, we entered into an agreement with Taiwan Biotech
Co. Ltd. to serve as the exclusive distributor of Anpo
in mainland China.
    
    Misopess. Misopess vaginal insert, or Misopess,
is a vaginal insert under investigation in several
countries for cervical ripening and induction of labor.
The manufacturer of Misopess is Cytokine. We entered
into an agreement with Cytokine in November 2006 to
conduct late-stage clinical development, registration,
sales, marketing and distribution in China. Under terms
of the agreement, we will initiate a Chinese
registration trial of Misopess, with the expectation
that, once Mispoess receives US FDA approval, data from
this single trial will permit a regulatory application
with the SFDA in late 2008 or 2009.
    
    Fentora. Fentora, or fentanyl buccal tablet,
received US FDA approval in September 2006 for the
management of breakthrough pain in patients with
cancer. The manufacturer of Fentora is Cephalon, Inc,
or Cephalon. We entered into a service agreement with
Cephalon in December 2006 under which we will complete
the clinical development and registration process for
Fentora in China.
  Critical Accounting Policies
 Uncertainty in Income Taxes
 Accounting for Uncertainty in
Income Taxes Accounting for Contingencies Accounting for Income Taxes
    14




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Revenue Recognition
  Results of Operations
 Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006
 Net Revenue:
  Cost of Sales:
  Sales and Marketing Expenses:
  General and Administrative Expenses:
  15




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Interest Income:
  Liquidity and Capital Resources
     
    
    Our operating expenses and general working capital;
    
    The marketing of our current and future products;
    
    Our pursuit of internal growth and strategic acquisition of Shanghai Rongheng
Pharmaceutical Company Limited (Rongheng); and
    
    The expenses necessary to maintain our status as an Exchange Act reporting company.
    16




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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
 Foreign Exchange Rate Sensitivity
  Interest Rate Sensitivity
  18




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ITEM 4. Controls and Procedures
 (a) Evaluation of Disclosure Controls and Procedures
  (b) Changes in Internal Control Over Financial Reporting
  19




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PART II  OTHER INFORMATION
 
 ITEM 1A. Risk Factors
  We may be unable to acquire, or may be delayed in acquiring, Sunstone Pharmaceutical Co.,
Ltd.
  ITEM 5. Other Information
  
 ITEM 6. Exhibits
 31.1
    
    Certificate of the Chief Executive Officer of Beijing Med-Pharm
Corporation required by Rule 13a-14(a) under the Exchange Act.31.2
    
    Certificate of the Chief Financial Officer of Beijing Med-Pharm
Corporation required by Rule 13a-14(a) under the Exchange Act32.1
    
    Certificate of the Chief Executive Officer of Beijing Med-Pharm
Corporation required by Rule 13a-14(b) under the Exchange Act32.2
    
    Certificate of the Chief Financial Officer of Beijing Med-Pharm
Corporation required by Rule 13a-14(b) under the Exchange Act
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SIGNATURES
  Beijing Med-Pharm CorporationDate: May 15, 2007
    
    /s/ DAVID GAODavid GaoChief Executive Officer(Principal Executive Officer)Date: May 15, 2007
    
    /s/ FRED M. POWELLFred M. PowellChief Financial Officer(Principal Financial and Accounting Officer)
 21