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REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Cayman Islands | 8011 | Not Applicable | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Leiming Chen | Portia Ku | |
Simpson Thacher & Bartlett LLP | O’Melveny & Myers LLP | |
35th Floor, ICBC Tower | 37/F Plaza 66, 1266 Nanjing Road W | |
3 Garden Road | Shanghai, People’s Republic of China | |
Central, Hong Kong | (86 10) 2307-7000 | |
(852) 2514-7600 |
Title of Each Class of | Proposed Maximum Aggregate | Amount of | ||||
Securities to be Registered | Offering Price(1) | registration fee | ||||
Ordinary shares, par value US$0.0001 per share(2)(3) | US$100,000,000 | US$5,580 | ||||
(1) | Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(o) under the Securities Act of 1933. | |
(2) | Includes ordinary shares initially offered and sold outside the United States that may be resold from time to time in the United States either as part of their distribution or within 40 days after the later of the effective date of this registration statement and the date the shares are first bona fide offered to the public, and also includes ordinary shares that may be purchased by the underwriters pursuant to an over-allotment option. These ordinary shares are not being registered for the purposes of sales outside of the United States. | |
(3) | American depositary shares issuable upon deposit of the ordinary shares registered hereby will be registered under a separate registration statement onForm F-6 (RegistrationNo. 333- ). Each American depositary share represents ordinary shares. |
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The information in this prospectus is not complete and may be changed. Neither we nor the selling shareholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted. |
Issued , 2009
Underwriting | ||||||||||||||||
Discounts | Proceeds to | |||||||||||||||
Price to | and | Proceeds to | Selling | |||||||||||||
Public | Commissions | Company | Shareholders | |||||||||||||
Per ADS | US$ | US$ | US$ | US$ | ||||||||||||
Total | US$ | US$ | US$ | US$ |
MORGAN STANLEY | J.P.MORGAN | CICC |
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Cms O J centers in .30 cities* Concord Medical operates the largest network of radiotherapy and diagnostic imaging centers in China** 1 As ot September 30,2009. ” In terms of revenues and the total number of centers in operation in 2008, according to a Frost & Sullivan report commissioned by Concord Medical. |
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• | leading market position and successful track record; |
• | doctors with extensive cancer treatment experience developed and supported by our network; | |
• | market-oriented management of centers; | |
• | successful track record of new center development and acquisitions; and | |
• | strong and experienced management team. |
• | continue to develop new radiotherapy and diagnostic imaging centers; | |
• | increase marketing efforts to drive growth in patient cases at our existing centers; | |
• | establish specialty cancer hospitals; | |
• | introduce advanced cancer treatment options and diagnostic technology in our network; and | |
• | complement our development of new centers with selected acquisitions. |
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• | we may encounter difficulties in successfully opening new centers or renewing agreements for existing centers due to the limited number of suitable hospital partners and their potential ability to finance the purchase of medical equipment directly; | |
• | we have historically derived a significant portion of our revenues from centers located at a limited number of our hospital partners and regions; | |
• | we conduct our business in a heavily regulated industry; | |
• | any failure by our hospital partners to make contracted payments to us or any disputes over, or significant delays in receiving, such payments could have a material adverse effect on our business and financial condition; and | |
• | our business may be harmed by technological and therapeutic changes or by shifts in doctors’ or patients’ preferences for alternative treatments. |
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• | Shenzhen Aohua Medical Services Co., Ltd., our wholly owned subsidiary incorporated in the PRC that engages in the provision of radiotherapy and diagnostic center management services to hospitals in the PRC; | |
• | Shenzhen Aohua Medical Leasing and Services Co., Ltd., our wholly owned subsidiary incorporated in the PRC that engages in the provision of radiotherapy and diagnostic equipment leasing services to hospitals in the PRC; | |
• | Medstar (Shanghai) Leasing Co., Ltd., our wholly owned subsidiary incorporated in the PRC that engages in the sale of medical equipment and the provision of radiotherapy and diagnostic equipment leasing and management services to hospitals in the PRC; | |
• | CMS Hospital Management Co., Ltd., our wholly owned subsidiary incorporated in the PRC that engages in the provision of radiotherapy and diagnostic equipment management services to hospitals in the PRC; and | |
• | Beijing Xing Heng Feng Medical Technology Co., Ltd., our wholly owned subsidiary incorporated in the PRC that engages in the provision of radiotherapy and diagnostic equipment management services to hospitals in the PRC. |
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• | “ADRs” are to the American depositary receipts, which, if issued, evidence our ADSs; | |
• | “ADSs” are to our American depositary shares, each of which represents ordinary shares; | |
• | “China” and the “PRC” are to the People’s Republic of China, excluding, for the purposes of this prospectus only, Taiwan and the special administrative regions of Hong Kong and Macau; | |
• | “ordinary shares” are to our ordinary shares, par value US$0.0001 per share; | |
• | “PRC subsidiaries” are to our subsidiaries incorporated in the People’s Republic of China, including Aohua Medical, Aohua Leasing, Shanghai Medstar, CMS Hospital Management Co., Ltd., or CMS Hospital Management, and Xing Heng Feng Medical; | |
• | “RMB” and “Renminbi” are to the legal currency of China; | |
• | “US$” and “U.S. dollars” are to the legal currency of the United States; | |
• | “we,” “us,” “our company” and “our” are to Concord Medical Services Holdings Limited, its predecessor entities and its consolidated subsidiaries; and | |
• | “£” is to the legal currency of the United Kingdom of Great Britain and Northern Ireland. |
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Price per ADS | We currently estimate that the initial public offering price will be between US$ and US$ per ADS. | |
ADS offered by us | ADSs | |
ADS offered by the selling shareholders | ADSs | |
The ADSs | Each ADS represents ordinary shares, par value US$0.0001 per share. The ADSs may be evidenced by an ADR. | |
The depositary will be the holder of the ordinary shares underlying the ADSs and you will have the rights of an ADS holder as provided in the deposit agreement among us, the depositary and owners and beneficial owners of ADSs from time to time. | ||
You may surrender your ADSs to the depositary to withdraw the ordinary shares underlying your ADSs. The depositary will charge you a fee for such an exchange. | ||
We may amend or terminate the deposit agreement for any reason without your consent. If an amendment becomes effective, you will be bound by the deposit agreement as amended if you continue to hold your ADSs. | ||
To better understand the terms of the ADSs, you should carefully read the section in this prospectus entitled “Description of American Depositary Shares.” We also encourage you to read the deposit agreement, which is an exhibit to the registration statement that includes this prospectus. | ||
Over-allotment option | We and the selling shareholders have granted the underwriters an option, exercisable within 30 days from the date of this prospectus, to purchase up to an aggregate of additional ADSs representing ordinary shares | |
Ordinary shares outstanding immediately after the offering | ordinary shares (or ordinary shares if the underwriters exercise the option to purchase additional ADSs in full), excluding ordinary shares reserved for issuance under our 2008 share incentive plan. | |
ADSs outstanding immediately after the offering | ADSs (or ADSs if the underwriters exercise the option to purchase additional ADSs in full). | |
Use of proceeds | We will receive net proceeds from this offering of approximately US$ million, after deducting the underwriting discounts and commissions and estimated aggregate offering expenses payable by us. We intend to use a portion of the net proceeds we receive from this offering for the following purposes: | |
• approximately US$20 million to US$25 million to develop our Chang’an CMS International Cancer Center; and | ||
• approximately US$25 million to US$30 million to develop our Beijing Proton Medical Center. | ||
We will use the remaining portion of the net proceeds we receive from this offering for the expansion of our network of centers and for general corporate purposes, including potential acquisitions of, or |
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investments in, other businesses or technologies that we believe will complement our current operations and expansion strategies. See “Use of Proceeds” for additional information. | ||
We will not receive any of the proceeds from the sale of the ADSs by the selling shareholders. | ||
Listing | We have applied to have our ADSs traded on the New York Stock Exchange, or the NYSE. Our ordinary shares will not be listed on any exchange or quoted for trading on any over-the-counter trading system. | |
NYSE trading symbol | CCM | |
Lock-up | We, our directors, executive officers and all existing shareholders have agreed with the underwriters, subject to certain exceptions, not to sell, transfer or dispose of any of our ADSs, ordinary shares or similar securities for a period of 180 days after the date of this prospectus. See “Underwriting.” | |
Reserved ADSs | At our request, the underwriters have reserved for sale, at the public offering price, up to an aggregate of ADSs offered by this prospectus to our directors, officers, employees, business associates and related persons through a reserved share program. | |
Depositary | JPMorgan Chase Bank, N. A. | |
Payment and settlement | The ADSs are expected to be delivered against payment on , 2009. The ADSs will be deposited with a custodian for, and registered in the name of a nominee of, The Depository Trust Company, or DTC, in New York, New York. Initially, beneficial interests in the ADSs will be shown on, and transfers of these beneficial interest will be effected through, records maintained by DTC and its direct and indirect participants. | |
Risk factors | See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in the ADSs. |
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Concord | |||||||||||||||||||||||||||||||||
Medical | |||||||||||||||||||||||||||||||||
Predecessor | (Successor) | Combined | Concord Medical (Successor) | ||||||||||||||||||||||||||||||
Period from | Period from | ||||||||||||||||||||||||||||||||
January 1, | September 10, | ||||||||||||||||||||||||||||||||
2007 to | 2007 to | Year Ended | |||||||||||||||||||||||||||||||
October 30, | December 31, | December 31, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||
2007 | 2007 | 2007 | Year Ended December 31, 2008 | 2008 | 2009 | ||||||||||||||||||||||||||||
RMB | RMB | RMB | US$ | ||||||||||||||||||||||||||||||
RMB | RMB | RMB | US$ | ||||||||||||||||||||||||||||||
(in thousands, except share, per share and per ADS data) | |||||||||||||||||||||||||||||||||
Summary Consolidated Statements of Operations Data | |||||||||||||||||||||||||||||||||
Revenues, net of business tax, value-added tax and related surcharges: | |||||||||||||||||||||||||||||||||
Lease and management services | 63,082 | 13,001 | 76,083 | 155,061 | 22,716 | 94,296 | 184,937 | 27,092 | |||||||||||||||||||||||||
Management services | 4,340 | 982 | 5,322 | 12,677 | 1,857 | 7,519 | 20,096 | 2,944 | |||||||||||||||||||||||||
Other, net | — | — | — | 4,051 | 593 | 178 | 624 | 91 | |||||||||||||||||||||||||
Total net revenues | 67,422 | 13,983 | 81,405 | 171,789 | 25,166 | 101,993 | 205,657 | 30,127 | |||||||||||||||||||||||||
Cost of revenues: | |||||||||||||||||||||||||||||||||
Lease and management services | (20,396 | ) | (1,908 | ) | (22,304 | ) | (25,046 | ) | (3,669 | ) | (14,671 | ) | (42,144 | ) | (6,174 | ) | |||||||||||||||||
Amortization of acquired intangibles | — | (2,002 | ) | (2,002 | ) | (20,497 | ) | (3,003 | ) | (13,671 | ) | (20,388 | ) | (2,987 | ) | ||||||||||||||||||
Management services | (20 | ) | (4 | ) | (24 | ) | (54 | ) | (8 | ) | (19 | ) | (9 | ) | (1 | ) | |||||||||||||||||
Total cost of revenues | (20,416 | ) | (3,914 | ) | (24,330 | ) | (45,597 | ) | (6,680 | ) | (28,361 | ) | (62,541 | ) | (9,162 | ) | |||||||||||||||||
Gross profit | 47,006 | 10,069 | 57,075 | 126,192 | 18,486 | 73,632 | 143,116 | 20,965 | |||||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||||
Selling expenses | (1,601 | ) | (757 | ) | (2,358 | ) | (5,497 | ) | (805 | ) | (3,275 | ) | (4,463 | ) | (654 | ) | |||||||||||||||||
General and administrative expenses(1) | (8,467 | ) | (57,171 | ) | (65,638 | ) | (18,869 | ) | (2,764 | ) | (12,468 | ) | (19,687 | ) | (2,884 | ) | |||||||||||||||||
Operating income (loss) | 36,938 | (47,859 | ) | (10,921 | ) | 101,826 | 14,917 | 57,889 | 118,966 | 17,427 | |||||||||||||||||||||||
Other (loss) income | (2,494 | ) | (649 | ) | (3,143 | ) | 578 | 84 | (5,262 | ) | (4,275 | ) | (626 | ) | |||||||||||||||||||
(Loss) income before income taxes | 34,444 | (48,508 | ) | (14,064 | ) | 102,404 | 15,001 | 52,627 | 114,691 | 16,801 | |||||||||||||||||||||||
Income tax (expense) benefit | (15,014 | ) | 182 | (14,832 | ) | (23,335 | ) | (3,418 | ) | (12,611 | ) | (25,734 | ) | (3,770 | ) | ||||||||||||||||||
Net (loss) income | 19,430 | (48,326 | ) | (28,896 | ) | 79,069 | 11,583 | 40,016 | 88,957 | 13,031 | |||||||||||||||||||||||
Accretion of Series A contingently redeemable convertible preferred shares | — | — | — | (270,343 | ) | (39,604 | ) | (262,286 | ) | (23,851 | ) | (3,494 | ) | ||||||||||||||||||||
Accretion of Series B contingently redeemable convertible preferred shares | — | — | — | (304,763 | ) | (44,646 | ) | — | (38,383 | ) | (5,623 | ) | |||||||||||||||||||||
Net income (loss) attributable to ordinary shareholders | 19,430 | (48,326 | ) | (28,896 | ) | (496,037 | ) | (72,667 | ) | (222,270 | ) | 26,723 | 3,914 | ||||||||||||||||||||
Earning (loss) per share — basic and diluted | 0.39 | (0.97 | ) | (0.58 | ) | (8.63 | ) | (1.26 | ) | (3.67 | ) | 0.38 | 0.06 | ||||||||||||||||||||
Earning (loss) per ADS — basic and diluted | |||||||||||||||||||||||||||||||||
Shares used in computation — basic and diluted(2) | 50,000,000 | 50,000,000 | 50,000,000 | 57,481,400 | 57,481,000 | 60,621,700 | 70,428,100 | 70,428,100 | |||||||||||||||||||||||||
ADSs used in computation — basic and diluted |
(1) | Our general and administrative expenses include share-based compensation expenses related to certain share options granted in 2007 that amounted to RMB49.5 million, RMB4.2 million (US$0.6 million) and RMB4.2 million in 2007, 2008 and for the nine months ended September 30, 2008, respectively. We did not recognize anyshare-based compensation expenses for the nine months ended September 30, 2009. | |
(2) | On November 17, 2009, we effected a share split whereby all of our issued and outstanding 704,281 ordinary shares of a par value of US$0.01 per share were split into 70,428,100 ordinary shares of US$0.0001 par value per share and the number of our authorized shares were increased from 4,500,000 to 450,000,000. The share split has been retroactively reflected in this prospectus so that share number, per share price and par value data are presented as if the share split had occurred from our inception. |
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Actual | Pro Forma as | |||||||||||||||||||||||||||
As of December 31, | As of September 30, | Adjusted as of | ||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2009 | September 30, 2009(1) | ||||||||||||||||||||||||
RMB | RMB | US$ | RMB | US$ | RMB | US$ | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Summary Consolidated Balance Sheet Data | ||||||||||||||||||||||||||||
Cash | 39,792 | 353,991 | 51,858 | 285,703 | 41,854 | |||||||||||||||||||||||
Total current assets | 66,135 | 492,978 | 72,219 | 466,487 | 68,338 | |||||||||||||||||||||||
Property, plant and equipment, net | 54,703 | 349,121 | 51,144 | 557,433 | 81,661 | 557,433 | 81,661 | |||||||||||||||||||||
Goodwill | 259,282 | 300,163 | 43,972 | 300,163 | 43,972 | 300,163 | 43,972 | |||||||||||||||||||||
Acquired intangible assets, net | 129,998 | 181,838 | 26,638 | 161,450 | 23,652 | 161,450 | 23,652 | |||||||||||||||||||||
Total assets | 543,023 | 1,514,395 | 221,850 | 1,673,254 | 245,122 | |||||||||||||||||||||||
Long-term bank borrowings, current portion | — | 39,840 | 5,836 | 44,880 | 6,575 | 44,880 | 6,575 | |||||||||||||||||||||
Long-term bank borrowings, non-current portion | — | 52,120 | 7,635 | 104,912 | 15,369 | 104,912 | 15,369 | |||||||||||||||||||||
Series A contingently redeemable convertible preferred shares | — | 254,358 | 37,262 | 269,017 | 39,409 | — | — | |||||||||||||||||||||
Series B contingently redeemable convertible preferred shares | — | 411,101 | 60,224 | 434,036 | 63,584 | — | — | |||||||||||||||||||||
Total shareholders’ equity | 394,878 | 565,020 | 82,772 | 591,582 | 86,663 | |||||||||||||||||||||||
Total liabilities and shareholders’ equity | 543,023 | 1,514,395 | 221,850 | 1,673,254 | 245,122 | |||||||||||||||||||||||
(1) | Pro forma as adjusted summary consolidated balance sheet data take into account (i) the automatic conversion of all our outstanding contingently redeemable convertible preferred shares into of our ordinary shares immediately upon the completion of this offering and (ii) the issuance and sale of ordinary shares in the form of ADSs by us in this offering, assuming an initial public offering price of US$ per ADS, the midpoint of the estimated range of the initial public offering price, after deducting estimated underwriting discounts and commissions and estimated aggregate offering expenses payable by us and assuming no exercise of the underwriters’ option to purchase additional ADSs and no other change to the number of ADSs sold by us as set forth on the cover of this prospectus. Assuming the number of ADSs offered by us as set forth on the cover page of this prospectus remains the same, and after deduction of underwriting discounts and commissions and the estimated offering expenses payable by us, a US$1.00 increase (decrease) in the assumed initial public offering price of US$ per ADS would increase (decrease) each of cash, total current assets, total assets, total shareholders’ equity and total liabilities and shareholders’ equity by US$ million. |
Predecessor | Concord Medical (Successor) | ||||||||||||||||||||||||||||
Period | Period | ||||||||||||||||||||||||||||
from | from | ||||||||||||||||||||||||||||
January 1, | September 10, | ||||||||||||||||||||||||||||
2007 to | 2007 to | ||||||||||||||||||||||||||||
October 30, | December 31, | Nine Months Ended September 30, | |||||||||||||||||||||||||||
2007 | 2007 | Year Ended December 31, 2008 | 2008 | 2009 | |||||||||||||||||||||||||
RMB | RMB | RMB | US$ | RMB | RMB | US$ | |||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||
Selected Consolidated Statements of Cash Flow Data | |||||||||||||||||||||||||||||
Net cash generated from operating activities | 44,593 | 6,103 | 46,774 | 6,852 | 27,370 | 104,500 | 15,308 | ||||||||||||||||||||||
Net cash used in investing activities(1) | (50,452 | ) | (30,441 | ) | (376,371 | ) | (55,136 | ) | (300,692 | ) | (223,426 | ) | (32,731 | ) | |||||||||||||||
Net cash generated from financing activities | 6,020 | 63,225 | 649,494 | 95,147 | 278,407 | 50,829 | 7,448 | ||||||||||||||||||||||
Exchange rate effect on cash | — | 138 | (5,698 | ) | (834 | ) | (5,949 | ) | (191 | ) | (29 | ) | |||||||||||||||||
Net increase (decrease) in cash | 161 | 39,025 | 314,199 | 46,029 | (864 | ) | (68,288 | ) | (10,004 | ) |
(1) | Net cash used in investing activities in 2008 and for the nine months ended September 30, 2008 and 2009 includes cash used for acquisitions, net of cash acquired, of RMB231.5 million (US$33.9 million), RMB219.1 million and RMB21.5 million (US$3.2 million), respectively. |
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Concord | |||||||||||||||||||||||||||||||||
Medical | |||||||||||||||||||||||||||||||||
(Successor) | Combined | Concord Medical (Successor) | |||||||||||||||||||||||||||||||
Predecessor | Period | ||||||||||||||||||||||||||||||||
Period | from | ||||||||||||||||||||||||||||||||
from January 1, | September 10, | ||||||||||||||||||||||||||||||||
2007 to | 2007 to | Year Ended | |||||||||||||||||||||||||||||||
October 30, | December 31, | December 31, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||
2007 | 2007 | 2007 | Year Ended December 31, 2008 | 2008 | 2009 | ||||||||||||||||||||||||||||
RMB | RMB | RMB | RMB | US$ | RMB | RMB | US$ | ||||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||||
Non-GAAP Financial Data | |||||||||||||||||||||||||||||||||
Adjusted EBITDA(1) | 54,844 | 4,753 | 59,597 | 144,167 | 21,120 | 85,188 | 174,455 | 25,556 |
(1) | Adjusted EBITDA is defined as net (loss) income plus interest, taxes, depreciation and amortization, share-based compensation expenses and other adjustments. Adjusted EBITDA is used by management to evaluate our financial performance and determine the allocation of resources and provides the management with the ability to determine our return on capital expenditure relating to our purchase of medical equipment used in our network of centers and businesses acquired. Items that are eliminated from the calculation of Adjusted EBITDA are collectively managed by our senior executive officers, taking into consideration our strategic, business and financial goals. Depreciation and amortization are primarily managed by our chief executive officer, our chief operating officer and our chief financial officer. Share-based compensation expense is primarily managed by our chief executive officer and our financial officers. Interest expense and income, income tax expense or benefit and all other items eliminated from the calculation of Adjusted EBITDA are primarily managed by our chief executive officer, our financial controller and corporate vice president. In addition, we believe that Adjusted EBITDA will be a key metric analyzed in determining the amount of new debt financing that may be available to us and, therefore, we believe this measure provides investors with additional information about our ability to fund our growth through debt financing, if needed. Furthermore, Adjusted EBITDA eliminates the impact of items that we do not consider indicative of the performance of our network of centers. For example, depreciation and amortization expenses relating to the medical equipment used in our network of centers and acquired intangibles represented historical accrued expenditures that are not indicative of the operating performance of our network of centers during the periods presented. We believe investors will similarly use Adjusted EBITDA as one of the key metrics to evaluate our financial performance and to compare our current operating results with corresponding historical periods and with other companies in the healthcare services industry. The presentation of Adjusted EBITDA should not be construed as an indication that our future results will be unaffected by other charges and gains we consider to be outside the ordinary course of our business. | |
The use of Adjusted EBITDA has certain limitations. Items excluded from Adjusted EBITDA are significant components in understanding and assessing our operating and financial performance. Depreciation and amortization expense, income tax expense, interest expense and interest income as well as share-based compensation expenses have been and will be incurred in our business and are not reflected in the presentation of Adjusted EBITDA. Each of these items should also be considered in the overall evaluation of our results. Additionally, Adjusted EBITDA does not consider capital expenditures and other investing activities and should not be considered as a measure of our liquidity. We compensate for these limitations by providing the relevant disclosure of our depreciation and amortization expense, interest expense and interest income, income tax expense, capital expenditures as well as share-based compensation expenses and other relevant items both in our reconciliations to the U.S. GAAP financial measures and in our consolidated financial statements, all of which should be considered when evaluating our performance. The term Adjusted EBITDA is not defined under U.S. GAAP, and Adjusted EBITDA is not a measure of net income, operating income, operating performance or liquidity presented in accordance with U.S. GAAP. When assessing our operating and financial performance, you should not consider this data in isolation or as a substitute for our net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, our Adjusted EBITDA may not be comparable to Adjusted EBITDA or similarly titled measures utilized by other companies since such other companies may not calculate Adjusted EBITDA in the same manner as we do. |
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The following table is a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP: |
Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||
Concord | |||||||||||||||||||||||||||||||||
Predecessor | Medical | ||||||||||||||||||||||||||||||||
Period from | (Successor) | Combined | Concord Medical (Successor) | ||||||||||||||||||||||||||||||
January 1, | Period from | ||||||||||||||||||||||||||||||||
2007 to | September 10, 2007 to | Year Ended | |||||||||||||||||||||||||||||||
October 30, | December 31, | December 31, | |||||||||||||||||||||||||||||||
2007 | 2007 | 2007 | Year Ended December 31, 2008 | 2008 | 2009 | ||||||||||||||||||||||||||||
RMB | RMB | RMB | RMB | US$ | RMB | RMB | US$ | ||||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||||
Net (loss) income | 19,430 | (48,326 | ) | (28,896 | ) | 79,069 | 11,583 | 40,016 | 88,957 | 13,031 | |||||||||||||||||||||||
Interest expense, net | 939 | 279 | 1,218 | 7,025 | 1,029 | 5,177 | 4,057 | 594 | |||||||||||||||||||||||||
Income tax expense (benefit) | 15,014 | (182 | ) | 14,832 | 23,335 | 3,418 | 12,611 | 25,734 | 3,770 | ||||||||||||||||||||||||
Depreciation and amortization | 17,906 | 3,086 | 20,992 | 38,126 | 5,585 | 23,084 | 55,489 | 8,129 | |||||||||||||||||||||||||
Share-based compensation expenses | — | 49,526 | 49,526 | 4,215 | 617 | 4,215 | — | — | |||||||||||||||||||||||||
Other adjustments* | 1,555 | 370 | 1,925 | (7,603 | ) | (1,114 | ) | 85 | 218 | 32 | |||||||||||||||||||||||
Adjusted EBITDA | 54,844 | 4,753 | 59,597 | 144,167 | 21,120 | 85,188 | 174,455 | 25,556 | |||||||||||||||||||||||||
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As of December 31, | As of September 30, | |||||||||||
Operating Data(1) | 2007 | 2008 | 2009 | |||||||||
Number of primary medical equipment owned: | ||||||||||||
Linear accelerators | 1 | 12 | 16 | |||||||||
Head gamma knife systems | 15 | 15 | 16 | |||||||||
Body gamma knife systems | 8 | 9 | 10 | |||||||||
PET-CT scanners | — | 3 | 7 | |||||||||
MRI scanners | 2 | 10 | 16 | |||||||||
Others(2) | 8 | 15 | 16 | |||||||||
Total | 34 | 64 | 81 | |||||||||
Year Ended December 31, | Nine Months Ended September 30, | |||||||||||
2007 | 2008 | 2009 | ||||||||||
Number of patient cases treated or diagnosed by our primary medical equipment: | ||||||||||||
Linear accelerators | 697 | 4,678 | 8,554 | |||||||||
Head gamma knife systems | 8,493 | 9,455 | 7,767 | |||||||||
Body gamma knife systems | 2,635 | 3,057 | 2,706 | |||||||||
PET-CT scanners | — | 1,929 | 3,766 | |||||||||
MRI scanners | 11,830 | 31,827 | 57,972 |
Predecessor | Concord Medical (Successor) | Combined | Concord Medical (Successor) | ||||||||||||||||||||||
Period from | Period from | ||||||||||||||||||||||||
January 1, 2007 | September 1, | Year Ended | |||||||||||||||||||||||
to October 30, | 2007 to | December 31, | Nine Months Ended September 30, | ||||||||||||||||||||||
2007 | December 31, 2007 | 2007 | Year Ended December 31, 2008 | 2008 | 2009 | ||||||||||||||||||||
(in RMB thousands) | |||||||||||||||||||||||||
Total net revenues generated by our primary medical equipment under lease and management services arrangements: | |||||||||||||||||||||||||
Linear accelerators | 3,206 | 877 | 4,083 | 40,506 | 21,588 | 60,183 | |||||||||||||||||||
Head gamma knife systems | 40,408 | 8,731 | 49,139 | 65,365 | 47,096 | 51,673 | |||||||||||||||||||
Body gamma knife systems | 13,537 | 2,565 | 16,102 | 20,071 | 12,225 | 18,204 | |||||||||||||||||||
PET-CT scanners | — | — | — | 5,241 | 578 | 14,289 | |||||||||||||||||||
MRI scanners | 2,899 | 437 | 3,336 | 15,123 | 7,515 | 27,618 | |||||||||||||||||||
Others(2) | 3,032 | 391 | 3,423 | 8,755 | 5,294 | 12,970 | |||||||||||||||||||
Total net revenues — lease and management services | 63,082 | 13,001 | 76,083 | 155,061 | 94,296 | 184,937 | |||||||||||||||||||
(1) | Excluding data from seven, eight and two centers under service-only agreements as of December 31, 2007, December 31, 2008 and September 30, 2009, respectively. | |
(2) | Other primary medical equipment used includes computed tomography scanners, or CT scanners, and emission computed tomography scanners, or ECT scanners, for diagnostic imaging, electroencephalography for the diagnosis of epilepsy, thermotherapy to increase the efficacy of and for pain relief after radiotherapy and chemotherapy, high intensity focused ultrasound therapy for the treatment of cancer, stereotactic radiofrequency ablation for the treatment of Parkinson’s Disease and refraction and tonometry for the diagnosis of ophthalmic conditions. |
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FOR THE YEAR ENDED DECEMBER 31, 2008
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Pro Forma | Pro Forma | |||||||||||||||||||
Concord Medical | China Medstar | Adjustment | Combined | |||||||||||||||||
Seven-month | ||||||||||||||||||||
Year Ended | Period Ended | |||||||||||||||||||
December 31, 2008 | July 31, 2008 | 2008 | ||||||||||||||||||
RMB | RMB | RMB | US$ | |||||||||||||||||
(in thousands, except share, per share and per ADS data) | ||||||||||||||||||||
Summary Unaudited Pro Forma Condensed Combined Statement of Operations Data | ||||||||||||||||||||
Revenue, net of business tax, value-added tax and related surcharges: | ||||||||||||||||||||
Lease and management services | 155,061 | 48,745 | 203,806 | 29,856 | ||||||||||||||||
Management services | 12,677 | 7,980 | 20,657 | 3,026 | ||||||||||||||||
Other, net | 4,051 | 6,148 | 10,199 | 1,494 | ||||||||||||||||
Total net revenues | 171,789 | 62,873 | 234,662 | 34,377 | ||||||||||||||||
Cost of revenues: | ||||||||||||||||||||
Lease and management services | (25,046 | ) | (14,806 | ) | 5,624 | (1) | (34,228 | ) | (5,014 | ) | ||||||||||
Amortization of acquired intangibles | (20,497 | ) | — | (5,743 | )(1) | (26,240 | ) | (3,844 | ) | |||||||||||
Management services | (54 | ) | (63 | ) | (117 | ) | (17 | ) | ||||||||||||
Total cost of revenues | (45,597 | ) | (14,869 | ) | (60,585 | ) | (8,875 | ) | ||||||||||||
Gross profit | 126,192 | 48,004 | 174,077 | 25,501 | ||||||||||||||||
Operating expenses: | ||||||||||||||||||||
Selling expenses | (5,497 | ) | (1,581 | ) | (7,078 | ) | (1,037 | ) | ||||||||||||
General and administrative expenses | (18,869 | ) | (8,340 | ) | (27,209 | ) | (3,986 | ) | ||||||||||||
Operating income | 101,826 | 38,083 | 139,790 | 20,478 | ||||||||||||||||
Interest expense | (7,455 | ) | (1,585 | ) | (9,040 | ) | (1,324 | ) | ||||||||||||
Change in fair value of convertible notes | (464 | ) | — | (464 | ) | (68 | ) | |||||||||||||
Foreign exchange loss | (325 | ) | (230 | ) | (555 | ) | (81 | ) | ||||||||||||
Loss from disposal of equipment | 658 | — | 658 | 96 | ||||||||||||||||
Interest income | 430 | 32 | 462 | 68 | ||||||||||||||||
Other income (expense) | 7,734 | (200 | ) | 7,534 | 1,104 | |||||||||||||||
Income before income taxes | 102,404 | 36,100 | 138,385 | 20,273 | ||||||||||||||||
Income tax expenses | (23,335 | ) | (8,445 | ) | 21(2 | ) | (31,759 | ) | (4,653 | ) | ||||||||||
Net income from continuing operations | 79,069 | 27,655 | 106,626 | 15,620 | ||||||||||||||||
Pro forma income per share from continuing operations | ||||||||||||||||||||
Basic and diluted | 1.38 | 1.85 | 0.27 | |||||||||||||||||
Weighted average number of ordinary shares outstanding: | ||||||||||||||||||||
Basic and diluted | 57,481,400 | 57,481,400 | 57,481,400 | |||||||||||||||||
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(1) | The aggregate purchase price of approximately £17.1 million (RMB238.7 million or US$35.0 million) for the purchase of China Medstar is comprised of the following: |
RMB | US$ | |||||||
(in thousands) | ||||||||
Goodwill | 21,210 | 3,107 | ||||||
Current assets | 77,053 | 11,287 | ||||||
Long-term receivable | 9,397 | 1,377 | ||||||
Property, plant and equipment | 217,965 | 31,931 | ||||||
Other intangible assets- customer relationships and operating leases | 52,380 | 7,673 | ||||||
Deposit for property, plant and equipment | 83,505 | 12,233 | ||||||
Deferred tax assets, non-current portion | 23,089 | 3,382 | ||||||
Deferred tax liabilities, non-current portion | (12,529 | ) | (1,835 | ) | ||||
Liabilities assumed | (233,323 | ) | (34,180 | ) | ||||
Total consideration paid | 238,747 | 34,975 | ||||||
The preliminary purchase price allocation and preliminary intangible asset valuations described above were based on valuation work determined by us with the assistance of American Appraisal China Limited, an independent valuation firm. The valuation report utilizes and considers generally accepted valuation methodologies such as the income, market, cost and actual transaction of shares approach. We have incorporated certain assumptions which include projected cash flows and replacement costs. | ||
This adjustment of RMB5.6 million reflects an additional seven full months of amortization of the acquired intangibles recorded as a result of our acquisition of China Medstar on July 31, 2008 as if the acquisition had been consummated on January 1, 2008. | ||
This adjustment of RMB5.7 million reflects an additional reduction in depreciation expense as if the acquisition had been consummated on January 1, 2008 related to medical equipment because the assigned estimated fair values are lower than the net book values as at the acquisition date. | ||
(2) | Reflects the adjustment to income tax expense based on the pro forma adjusting entries to depreciation expense and amortization expense discussed above. |
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• | reduction in the number of patient cases at the centers located at these partner hospitals; |
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• | loss of key experienced medical professionals; | |
• | decrease in the profitability of such centers; | |
• | failure to maintain or renew our agreements with these hospital partners; | |
• | any failure of these hospital partners to pay us our contracted percentage of any such center’s revenue net of specified operating expenses; | |
• | any regulatory changes in the geographic areas where our hospital partners are located; or | |
• | any other disputes with these hospital partners. |
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• | our future financial condition, results of operations and cash flows; | |
• | general market conditions for capital raising and debt financing activities; and | |
• | economic, political and other conditions in China and elsewhere. |
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• | have a majority of the board be independent (other than due to the requirements for the audit committee under the United States Securities Exchange Act of 1934, as amended, or the Exchange Act); | |
• | have a minimum of three members in our audit committee; | |
• | have a compensation committee, a nominating or corporate governance committee; | |
• | provide annual certification by our chief executive officer that he or she is not aware of any non-compliance with any corporate governance rules of the NYSE; | |
• | have regularly scheduled executive sessions with only non-management directors; | |
• | have at least one executive session of solely independent directors each year; | |
• | seek shareholder approval for (i) the implementation and material revisions of the terms of share incentive plans, (ii) the issuance of more than 1% of our outstanding ordinary shares or 1% of the voting power outstanding to a related party, (iii) the issuance of more than 20% of our outstanding ordinary shares, and (iv) an issuance that would result in a change of control; | |
• | adopt and disclose corporate governance guidelines; or | |
• | adopt and disclose a code of business conduct and ethics for directors, officers and employees. |
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• | the degree of government involvement; | |
• | the level of development; | |
• | the growth rate; | |
• | the control of foreign exchange; | |
• | the allocation of resources; | |
• | an evolving regulatory system; and | |
• | lack of sufficient transparency in the regulatory process. |
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• | announcements of technological or competitive developments; | |
• | regulatory developments in China affecting us or our competitors; | |
• | announcements of studies and reports relating to the effectiveness or safety of the services provided in our network of centers or those of our competitors; | |
• | actual or anticipated fluctuations in our quarterly operating results and changes or revisions of our expected results; | |
• | changes in financial estimates by securities research analysts; | |
• | changes in the economic performance or market valuations of other medical services companies; | |
• | addition or departure of our senior management and other key personnel; | |
• | release or expiry oflock-up or other transfer restrictions on our outstanding ordinary shares or ADSs; and | |
• | sales or perceived sales of additional ordinary shares or ADSs. |
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• | the risks, challenges and uncertainties in the radiotherapy and diagnostic imaging industry and for our business generally; | |
• | our beliefs regarding our strengths and strategies; | |
• | our current expansion strategy, including our ability to expand our network of centers and to establish specialty cancer hospitals; | |
• | our ability to maintain strong working relationships with our hospital partners; | |
• | our expectations regarding patients’ and their referring doctors’ demand for and acceptance of the radiotherapy and diagnostic imaging services offered by our centers; | |
• | changes in the healthcare industry in China, including changes in the healthcare policies and regulations of the PRC government; | |
• | technological or therapeutic changes affecting the field of cancer treatment and diagnostic imaging; | |
• | our ability to comply with all relevant environmental, health and safety laws and regulations; | |
• | our ability to obtain and maintain permits, licenses and registrations to carry on our business; | |
• | our planned use of proceeds; | |
• | our future prospects, business development, results of operations and financial condition; and | |
• | fluctuations in general economic and business conditions in China. |
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• | approximately US$20 million to US$25 million to develop our Chang’an CMS International Cancer Center; and | |
• | approximately US$25 million to US$30 million to develop our Beijing Proton Medical Center. |
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• | on an actual basis; and | |
• | on a pro forma as adjusted basis to reflect (i) the automatic conversion of all our outstanding contingently redeemable convertible preferred shares into 41,027,400 of our ordinary shares immediately upon the completion of this offering and (ii) the issuance and sale of ordinary shares in the form of ADSs by us in this offering, assuming an initial public offering price of US$ per ADS, the midpoint of the estimated range of the initial public offering price, after deducting estimated underwriting discounts and commissions and estimated aggregate offering expenses payable by us and assuming no exercise of the underwriters’ option to purchase additional ADSs and no other change to the number of ADSs sold by us as set forth on the cover page of this prospectus. |
As of September 30, 2009 | ||||||||||||||||
Actual | Pro Forma as Adjusted | |||||||||||||||
RMB | US$ | RMB | US$ | |||||||||||||
(in thousands) | ||||||||||||||||
Long-term bank borrowings, non-current portion | 104,912 | 15,369 | 104,912 | 15,369 | ||||||||||||
Obligations under capitalized leases, non-current portion | 8,719 | 1,277 | 8,719 | 1,277 | ||||||||||||
Series A contingently redeemable convertible preferred shares: US$0.01 par value, 200,000 shares authorized; 176,942 shares issued and outstanding on an actual basis; and nil shares issued and outstanding on a pro forma as adjusted basis | 269,017 | 39,410 | — | — | ||||||||||||
Series B contingently redeemable convertible preferred shares: US$0.01 par value, 300,000 shares authorized; 233,332 shares issued and outstanding on an actual basis; and nil shares issued and outstanding on a pro forma as adjusted basis | 434,036 | 63,584 | — | — | ||||||||||||
Ordinary shares: US$0.0001 par value, 450,000,000 shares authorized; 70,428,100 shares issued and outstanding on an actual basis; and shares issued and outstanding on a pro forma as adjusted basis(1) | 55 | 8 | ||||||||||||||
Additional paid-in capital(2) | 1,113,204 | 163,078 | ||||||||||||||
Accumulated other comprehensive (loss) | (4,037 | ) | (592 | ) | (4,037 | ) | (591 | ) | ||||||||
Accumulated deficit | (517,640 | ) | (75,831 | ) | (517,640 | ) | (75,831 | ) | ||||||||
Total shareholders’ equity(2) | 591,582 | 86,663 | ||||||||||||||
Total capitalization(2) | 1,408,266 | 206,303 | ||||||||||||||
(1) | On November 17, 2009, we effected a share split whereby all of our issued and outstanding 704,281 ordinary shares of a par value of US$0.01 per share were split into 70,428,100 ordinary shares of US$0.0001 par value per share and the number of our authorized shares were increased from 4,500,000 to 450,000,000. The share split has been retroactively reflected in this prospectus so that share number, per share price and par value data are presented as if the share split had occurred from our inception. | |
(2) | Assuming the number of ADSs offered by us as set forth on the cover page of this prospectus remains the same, and after deduction of underwriting discounts and commissions and the estimated offering expenses payable by us, a US$1.00 increase (decrease) in the assumed initial public offering price of US$ per ADS would increase (decrease) each of additional paid-in capital, total shareholders’ equity and total capitalization by US$ million. |
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Estimated initial public offering price per ordinary share | US$ | |||
Net tangible book value per ordinary share as of September 30, 2009 | US$ | |||
Amount of dilution in net tangible book value per ordinary share to new investors in this offering | US$ | |||
Amount of dilution in net tangible book value per ADS to new investors in this offering | US$ |
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Average Price | ||||||||||||||||||||||||
Ordinary Shares Purchased | Total Consideration | per Ordinary | Average Price | |||||||||||||||||||||
Number | Percent | Amount | Percent | Share | per ADSs | |||||||||||||||||||
Existing shareholders | % | % | US$ | US$ | ||||||||||||||||||||
New investors | US$ | US$ | ||||||||||||||||||||||
Total | % | % | US$ | US$ | ||||||||||||||||||||
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Noon Buying Rate | ||||||||||||||||
Period | Period End | Average(1) | Low | High | ||||||||||||
(RMB per US$1.00) | ||||||||||||||||
2004 | 8.2765 | 8.2768 | 8.2774 | 8.2764 | ||||||||||||
2005 | 8.0702 | 8.1826 | 8.2765 | 8.0702 | ||||||||||||
2006 | 7.8041 | 7.9579 | 8.0702 | 7.8041 | ||||||||||||
2007 | 7.2946 | 7.5806 | 7.8127 | 7.2946 | ||||||||||||
2008 | 6.8225 | 6.9193 | 7.2946 | 6.7800 | ||||||||||||
2009 (through September 30) | 6.8262 | 6.8306 | 6.8470 | 6.8176 | ||||||||||||
2009 | ||||||||||||||||
May | 6.8227 | 6.8221 | 6.8265 | 6.8176 | ||||||||||||
June | 6.8302 | 6.8334 | 6.8371 | 6.8264 | ||||||||||||
July | 6.8319 | 6.9186 | 6.8342 | 6.8300 | ||||||||||||
August | 6.8299 | 6.8323 | 6.8358 | 6.8299 | ||||||||||||
September | 6.8262 | 6.8277 | 6.8303 | 6.8247 | ||||||||||||
October | 6.8264 | 6.8267 | 6.8292 | 6.8248 | ||||||||||||
November (through November 13) | 6.8260 | 6.8265 | 6.8278 | 6.8255 |
(1) | Annual averages are calculated from month-end rates. Monthly averages are calculated using the average of the daily rates during the relevant period. |
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• | political and economic stability; | |
• | an effective judicial system; | |
• | a favorable tax system; | |
• | the absence of exchange control or currency restrictions; and | |
• | the availability of professional and support services. |
• | the Cayman Islands has a less developed body of securities laws as compared to the United States and provides significantly less protection to investors; and | |
• | Cayman Islands companies do not have standing to sue before the federal courts of the United States. |
• | recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or | |
• | entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States. |
• | a final and conclusive judgment in the federal or state courts of the United States under which a sum of money is payable, other than a sum payable in respect of taxes, fines, penalties or similar charges, and which was neither obtained in a waiver nor is of a kind of enforcement which is contrary to natural justice or the public policy of the Cayman Islands, may be subject to enforcement proceedings as a debt in the courts of the Cayman Islands under common law; and |
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• | it is unlikely that a monetary award ordered by a U.S. court as a result of a fine or a penalty arising under the U.S. federal securities laws would be recognized as valid, or enforced, by the courts of the Cayman Islands. |
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• | Shenzhen Aohua Medical Services Co., Ltd., our wholly owned subsidiary incorporated in the PRC that engages in the provision of radiotherapy and diagnostic center management services to hospitals in the PRC; | |
• | Shenzhen Aohua Medical Leasing and Services Co., Ltd., our wholly owned subsidiary incorporated in the PRC that engages in the provision of radiotherapy and diagnostic equipment leasing services to hospitals in the PRC; | |
• | Medstar (Shanghai) Leasing Co., Ltd., our wholly owned subsidiary incorporated in the PRC that engages in the sale of medical equipment and the provision of radiotherapy and diagnostic equipment leasing and management services to hospitals in the PRC; | |
• | CMS Hospital Management Co., Ltd., our wholly owned subsidiary incorporated in the PRC that engages in the provision of radiotherapy and diagnostic equipment management services to hospitals in the PRC; and | |
• | Beijing Xing Heng Feng Medical Technology Co., Ltd., our wholly owned subsidiary incorporated in the PRC that engages in the provision of radiotherapy and diagnostic equipment management services to hospitals in the PRC. |
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Predecessor | Concord Medical (Successor) | ||||||||||||||||||||||||||||||||
Period from | Period from | ||||||||||||||||||||||||||||||||
January 1, | September 10, | ||||||||||||||||||||||||||||||||
Year Ended | 2007 to | 2007 to | |||||||||||||||||||||||||||||||
December 31, | October 30, | December 31, | Year Ended December 31, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||
2006 | 2007 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||||||||||||||
RMB | RMB | US$ | |||||||||||||||||||||||||||||||
RMB | |||||||||||||||||||||||||||||||||
RMB | RMB | RMB | US$ | ||||||||||||||||||||||||||||||
(in thousands, except share, per share and per ADS data) | |||||||||||||||||||||||||||||||||
Selected Consolidated Statements of Operations Data | |||||||||||||||||||||||||||||||||
Revenues, net of business tax, value-added tax and related surcharges: | |||||||||||||||||||||||||||||||||
Lease and management services | 61,440 | 63,082 | 13,001 | 155,061 | 22,716 | 94,296 | 184,937 | 27,092 | |||||||||||||||||||||||||
Management services | 876 | 4,340 | 982 | 12,677 | 1,857 | 7,519 | 20,096 | 2,944 | |||||||||||||||||||||||||
Other, net | — | — | — | 4,051 | 593 | 178 | 624 | 91 | |||||||||||||||||||||||||
Total net revenues | 62,316 | 67,422 | 13,983 | 171,789 | 25,166 | 101,993 | 205,657 | 30,127 | |||||||||||||||||||||||||
Cost of revenues: | |||||||||||||||||||||||||||||||||
Lease and management services | (22,388 | ) | (20,396 | ) | (1,908 | ) | (25,046 | ) | (3,669 | ) | (14,671 | ) | (42,144 | ) | (6,174 | ) | |||||||||||||||||
Amortization of acquired intangibles | — | — | (2,002 | ) | (20,497 | ) | (3,003 | ) | (13,671 | ) | (20,388 | ) | (2,987 | ) | |||||||||||||||||||
Management services | (24 | ) | (20 | ) | (4 | ) | (54 | ) | (8 | ) | (19 | ) | (9 | ) | (1 | ) | |||||||||||||||||
Total cost of revenues | (22,412 | ) | (20,416 | ) | (3,914 | ) | (45,597 | ) | (6,680 | ) | (28,361 | ) | (62,541 | ) | (9,162 | ) | |||||||||||||||||
Gross profit | 39,904 | 47,006 | 10,069 | 126,192 | 18,486 | 73,632 | 143,116 | 20,965 | |||||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||||
Selling expenses | (1,267 | ) | (1,601 | ) | (757 | ) | (5,497 | ) | (805 | ) | (3,275 | ) | (4,463 | ) | (654 | ) | |||||||||||||||||
General and administrative expenses(1) | (15,600 | ) | (8,467 | ) | (57,171 | ) | (18,869 | ) | (2,764 | ) | (12,468 | ) | (19,687 | ) | (2,884 | ) | |||||||||||||||||
Operating income (loss) | 23,037 | 36,938 | (47,859 | ) | 101,826 | 14,917 | 57,889 | 118,966 | 17,427 | ||||||||||||||||||||||||
Interest expense | (1,710 | ) | (954 | ) | (279 | ) | (7,455 | ) | (1,092 | ) | (5,293 | ) | (4,880 | ) | (715 | ) | |||||||||||||||||
Change in fair value of convertible notes | — | — | (341 | ) | (464 | ) | (68 | ) | (460 | ) | — | — | |||||||||||||||||||||
Foreign exchange loss | — | — | (4 | ) | (325 | ) | (48 | ) | (17 | ) | (218 | ) | (32 | ) | |||||||||||||||||||
(Loss) gain from disposal of equipment | (469 | ) | (1,555 | ) | (25 | ) | 658 | 96 | 392 | — | — | ||||||||||||||||||||||
Interest income | 68 | 15 | — | 430 | 63 | 116 | 823 | 121 | |||||||||||||||||||||||||
Other income | — | — | — | 7,734 | 1,133 | — | — | — | |||||||||||||||||||||||||
Income (loss) before income taxes | 20,926 | 34,444 | (48,508 | ) | 102,404 | 15,001 | 52,627 | 114,691 | 16,801 | ||||||||||||||||||||||||
Income tax (expenses) benefit | (4,097 | ) | (15,014 | ) | 182 | (23,335 | ) | (3,418 | ) | (12,611 | ) | (25,734 | ) | (3,770 | ) | ||||||||||||||||||
Net income (loss) | 16,829 | 19,430 | (48,326 | ) | 79,069 | 11,583 | 40,016 | 88,957 | 13,031 | ||||||||||||||||||||||||
Accretion of Series A contingently redeemable convertible preferred shares | — | — | — | (270,343 | ) | (39,604 | ) | (262,286 | ) | (23,851 | ) | (3,494 | ) | ||||||||||||||||||||
Accretion of Series B contingently redeemable convertible preferred shares | — | — | — | (304,763 | ) | (44,646 | ) | — | (38,383 | ) | (5,623 | ) | |||||||||||||||||||||
Net income (loss) attributable to ordinary shareholders | 16,829 | 19,430 | (48,326 | ) | (496,037 | ) | (72,667 | ) | (222,270 | ) | 26,723 | 3,914 | |||||||||||||||||||||
Earning (loss) per share — basic and diluted(2) | 0.34 | 0.39 | (0.97 | ) | (8.63 | ) | (1.26 | ) | (3.67 | ) | 0.38 | 0.06 | |||||||||||||||||||||
Earning (loss) per ADS — basic and diluted | |||||||||||||||||||||||||||||||||
Shares used in computation — basic and diluted | 50,000,000 | 50,000,000 | 50,000,000 | 57,481,400 | 57,481,000 | 60,621,700 | 70,428,100 | 70,428,100 | |||||||||||||||||||||||||
ADSs used in computation — basic and diluted | |||||||||||||||||||||||||||||||||
(1) | Our general and administrative expenses include share-based compensation expenses related to certain share options granted in 2007 that amounted to RMB49.5 million, RMB4.2 million (US$0.6 million) and RMB4.2 million in 2007, 2008 and for the nine months ended September 30, 2008, respectively. We did not recognize any share-based compensation expenses in 2006 and for the nine months ended September 30, 2009. | |
(2) | On November 17, 2009, we effected a share split whereby all of our issued and outstanding 704,281 ordinary shares of a par value of US$0.01 per share were split into 70,428,100 ordinary shares of US$0.0001 par value per share and the number of our authorized shares were increased from 4,500,000 to 450,000,000. The share split has been retroactively reflected in this prospectus so that share number, per share price and par value data are presented as if the share split had occurred from our inception. |
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As of December 31, | As of September 30, | |||||||||||||||||||||||
2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||||||
RMB | RMB | RMB | US$ | RMB | US$ | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Selected Consolidated Balance Sheet Data | ||||||||||||||||||||||||
Cash | 606 | 39,792 | 353,991 | 51,858 | 285,703 | 41,854 | ||||||||||||||||||
Total current assets | 23,333 | 66,135 | 492,978 | 72,219 | 466,487 | 68,338 | ||||||||||||||||||
Property, plant and equipment, net | 231,215 | 54,703 | 349,121 | 51,144 | 557,433 | 81,661 | ||||||||||||||||||
Goodwill | — | 259,282 | 300,163 | 43,972 | 300,163 | 43,972 | ||||||||||||||||||
Acquired intangible assets, net | — | 129,998 | 181,838 | 26,638 | 161,450 | 23,652 | ||||||||||||||||||
Total assets | 256,330 | 543,023 | 1,514,395 | 221,850 | 1,673,254 | 245,122 | ||||||||||||||||||
Long-term bank borrowings, current portion | — | — | 39,840 | 5,836 | 44,880 | 6,575 | ||||||||||||||||||
Long-term bank borrowings, non-current portion | — | — | 52,120 | 7,635 | 104,912 | 15,369 | ||||||||||||||||||
Series A contingently redeemable convertible preferred shares | — | — | 254,358 | 37,262 | 269,017 | 39,409 | ||||||||||||||||||
Series B contingently redeemable convertible preferred shares | — | — | 411,101 | 60,224 | 434,036 | 63,584 | ||||||||||||||||||
Total shareholders’ equity | 134,264 | 394,878 | 565,020 | 82,772 | 591,582 | 86,663 | ||||||||||||||||||
Total liabilities and shareholders’ equity | 256,330 | 543,023 | 1,514,395 | 221,850 | 1,673,254 | 245,122 | ||||||||||||||||||
Predecessor | Concord Medical (Successor) | ||||||||||||||||||||||||||||
Period from | Period from | ||||||||||||||||||||||||||||
January 1, | September 10, | ||||||||||||||||||||||||||||
2007 | 2007 | ||||||||||||||||||||||||||||
to | to | ||||||||||||||||||||||||||||
October 30, | December 31, | Nine Months Ended September 30, | |||||||||||||||||||||||||||
2007 | 2007 | Year Ended December 31, 2008 | 2008 | 2009 | |||||||||||||||||||||||||
RMB | RMB | RMB | US$ | RMB | RMB | US$ | |||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||
Selected Consolidated Statements of Cash Flow Data | |||||||||||||||||||||||||||||
Net cash generated from operating activities | 44,593 | 6,103 | 46,774 | 6,852 | 27,370 | 104,500 | 15,308 | ||||||||||||||||||||||
Net cash used in investing activities(1) | (50,452 | ) | (30,441 | ) | (376,371 | ) | (55,136 | ) | (300,692 | ) | (223,426 | ) | (32,731 | ) | |||||||||||||||
Net cash generated from financing activities | 6,020 | 63,225 | 649,494 | 95,147 | 278,407 | 50,829 | 7,448 | ||||||||||||||||||||||
Exchange rate effect on cash | — | 138 | (5,698 | ) | (834 | ) | (5,949 | ) | (191 | ) | (29 | ) | |||||||||||||||||
Net increase (decrease) in cash | 161 | 39,025 | 314,199 | 46,029 | (864 | ) | (68,288 | ) | (10,004 | ) |
(1) | Net cash used in investing activities in 2008 and for the nine months ended September 30, 2008 and 2009 includes acquisition, net of cash acquired, of RMB231.5 million (US$33.9 million). RMB219.2 million and RMB21.5 million (US$3.2 million), respectively. |
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As of December 31, | As of September 30, | |||||||||||
Operating Data(1) | 2007 | 2008 | 2009 | |||||||||
Number of primary medical equipment owned: | ||||||||||||
Linear accelerators | 1 | 12 | 16 | |||||||||
Head gamma knife systems | 15 | 15 | 16 | |||||||||
Body gamma knife systems | 8 | 9 | 10 | |||||||||
PET-CT scanners | — | 3 | 7 | |||||||||
MRI scanners | 2 | 10 | 16 | |||||||||
Others(2) | 8 | 15 | 16 | |||||||||
Total | 34 | 64 | 81 | |||||||||
Year Ended December 31, | Nine Months Ended September 30, | |||||||||||
2007 | 2008 | 2009 | ||||||||||
Number of patient cases treated or diagnosed by our primary medical equipment: | ||||||||||||
Linear accelerators | 697 | 4,678 | 8,554 | |||||||||
Head gamma knife systems | 8,493 | 9,455 | 7,767 | |||||||||
Body gamma knife systems | 2,635 | 3,057 | 2,706 | |||||||||
PET-CT scanners | — | 1,929 | 3,766 | |||||||||
MRI scanners | 11,830 | 31,827 | 57,972 |
Predecessor | Concord Medical (Successor) | Combined | Concord Medical (Successor) | ||||||||||||||||||||||
Period from | Period from | ||||||||||||||||||||||||
January 1, 2007 | September 1, | Year Ended | |||||||||||||||||||||||
to October 30, | 2007 to | December 31, | Nine Months Ended September 30, | ||||||||||||||||||||||
2007 | December 31, 2007 | 2007 | Year Ended December 31, 2008 | 2008 | 2009 | ||||||||||||||||||||
(in RMB thousands) | |||||||||||||||||||||||||
Total net revenues generated by our primary medical equipment under lease and management services arrangements: | |||||||||||||||||||||||||
Linear accelerators | 3,206 | 877 | 4,083 | 40,506 | 21,588 | 60,183 | |||||||||||||||||||
Head gamma knife systems | 40,408 | 8,731 | 49,139 | 65,365 | 47,096 | 51,673 | |||||||||||||||||||
Body gamma knife systems | 13,537 | 2,565 | 16,102 | 20,071 | 12,225 | 18,204 | |||||||||||||||||||
PET-CT scanners | — | — | — | 5,241 | 578 | 14,289 | |||||||||||||||||||
MRI scanners | 2,899 | 437 | 3,336 | 15,123 | 7,515 | 27,618 | |||||||||||||||||||
Others(2) | 3,032 | 391 | 3,423 | 8,755 | 5,294 | 12,970 | |||||||||||||||||||
Total net revenues — lease and management services | 63,082 | 13,001 | 76,083 | 155,061 | 94,296 | 184,937 | |||||||||||||||||||
(1) | Excluding data from seven, eight and two centers under service-only agreements as of December 31, 2007, December 31, 2008 and September 30, 2009, respectively. | |
(2) | Other primary medical equipment used includes CT scanners and ECT scanners for diagnostic imaging, electroencephalography for the diagnosis of epilepsy, thermotherapy to increase the efficacy of and for pain relief after radiotherapy and chemotherapy, high intensity focused ultrasound therapy for the treatment of cancer, stereotactic radiofrequency ablation for the treatment of Parkinson’s Disease and refraction and tonometry for the diagnosis of ophthalmic conditions. |
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AND RESULTS OF OPERATIONS
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• | our ability to expand our network of centers; | |
• | the number of patient cases treated in our network; | |
• | the operational arrangements with our hospital partners; | |
• | the range and mix of services provided in our network; and | |
• | the cost of our medical equipment. |
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• | the reputation of our existing network of centers and doctors providing services in our network of centers; | |
• | our financial resources; | |
• | our ability to timely establish and manage new centers in conjunction with our hospital partners; and | |
• | our relationship with our hospital partners. |
• | the size and location of potential hospital partner; | |
• | the length of the arrangement; | |
• | the type of medical equipment to be installed in the hospital’s center; | |
• | the capabilities of the doctors that will provide services at the centers; and | |
• | the potential growth of such center. |
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• | China Medstar in July 2008 for approximately £17.1 million or approximately RMB238.7 million (US$35.0 million); | |
• | Xing Heng Feng Medical in October 2008 for approximately RMB35.0 million (US$5.1 million); | |
• | certain medical equipment located in Tianjin People’s Liberation Army 272 Hospital and the related business from a third party for RMB14.0 million (US$2.1 million); and | |
• | certain medical equipment located in People’s Liberation Army 254 Hospital and the related business from another third party for RMB4.0 million (US$0.6 million). |
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Year Ended December 31, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||
2007(1) | 2008 | 2008 | 2009 | |||||||||||||||||||||||||||||||||||||
% of Total | % of Total | % of Total | % of Total | |||||||||||||||||||||||||||||||||||||
RMB | Net Revenues | RMB | US$ | Net Revenues | RMB | Net Revenues | RMB | US$ | Net Revenues | |||||||||||||||||||||||||||||||
(in thousands, except for percentages) | ||||||||||||||||||||||||||||||||||||||||
Lease and management services | 76,083 | 93.5 | 155,061 | 22,716 | 90.3 | 94,296 | 92.5 | 184,937 | 27,092 | 89.9 | ||||||||||||||||||||||||||||||
Management services | 5,322 | 6.5 | 12,677 | 1,857 | 7.4 | 7,519 | 7.4 | 20,096 | 2,944 | 9.8 | ||||||||||||||||||||||||||||||
Other, net | — | — | 4,051 | 593 | 2.3 | 178 | 0.1 | 624 | 91 | 0.3 | ||||||||||||||||||||||||||||||
Total net revenues | 81,405 | 100.0 | 171,789 | 25,166 | 100.0 | 101,993 | 100.0 | 205,657 | 30,127 | 100.0 | ||||||||||||||||||||||||||||||
(1) | Represent the addition of the amounts for the specific line items of OMS, our predecessor, for the period from January 1, 2007 to October 30, 2007, and the amounts for the corresponding line items of Concord Medical for the period from September 10, 2007 to December 31, 2007. For the period from September 10, 2007, the date of inception of Ascendium, to October 30, 2007, during which period the financial statements of our predecessor and those of Concord Medical overlap, Ascendium did not engage in any business or operations. The unaudited combined financial data for the year ended December 31, 2007 do not comply with U.S. GAAP. |
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Year Ended December 31, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||
2007(1) | 2008 | 2008 | 2009 | |||||||||||||||||||||||||||||||||||||
% of Total | % of Total | % of Total | % of Total | |||||||||||||||||||||||||||||||||||||
RMB | Net Revenues | RMB | US$ | Net Revenues | RMB | Net Revenues | RMB | US$ | Net Revenues | |||||||||||||||||||||||||||||||
(in thousands, except for percentages) | ||||||||||||||||||||||||||||||||||||||||
Cost of revenues: | ||||||||||||||||||||||||||||||||||||||||
Lease and management services | 22,304 | 27.4 | 25,046 | 3,669 | 14.6 | 14,671 | 14.4 | 42,144 | 6,174 | 20.5 | ||||||||||||||||||||||||||||||
Amortization of acquired intangibles | 2,002 | 2.5 | 20,497 | 3,003 | 11.9 | 13,671 | 13.4 | 20,388 | 2,987 | 9.9 | ||||||||||||||||||||||||||||||
Management services | 24 | 0.0 | 54 | 8 | 0.0 | 19 | 0.0 | 9 | 1 | 0.0 | ||||||||||||||||||||||||||||||
Total cost of revenues | 24,330 | 29.9 | 45,597 | 6,680 | 26.5 | 28,361 | 27.8 | 62,541 | 9,162 | 30.4 | ||||||||||||||||||||||||||||||
Gross Profit | 57,075 | 70.1 | 126,192 | 18,486 | 73.5 | 73,632 | 72.2 | 143,116 | 20,965 | 69.6 | ||||||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||||||||||
Selling expenses | 2,358 | 2.9 | 5,497 | 805 | 3.2 | 3,275 | 3.2 | 4,463 | 654 | 2.2 | ||||||||||||||||||||||||||||||
General and administrative expenses(2) | 65,638 | 80.6 | 18,869 | 2,764 | 11.0 | 12,468 | 12.2 | 19,687 | 2,884 | 9.6 | ||||||||||||||||||||||||||||||
Total operating expenses | 67,996 | 83.5 | 24,366 | 3,569 | 14.2 | 15,743 | 15.4 | 24,150 | 3,538 | 11.7 | ||||||||||||||||||||||||||||||
(1) | Represent the addition of the amounts for the specific line items of OMS, our predecessor, for the period from January 1, 2007 to October 30, 2007, and the amounts for the corresponding line items of Concord Medical for the period from September 10, 2007 to December 31, 2007. For the period from September 10, 2007, the date of inception of Ascendium, to October 30, 2007, during which the financial statements of our predecessor and those of Concord Medical overlap, Ascendium did not engage in any business or operations. The unaudited combined financial data for the year ended December 31, 2007 do not comply with U.S. GAAP. | |
(2) | Our general and administrative expenses include share-based compensation expenses related to certain share options granted in 2007 that amounted to RMB49.5 million, RMB4.2 million (US$0.6 million) and RMB4.2 million in 2007, 2008 and for the nine months ended September 30, 2008, respectively. We did not recognize any share-based compensation expenses for the nine months ended September 30, 2009. |
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• | hiring a professional consulting firm to help us to improve internal control in preparation for compliance with the Sarbanes-Oxley Act and other applicable SEC rules and regulations; | |
• | hiring additional qualified personnel with U.S. GAAP expertise and SEC reporting experience to further build an internal finance team and a dedicated internal audit department; | |
• | improving internal control procedures and standards, including compiling an internal accounting policies and procedures manual, and implementing policies as to the inspections and reporting of the medical equipment used in our network of centers; |
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• | enhancing the periodic and systematic physical inspections of the medical equipment used in our network of centers to monitor the working condition of the equipment and to report damages in a timely manner; | |
• | enhancing the management of agreements with our hospital partners and establishing standard policies and procedures governing agreement terms and approval process; and | |
• | conducting accounting and financial reporting training for our existing personnel as part of our commitment to provide ongoing U.S. GAAP trainings to our employees. |
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Concord Medical | Concord Medical | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Predecessor | (Successor) | Combined | (Successor) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Period from | Period from | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
January 1, 2007 | September 10, 2007 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
to | to | Year Ended | Year Ended | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||
October 30, 2007 | December 31, 2007 | December 31, 2007 | December 31, 2008 | 2008 | 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
RMB | % | RMB | % | RMB | % | RMB | US$ | % | RMB | % | RMB | US$ | % | ||||||||||||||||||||||||||||||||||||||||||||
(in thousands, except for percentages) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary Consolidated Statements of Operation Data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues, net of business tax, value-added tax and related surcharges: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease and management services | 63,082 | 93.6 | 13,001 | 93.0 | 76,083 | 93.5 | 155,061 | 22,716 | 90.3 | 94,296 | 92.5 | 184,937 | 27,092 | 89.9 | |||||||||||||||||||||||||||||||||||||||||||
Management services | 4,340 | 6.4 | 982 | 7.0 | 5,322 | 6.5 | 12,677 | 1,857 | 7.4 | 7,519 | 7.4 | 20,096 | 2,944 | 9.8 | |||||||||||||||||||||||||||||||||||||||||||
Other, net | — | — | — | — | — | — | 4,051 | 593 | 2.3 | 178 | 0.1 | 624 | 91 | 0.3 | |||||||||||||||||||||||||||||||||||||||||||
Total net revenues | 67.422 | 100.0 | 13,983 | 100.0 | 81,405 | 100.0 | 171,789 | 25,166 | 100.0 | 101,993 | 100.0 | 205,657 | 30,127 | 100.0 | |||||||||||||||||||||||||||||||||||||||||||
Cost of revenues: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease and management services | (20,396 | ) | (30.3 | ) | (1,908 | ) | (13.6 | ) | (22,304 | ) | (27.4 | ) | (25,046 | ) | (3,669 | ) | (14.6 | ) | (14,671 | ) | (14.4 | ) | (42,144 | ) | (6,174 | ) | (20.5 | ) | |||||||||||||||||||||||||||||
Amortization of acquired intangibles | — | — | (2,002 | ) | (14.3 | ) | (2,002 | ) | (2.5 | ) | (20,497 | ) | (3,003 | ) | (11.9 | ) | (13,671 | ) | (13.4 | ) | (20,388 | ) | (2,987 | ) | (9.9 | ) | |||||||||||||||||||||||||||||||
Management services | (20 | ) | (0.0 | ) | (4 | ) | (0.1 | ) | (24 | ) | (0.0 | ) | (54 | ) | (8 | ) | (0.0 | ) | (19 | ) | (0.0 | ) | (9 | ) | (1 | ) | (0.0 | ) | |||||||||||||||||||||||||||||
Total cost of revenues | (20,416 | ) | (30.3 | ) | (3,914 | ) | (28.0 | ) | (24,330 | ) | (29.9 | ) | (45,597 | ) | (6,680 | ) | (26.5 | ) | (28,361 | ) | (27.8 | ) | (62,541 | ) | (9,162 | ) | (30.4 | ) | |||||||||||||||||||||||||||||
Gross profit | 47,006 | 69.7 | 10,069 | 72.0 | 57,075 | 70.1 | 126,192 | 18,486 | 73.5 | 73,632 | 72.2 | 143,116 | 20,965 | 69.6 | |||||||||||||||||||||||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Selling expenses | (1,601 | ) | (2.4 | ) | (757 | ) | (5.4 | ) | (2,358 | ) | (2.9 | ) | (5,497 | ) | (805 | ) | (3.2 | ) | (3,275 | ) | (3.2 | ) | (4,463 | ) | (654 | ) | (2.1 | ) | |||||||||||||||||||||||||||||
General and administrative expenses(1) | (8,467 | ) | (12.6 | ) | (57,171 | ) | (408.9 | ) | (65,638 | ) | (80.6 | ) | (18,869 | ) | (2,764 | ) | (11.0 | ) | (12,468 | ) | (12.2 | ) | (19,687 | ) | (2,884 | ) | (9.6 | ) | |||||||||||||||||||||||||||||
Operating income (loss) | 36,938 | 54.8 | (47,859 | ) | (342.3 | ) | (10,921 | ) | (13.4 | ) | 101,826 | 14,917 | 59.3 | 57,889 | 56.8 | 118,966 | 17,427 | 57.9 | |||||||||||||||||||||||||||||||||||||||
Interest expense | (954 | ) | (1.4 | ) | (279 | ) | (2.0 | ) | (1,233 | ) | (1.5 | ) | (7,455 | ) | (1,092 | ) | (4.3 | ) | (5,293 | ) | (5.2 | ) | (4,880 | ) | (715 | ) | (2.4 | ) | |||||||||||||||||||||||||||||
Change in fair value of convertible notes | — | — | (341 | ) | (2.4 | ) | (341 | ) | (0.4 | ) | (464 | ) | (68 | ) | (0.3 | ) | (460 | ) | (0.5 | ) | — | — | — | ||||||||||||||||||||||||||||||||||
Foreign exchange loss | — | — | (4 | ) | (0.0 | ) | (4 | ) | (0.0 | ) | (325 | ) | (48 | ) | (0.2 | ) | (17 | ) | (0.0 | ) | (218 | ) | (32 | ) | (0.1 | ) | |||||||||||||||||||||||||||||||
(Loss) gain from disposal of equipment | (1,555 | ) | (2.3 | ) | (25 | ) | (0.2 | ) | (1,580 | ) | (1.9 | ) | 658 | 96 | 0.4 | 392 | 0.4 | — | — | — | |||||||||||||||||||||||||||||||||||||
Interest income | 15 | 0.0 | — | — | 15 | 0.0 | 430 | 63 | 0.3 | 116 | 0.1 | 823 | 121 | 0.4 | |||||||||||||||||||||||||||||||||||||||||||
Other income | — | — | — | — | — | — | 7,734 | 1,133 | 4.5 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
Income (loss) before income taxes | 34,444 | 51.1 | (48,508 | ) | (346.9 | ) | (14,064 | ) | (17.3 | ) | 102,404 | 15,001 | 59.6 | 52,627 | 51.6 | 114,691 | 16,801 | 55.8 | |||||||||||||||||||||||||||||||||||||||
Income tax (expenses) benefit | (15,014 | ) | (22.3 | ) | 182 | 1.3 | (14,832 | ) | (18.2 | ) | (23,335 | ) | (3,418 | ) | (13.6 | ) | (12,611 | ) | (12.4 | ) | (25,734 | ) | (3,770 | ) | (12.5 | ) | |||||||||||||||||||||||||||||||
Net income (loss) | 19,430 | 28.8 | (48,326 | ) | (345.6 | ) | (28,896 | ) | (35.5 | ) | 79,069 | 11,583 | 46.0 | 40,016 | 39.2 | 88,957 | 13,031 | 43.3 | |||||||||||||||||||||||||||||||||||||||
(1) | Our general and administrative expenses include share-based compensation expenses related to certain share options granted in 2007 that amounted to RMB49.5 million, RMB4.2 million (US$0.6 million) and RMB4.2 million in 2007, 2008 and for the nine months ended September 30, 2008, respectively. We did not recognize any share-based compensation expenses for the nine months ended September 30, 2009. |
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• | an increase in the number of new centers that are in operation and the higher cost of revenues as a percentage of total net revenues associated with such centers during theirramp-up period; and | |
• | an increase in the number of new centers that offer diagnostic imaging services, which have a higher cost of revenues as a percentage of total net revenues as compared to radiotherapy treatments. |
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• | Selling Expenses. Our selling expenses increased by 36.3% to RMB4.5 million (US$0.6 million) for the nine months ended September 30, 2009 from RMB3.3 million for the same period in 2008. This increase in our selling expenses was due primarily to an increase in salaries and benefits payment associated with an increased headcount as a result of our acquisition of China Medstar, an increase in marketing expenses and salaries and benefits payment in connection with an increase in our business development efforts for the nine months ended September 30, 2009 as compared to the same period in 2008 to increase the number of new centers and for the development of specialty cancer hospitals. Selling expenses as a percentage of our total net revenues decreased to 2.1% for the nine months ended September 30, 2009 from 3.2% for the same period in 2008. This was due primarily to increased economies of scale. | |
• | General and Administrative Expenses. Our general and administrative expenses increased by 57.9% to RMB19.7 million (US$2.9 million) for the nine months ended September 30, 2009 from RMB12.5 million for the same period in 2008. This increase was due primarily to increases in salaries and benefits payment in connection with the increased headcount of our personnel and their travel related expenses principally as a result of our acquisition of China Medstar and also in connection with the continued expansion of our business. Our general and administrative expenses include charges of RMB4.2 million for the nine months ended September 30, 2008 related to share-based compensation. General and administrative expenses as a percentage of our total net revenues decreased to 9.6% for the nine months ended September 30, 2009 from 12.2% for the same period in 2008. This was due primarily toshare-based compensation expenses that were incurred during the nine months ended September 30, 2008 that we did not incur for the same period in 2009. |
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• | Selling Expenses. Our selling expenses were RMB5.5 million (US$0.8 million) in 2008. Our selling expenses were RMB1.6 million for the period from January 1, 2007 to October 30, 2007 and RMB0.8 million for the period from September 10, 2007 to December 31, 2007. Our selling expenses as a percentage of total net revenues were 3.2% in 2008. Our selling expenses as a percentage of total net revenues were 2.4% for the period from January 1, 2007 to October 30, 2007 and 5.4% for the period from September 10, 2007 to December 31, 2007. |
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• | General and Administrative Expenses. Our general and administrative expenses were RMB18.9 million (US$2.8 million) in 2008. Our general and administrative expenses were RMB8.5 million for the period from January 1, 2007 to October 30, 2007 and RMB57.2 million for the period from September 10, 2007 to December 31, 2007. Our general and administrative expenses as a percentage of total net revenues were 11.0% in 2008. Our general and administrative expenses as a percentage of total net revenues were 12.6% for the period from January 1, 2007 to October 30, 2007 and 408.9% for the period from September 10, 2007 to December 31, 2007. The general and administrative expenses for the period from September 10, 2007 to December 31, 2007 were affected by the share-based compensation expenses from the grant of certain OMS share options, which amounted to RMB49.5 million. The general and administrative expenses in 2008 were also affected by the share-based compensation expenses that amounted to RMB4.2 million (US$0.6 million) from the transfer of vested options of certain OMS share options to three of our executive directors. |
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• | the downward purchase price adjustment to the fair value of the medical equipment used in our network of centers and a decrease in depreciation expenses as a result; | |
• | an increase in net revenues derived from centers managed under service-only agreements as a percentage of our total net revenues to 7.4% in 2008 from 6.5% in 2007. Centers managed under service-only agreements have a lower cost of revenues as a percentage of total net revenues as compared to centers managed under lease and management services arrangements. This is because we do not purchase the medical equipment used in the centers managed under service-only agreements and, as a result, do not incur the associated equipment depreciation expenses; and | |
• | our acquisition of China Medstar, which had a lower cost of revenues as a percentage of total net revenues as compared to our company. This was because of the higher cost of certain of our installed medical equipment as compared to the cost of China Medstar’s medical equipment, which had a higher depreciation expenses. |
• | Selling Expenses. Our selling expenses increased by 129.0% to RMB5.5 million (US$0.8 million) in 2008 from RMB2.4 million in 2007. This increase in our selling expenses was due primarily to an increase in marketing expenses and salaries and benefits payment in connection with an increase in our business development efforts in 2008 as compared to 2007 to increase the number of new centers and for the development of specialty cancer hospitals. Selling expenses as a percentage of our total net revenues in 2008 remained in line with 2007 and increased slightly to 3.2% in 2008 from 2.9% in 2007. | |
• | General and Administrative Expenses. Our general and administrative expenses decreased by 71.3% to RMB18.9 million (US$2.8 million) in 2008 from RMB65.6 million in 2007. Our general and administrative expenses include charges of RMB4.2 million (US$0.6 million) and RMB49.5 million in 2008 and 2007, respectively, related to share-based compensation. Our general and administrative expenses, not including the share-based compensation expenses, have also increased in 2008 from 2007, which was due primarily to increases in salaries and benefits payments in connection with the increased headcount of our personnel as well as their travel related expenses. |
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For the Three Months Ended | ||||||||||||||||||||||||||||
March 31, | June 30, | September. 30, | December 31, | March 31, | June 30, | September 30, | ||||||||||||||||||||||
2008 | 2008 | 2008 | 2008 | 2009 | 2009 | 2009 | ||||||||||||||||||||||
(in RMB thousands) | ||||||||||||||||||||||||||||
Revenues, net of business tax, value-added tax and related surcharges: | ||||||||||||||||||||||||||||
Lease and management services | 20,672 | 23,813 | 49,811 | 60,765 | 47,349 | 66,696 | 70,892 | |||||||||||||||||||||
Management services | 2,013 | 2,751 | 2,755 | 5,158 | 8,323 | 5,084 | 6,689 | |||||||||||||||||||||
Other, net | — | — | 178 | 3,873 | 79 | 137 | 408 | |||||||||||||||||||||
Total net revenues | 22,685 | 26,564 | 52,744 | 69,796 | 55,751 | 71,917 | 77,989 | |||||||||||||||||||||
Cost of revenues: | ||||||||||||||||||||||||||||
Lease and management services | (3,092 | ) | (3,335 | ) | (8,244 | ) | (10,375 | ) | (11,171 | ) | (15,270 | ) | (15,703 | ) | ||||||||||||||
Amortization of acquired intangible assets | (4,008 | ) | (4,008 | ) | (5,655 | ) | (6,826 | ) | (6,882 | ) | (6,882 | ) | (6,624 | ) | ||||||||||||||
Management services | (7 | ) | (7 | ) | (5 | ) | (35 | ) | (3 | ) | (4 | ) | (2 | ) | ||||||||||||||
�� | ||||||||||||||||||||||||||||
Total cost of revenues | (7,107 | ) | (7,350 | ) | (13,904 | ) | (17,236 | ) | (18,056 | ) | (22,156 | ) | (22,329 | ) | ||||||||||||||
Gross profit | 15,578 | 19,214 | 38,840 | 52,560 | 37,695 | 49,761 | 55,660 | |||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||
Selling expenses | (799 | ) | (1,053 | ) | (1,423 | ) | (2,222 | ) | (1,316 | ) | (1,671 | ) | (1,476 | ) | ||||||||||||||
General and administrative expenses | (2,407 | ) | (2,742 | ) | (7,319 | ) | (6,401 | ) | (5,754 | ) | (5,722 | ) | (8,211 | ) | ||||||||||||||
Operating income | 12,372 | 15,419 | 30,098 | 43,937 | 30,625 | 42,368 | 45,973 | |||||||||||||||||||||
Interest expense | (1,006 | ) | (1,732 | ) | (2,555 | ) | (2,162 | ) | (1,638 | ) | (1,571 | ) | (1,671 | ) | ||||||||||||||
Change in fair value of convertible notes | (883 | ) | 1,297 | (878 | ) | — | — | — | — | |||||||||||||||||||
Foreign exchange (loss) income | (76 | ) | 109 | (46 | ) | (312 | ) | (663 | ) | 542 | (97 | ) | ||||||||||||||||
Gain from disposal of equipment | — | 127 | 265 | 266 | — | — | — | |||||||||||||||||||||
Interest income | 3 | 52 | 61 | 314 | 224 | 423 | 176 | |||||||||||||||||||||
Other income | — | — | — | 7,734 | — | — | — | |||||||||||||||||||||
Income before income taxes | 10,410 | 15,272 | 26,945 | 49,777 | 28,548 | 41,762 | 44,381 | |||||||||||||||||||||
Income tax expenses | (3,062 | ) | (3,651 | ) | (5,898 | ) | (10,724 | ) | (6,709 | ) | (8,826 | ) | (10,199 | ) | ||||||||||||||
Net income | 7,348 | 11,621 | 21,047 | 39,053 | 21,839 | 32,936 | 34,182 | |||||||||||||||||||||
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For the Three Months Ended | ||||||||||||||||||||||||||||
March 31, | June 30, | September 30, | December 31, | March 31, | June 30, | September 30, | ||||||||||||||||||||||
2008 | 2008 | 2008 | 2008 | 2009 | 2009 | 2009 | ||||||||||||||||||||||
Revenues, net of business tax, value-added tax and related surcharges: | ||||||||||||||||||||||||||||
Lease and management services | 91.1 | % | 89.6 | % | 94.4 | % | 87.1 | % | 84.9 | % | 92.7 | % | 90.9 | % | ||||||||||||||
Management services | 8.9 | 10.4 | 5.2 | 7.4 | 15.1 | 7.1 | 8.6 | |||||||||||||||||||||
Other, net | — | — | 0.4 | 5.5 | — | 0.2 | 0.5 | |||||||||||||||||||||
Total net revenues | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | |||||||||||||||||||||
Cost of revenues: | ||||||||||||||||||||||||||||
Lease and management services | (13.6 | ) | (12.6 | ) | (15.6 | ) | (14.9 | ) | (20.0 | ) | (21.2 | ) | (20.1 | ) | ||||||||||||||
Amortization of acquired intangible assets | (17.7 | ) | (15.1 | ) | (10.8 | ) | (9.7 | ) | (12.4 | ) | (9.6 | ) | (8.5 | ) | ||||||||||||||
Management services | — | — | — | (0.1 | ) | — | — | — | ||||||||||||||||||||
Total cost of revenues | (31.3 | ) | (27.7 | ) | (26.4 | ) | (24.7 | ) | (32.4 | ) | (30.8 | ) | (28.6 | ) | ||||||||||||||
Gross profit | 68.7 | 72.3 | 73.6 | 75.3 | 67.6 | 69.2 | 71.4 | |||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||
Selling expenses | (3.5 | ) | (4.0 | ) | (2.7 | ) | (3.2 | ) | (2.4 | ) | (2.3 | ) | (1.9 | ) | ||||||||||||||
General and administrative expenses | (10.6 | ) | (10.3 | ) | (13.8 | ) | (9.2 | ) | (10.3 | ) | (8.0 | ) | (10.6 | ) | ||||||||||||||
Operating income | 54.6 | 58.0 | 57.1 | 62.9 | 54.9 | 58.9 | 58.9 | |||||||||||||||||||||
Interest expense | (4.4 | ) | (6.5 | ) | (4.8 | ) | (3.1 | ) | (2.9 | ) | (2.2 | ) | (2.1 | ) | ||||||||||||||
Change in fair value of convertible notes | (3.9 | ) | 4.9 | (1.7 | ) | (0.1 | ) | — | — | — | ||||||||||||||||||
Foreign exchange (loss) income | (0.3 | ) | 0.4 | (0.1 | ) | (0.4 | ) | (1.2 | ) | 0.8 | (0.1 | ) | ||||||||||||||||
Gain from disposal of equipment | — | 0.5 | 0.5 | 0.4 | — | — | — | |||||||||||||||||||||
Interest income | — | 0.2 | 0.1 | 0.5 | 0.4 | 0.6 | 0.2 | |||||||||||||||||||||
Other income | — | — | — | 11.1 | — | — | — | |||||||||||||||||||||
Income before income taxes | 46.0 | 57.5 | 51.1 | 71.3 | 51.2 | 58.1 | 56.9 | |||||||||||||||||||||
Income tax expenses | (13.5 | ) | (13.8 | ) | (11.2 | ) | (15.3 | ) | (12.0 | ) | (12.3 | ) | (13.1 | ) | ||||||||||||||
Net income | 32.5 | 43.7 | 39.9 | 56.0 | 39.2 | 45.8 | 43.8 | |||||||||||||||||||||
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Predecessor | Concord Medical (Successor) | |||||||||||||||||||||||||||
Period from | Period from | |||||||||||||||||||||||||||
January 1, 2007 | September 10, 2007 | |||||||||||||||||||||||||||
to | to | Year Ended December 31, | Nine Months Ended September 30, | |||||||||||||||||||||||||
October 30, 2007 | December 31, 2007 | 2008 | 2008 | 2008 | 2009 | |||||||||||||||||||||||
RMB | RMB | RMB | US$ | RMB | RMB | US$ | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Net cash generated from operating activities | 44,593 | 6,103 | 46,774 | 6,852 | 27,370 | 104,500 | 15,308 | |||||||||||||||||||||
Net cash used in investing activities | (50,452 | ) | (30,441 | ) | (376,371 | ) | (55,136 | ) | (300,692 | ) | (223,426 | ) | (32,731 | ) | ||||||||||||||
Net cash generated from financing activities | 6,020 | 63,225 | 649,494 | 95,147 | 278,407 | 50,829 | 7,448 | |||||||||||||||||||||
Exchange rate effect on cash | — | 138 | (5,698 | ) | (834 | ) | (5,949 | ) | (191 | ) | (29 | ) | ||||||||||||||||
Net increase (decrease) in cash | 161 | 39,025 | 314,199 | 46,029 | (864 | ) | (68,288 | ) | (10,004 | ) | ||||||||||||||||||
Cash at beginning of the period/year | 606 | 767 | 39,792 | 5,829 | 39,792 | 353,991 | 51,858 | |||||||||||||||||||||
Cash at end of the period/year | 767 | 39,792 | 353,991 | 51,858 | 38,928 | 285,703 | 41,854 |
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Contractual Obligations | ||||||||||||||||||||
Less Than | More Than | |||||||||||||||||||
1 Year | 1-3 Year | 3-5 Year | 5 Years | Total | ||||||||||||||||
RMB | RMB | RMB | RMB | RMB | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Short-term debt obligations | 20,800 | — | — | — | 20,800 | |||||||||||||||
Long-term debt obligations | 39,840 | 52,120 | — | — | 91,960 | |||||||||||||||
Capital lease obligations | 5,084 | 7,562 | 6,392 | — | 19,038 | |||||||||||||||
Operating lease obligations | 2,700 | 2,703 | 1,144 | — | 6,547 | |||||||||||||||
Purchase obligations | 115,919 | — | — | — | 115,919 | |||||||||||||||
Total | 184,343 | 62,385 | 7,536 | — | 254,264 | |||||||||||||||
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• | In April 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”)805-20, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies” to amend SFAS 141 (revised 2007) “Business Combinations.” ASC805-20 addresses the initial recognition, measurement and subsequent accounting for assets and liabilities arising from contingencies in a business combination, and requires that such assets acquired or liabilities assumed be initially recognized at fair value at the acquisition date if fair value can be determined during the measurement period. If the acquisition-date fair value cannot be determined, the asset acquired or liability assumed arising from a contingency is recognized only if certain criteria are met. ASC805-20 also requires that a systematic and rational basis for subsequently measuring and accounting for the assets or liabilities be developed depending on their nature. The Company does not anticipate that the adoption of this statement will have a material impact on its consolidated financial statements, absent any material business combinations. | |
• | In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140” (“SFAS 166”). SFAS 166 seeks to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred |
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financial assets. Specifically, SFAS 166 eliminates the concept of a qualifying special-purpose entity, creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies other sale-accounting criteria, and changes the initial measurement of a transferor’s interest in transferred financial assets. The Company does not anticipate that the adoption of this statement will have a material impact on its consolidated financial statements. |
• | In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”). SFAS 167 amends FASB Interpretation No. 46(R), “Variable Interest Entities” for determining whether an entity is a variable interest entity (“VIE”) and requires an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a VIE. Under SFAS 167, an enterprise has a controlling financial interest when it has a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. SFAS 167 also requires an enterprise to assess whether it has an implicit financial responsibility to ensure that a VIE operates as designed when determining whether it has power to direct the activities of the VIE that most significantly impact the entity’s economic performance. SFAS 167 also requires ongoing assessments of whether an enterprise is the primary beneficiary of a VIE, requires enhanced disclosures and eliminates the scope exclusion for qualifying special-purpose entities. The Company is currently evaluating the impact the adoption of SFAS 167 will have on its consolidated financial statements. | |
• | In June 2009, the FASB issued Statement of Financial Accounting Standard (“SFAS”) No. 168, The FASB Accounting Standards Codificationtm and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162. This statement modifies the Generally Accepted Accounting Principles (“GAAP”) hierarchy by establishing only two levels of GAAP, authoritative and nonauthoritative accounting literature. Effective July 2009, the FASB Accounting Standards Codificationtm (“ASC”), also known collectively as the “Codification,” is considered the single source of authoritative U.S. accounting and reporting standards, except for additional authoritative rules and interpretive releases issued by the SEC. Nonauthoritative guidance and literature would include, among other things, FASB Concepts Statements, American Institute of Certified Public Accountants Issue Papers and Technical Practice Aids and accounting textbooks. The Codification was developed to organize U.S. GAAP pronouncements by topic so that users can more easily access authoritative accounting guidance. It is organized by topic, subtopic, section, and paragraph, each of which is identified by a numerical designation. This statement applies beginning in third quarter 2009. All accounting references have been updated, and therefore U.S. GAAP standards have been replaced with ASC references. This standard had no impact on the Company’s financial position, results of operations or cash flows. | |
• | In August 2009, the FASB issued Accounting Standards UpdateNo. 2009-5, “Measuring Liabilities at Fair Value” (“ASU2009-05”). ASU2009-05 amends Accounting Standards Codification Topic 820, “Fair Value Measurements.” Specifically, ASU2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following methods: 1) a valuation technique that uses a) the quoted price of the identical liability when traded as an asset or b) quoted prices for similar liabilities or similar liabilities when traded as assetsand/or 2) a valuation technique that is consistent with the principles of Topic 820 of the Accounting Standards Codification (e.g. an income approach or market approach). ASU2009-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to adjust to include inputs relating to the existence of transfer restrictions on that liability. The Company does not anticipate that the adoption of this statement will have a material impact on its consolidated financial statements. | |
• | In September 2009, the Emerging Issues Task Force (EITF) reached final consensus on ASC605-25, “Revenue Arrangements with Multiple Deliverables.” ASC605-25 addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting, and how the arrangement consideration should be allocated among the separate units of accounting.EITF 08-1 may be applied retrospectively or prospectively for new or materially modified arrangements and early adoption is permitted. The Company does not anticipate that the adoption of this statement will have a material impact on its consolidated financial statements. |
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• | Increasing cancer incidence rate: The cancer incidence rate in China has grown from approximately 0.216% in 2003 to approximately 0.260% in 2008, an increase of 20.4%, according to a report by Frost & Sullivan. It is expected that demographic changes and urbanization will lead to further increases in the number of cancer cases in China. | |
• | Increasing physician adoption of advanced diagnostic imaging equipment:With the modernization of medical care in China, more physicians are expected to utilize more advanced diagnostic imaging equipment, such as MRI and PET-CT. | |
• | Increasing percentage of cancer patients treated with radiotherapy: The percentage of cancer patients treated with radiotherapy is expected to increase due to improving awareness of radiotherapy among the doctors and patients, and increased availability of radiotherapy and diagnostic imaging equipment. | |
• | Increasing affordability and potentially increased accessibility: China’s rising disposable income and increasing government expenditure on healthcare are also expected to stimulate the overall demand for radiotherapy and diagnostic imaging services. In addition, China recently approved a new round of healthcare reforms that encourage the investment of private capital in non-profit hospitals, which may potentially increase the accessibility of radiotherapy and diagnostic imaging services to patients. |
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• | population density, demographics and the level of economic development of the regions or cities in which such new centers would be located; and | |
• | the reputation of the potential hospital partner and its doctors, nurses and other personnel and the number of licensed patient beds and patient volume. |
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As of September 30, | % of Total | |||||||
2009 | Employees | |||||||
Administration | 28 | 18.7 | % | |||||
Financial control | 37 | 24.7 | ||||||
Operation | 62 | 41.3 | ||||||
Marketing | 11 | 7.3 | ||||||
Business development | 7 | 4.7 | ||||||
Medical development | 5 | 3.3 | ||||||
Total | 150 | 100.0 | % | |||||
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Location | Size (in square meters) | Expiration Date | ||
Beijing | 286 | July 2010 | ||
Shanghai | 16 | November 2009 | ||
Shanghai | 34 | May 2010 | ||
Shanghai | 195 | January 2011 | ||
Shenzhen | 522 | November 2012 |
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Urban Employees Basic Medical | Urban Residents Basic Medical | |||||||
Insurance Program | Insurance Program | Rural Cooperative Medical Program | ||||||
Launch Time | 1998 | 2007 | 2003 | |||||
Participants | Urban employees | Urban non-employees | Rural residents | |||||
Participation | Mandatory | Voluntary | Voluntary | |||||
Number of People covered in 2008 | Approximately 200.0 million (33.0% of China’s urban population) | Approximately 118.3 million (19.5% of China’s urban population) | Approximately 815 million (91.5% of China’s rural population) | |||||
Total reimbursement amount in 2008 | RMB208.4 billion | N/A | RMB66.2 billion | |||||
Funding | Employers and employees: • employer contributes approximately 6% of each employee’s total salary; and • employee contributes approximately 2% of such employee’s total salary. | Households and the government: • monthly premium are paid by each household; and • government subsidizes no less than RMB80 per person annually and RMB40 per person annually for the mid/western regions of China, with greater subsidies provided to low-income families and disabled persons. | Individuals and the government: • individual pays no less than RMB20 per year and local government subsidizes no less than RMB40 per person annually; and • government subsidizes RMB40 per person annually for the middle and western regions of the country and a smaller amount for the eastern region. | |||||
General Reimbursement Policy | Reimbursement comes from two sources — individual’s reimbursement account and the social medical expense pool: • All of the employee’s contribution and 30% of the employer’s contribution are allocated to the individual’s reimbursement account; the reimbursement cap from the individual account is the balance of that account; and • The remaining 70% of the employers’ contribution is aggregated into a social medical expense pool; the reimbursement cap from the social medical expense pool for an individual participant in a calendar year is around four times the regional average annual salary. | There is no specific requirement or guidance from the central government. Reimbursement policy is separately determined by local governments. | The central government suggests that, beginning in the second half of 2009, the reimbursement cap for all regions should be no less than six times the average annual per capita net income of rural residents in the region. | |||||
Examples of Local Reimbursement Policy | Shanghai: reimbursement cap from the social medical expense pool for an individual participant in a calendar year is approximately four times the average annual salary in Shanghai from the previous year. Inner Mongolia: reimbursement cap from the social medical expense pool for an individual participant in a calendar year is RMB25,000. | Jiangsu Province: approximately 50% to 60% of medical expense can be reimbursed by the program. Sichuan Province: approximately 60% (and not less than 50%) of medical expense can be reimbursed by the program. Guangdong Province: approximately 40% to 60% of medical expense can be reimbursed by the program; maximum reimbursement amount is approximately two times the average annual salary in Guangdong province from the previous year. | Guangdong Province: maximum reimbursement amount is approximately RMB50,000 per person per year. Hubei Province: maximum reimbursement amount for hospitalization is approximately RMB30,000 per person per year. Anhui Province: maximum reimbursement amount for hospitalization is approximately RMB30,000 per person per year. |
Sources: | MOH, Ministry of Human Resources and Social Security, National Bureau of Statistics, and various other central and local PRC government websites. |
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Name | Age | Position/Title | ||||
Jianyu Yang | 38 | Director, chief executive officer and president | ||||
Zheng Cheng | 45 | Co-chairman of the board of directors and chief operating officer | ||||
Steve Sun | 48 | Co-chairman of the board of directors and chief financial officer | ||||
Jing Zhang | 45 | Director and executive president | ||||
Yaw Kong Yap | 45 | Director and financial controller | ||||
Shirley Chen | 44 | Director | ||||
Feng Xiao | 37 | Director | ||||
Elaine Zong | 38 | Director | ||||
Wai Hong Ku | 58 | Director | ||||
Denny Lee* | 41 | Independent Director | ||||
Boxun Zhang | 33 | Corporate vice president |
* | Mr. Denny Lee has accepted our appointment to be the independent director of our company, effective upon commencement of the trading of our ADSs on the NYSE. |
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• | convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings; | |
• | declaring dividends and distributions; | |
• | appointing officers and determining the term of office of officers; | |
• | exercising the borrowing powers of our company and mortgaging the property of our company; and | |
• | approving the transfer of shares of our company, including registering such shares in our share register. |
• | selecting our independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by our independent registered public accounting firm; | |
• | reviewing with our independent registered public accounting firm any audit problems or difficulties and management’s response; | |
• | reviewing and approving all proposed related-party transactions, as defined in Item 404 ofRegulation S-K under the Securities Act; | |
• | discussing the annual audited financial statements with management and our independent registered public accounting firm; | |
• | reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of significant control deficiencies; | |
• | annually reviewing and reassessing the adequacy of our audit committee charter; | |
• | such other matters that are specifically delegated to our audit committee by our board of directors from time to time; |
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• | meeting separately and periodically with management and our internal auditor and independent registered public accounting firm; and | |
• | reporting regularly to the full board of directors. |
• | approving and overseeing the compensation package for our executive officers; | |
• | reviewing and making recommendations to the board with respect to the compensation of our directors; | |
• | reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer, evaluating the performance of our chief executive officer in light of those goals and objectives, and setting the compensation level of our chief executive officer based on such evaluation; and | |
• | reviewing periodically and making recommendations to the board regarding any long-term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans. |
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• | each of our directors and executive officers; | |
• | each person known to us to own beneficially more than 5.0% of our ordinary shares; and | |
• | each other selling shareholders. |
Ordinary Shares Beneficially | Ordinary Shares Being Sold | Ordinary Shares Beneficially | ||||||||||||||||||||||
Owned Prior to This Offering | in This Offering | Owned After This Offering | ||||||||||||||||||||||
Number | % | Number | % | Number | % | |||||||||||||||||||
Directors and Executive Officers: | ||||||||||||||||||||||||
Jianyu Yang(1) | 4,065,800 | 3.6 | ||||||||||||||||||||||
Zheng Cheng(2) | 7,319,900 | 6.6 | ||||||||||||||||||||||
Steve Sun(3) | 4,065,800 | 3.6 | ||||||||||||||||||||||
Jing Zhang(4) | 2,979,900 | 2.7 | ||||||||||||||||||||||
Yaw Kong Yap(5) | * | * | ||||||||||||||||||||||
Shirley Chen(6) | 7,533,817 | 6.8 | ||||||||||||||||||||||
Feng Xiao(7) | 26,172,700 | 23.5 | ||||||||||||||||||||||
Elaine Zong(8) | 10,418,000 | 9.3 | ||||||||||||||||||||||
Wai Hong Ku(9) | 2,889,500 | 2.6 | ||||||||||||||||||||||
Boxun Zhang(10) | * | * | ||||||||||||||||||||||
All directors and executive officers as a group | 66,239,521 | 59.4 | ||||||||||||||||||||||
Principal and Selling Shareholders: | ||||||||||||||||||||||||
Carlyle Entities(11) | 26,172,700 | 23.5 | ||||||||||||||||||||||
Notable Enterprise Limited(12) | 23,321,300 | 20.9 | ||||||||||||||||||||||
Starr Investments Cayman II, Inc.(13) | 10,418,000 | 9.3 | ||||||||||||||||||||||
Grand Best Group Limited(14) | 9,215,800 | 8.3 | ||||||||||||||||||||||
CZY Investments Limited(15) | 7,319,900 | 6.6 | ||||||||||||||||||||||
CICC Sun Company Limited(16) | 7,177,200 | 6.4 |
* | Upon exercise of all options granted, would beneficially own less than 1.0% of our outstanding ordinary shares. | |
(1) | Represents 4,065,800 ordinary shares held by Daketala International Investment Holdings Ltd., a limited liability company organized under the laws of the British Virgin Islands wholly owned by Dr. Yang. 2,910,800 of the ordinary shares held by Daketala International |
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Investment Holdings Ltd. have been pledged to certain of our shareholders in connection with the issuance of our Series B contingently redeemable convertible preferred shares on October 20, 2008. | ||
(2) | Represents 7,319,900 ordinary shares held by CZY Investment Ltd., a limited liability company organized under the laws of the British Virgin Islands wholly owned by Mr. Cheng. 6,369,500 of the ordinary shares held by CZY Investment Ltd. have been pledged to certain of our shareholders in connection with the issuance of our Series B contingently redeemable convertible preferred shares on October 20, 2008. In addition, 2,191,500 of the ordinary shares held by CZY Investment Ltd. have been pledged to certain of our shareholders as security for a loan. | |
(3) | Represents 4,065,800 ordinary shares held by Dragon Image Investment Ltd., a limited liability company organized under the laws of the British Virgin Islands wholly owned by Mr. Sun. 3,193,800 of the ordinary shares held by Dragon Image Investment Ltd. have been pledged to certain of our shareholders in connection with the issuance of our Series B contingently redeemable convertible preferred shares on October 20, 2008. | |
(4) | Represents 2,979,900 ordinary shares held by Thousand Ocean Group Limited, a limited liability company organized under the laws of the British Virgin Islands wholly owned by Mr. Zhang. 1,675,000 of the ordinary shares held by Thousand Ocean Group Limited have been pledged to certain of our shareholders in connection with the issuance of our Series B contingently redeemable convertible preferred shares on October 20, 2008. | |
(5) | Represents ordinary shares held by Top Mount Group Limited, a limited liability company organized under the laws of the British Virgin Islands wholly owned by Mr. Yap. Certain portion of the ordinary shares held by Top Mount Group Limited have been pledged to certain of our shareholders in connection with the issuance of our Series B contingently redeemable convertible preferred shares on October 20, 2008. | |
(6) | Represents 6,616,900 and 323,200 ordinary shares held by CICC Sun Company Limited and Perfect Key Holdings Limited, respectively, issuable upon conversion of all Series A and Series B contingently redeemable convertible preferred shares held by such shareholders and 560,300 and 33,417 ordinary shares, respectively, held by such shareholders. For a description of the beneficial ownership of our ordinary shares by CICC Sun Company Limited, see Note 16 below. Ms. Shirley Chen disclaims beneficial ownership of our ordinary shares held by CICC Sun Company Limited except to the extent of her pecuniary interest in these shares. Perfect Key Holdings Limited is a limited liability company organized under the laws of the British Virgin Islands in which Ms. Shirley Chen holds 47.4% beneficial ownership. | |
(7) | Represents 23,085,700 and 920,600 ordinary shares held by Carlyle Asia Growth Partners III, L.P. and CAGP III Co-Investment, L.P., respectively, issuable upon conversion of all Series A and Series B contingently redeemable convertible preferred shares held by such shareholders and 2,083,300 and 83,100 ordinary shares, respectively, held by such shareholders. Carlyle Asia Growth Partners III, L.P. and CAGP III Co-Investment, L.P. are collectively referred to in this prospectus as the Carlyle Entities. For a description of the beneficial ownership of our ordinary shares by the Carlyle Entities, see Note 10 below. Mr. Feng Xiao disclaims beneficial ownership of our ordinary shares held by the Carlyle Entities, except to the extent of his pecuniary interest in these shares. | |
(8) | Represents 9,722,200 ordinary shares issuable upon conversion of all Series B contingently redeemable convertible preferred shares held by Starr Investments Cayman II, Inc. and 695,800 ordinary shares held by such shareholder. For a description of the beneficial ownership of our ordinary shares by Starr Investments Cayman II, Inc., see Note 12 below. Ms. Elaine Zong disclaims beneficial ownership of our ordinary shares held by Starr Investments Cayman II, Inc. except to the extent of her pecuniary interest in these shares. | |
(9) | Represents 9,215,800 ordinary shares held by Grand Best Group Limited, a limited liability company organized under the laws of the British Virgin Islands. For a description of the beneficial ownership of our ordinary shares held by Grand Best Group Limited, see Note 13 below. Mr. Ku owns 31.4% of the equity interest in Grand Best Group Limited. | |
(10) | Represents ordinary shares held by Triumph Concept Investment Limited, a limited liability company organized under the laws of the British Virgin Islands wholly owned by Mr. Zhang. | |
(11) | Represents 23,085,700 and 920,600 ordinary shares held by Carlyle Asia Growth Partners III, L.P. and CAGP III Co-Investment, L.P., respectively, issuable upon conversion of all Series A and Series B contingently redeemable convertible preferred shares held by such shareholders and 2,083,300 and 83,100 ordinary shares, respectively, held by such shareholders. The general partner of each Carlyle Entity is CAGP General Partner, L.P., which is in turn managed by its general partner, CAGP Ltd. The directors of CAGP Ltd. are Mr. William E. Conway, Jr., Mr. Daniel A. D’Aniello, Mr. David Rubenstein, Mr. Jeffery Ferguson and Mr. Curtis L. Buser. The address of the Carlyle Entities is Walker House, PO Box 908GT, Mary Street, George Town, Grand Cayman, Cayman Islands. | |
(12) | Notable Enterprise Limited is a limited liability company organized under the laws of the British Virgin Islands wholly owned by Ms. Bona Lau. Ms. Lau is the daughter of Mr. Haifeng Liu, the chairman of Aohua Medical from December 2005 to December 2007 and our director until July 2009. Prior to serving as chairman of Aohua Medical, Mr. Liu was detained in March 2004 by the authorities of Luoyang city, Henan Province, for alleged misappropriation of funds while serving as chairman of a company unrelated to Aohua Medical or us. Mr. Liu was released in June 2005 by the local prosecutor without an indictment due to insufficient evidence. Notable Enterprise Limited was originally owned by Mr. Liu, who irrevocably transferred all of his interest in Notable Enterprise Limited to Ms. Lau in November 2007 for consideration not significantly lower than the then fair market value. At the time of the transfer, Notable Enterprise Limited indirectly held a 44.2% equity interest in OMS. The address of Notable Enterprise Limited is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. 134,478 of the ordinary shares held by Notable Enterprise Limited have been pledged to certain of our shareholders in connection with the issuance of our Series B contingently redeemable convertible preferred shares on October 20, 2008. | |
(13) | Represents 9,722,200 ordinary shares issuable upon conversion of all Series B contingently redeemable convertible preferred shares held by Starr Investments Cayman II, Inc. and 695,800 ordinary shares held by such shareholder. Starr Investments Cayman II, Inc. is ultimately controlled by Starr International Company, Inc. whose voting shareholders (none of whom control 10% or more individually) are Mr. Maurice R. Greenberg, Mr. Edward E. Matthews, Mr. Howard I. Smith, Mr. John J. Roberts, Mr. Houghton Freeman, Mr. Joseph C. H. Johnson, Mr. Cesar Zalamea, Mr. Peter Hammer, Mr. Michael Morrison, Mr. Bertil P. Lundqvist and Ms. Florence Davis. The address of Starr Investments Cayman II, Inc. is Avalon Management Limited, Landmark Square, 64 Earth Close, West Bay Beach, Grand Cayman, KY1-1107, Cayman Islands | |
(14) | Grand Best Group Limited is a limited liability company organized under the laws of the British Virgin Islands. The shareholders of Grand Best Group Limited are Ku Wai Hong, Ever Bounteous Group Limited, Iu Kong, Cheng Mai Yue, Wang Rong Kang, Brave Faith |
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Development Limited, Echolac Company Limited and Huang Pei Lin. The address of Grand Best Group Limited is Portcullis TrustNet Chambers, P.O. Box 3444, Road Town, Tortola, British Virgin Islands. | ||
(15) | CZY Investments Limited is a limited liability company organized under the laws of the British Virgin Islands wholly owned by Dr. Zheng Cheng. The address of CZY Investments Limited is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. | |
(16) | Represents 6,616,900 ordinary shares issuable upon conversion of all Series A and Series B contingently redeemable convertible preferred shares held by CICC Sun Company Limited and 560,300 ordinary shares held by such shareholder. CICC Sun Company Limited is wholly owned by China International Capital Corporation Limited, one of our underwriters, in which Morgan Stanley, another underwriter to this offering, beneficially owns 34.0% of its equity interest. China International Capital Corporation Limited has ultimate investment and voting power over the shares held by CICC Sun Company Limited. The address of CICC Sun Company Limited is 2/F., Abbott Building, Road Town, Tortola, British Virgin Islands. |
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• | the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer; | |
• | the instrument of transfer is in respect of only one class of ordinary shares; | |
• | the instrument of transfer is properly stamped, if required; | |
• | in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four; or | |
• | the ordinary shares transferred are free of any lien in favor of us. |
• | issue ordinary shares on terms that they are to be redeemed or are liable to be redeemed at our option or at the option of the shareholders, on such terms and in such manner as we may, before the issue of such ordinary shares, determine; | |
• | purchase our own ordinary shares (including any redeemable shares) on such terms and in such manner as we may determine and agree with our shareholders; and |
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• | make a payment in respect of the redemption or purchase of our own ordinary shares in any manner authorized by the Companies Law, including out of our capital, profits or the proceeds of a fresh issue of ordinary shares. |
• | increase the share capital by such sum, to be divided into shares of such classes and amount, as the resolution shall prescribe; | |
• | consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares; | |
• | convert all or any of our paid up shares into stock and reconvert that stock into paid up shares of any denomination; | |
• | sub-divide our existing shares, or any of them into shares of a smaller amount that is fixed by the third amended and restated memorandum and articles of association; and | |
• | cancel any shares that, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of our share capital by the amount of the shares so cancelled. |
• | the designation of the series; | |
• | the number of shares of the series; | |
• | the dividend rights, dividend rates, conversion rights, voting rights; and | |
• | the rights and terms of redemption and liquidation preferences. |
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• | the appointment or removal of either our chief executive officer or chief financial officer; | |
• | any anti-takeover action in response to a takeover attempt; | |
• | any merger resulting in our shareholders immediately prior to such merger holding less than a majority of the voting power of the outstanding share capital of the surviving business entity; | |
• | the sale or transfer of all or substantially all of our assets; and | |
• | any change in the number of directors on our board of directors. |
• | an exempted company does not have to file an annual return of its shareholders with the Registrar of Companies; | |
• | an exempted company’s register of members is not open to inspection; | |
• | an exempted company does not have to hold an annual general meeting; | |
• | an exempted company may issue negotiable or bearer shares or shares with no par value; | |
• | an exempted company may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance); | |
• | an exempted company may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands; | |
• | an exempted company may register as a limited duration company; and | |
• | an exempted company may register as a segregated portfolio company. |
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• | the statutory provisions as to the dual majority vote have been met; | |
• | the shareholders have been fairly represented at the meeting in question; | |
• | the arrangement is such that a businessman would reasonably approve; and | |
• | the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law. |
• | a company acts or proposes to act illegally or ultra vires; |
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• | the act complained of, although not ultra vires, could be duly effected if authorized by a special or ordinary resolution that has not been obtained; and | |
• | those who control the company are perpetrating a “fraud on the minority.” |
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• | sell such rights if practicable and distribute the net proceeds in the same manner as cash to the ADR holders entitled thereto; or | |
• | if it is not practicable to sell such rights, do nothing and allow such rights to lapse, in which case ADR holders will receive nothing. |
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• | temporary delays caused by closing our transfer books or those of the depositary or the deposit of shares in connection with voting at a shareholders’ meeting, or the payment of dividends; | |
• | the payment of fees, taxes and similar charges; or | |
• | compliance with any U.S. or foreign laws or governmental regulations relating to the ADRs or to the withdrawal of deposited securities. |
• | to receive any distribution on or in respect of shares, | |
• | to give instructions for the exercise of voting rights at a meeting of holders of shares, or | |
• | to pay the fee assessed by the depositary for administration of the ADR program and for any expenses as provided for in the ADR, | |
• | to receive any notice or to act in respect of other matters all subject to the provisions of the deposit agreement. |
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• | a fee of up to US$1.50 per ADR or ADRs for transfers of certificated or direct registration ADRs; | |
• | a fee of up to US$0.05 per ADS for any cash distribution made pursuant to the deposit agreement; | |
• | a fee of up to US$0.05 per ADS per calendar year (or portion thereof) for services performed by the depositary in administering the ADRs (which fee may be charged on a periodic basis during each calendar year and shall be assessed against holders of ADRs as of the record date or record dates set by the depositary during each calendar year and shall be payable in the manner described in the next succeeding provision); | |
• | reimbursement of such fees, charges and expenses as are incurred by the depositaryand/or any of the depositary’s agents (including, without limitation, the custodian and expenses incurred on behalf of holders in connection with compliance with foreign exchange control regulations or any law or regulation relating to foreign investment) in connection with the servicing of the shares or other deposited securities, the delivery of deposited securities or otherwise in connection with the depositary’s or its custodian’s compliance with applicable law, rule or regulation (which charge shall be assessed on a proportionate basis against holders as of the record date or dates set by the depositary and shall be payable at the sole discretion of the depositary by billing such holders or by deducting such charge from one or more cash dividends or other cash distributions); |
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• | a fee for the distribution of securities (or the sale of securities in connection with a distribution), such fee being in an amount equal to the fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities (treating all such securities as if they were shares) but which securities or the net cash proceeds from the sale thereof are instead distributed by the depositary to those holders entitled thereto; | |
• | stock transfer or other taxes and other governmental charges; | |
• | cable, telex and facsimile transmission and delivery charges incurred at your request in connection with the deposit or delivery of shares; | |
• | transfer or registration fees for the registration of transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities; and | |
• | expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars. |
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• | payment with respect thereto of (i) any stock transfer or other tax or other governmental charge, (ii) any stock transfer or registration fees in effect for the registration of transfers of shares or other deposited securities upon any applicable register and (iii) any applicable fees and expenses described in the deposit agreement; | |
• | the production of proof satisfactory to it of (i) the identity of any signatory and genuineness of any signature and (ii) such other information, including without limitation, information as to citizenship, residence, exchange control approval, beneficial ownership of any securities, compliance with applicable law, regulations, provisions of or governing deposited securities and terms of the deposit agreement and the ADRs, as it may deem necessary or proper; and | |
• | compliance with such regulations as the depositary may establish consistent with the deposit agreement. |
• | any present or future law, rule, regulation, fiat, order or decree of the United States, the Cayman Islands, The People’s Republic of China (including the Hong Kong Special Administrative Region, the People’s Republic of China) or any other country, or of any governmental or regulatory authority or securities exchange or market or automated quotation system, the provisions of or governing any deposited securities, any present or future provision of our charter, any act of God, war, terrorism or other circumstance beyond our, the depositary’s or our respective agents’ control shall prevent, delay or subject to any civil or criminal penalty any act which the deposit agreement or the ADRs provide shall be done or performed by us, the depositary or our respective agents (including, without limitation, voting); | |
• | it exercises or fails to exercise discretion under the deposit agreement or the ADR; | |
• | it performs its obligations under the deposit agreement and ADRs without gross negligence or bad faith; | |
• | it takes any action or refrains from taking any action in reliance upon the advice of or information from legal counsel, accountants, any person presenting shares for deposit, any registered holder of ADRs, or any other person believed by it to be competent to give such advice or information; or | |
• | it relies upon any written notice, request, direction or other document believed by it to be genuine and to have been signed or presented by the proper party or parties. |
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• | be a party to and bound by the terms of the deposit agreement and the applicable ADR or ADRs, and | |
• | appoint the depositary its attorney-in-fact, with full power to delegate, to act on its behalf and to take any and all actions contemplated in the deposit agreement and the applicable ADR or ADRs, to adopt any and all procedures necessary to comply with applicable laws and to take such action as the depositary in its sole discretion may deem necessary or appropriate to carry out the purposes of the deposit agreement and the applicable ADR and ADRs, the taking of such actions to be the conclusive determinant of the necessity and appropriateness thereof. |
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• | 1.0% of the number of our ordinary shares then outstanding, in the form of ADSs or otherwise, which will equal approximately shares immediately after this offering, or shares if the underwriters exercise their option to purchase additional ADSs in full; and | |
• | the average weekly trading volume of our ADSs on the during the four calendar weeks preceding the date on which notice of the sale is filed with the SEC. |
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• | an individual citizen or resident of the United States; | |
• | a corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; | |
• | an estate the income of which is subject to United States federal income taxation regardless of its source; or | |
• | a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person. |
• | a dealer in securities or currencies; | |
• | a financial institution; | |
• | a regulated investment company; | |
• | a real estate investment trust; | |
• | an insurance company; | |
• | a tax exempt organization; | |
• | a person holding our ordinary shares or ADSs as part of a hedging, integrated or conversion transaction, a constructive sale or a straddle; | |
• | a trader in securities that has elected the mark-to-market method of accounting for your securities; | |
• | a person liable for alternative minimum tax; | |
• | a person who owns or is deemed to own more than 10% of our voting stock; | |
• | a partnership or other pass-through entity for United States federal income tax purposes; or | |
• | a person whose “functional currency” is not the United States dollar. |
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• | at least 75% of our gross income is passive income; or | |
• | at least 50% of the value of our assets (based on an average of the quarterly values) is attributable to assets that produce or are held for the production of passive income. |
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• | the excess distribution or gain will be allocated ratably over your holding period for the ADSs or ordinary shares; | |
• | the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, will be treated as ordinary income; and | |
• | the amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year. |
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Number of | ||||
Name | ADSs | |||
Morgan Stanley & Co. International plc | ||||
J.P. Morgan Securities Inc. | ||||
China International Capital Corporation Hong Kong Securities Limited | ||||
Total | ||||
Underwriting Discounts and Commissions | No Exercise | Full Exercise | ||||||
Per ADS | US$ | US$ | ||||||
Total by us | US$ | US$ | ||||||
Total by the selling shareholders | US$ | US$ |
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• | offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any ordinary shares or ADSs or any securities convertible into or exercisable or exchangeable for ordinary shares or ADSs; | |
• | enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the ordinary shares or ADSs; or | |
• | file any registration statement with the SEC relating to the offering of any ordinary shares, ADSs or any securities convertible into or exercisable or exchangeable for ordinary shares or ADSs (other than a registration statement onForm S-8). |
• | ADSs to be sold by us to the underwriters in the offering; | |
• | transactions by the selling shareholders relating to ordinary shares, ADSs or other securities acquired in open market transactions after the completion of the offering, provided that no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made in connection with subsequent sales of ordinary shares, ADSs or other securities acquired in such open market transactions; | |
• | the issuance by us of ordinary shares issuable upon the exercise of an option or warrant or the conversion of any outstanding securities, provided that such recipients shall agree in writing to be subject to the restrictions described above; or | |
• | the grant or issuance by us of options, shares, restricted shares, restricted share units, share appreciation rights, performance units or performance shares under our equity plans and the shares or other securities issued upon exercise or conversion of any of the foregoing, provided that such recipients shall agree in writing to be subject to the restrictions described above. |
• | offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any ordinary shares or ADSs or any securities convertible into or exercisable or exchangeable for ordinary shares or ADSs; or | |
• | enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the ordinary shares or ADSs. |
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• | the ordinary shares as represented by the ADSs to be sold in this offering; | |
• | transactions relating to ordinary shares, ADSs or other securities acquired in open market transactions after the completion of the offering, provided that no filing under Section 16(a) of the Exchange Act will be required or will be voluntarily made in connection with subsequent sales of ordinary shares, ADSs or other securities acquired in such open market transactions; | |
• | the exercise of rights to acquire ordinary shares, ADSs or other securities of our company issued pursuant to any of our share option or similar equity incentive or compensation plan for the issuance of share options or equity grants, provided that, in each case, such plan is in effect as of the date of and disclosed in the prospectus, and that any subsequent sale, transfer or disposition of any securities issued upon exercise of such equity incentive grants should be subject to the restrictions described above; | |
• | transfers of our ordinary shares or ADSs to shareholders who are our existing shareholders prior to the offering or partners, members, stockholders or affiliates (as defined inRule 12b-2 of the Exchange Act) of such existing shareholders, provided that each transferee should agree in writing to be subject to the restrictions described above, and that no filing under Section 16(a) of the Exchange Act reporting a reduction in beneficial ownership of ordinary shares or ADSs will be required or will be voluntarily made during the applicablelock-up period; | |
• | transfers of our ordinary shares, ADSs or any security convertible into our ordinary shares or ADSs (i) to an immediate family member or a trust formed for the benefit of an immediate family member, (ii) as a bona fide gift or (iii) through will or intestacy, provided that each transferee or donee should agree in writing to be subject to the restrictions described above, and that no filing under Section 16(a) of the Exchange Act reporting a reduction in beneficial ownership of our ordinary shares or ADSs will be required or will be voluntarily made during the applicablelock-up period; | |
• | transfers or distributions of our ordinary shares, ADSs or any security convertible into our ordinary shares or ADSs to partners, members, stockholders or affiliates, provided that each transferee or distributee should agree in writing to be subject to the restrictions described above, and that no filing under Section 16(a) of the Exchange Act reporting a reduction in beneficial ownership of our ordinary shares or ADSs should be required or should be voluntarily made during the applicablelock-up period; or | |
• | the establishment of a trading plan pursuant toRule 10b5-1 under the Exchange Act for the sale of our ordinary shares or ADSs, provided that such plan does not provide for the transfer of our ordinary shares or ADSs during the applicablelock-up period. |
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(a) | to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; |
(b) | to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; |
(c) | to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive; or |
(d) | in any other circumstances which do not require the publication by the company of a prospectus pursuant to Article 3 of the Prospectus Directive; |
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(a) | a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or |
(b) | a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, |
(1) | to an institutional investor (for corporations, under 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions specified in Section 275 of the SFA; | |
(2) | where no consideration is or will be given for the transfer; or | |
(3) | where the transfer is by operation of law. |
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SEC registration fee | US$ | 5,580 | ||
NYSE listing fee | ||||
Financial Industry Regulatory Authority Inc. filing fee | 10,500 | |||
Printing and engraving expenses | ||||
Legal fees and expenses | ||||
Accounting fees and expenses | ||||
Miscellaneous | ||||
Total | US$ | |||
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167
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168
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Page | ||||
Audited Consolidated Financial Statements | ||||
F-2 | ||||
F-3 | ||||
F-5 | ||||
F-5 | ||||
F-7 | ||||
F-7 | ||||
F-9 | ||||
F-9 | ||||
F-10 | ||||
Unaudited Condensed Consolidated Financial Statements | ||||
F-52 | ||||
F-54 | ||||
F-56 | ||||
F-58 | ||||
F-59 |
F-1
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F-2
Table of Contents
As at December 31, | Pro Forma as at December 31, | |||||||||||||||||||||||
Note | 2007 | 2008 | 2008 | 2008 | 2008 | |||||||||||||||||||
(successor) | (successor) | |||||||||||||||||||||||
RMB | RMB | US$ | RMB | US$ | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
(Note 2) | ||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Current Assets: | ||||||||||||||||||||||||
Cash | 39,792 | 353,991 | 51,858 | 343,204 | 50,278 | |||||||||||||||||||
Accounts receivable (net of allowance of RMB3,808, RMB3,830 (US$561), for 2007 and 2008, respectively) | 5 | 19,010 | 92,772 | 13,591 | ||||||||||||||||||||
Prepayment and other current assets | 6 | 6,132 | 43,566 | 6,382 | ||||||||||||||||||||
Deferred tax assets, current portion | 17 | 1,201 | 2,649 | 388 | ||||||||||||||||||||
Total Current Assets | 66,135 | 492,978 | 72,219 | |||||||||||||||||||||
Non-current assets: | ||||||||||||||||||||||||
Property, plant and equipment, net | 7 | 54,703 | 349,121 | 51,144 | ||||||||||||||||||||
Goodwill | 4, 8 | 259,282 | 300,163 | 43,972 | ||||||||||||||||||||
Acquired intangible assets, net | 8 | 129,998 | 181,838 | 26,638 | ||||||||||||||||||||
Deposits for non-current assets | 9, 20 | 25,365 | 167,200 | 24,494 | ||||||||||||||||||||
Deferred tax assets, non-current portion | 17 | — | 12,650 | 1,853 | ||||||||||||||||||||
Other non-current assets | 7,540 | 10,445 | 1,530 | |||||||||||||||||||||
Total assets | 543,023 | 1,514,395 | 221,850 | |||||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||||||
Short-term bank borrowing | 10 | — | 20,800 | 3,047 | ||||||||||||||||||||
Long-term bank borrowings, current portion | 10 | — | 39,840 | 5,836 | ||||||||||||||||||||
Accounts payable | — | 9,741 | 1,427 | |||||||||||||||||||||
Accrual for purchase of property, plant and equipment | 10,000 | 1,881 | 276 | |||||||||||||||||||||
Obligations under capital leases, current portion | 12 | 5,660 | 3,719 | 545 | ||||||||||||||||||||
Accrued expenses and other liabilities | 11 | 21,979 | 42,444 | 6,218 | ||||||||||||||||||||
Income tax payable | 7,033 | 17,041 | 2,496 | |||||||||||||||||||||
Deferred revenue, current portion | — | 12,656 | 1,854 | |||||||||||||||||||||
Payable for acquisition of a subsidiary and business components | 4 | — | 28,016 | 4,104 | ||||||||||||||||||||
Dividends payable | 14 | — | 10,788 | 1,580 | — | — | ||||||||||||||||||
Amounts due to related parties | 20 | 43,700 | 3,607 | 529 | ||||||||||||||||||||
Total current liabilities | 88,372 | 190,533 | 27,912 | |||||||||||||||||||||
F-3
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As at December 31, | Pro Forma as at December 31, | |||||||||||||||||||||||
Note | 2007 | 2008 | 2008 | 2008 | 2008 | |||||||||||||||||||
(successor) | (successor) | |||||||||||||||||||||||
RMB | RMB | US$ | RMB | US$ | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
(Note 2) | ||||||||||||||||||||||||
Non-Current Liabilities: | ||||||||||||||||||||||||
Long-term bank borrowings, non-current portion | 10 | — | 52,120 | 7,636 | ||||||||||||||||||||
Deferred revenue, non-current portion | 5,524 | 6,314 | 925 | |||||||||||||||||||||
Obligations under capitalized leases, non-current portion | 12 | 1,631 | 11,656 | 1,707 | ||||||||||||||||||||
Lease deposit | — | 3,215 | 471 | |||||||||||||||||||||
Deferred tax liabilities, non-current portion | 17 | 15,765 | 20,078 | 2,941 | ||||||||||||||||||||
Convertible notes | 13 | 36,853 | — | — | ||||||||||||||||||||
Total liabilities | 148,145 | 283,916 | 41,592 | |||||||||||||||||||||
Commitments and contingencies | 22 | |||||||||||||||||||||||
Series A contingently redeemable convertible preferred shares (par value of US$0.01 per share; Authorized — nil and 200,000 shares as at December 31, 2007 and 2008, respectively; Issued and outstanding — nil and 176,942 shares as at December 31, 2007 and 2008, respectively; pro forma nil (unaudited). As at December 31, 2008, aggregate liquidation preference and redemption amounts were US$54,573 and US$38,147, respectively (2007-nil)) | 14 | — | 254,358 | 37,262 | — | — | ||||||||||||||||||
Series B contingently redeemable convertible preferred shares (par value of US$0.01 per share; Authorized — nil and 300,000 shares as at December 31, 2007 and 2008, respectively; Issued and outstanding — nil and 233,332 shares as at December 31, 2007 and 2008, respectively; pro forma nil (unaudited). As at December 31, 2008, aggregate liquidation preference and redemption amounts were US$90,583 and US$61,390, respectively (2007-nil)) | 14 | — | 411,101 | 60,224 | — | — | ||||||||||||||||||
Shareholders’ Equity: | ||||||||||||||||||||||||
Ordinary shares (par value of US$0.0001 per share at December 31, 2007 and 2008; Authorized — 450,000,000 shares at December 31, 2007 and 2008; Issued and outstanding — 50,000,000 and 70,428,100 shares at December 31, 2007 and 2008, respectively, 111,455,500 shares for pro forma (unaudited)) | 15 | 41 | 55 | 8 | 83 | 12 | ||||||||||||||||||
Additional paid-in capital | 443,016 | 1,113,150 | 163,070 | 1,778,581 | 260,552 | |||||||||||||||||||
Accumulated other comprehensive (loss) income | 147 | (3,822 | ) | (560 | ) | (3,822 | ) | (560 | ) | |||||||||||||||
Accumulated deficit | (48,326 | ) | (544,363 | ) | (79,746 | ) | (544,363 | ) | (79,746 | ) | ||||||||||||||
Total shareholders’ equity | 394,878 | 565,020 | 82,772 | 1,230,479 | 180,258 | |||||||||||||||||||
Total liabilities and shareholders’ equity | 543,023 | 1,514,395 | 221,850 | |||||||||||||||||||||
F-4
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January 1, 2007 | September 10, 2007 | ||||||||||||||||||||
to | to | ||||||||||||||||||||
Notes | October 30, 2007 | December 31, 2007 | For the Year Ended December 31, 2008 | ||||||||||||||||||
(Successor) | |||||||||||||||||||||
(Predecessor) | (Successor) | ||||||||||||||||||||
RMB | RMB | RMB | US$ | ||||||||||||||||||
Revenues, Net of Business Tax, Value-Added Tax and Related Surcharges: | |||||||||||||||||||||
Lease and management services | 63,082 | 13,001 | 155,061 | 22,716 | |||||||||||||||||
Management services | 4,340 | 982 | 12,677 | 1,857 | |||||||||||||||||
Other, net | — | — | 4,051 | 593 | |||||||||||||||||
Total net revenues | 67,422 | 13,983 | 171,789 | 25,166 | |||||||||||||||||
Cost of Revenues: | |||||||||||||||||||||
Lease and management services | (20,396 | ) | (1,908 | ) | (25,046 | ) | (3,669 | ) | |||||||||||||
Amortization of acquired intangibles | — | (2,002 | ) | (20,497 | ) | (3,003 | ) | ||||||||||||||
Management services | (20 | ) | (4 | ) | (54 | ) | (8 | ) | |||||||||||||
Total cost of revenues | (20,416 | ) | (3,914 | ) | (45,597 | ) | (6,680 | ) | |||||||||||||
Gross profit | 47,006 | 10,069 | 126,192 | 18,486 | |||||||||||||||||
Operating Expenses: | |||||||||||||||||||||
Selling expenses | (1,601 | ) | (757 | ) | (5,497 | ) | (805 | ) | |||||||||||||
General and administrative expenses | (8,467 | ) | (57,171 | ) | (18,869 | ) | (2,764 | ) | |||||||||||||
Operating income (loss) | 36,938 | (47,859 | ) | 101,826 | 14,917 | ||||||||||||||||
Interest expense (including related party amounts of RMB8, RMB96 and RMB2,991 (US$438) for the period from January 1 to October 30, 2007 (predecessor), September 10 to December 31, 2007 (successor) and the year ended December 31, 2008 (successor), respectively) | 20 | (954 | ) | (279 | ) | (7,455 | ) | (1,092 | ) | ||||||||||||
Change in fair value of convertible notes | 13 | — | (341 | ) | (464 | ) | (68 | ) | |||||||||||||
Foreign exchange loss | — | (4 | ) | (325 | ) | (48 | ) | ||||||||||||||
(Loss) gain from disposal of equipment | (1,555 | ) | (25 | ) | 658 | 96 | |||||||||||||||
Interest income | 15 | — | 430 | 63 | |||||||||||||||||
Other income | 18 | — | — | 7,734 | 1,133 | ||||||||||||||||
Income (loss) before income taxes | 34,444 | (48,508 | ) | 102,404 | 15,001 | ||||||||||||||||
Income tax (expense) benefit | 17 | (15,014 | ) | 182 | (23,335 | ) | (3,418 | ) | |||||||||||||
Net income (loss) | 19,430 | (48,326 | ) | 79,069 | 11,583 | ||||||||||||||||
F-5
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January 1, 2007 | September 10, 2007 | ||||||||||||||||||||
to | to | ||||||||||||||||||||
Notes | October 30, 2007 | December 31, 2007 | For the Year Ended December 31, 2008 | ||||||||||||||||||
(Successor) | |||||||||||||||||||||
(Predecessor) | (Successor) | ||||||||||||||||||||
RMB | RMB | RMB | US$ | ||||||||||||||||||
Accretion of Series A contingently redeemable convertible preferred shares | 14 | — | — | (270,343 | ) | (39,604 | ) | ||||||||||||||
Accretion of Series B contingently redeemable convertible preferred shares | 14 | — | — | (304,763 | ) | (44,646 | ) | ||||||||||||||
Net income (loss) attributable to ordinary shareholders | 19,430 | (48,326 | ) | (496,037 | ) | (72,667 | ) | ||||||||||||||
Income (loss) per share | |||||||||||||||||||||
Basic and diluted | 24 | 0.39 | (0.97 | ) | (8.63 | ) | (1.26 | ) | |||||||||||||
Weighted Average Number of Ordinary Shares Outstanding: | |||||||||||||||||||||
Basic and diluted shares | 24 | 50,000,000 | 50,000,000 | 57,481,400 | 57,481,400 | ||||||||||||||||
Pro forma loss per share | |||||||||||||||||||||
Basic and diluted on an as converted basis (unaudited) | 24 | (4.87 | ) | (0.71 | ) | ||||||||||||||||
Weighted average number of ordinary shares outstanding used in computation of: | |||||||||||||||||||||
Pro forma basic and diluted on an as converted basis (unaudited) | 24 | 98,508,800 | 98,508,800 | ||||||||||||||||||
F-6
Table of Contents
January 1, 2007 to | September 10, 2007 to | For the Year Ended | |||||||||||||||
October 30, 2007 | December 31, 2007 | December 31, 2008 | |||||||||||||||
(successor) | |||||||||||||||||
(predecessor) | (successor) | ||||||||||||||||
RMB | RMB | RMB | US$ | ||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||||||||
Net income (loss) | 19,430 | (48,326 | ) | 79,069 | 11,583 | ||||||||||||
Adjustments to reconcile net income (loss) to net cash generated from operating activities: | |||||||||||||||||
Share-based compensation | — | 49,526 | 4,215 | 617 | |||||||||||||
Imputed interest on amounts due to related parties (note 20) | 8 | 96 | 2,991 | 438 | |||||||||||||
Depreciation of property, plant and equipment | 17,906 | 1,084 | 17,629 | 2,583 | |||||||||||||
Amortization of acquired intangible assets | — | 2,002 | 20,497 | 3,003 | |||||||||||||
Loss (gain) on disposal of equipment | 1,555 | 25 | (658 | ) | (96 | ) | |||||||||||
Deferred tax expense (benefit) | 9,472 | (1,608 | ) | (5,080 | ) | (744 | ) | ||||||||||
Change in fair value of convertible notes | 341 | 464 | 68 | ||||||||||||||
Interest expense | — | — | 895 | 131 | |||||||||||||
Changes in operating assets and liabilities: | |||||||||||||||||
Increase in accounts receivable | (5,416 | ) | (2,771 | ) | (19,283 | ) | (2,825 | ) | |||||||||
Increase (decrease) in prepayments and other current assets | (4,782 | ) | 2,723 | (23,043 | ) | (3,376 | ) | ||||||||||
Increase in deposits for non-current assets | (280 | ) | — | (621 | ) | (91 | ) | ||||||||||
Decrease in accounts payable | — | — | (20,221 | ) | (2,962 | ) | |||||||||||
Increase (decrease) in accrued expenses and other liabilities | 4,095 | 2,049 | (13,709 | ) | (2,008 | ) | |||||||||||
Decrease in deferred revenue | — | — | (1,666 | ) | (244 | ) | |||||||||||
Decrease in lease deposit | — | — | 30 | 4 | |||||||||||||
Increase in income tax payable | 2,605 | 962 | 5,265 | 771 | |||||||||||||
Net cash generated from operating activities | 44,593 | 6,103 | 46,774 | 6,852 | |||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||||||||
Payment under arrangement with Chang’an Hospital (note 25) | — | — | (20,821 | ) | (3,050 | ) | |||||||||||
Acquisitions, net of cash acquired (note 4) | — | — | (231,481 | ) | (33,911 | ) | |||||||||||
Acquisition of property, plant and equipment | (43,398 | ) | (22,466 | ) | (31,575 | ) | (4,625 | ) | |||||||||
Deposits for the purchase of non-current assets | (13,031 | ) | (13,573 | ) | (95,110 | ) | (13,933 | ) | |||||||||
Proceeds from disposal of property, plant and equipment | 5,977 | 5,598 | 2,616 | 383 | |||||||||||||
Net cash used in investing activities | (50,452 | ) | (30,441 | ) | (376,371 | ) | (55,136 | ) | |||||||||
F-7
Table of Contents
January 1, 2007 to | September 10, 2007 to | For the Year Ended | |||||||||||||||
October 30, 2007 | December 31, 2007 | December 31, 2008 | |||||||||||||||
(successor) | |||||||||||||||||
(predecessor) | (successor) | ||||||||||||||||
RMB | RMB | RMB | US$ | ||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||||||||
Proceeds from issuance of convertible notes | — | 36,523 | 140,241 | 20,545 | |||||||||||||
Proceeds from issuance of Series A contingently redeemable convertible preferred shares (net of paid issuance costs of RMB2,449) | — | — | 67,671 | 9,913 | |||||||||||||
Proceeds from issuance of Series B contingently redeemable convertible preferred shares (net of paid issuance costs of RMB5,664) | — | — | 405,331 | 59,379 | |||||||||||||
Proceeds from short-term bank borrowings | — | — | 20,800 | 3,047 | |||||||||||||
Proceeds from long-term bank borrowings | — | — | 7,460 | 1,093 | |||||||||||||
Repayment of obligations under capitalized leases | (786 | ) | (5,698 | ) | (5,525 | ) | (809 | ) | |||||||||
Repayment of long-term bank borrowings | — | — | (37,890 | ) | (5,551 | ) | |||||||||||
Repayment of short-term bank borrowings | — | — | (21,500 | ) | (3,150 | ) | |||||||||||
Proceeds from exercise of share options | — | — | 114,606 | 16,789 | |||||||||||||
Increase (decrease) in amounts due to related parties | 6,806 | 32,400 | (41,700 | ) | (6,109 | ) | |||||||||||
Net cash generated from financing activities | 6,020 | 63,225 | 649,494 | 95,147 | |||||||||||||
Exchange rate effect on cash | — | 138 | (5,698 | ) | (834 | ) | |||||||||||
Net increase in cash | 161 | 39,025 | 314,199 | 46,029 | |||||||||||||
Cash at beginning of period | 606 | 767 | 39,792 | 5,829 | |||||||||||||
Cash at end of period | 767 | 39,792 | 353,991 | 51,858 | |||||||||||||
Supplemental schedule of cash flows information: | |||||||||||||||||
Income tax paid | (737 | ) | — | (11,688 | ) | (1,712 | ) | ||||||||||
Interest paid | (946 | ) | (184 | ) | (3,538 | ) | (518 | ) | |||||||||
Supplemental schedule of non-cash activities: | |||||||||||||||||
Acquisition of property, plant and equipment and other intangible assets through utilization of deposits | — | 1,961 | 50,601 | 7,413 | |||||||||||||
Acquisition of property, plant and equipment under capitalized lease | — | — | 14,520 | 2,127 | |||||||||||||
Conversion of convertible notes into Series A contingently redeemable convertible preferred shares | — | — | 176,082 | 25,795 |
F-8
Table of Contents
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares)
Accumulated | Retained | |||||||||||||||||||||||
Number of | Additional | Other | Earnings | Total | ||||||||||||||||||||
Ordinary | Ordinary | Paid-in | Comprehensive | (Cumulative | Shareholders’ | |||||||||||||||||||
Shares | Shares | Capital | Income(loss) | Deficit) | Equity | |||||||||||||||||||
Predecessor — Our Medical Services, Limited | RMB | RMB | RMB | RMB | RMB | |||||||||||||||||||
Balance as of January 1, 2007 | 50,000,000 | 41 | 45,779 | — | 88,444 | 134,264 | ||||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||
Net income | — | — | — | — | 19,430 | 19,430 | ||||||||||||||||||
Imputed interest on related parties’ loan (note 20) | — | — | 8 | — | — | 8 | ||||||||||||||||||
Balance as of October 30, 2007 | 50,000,000 | 41 | 45,787 | — | 107,874 | 153,702 | ||||||||||||||||||
Successor — Concord Medical Services Holdings, Limited | ||||||||||||||||||||||||
Reorganization (note 1) | — | — | 347,607 | — | (107,874 | ) | 239,733 | |||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||
Net loss | — | — | — | — | (48,326 | ) | (48,326 | ) | ||||||||||||||||
Foreign currency translation adjustments | — | — | — | 147 | — | 147 | ||||||||||||||||||
Total comprehensive income | — | — | — | — | — | (48,179 | ) | |||||||||||||||||
Imputed interest on related parties’ loan (note 20) | — | — | 96 | — | — | 96 | ||||||||||||||||||
Share-based compensation | — | — | 49,526 | — | — | 49,526 | ||||||||||||||||||
Balance as of December 31, 2007 | 50,000,000 | 41 | 443,016 | 147 | (48,326 | ) | 394,878 | |||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||
Net income | — | — | — | — | 79,069 | 79,069 | ||||||||||||||||||
Foreign currency translation adjustments | — | — | — | (3,969 | ) | — | (3,969 | ) | ||||||||||||||||
Total comprehensive income | — | — | — | — | — | 75,100 | ||||||||||||||||||
Imputed interest on related parties’ loan (note 20) | — | — | 2,991 | — | — | 2,991 | ||||||||||||||||||
Exercise of share options | 21,184,600 | 15 | 114,591 | — | — | 114,606 | ||||||||||||||||||
Redesignation of 756,500 ordinary shares to Series A contingently redeemable convertible preferred shares (note 15) | (756,500 | ) | (1 | ) | 1 | — | — | — | ||||||||||||||||
Share-based compensation | — | — | 4,215 | — | — | 4,215 | ||||||||||||||||||
Recognition of beneficial conversion feature upon issuance of Series A contingently redeemable convertible preferred shares | — | — | 253,317 | — | — | 253,317 | ||||||||||||||||||
Recognition of beneficial conversion feature upon issuance of Series B contingently redeemable convertible preferred shares | — | — | 295,019 | — | — | 295,019 | ||||||||||||||||||
Accretion of Series A contingently redeemable convertible preferred shares (note 14) | — | — | — | — | (270,343 | ) | (270,343 | ) | ||||||||||||||||
Accretion of Series B contingently redeemable convertible preferred shares (note 14) | — | — | — | — | (304,763 | ) | (304,763 | ) | ||||||||||||||||
Balance as of December 31, 2008 | 70,428,100 | 55 | 1,113,150 | (3,822 | ) | (544,363 | ) | 565,020 | ||||||||||||||||
Balance as of December 31, 2008, in US$ | 8 | 163,070 | (560 | ) | (79,746 | ) | 82,772 | |||||||||||||||||
F-9
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares)
1. | ORGANIZATION AND BASIS OF PRESENTATION |
Percentage of | ||||||||||||||
Date of | Place of | Ownership by the | ||||||||||||
Company | Establishment | Establishment | Company | Principal Activities | ||||||||||
Ascendium | September 10, 2007 | BVI | 100 | % | Investment Holding | |||||||||
OMS | August 22, 1996 | BVI | 100 | % | Investment Holding | |||||||||
China Medstar | August 8, 2003 | Singapore | 100 | % | Investment Holding | |||||||||
Cyber | May 26, 2006 | Hong Kong | 100 | % | Investment Holding | |||||||||
CMS Holdings | July 18, 2008 | Hong Kong | 100 | % | Investment Holding | |||||||||
AMS | July 23, 1997 | PRC | 100 | % | Leasing of medical equipment and provision of management services | |||||||||
AML | February 21, 2008 | PRC | 100 | % | Leasing of medical equipment and provision of management services | |||||||||
MSC | March 21, 2003 | PRC | 100 | % | Leasing and sales of medical equipment, provision of management services | |||||||||
CHM | July 23, 2008 | PRC | 100 | % | Provision of management services | |||||||||
XHF | July 26, 2007 | PRC | 100 | % | Provision of management services |
F-10
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
RMB | US$ | |||||||
Goodwill | 259,282 | 37,983 | ||||||
Current assets | 37,253 | 5,458 | ||||||
Property, plant and equipment | 53,786 | 7,879 | ||||||
Other intangible assets- customer relationships and operating leases | 132,000 | 19,337 | ||||||
Deposit for property, plant and equipment | 13,753 | 2,015 | ||||||
Deferred tax assets, non-current portion | 41,199 | 6,035 | ||||||
Deferred tax liabilities, non-current portion | (58,792 | ) | (8,612 | ) | ||||
Other non-current assets | 7,538 | 1,104 | ||||||
Liabilities assumed | (92,584 | ) | (13,563 | ) | ||||
Total consideration | 393,435 | 57,636 | ||||||
F-11
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-12
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
Category | Estimated useful life | Estimated residual value | ||||||
Medical equipment* | Shorter of customer contract or 6-20 years | — | ||||||
Electronic and office equipment | 5 years | 5-10 | % | |||||
Motor vehicles | 5 years | 5-10 | % | |||||
Leasehold improvement | shorter of lease term or 5 years | — |
* | The cost of the asset is amortized over the lease term. However, if ownership is transferred at the end of the lease term, the cost of the asset is amortized over the shorter of customer contract or the useful life of the asset which ranges from 6-20 years. |
F-13
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
F-14
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
F-15
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
F-16
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
F-17
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
F-18
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
3. | CONCENTRATION OF RISKS |
F-19
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
F-20
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
4. | ACQUISITIONS |
RMB | US$ | |||||||
Goodwill | 21,210 | 3,107 | ||||||
Current assets | 77,053 | 11,287 | ||||||
Long-term receivables | 9,397 | 1,377 | ||||||
Property, plant and equipment | 217,965 | 31,931 | ||||||
Other intangible assets- customer relationships and operating lease | 52,380 | 7,673 | ||||||
Deposit for property, plant and equipment | 83,505 | 12,233 | ||||||
Deferred tax assets, non-current portion | 23,089 | 3,382 | ||||||
Deferred tax liabilities, non-current portion | (12,529 | ) | (1,835 | ) | ||||
Liabilities assumed | (233,323 | ) | (34,180 | ) | ||||
Total consideration paid | 238,747 | 34,975 | ||||||
F-21
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
September 10, 2007 | ||||||||||||
to December 31, | For the Year Ended December 31, | |||||||||||
2007 | 2008 | |||||||||||
(successor) | (successor) | |||||||||||
RMB | RMB | US$ | ||||||||||
Revenues, net | 25,392 | 234,662 | 34,377 | |||||||||
Net (loss) income | (45,638 | ) | 106,626 | 15,620 | ||||||||
Net loss attributable to ordinary shareholders | (45,610 | ) | (603,628 | ) | (88,428 | ) | ||||||
Net loss per common share — basic and diluted | (0.91 | ) | (10.50 | ) | (1.54 | ) | ||||||
RMB | US$ | |||||||
Goodwill | 10,906 | 1,598 | ||||||
Current assets | 12,680 | 1,857 | ||||||
Property, plant and equipment | 15,288 | 2,239 | ||||||
Other intangible assets — customer contracts and customer relationships | 18,000 | 2,637 | ||||||
Liabilities assumed | (21,895 | ) | (3,207 | ) | ||||
Total cash consideration | 34,979 | 5,124 | ||||||
F-22
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
5. | ACCOUNTS RECEIVABLE |
December 31, | ||||||||||||
2007 | 2008 | 2008 | ||||||||||
(successor) | (successor) | (successor) | ||||||||||
RMB | RMB | US$ | ||||||||||
Accounts receivable | 22,818 | 96,602 | 14,152 | |||||||||
Allowance for doubtful accounts | (3,808 | ) | (3,830 | ) | (561 | ) | ||||||
Accounts receivable, net | 19,010 | 92,772 | 13,591 | |||||||||
Movement in allowance for doubtful accounts: | ||||||||||||
Balance at beginning of the period | 2,528 | 3,808 | 558 | |||||||||
Provisions | 1,280 | 22 | 3 | |||||||||
Balance at end of the period | 3,808 | 3,830 | 561 | |||||||||
6. | PREPAYMENT AND OTHER CURRENT ASSETS |
December 31, | ||||||||||||
2007 | 2008 | 2008 | ||||||||||
(successor) | (successor) | (successor) | ||||||||||
RMB | RMB | US$ | ||||||||||
Deposits to a hospital* | — | 15,000 | 2,197 | |||||||||
Prepayments to suppliers** | — | 9,953 | 1,458 | |||||||||
Advance to the hospitals | 2,217 | 2,568 | 376 | |||||||||
Deferred cost | — | 7,005 | 1,026 | |||||||||
Others | 3,915 | 9,040 | 1,325 | |||||||||
6,132 | 43,566 | 6,382 | ||||||||||
* | The amount represents an interest-free cash deposit paid to a customer hospital pursuant to the management service contract to which the deposit is repayable at the termination of the service contract (see note 25.) | |
** | The amount represents interest-free non-refundable partial payments to suppliers associated with contracts the Group enters into for the future scheduled delivery of medical equipment for sales. The remaining contractual obligations associated with these purchase contracts are approximately RMB4,200 (US$615) which is included in the amount disclosed as Purchase Commitments at note 22. The risk of loss arising from non-performance by or bankruptcy of the suppliers is assessed prior to ordering the equipment. To date, the Group has not experienced any loss on advances to suppliers. |
F-23
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
7. | PROPERTY, PLANT AND EQUIPMENT, NET |
December 31, | ||||||||||||
2007 | 2008 | 2008 | ||||||||||
(successor) | (successor) | (successor) | ||||||||||
RMB | RMB | US$ | ||||||||||
Medical equipment | 54,225 | 299,100 | 43,816 | |||||||||
Electronic and office equipment | 1,186 | 1,895 | 278 | |||||||||
Motor vehicles | 178 | 178 | 26 | |||||||||
Leasehold improvement and building improvement | 113 | 1,182 | 173 | |||||||||
Construction in progress | — | 65,029 | 9,526 | |||||||||
Total | 55,702 | 367,384 | 53,819 | |||||||||
Less: Accumulated depreciation | (999 | ) | (18,263 | ) | (2,675 | ) | ||||||
54,703 | 349,121 | 51,144 | ||||||||||
8. | OTHER INTANGIBLE ASSETS AND GOODWILL |
September 10, | ||||||||||||||||
2007 | ||||||||||||||||
January 1, 2007 to | to December 31, | For the Year Ended December 31, | ||||||||||||||
October 30, | 2007 | 2008 | ||||||||||||||
(predecessor) | (successor) | (successor) | (successor) | |||||||||||||
RMB | RMB | RMB | US$ | |||||||||||||
Balance at beginning of period | — | — | 259,282 | 37,983 | ||||||||||||
Goodwill recognized upon Reorganization (note 1) | — | 259,282 | — | — | ||||||||||||
Goodwill recognized upon acquisition of China Medstar | — | — | 21,209 | 3,107 | ||||||||||||
Goodwill recognized upon acquisition of XHF (note 4) | — | — | 10,906 | 1,598 | ||||||||||||
Goodwill recognized in other business acquisitions (note 4) | — | — | 8,766 | 1,284 | ||||||||||||
Balance at end of period | — | 259,282 | 300,163 | 43,972 | ||||||||||||
F-24
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
December 31, | ||||||||||||
2007 | 2008 | 2008 | ||||||||||
(successor) | (successor) | (successor) | ||||||||||
RMB | RMB | US$ | ||||||||||
Customer relationship intangibles — OMS (note 1) | 122,000 | 122,000 | 17,872 | |||||||||
Operating lease intangibles — OMS (note 1) | 10,000 | 10,000 | 1,465 | |||||||||
Customer relationship intangibles — China Medstar and other acquisitions (note 4) | — | 67,259 | 9,853 | |||||||||
Operating lease intangibles — China Medstar and other acquisitions (note 4) | — | 5,078 | 744 | |||||||||
Less: Accumulated amortization | (2,002 | ) | (22,499 | ) | (3,296 | ) | ||||||
129,998 | 181,838 | 26,638 | ||||||||||
Amortization | ||||||||
RMB | US$ | |||||||
2009 | 26,493 | 3,881 | ||||||
2010 | 26,815 | 3,928 | ||||||
2011 | 23,142 | 3,390 | ||||||
2012 | 23,142 | 3,390 | ||||||
2013 | 18,862 | 2,763 | ||||||
118,454 | 17,352 | |||||||
9. | DEPOSITS FOR NON-CURRENT ASSETS |
December 31, | ||||||||||||
2007 | 2008 | 2008 | ||||||||||
(successor) | (successor) | (successor) | ||||||||||
RMB | RMB | US$ | ||||||||||
Deposit for purchase of property, plant and equipment * | 9,461 | 128,749 | 18,861 | |||||||||
Deposit held by a related party ** | 15,904 | 17,630 | 2,583 | |||||||||
Other *** | — | 20,821 | 3,050 | |||||||||
25,365 | 167,200 | 24,494 | ||||||||||
* | Represents interest-free non-refundable partial payments to suppliers associated with contracts the Company enters into for the future scheduled delivery of medical equipment to customers. The remaining contractual obligations associated with these purchase contracts are approximately RMB50,220 (US$7,357) which is included in the amount disclosed as Purchase Commitments in Note 22. The risk of loss arising from non-performance by or bankruptcy of the suppliers is assessed prior to ordering the equipment. To date, the Group has not experienced any loss on deposit to suppliers. |
F-25
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
** | On October 31, 2007, the Group entered into a long-term sale and purchase agreement with Our Medical, under which the Group agreed to purchase gamma knife systems at agreed upon prices and Our Medical also agreed to provide the Group relevant maintenance and repair services and training. Our Medical is controlled by an individual who was a director of the Group until July 2009. | |
*** | The Group has entered into two distinct framework agreements with Chang’an Hospital Co. Ltd. (“Chang’an”) towards the development and construction of the following two medical facilities: |
• | On December 18, 2007, the Group entered into a framework agreement to build a proton treatment center in Beijing, pursuant to which the Group paid deposits to a subsidiary of Chang’an Information Industry (Group) Co., Ltd., (“Chang’an Information”) to be used towards the construction of the proton treatment center (“Beijing Proton Medical Center”). Total deposits paid as of December 31, 2008 pursuant to this arrangement amounted to RMB3,821 (US$560). | |
• | On July 1, 2008, the Group entered into a framework agreement with Chang’an to build a cancer center in northwest China, the Chang’an CMS International Cancer Center (“CCICC”) pursuant to which the Group paid security deposits to Chang’an totaling RMB17,000 (US$2,490), which were been recorded as a non-current deposit as of December 31, 2008. (See note 25.) |
10. | BANK BORROWINGS |
December 31, | ||||||||||
2007 | 2008 | 2008 | ||||||||
(successor) | (successor) | (successor) | ||||||||
RMB | RMB | US$ | ||||||||
Total bank borrowings | — | 112,760 | 16,519 | |||||||
Comprised of: | ||||||||||
Short-term | — | 20,800 | 3,047 | |||||||
Long-term, current portion | — | 39,840 | 5,836 | |||||||
— | 60,640 | 8,883 | ||||||||
Long-term, non-current portion | — | 52,120 | 7,636 | |||||||
— | 112,760 | 16,519 | ||||||||
F-26
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
11. | ACCRUED EXPENSES AND OTHER LIABILITIES |
December 31, | ||||||||||||
2007 | 2008 | 2008 | ||||||||||
(successor) | (successor) | (successor) | ||||||||||
RMB | RMB | US$ | ||||||||||
Accrued expenses | 3,013 | 3,772 | 553 | |||||||||
Salary and welfare payable | 2,152 | 2,650 | 388 | |||||||||
Business and other taxes payable | 4,879 | 9,339 | 1,368 | |||||||||
Unrecognized tax benefit and related interest and penalty (note 17) | 4,993 | 20,509 | 3,004 | |||||||||
Other accruals | 6,942 | 6,174 | 905 | |||||||||
21,979 | 42,444 | 6,218 | ||||||||||
12. | OBLIGATIONS UNDER CAPITAL LEASES |
Minimum Lease Payments | ||||||||
RMB | US$ | |||||||
2009 | 5,084 | 745 | ||||||
2010 | 3,781 | 554 | ||||||
2011 | 3,781 | 554 | ||||||
2012 | 3,781 | 554 | ||||||
2013 | 2,611 | 382 | ||||||
Total capital lease payments | 19,038 | 2,789 | ||||||
Less: imputed interest | (3,663 | ) | (537 | ) | ||||
15,375 | 2,252 | |||||||
Less: current portion | (3,719 | ) | (545 | ) | ||||
11,656 | 1,707 | |||||||
F-27
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
13. | CONVERTIBLE NOTES |
F-28
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
(Successor) | ||||
RMB | ||||
Balance as at September 10, 2007 | ||||
Issuance of Tranche A Convertible Notes | 36,523 | |||
Fair value loss | 341 | |||
Foreign exchange translation gain | (11 | ) | ||
Balance as at December 31, 2007 | 36,853 | |||
Issuance of Tranche B Convertible Notes | 140,241 | |||
Fair value loss | 464 | |||
Foreign exchange translation gain | (1,476 | ) | ||
Conversion to Series A Preferred Shares | (176,082 | ) | ||
Balance as at December 31, 2008 | — | |||
Balance as at December 31, 2008 in US$ | — | |||
14. | CONTINGENTLY REDEEMABLE CONVERTIBLE PREFERRED SHARES |
F-29
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
F-30
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
F-31
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
Series A | Series B | Total | ||||||||||
RMB | RMB | RMB | ||||||||||
Mezzanine equity — Balance as at December 31, 2007 | — | — | — | |||||||||
Conversion of Convertible Notes into Series A Preferred Shares | 176,082 | — | 176,082 | |||||||||
Issuance of Series A Preferred Shares | 70,120 | — | 70,120 | |||||||||
Less: Series A Preferred Shares issuance costs | (2,964 | ) | — | (2,964 | ) | |||||||
Issuance of Series B Preferred Shares | — | 411,021 | 411,021 | |||||||||
Less: Series B Preferred Shares issuance costs | — | (5,677 | ) | (5,677 | ) | |||||||
Redesignation of 756,500 ordinary shares to Series A Preferred Shares | 895 | — | 895 | |||||||||
Allocation of proceeds to beneficial conversion feature | (253,317 | ) | (295,019 | ) | (548,336 | ) | ||||||
Accretion of beneficial conversion feature | 253,317 | 295,019 | 548,336 | |||||||||
Accretion of 5% fixed dividend | 6,801 | 3,987 | 10,788 | |||||||||
Accretion to the redemption amount | 10,225 | 5,757 | 15,982 | |||||||||
Total | 261,159 | 415,088 | 676,247 | |||||||||
Mezzanine equity — Balance as at December 31, 2008 | 254,358 | 411,101 | 665,459 | |||||||||
Mezzanine equity — Balance as at December 31, 2008, in US$ | 37,262 | 60,224 | 97,486 | |||||||||
Dividend payable — Balance as at December 31, 2008 | 6,801 | 3,987 | 10,788 | |||||||||
Dividend payable — Balance at the end of December 31, 2008, in US$ | 996 | 584 | 1,580 | |||||||||
15. | SHAREHOLDERS’ EQUITY |
F-32
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
16. | RESTRICTED NET ASSETS |
17. | TAXATION |
F-33
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
January 1, 2007 to | September 10, 2007 | For the Year Ended | |||||||||||||||
October 30, 2007 | to December 31, 2007 | December 31, 2008 | |||||||||||||||
(predecessor) | (successor) | (successor) | |||||||||||||||
RMB | RMB | US$ | |||||||||||||||
Non — PRC | — | (54,205 | ) | (6,335 | ) | (928 | ) | ||||||||||
PRC | 34,444 | 5,697 | 108,739 | 15,929 | |||||||||||||
34,444 | (48,508 | ) | 102,404 | 15,001 | |||||||||||||
F-34
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
January 1, 2007 to | September 10, 2007 | For the Year Ended | |||||||||||||||
October 30, 2007 | to December 31, 2007 | December 31, 2008 | |||||||||||||||
(predecessor) | (successor) | (successor) | |||||||||||||||
RMB | RMB | US$ | |||||||||||||||
Current tax expense | 5,542 | 1,426 | 28,395 | 4,159 | |||||||||||||
Deferred tax expense (benefit) | 9,472 | (1,608 | ) | (5,060 | ) | (741 | ) | ||||||||||
15,014 | (182 | ) | 23,335 | 3,418 | |||||||||||||
January 1, 2007 to | September 10, 2007 | For the Year Ended | |||||||||||||||
October 30, 2007 | to December 31, 2007 | December 31, 2008 | |||||||||||||||
(predecessor) | (successor) | (successor) | |||||||||||||||
RMB | RMB | US$ | |||||||||||||||
Income (loss) before income taxes | 34,444 | (48,508 | ) | 102,404 | 15,001 | ||||||||||||
Income tax computed at applicable tax rates (33% or 25%) | 11,367 | (16,007 | ) | 25,601 | 3,750 | ||||||||||||
Effect of different tax rates in different jurisdictions | — | 17,887 | 1,548 | 227 | |||||||||||||
Non-deductible expenses | 234 | 57 | 1,181 | 173 | |||||||||||||
Effect of preferential tax rate | (6,328 | ) | (1,057 | ) | (8,684 | ) | (1,272 | ) | |||||||||
Effect of tax rate changes | 8,929 | (1,248 | ) | (378 | ) | (55 | ) | ||||||||||
Interest and penalty on unrecognized tax benefits | 812 | 186 | 4,067 | 595 | |||||||||||||
15,014 | (182 | ) | 23,335 | 3,418 | |||||||||||||
January 1, 2007 to | September 10, 2007 | For the Years Ended | ||||||||||||||
October 30, 2007 | to December 31, 2007 | December 31, 2008 | ||||||||||||||
(predecessor) | (successor) | (successor) | (successor) | |||||||||||||
RMB | RMB | RMB | US$ | |||||||||||||
Balance — beginning | 1,552 | 2,941 | 3,218 | 471 | ||||||||||||
Additions based on tax positions related to the current year | 1,389 | 277 | 7,393 | 1,083 | ||||||||||||
Addition arising from business acquisitions | — | — | 2,294 | 336 | ||||||||||||
Balance — end | 2,941 | 3,218 | 12,905 | 1,890 | ||||||||||||
F-35
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
January 1, 2007 to | September 10, 2007 | For the Years Ended | ||||||||||||||
October 30, 2007 | to December 31, 2007 | December 31, 2008 | ||||||||||||||
(predecessor) | (successor) | (successor) | (successor) | |||||||||||||
RMB | RMB | RMB | US$ | |||||||||||||
(amounts in thousands except for the per share data) | ||||||||||||||||
The aggregate amount | 5,676 | 1,488 | 8,684 | 1,272 | ||||||||||||
The aggregate effect on basic and diluted earnings per share: | ||||||||||||||||
-Basic | 0.11 | 0.03 | 0.15 | 0.02 | ||||||||||||
-Diluted | 0.11 | 0.03 | 0.15 | 0.02 | ||||||||||||
F-36
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
December 31, | ||||||||||||
2007 | 2008 | 2008 | ||||||||||
(successor) | (successor) | (successor) | ||||||||||
RMB(’000) | RMB(’000) | US$(’000) | ||||||||||
Deferred tax assets, current portion | ||||||||||||
Accrued expenses | 516 | 300 | 44 | |||||||||
Accounts receivable | 685 | 994 | 146 | |||||||||
Deferred revenue | — | 2,595 | 380 | |||||||||
1,201 | 3,889 | 570 | ||||||||||
Deferred tax liability, current portion | ||||||||||||
Deferred cost | — | (1,240 | ) | (182 | ) | |||||||
Deferred tax assets, current portion, net* | 1,201 | 2,649 | 388 | |||||||||
Deferred tax assets, non-current portion | ||||||||||||
Accounts receivable | — | 3,765 | 552 | |||||||||
Property, plant and equipment | 36,520 | 54,044 | 7,917 | |||||||||
Deferred revenue, non-current portion | 1,105 | 1,841 | 270 | |||||||||
Other | 530 | 595 | 87 | |||||||||
38,155 | 60,245 | 8,826 | ||||||||||
Deferred tax liabilities, non-current portion | ||||||||||||
Deferred cost | (1,240 | ) | (1,523 | ) | (223 | ) | ||||||
Intangible assets | (29,945 | ) | (44,750 | ) | (6,556 | ) | ||||||
Property, plant and equipment | (22,735 | ) | (21,400 | ) | (3,135 | ) | ||||||
(53,920 | ) | (67,673 | ) | (9,914 | ) | |||||||
Deferred tax assets, non-current portion, net ** | — | 12,650 | 1,853 | |||||||||
Deferred tax liabilities, non-current portion, net ** | (15,765 | ) | (20,078 | ) | (2,941 | ) | ||||||
* | As at December 31, 2007 and 2008, deferred tax assets, current portion of approximately nil and RMB1,240 (US$182) have been offset against deferred tax liabilities, current portion relating to a particular tax-paying component of an enterprise and within a particular tax jurisdiction, respectively. | |
** | As at December 31, 2007 and 2008, deferred tax assets, non-current portion of approximately RMB38,155 and RMB47,595 (US$6,972) have been offset against deferred tax liabilities, non-current portion relating to a particular tax-paying component of an enterprise and within a particular tax jurisdiction, respectively. |
F-37
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
18. | Other Income |
19. | Employee Share Options |
F-38
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
November 17, | August 18, | August 18, | ||||||||||
2007 | 2008 | 2008 | ||||||||||
(Successor) | (Successor) | (Successor) | ||||||||||
OMS Options | OMS Options | Concord Options | ||||||||||
Risk-free interest rate | 4.17 | % | 2.94 | % | 2.94 | % | ||||||
Dividend yield | — | — | — | |||||||||
Expected volatility range | 38.34 | % | 39.53 | % | 39.53 | % | ||||||
Sub optimal early exercise factor | 1.5 times | 1.5 times | 1.5 times |
F-39
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
Weighted | ||||||||||||||||||||
Average | ||||||||||||||||||||
Remaining | ||||||||||||||||||||
Share Options Granted to | Number of | Weighted-Average | Weighted-Average | Contractual | Aggregate Intrinsic | |||||||||||||||
Employees | Shares | Exercise Price | Grant-date Fair Value | Term (Years) | Value | |||||||||||||||
Outstanding, January 1, 2007 and October 30, 2007 | — | |||||||||||||||||||
Granted — OMS Options | 25,000,000 | US$ | 0.80 | US$ | 0.26 | 1.09 | — | |||||||||||||
Outstanding, December 31, 2007 | 25,000,000 | US$ | 0.80 | US$ | 0.26 | 1 | — | |||||||||||||
Expiration of OMS Options | (25,000,000 | ) | US$ | 0.80 | US$ | 0.26 | 0.39 | — | ||||||||||||
Grant of Concord Options | 21,184,600 | US$ | 0.79 | US$ | 0.25 | 0.38 | — | |||||||||||||
Exercised of Concord Options | (21,184,600 | ) | US$ | 0.79 | US$ | 0.25 | 0.38 | US$ | 10,793 | |||||||||||
Outstanding, December 31, 2008 | — | |||||||||||||||||||
F-40
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
20. | RELATED PARTY TRANSACTIONS |
Name of Related Parties | Relationship with the Group | |
Mr. Haifeng Liu | A relative of a shareholder of the Company | |
Mr. Jianyu Yang | Director and shareholder of the Company | |
Mr. Zheng Cheng | Director and shareholder of the Company | |
Mr. Yaw Kong Yap | Director and shareholder of the Company | |
Shenzhen Hai Ji Tai Technology Co., Ltd. (“Haijitai”) | A company owned by Mr. Haifeng Liu | |
Beijing Medstar Hi-Tech Investment Co., Ltd. (“Beijing Medstar”) | A company under the control of Mr. Zheng Cheng | |
Our Medical New Technology Co, Ltd (“Our Medical”) | A company under the control of Mr. Haifeng Liu |
January 1, 2007 to | September 10, 2007 | For the Year Ended | ||||||||||||||
October 30, 2007 | to December 31, 2007 | December 31, 2008 | ||||||||||||||
(predecessor) | (successor) | (successor) | (successor) | |||||||||||||
RMB | RMB | RMB | US$ | |||||||||||||
Short-term interest-free loans borrowed from: | ||||||||||||||||
Haijitai | — | 38,700 | — | — | ||||||||||||
Mr. Haifeng Liu | — | 4,000 | — | — | ||||||||||||
Mr. Jianyu Yang | — | 1,000 | 4,000 | 586 | ||||||||||||
Repayment of interest-free loans borrowed from: | ||||||||||||||||
Haijitai | — | — | 38,700 | 5,669 | ||||||||||||
Mr. Haifeng Liu | — | — | 2,000 | 293 | ||||||||||||
Mr. Jianyu Yang | — | — | 5,000 | 732 | ||||||||||||
Non-current deposits made to: | ||||||||||||||||
Our Medical | 11,521 | 706 | 1,726 | 253 |
F-41
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
As at December 31, | ||||||||||||
2007 | 2008 | 2008 | ||||||||||
(successor) | (successor) | (successor) | ||||||||||
RMB | RMB | US$ | ||||||||||
Amount due to related parties: | ||||||||||||
Haijitai | 38,700 | — | — | |||||||||
Beijing Medstar | — | 196 | 29 | |||||||||
Mr. Haifeng Liu | 4,000 | 2,000 | 293 | |||||||||
Mr. Jianyu Yang | 1,000 | — | — | |||||||||
Mr. Zheng Cheng | — | 1,351 | 198 | |||||||||
Mr. Yaw Kong Yap | — | 60 | 9 | |||||||||
43,700 | 3,607 | 529 | ||||||||||
Deposits held by a related party: | ||||||||||||
Our Medical | 15,904 | 17,630 | 2,583 | |||||||||
21. | EMPLOYEE DEFINED CONTRIBUTION PLAN |
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Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
22. | COMMITMENTS AND CONTINGENCIES |
RMB | US$ | |||||||
2009 | 2,700 | 396 | ||||||
2010 | 1,512 | 221 | ||||||
2011 | 1,191 | 174 | ||||||
2012 | 1,144 | 168 | ||||||
6,547 | 959 | |||||||
23. | SEGMENT REPORTING |
F-43
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
24. | INCOME (LOSS) PER SHARE |
January 1, 2007 to | September 10, 2007 | |||||||||||||||
October 30, 2007 | to December 31, 2007 | For the Year Ended December 31, | ||||||||||||||
(predecessor) | (successor) | (successor) | (successor) | |||||||||||||
RMB | RMB | RMB | US$ | |||||||||||||
(amounts in thousands except for the number of shares and per share data) | ||||||||||||||||
Numerator: | ||||||||||||||||
Net income (loss) attributable to ordinary shareholders used in calculating loss per ordinary share — basic and diluted | 19,430 | (48,326 | ) | (496,037 | ) | (72,667 | ) | |||||||||
Denominator: | ||||||||||||||||
Weighted average number of ordinary shares outstanding used in calculating basic and diluted loss per share | 50,000,000 | 50,000,000 | 57,481,400 | 57,481,400 | ||||||||||||
Basic and diluted income (loss) per share | 0.39 | (0.97 | ) | (8.63 | ) | (1.26 | ) | |||||||||
F-44
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
For the Year Ended | ||||
December 31, 2008 | ||||
(pro forma) | ||||
(successor) | ||||
RMB (unaudited) | ||||
Numerator | ||||
Net loss attributable to ordinary shareholders | (496,037 | ) | ||
Pro forma adjustments: | ||||
Series A contingently redeemable convertible preferred shares — accretion to redemption amount | 10,225 | |||
Series B contingently redeemable convertible preferred shares — accretion to redemption amount | 5,758 | |||
Net loss for pro forma basic and diluted loss per share | (480,054 | ) | ||
Denominator | ||||
Weighted average number of ordinary shares outstanding used in calculating basic loss per share | 57,481,400 | |||
Conversion of Series A preferred shares | 17,694,200 | |||
Conversion of Series B preferred shares | 23,333,200 | |||
Weighted average number of ordinary shares outstanding used in calculating basic and diluted loss per share | 98,508,800 | |||
Pro forma loss per share — basic and diluted | (4.87 | ) | ||
Pro forma loss per share — basic and diluted (in US$) | (0.71 | ) | ||
25. | ARRANGEMENT WITH CHANG’AN HOSPITAL CO., LTD. |
F-45
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
F-46
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
For The Year Ended December 31, | ||||||||||||
2007 | 2008 | 2008 | ||||||||||
RMB | RMB | US$ | ||||||||||
Management services revenue: | ||||||||||||
Medical Equipment Entrusted Management Agreement | 4,500 | 8,000 | 1,172 | |||||||||
Entrusted Management Contract | — | 2,000 | 293 | |||||||||
Total management services revenue | 4,500 | 10,000 | 1,465 | |||||||||
Accounts receivable due from Chang’an | 4,000 | 4,000 | 586 | |||||||||
As at December 31, | ||||||||||
2007 | 2008 | 2008 | ||||||||
RMB | RMB | US$ | ||||||||
Current — Entrusted Management Contract | — | 15,000 | 2,197 | |||||||
Non-current — Proton Center and CCICC | — | 20,821 | 3,050 | |||||||
Total | — | 35,821 | 5,247 | |||||||
26. | SUBSEQUENT EVENTS |
F-47
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
• | To distribute an interim dividend to the holders of the ordinary shares as at November 17, 2009 in the sum of (i) US$2,391,534 to the holders of the ordinary shares; and (ii) US$1,590,676 to the holders of the Series A and B Preferred Shares, such dividend to be payable in cash on or about November 27, 2009. | |
• | Amended the Articles of Association to reflect a 100-for-one stock split of the Company’s ordinary shares whereby each ordinary share of the Company is subdivided into 100 shares at a par value of US$0.0001. All shares and per share amounts presented in the accompanying consolidated financial statements have been revised on a retroactive basis to reflect the effect of the share split. The par value per ordinary share has been retroactively revised as if it had been adjusted in proportion to the100-for-one share split. | |
• | Amended the Company’s 2008 Share Incentive Plan, to increase the total number of ordinary shares that may be issued under the 2008 Share Incentive Plan from 1,321,800 ordinary shares to 4,765,800 ordinary shares. |
27. | PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION |
As at December 31, | ||||||||||||
2007 | 2008 | 2008 | ||||||||||
(successor) | (successor) | (successor) | ||||||||||
RMB | RMB | US$ | ||||||||||
ASSETS | ||||||||||||
Current Assets: | ||||||||||||
Cash | — | 274,515 | 40,215 | |||||||||
Amount due from subsidiary | 36,523 | 167,140 | 24,485 | |||||||||
Total current assets | 36,523 | 441,655 | 64,700 | |||||||||
Non-Current Assets: | ||||||||||||
Investment in subsidiaries | 395,208 | 763,010 | 111,777 | |||||||||
Deposit for non-current assets | — | 37,746 | 5,529 | |||||||||
Total assets | 431,731 | 1,242,411 | 182,006 | |||||||||
F-48
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
As at December 31, | ||||||||||||
2007 | 2008 | 2008 | ||||||||||
(successor) | (successor) | (successor) | ||||||||||
RMB | RMB | US$ | ||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
Current Liabilities: | ||||||||||||
Accrued expenses and other liabilities | — | 529 | 78 | |||||||||
Amounts due to subsidiaries | — | 615 | 90 | |||||||||
Dividend payable | — | 10,788 | 1,580 | |||||||||
Total current liabilities | — | 11,932 | 1,748 | |||||||||
Non-Current Liabilities: | ||||||||||||
Convertible loan | 36,853 | — | — | |||||||||
Total liabilities | 36,853 | 11,932 | 1,748 | |||||||||
Commitments and Contingencies | ||||||||||||
Series A contingently redeemable convertible preferred shares (par value of US$0.01 per share; Authorized — nil and 200,000 shares as at December 31, 2007 and 2008, respectively; Issued and outstanding — nil and 176,942 shares as at December 31, 2007 and 2008, respectively. As at December 31, 2008, aggregate liquidation preference and redemption amounts were US$54,573 and US$38,147, respectively (2007-nil)) | — | 254,358 | 37,262 | |||||||||
Series B contingently redeemable convertible preferred shares (par value of US$0.01 per share; Authorized — nil and 300,000 shares as at December 31, 2007 and 2008, respectively; Issued and outstanding — nil and 233,332 shares as at December 31, 2007 and 2008, respectively. As at December 31, 2008, aggregate liquidation preference and redemption amounts were US$90,583 and US$61,390, respectively (2007-nil)) | — | 411,101 | 60,224 | |||||||||
Shareholders’ Equity: | ||||||||||||
Ordinary shares (par value of US$0.0001 per share as at December 31, 2007 and 2008, respectively; Authorized — 450,000,000 shares as at December 31, 2007 and 2008; Issued and outstanding — 50,000,000 and 70,428,100 shares as at December 31, 2007 and 2008, respectively) | 41 | 55 | 8 | |||||||||
Additional paid-in capital | 443,016 | 1,113,150 | 163,070 | |||||||||
Accumulated other comprehensive income (loss) | 147 | (3,822 | ) | (560 | ) | |||||||
Retained earnings | (48,326 | ) | (544,363 | ) | (79,746 | ) | ||||||
Total shareholders’ equity | 394,878 | 565,020 | 82,772 | |||||||||
Total liabilities, preferred shares and shareholders’ equity | 431,731 | 1,242,411 | 182,006 | |||||||||
F-49
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
September 10, 2007 | For the Years Ended | |||||||||||
to December 31, 2007 | December 31, 2008 | |||||||||||
(successor) | (successor) | |||||||||||
RMB | RMB | US$ | ||||||||||
Revenues | — | — | — | |||||||||
Cost of revenues | — | — | — | |||||||||
General and administrative expenses | (53,862 | ) | (4,593 | ) | (673 | ) | ||||||
Operating loss | (53,862 | ) | (4,593 | ) | (673 | ) | ||||||
Equity in profit of subsidiaries | 5,877 | 84,731 | 12,413 | |||||||||
Interest income | — | 364 | 53 | |||||||||
Interest expense | — | (895 | ) | (131 | ) | |||||||
Change in fair value of convertible note | (341 | ) | (464 | ) | (68 | ) | ||||||
Exchange loss | — | (74 | ) | (11 | ) | |||||||
Net (loss) income | (48,326 | ) | 79,069 | 11,583 | ||||||||
Accretion of Series A contingently redeemable convertible preferred shares | — | (270,343 | ) | (39,604 | ) | |||||||
Accretion of Series B contingently redeemable convertible preferred shares | — | (304,763 | ) | (44,646 | ) | |||||||
Net loss attributable to ordinary shareholders | (48,326 | ) | (496,037 | ) | (72,667 | ) | ||||||
F-50
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
For the Period from | ||||||||||||
September 10, to | For the Year Ended December 31, | |||||||||||
December 31, 2007 | 2008 | 2008 | ||||||||||
(successor) | (successor) | (successor) | ||||||||||
RMB | RMB | US$ | ||||||||||
Net cash generated from operating activities | — | 526 | 77 | |||||||||
Net cash used in investing activities | — | (448,224 | ) | (65,662 | ) | |||||||
Net cash generated from financing activities | — | 727,849 | 106,626 | |||||||||
Exchange rate effect on cash | — | (5,636 | ) | (826 | ) | |||||||
Net increase in cash | — | 274,515 | 40,215 | |||||||||
Cash at beginning of the year | — | — | — | |||||||||
Cash at end of the year | — | 274,515 | 40,215 | |||||||||
Supplemental schedule of non-cash activities: | ||||||||||||
Conversion of convertible notes into Series A contingently redeemable convertible preferred shares | — | 176,082 | 25,795 | |||||||||
Proceeds from convertible notes paid directly to a subsidiary of the Company | 36,523 | — | — | |||||||||
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Table of Contents
As at | Pro Forma as at | |||||||||||||||||||||||
December 31, | September 30, | September 30, | ||||||||||||||||||||||
Note | 2008* | 2009 | 2009 | 2009 | 2009 | |||||||||||||||||||
RMB | RMB | US$ | RMB | US$ | ||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Cash | 353,991 | 285,703 | 41,854 | 250,276 | 36,664 | |||||||||||||||||||
Restricted cash, current portion | 5 | — | 2,012 | 295 | ||||||||||||||||||||
Accounts receivable (net of allowance of RMB3,830 (US$561) as of December 31, 2008 and September 30, 2009) | 92,772 | 119,127 | 17,451 | |||||||||||||||||||||
Prepayment and other current assets | 43,566 | 56,869 | 8,331 | �� | ||||||||||||||||||||
Deferred tax assets, current portion | 2,649 | 2,776 | 407 | |||||||||||||||||||||
Total current assets | 492,978 | 466,487 | 68,338 | |||||||||||||||||||||
Non-Current Assets: | ||||||||||||||||||||||||
Restricted cash, non-current portion | 5 | — | 5,233 | 767 | ||||||||||||||||||||
Property, plant and equipment, net | 3 | 349,121 | 557,433 | 81,661 | ||||||||||||||||||||
Goodwill | 300,163 | 300,163 | 43,972 | |||||||||||||||||||||
Acquired intangible assets, net | 181,838 | 161,450 | 23,652 | |||||||||||||||||||||
Deposits for non-current assets | 4 | 167,200 | 147,851 | 21,659 | ||||||||||||||||||||
Deferred tax assets, non-current portion | 12,650 | 12,648 | 1,853 | |||||||||||||||||||||
Other non-current assets | 10,445 | 10,782 | 1,578 | |||||||||||||||||||||
Deferred initial public offering expenses | — | 11,207 | 1,642 | |||||||||||||||||||||
Total assets | 1,514,395 | 1,673,254 | 245,122 | |||||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||||||
Short-term bank borrowing | 5 | 20,800 | 30,000 | 4,395 | ||||||||||||||||||||
Long-term bank borrowings, current portion | 5 | 39,840 | 44,880 | 6,575 | ||||||||||||||||||||
Accounts payable | 9,741 | 9,744 | 1,427 | |||||||||||||||||||||
Accrual for purchase of property, plant and equipment | 1,881 | 25,839 | 3,785 | |||||||||||||||||||||
Obligations under capital leases, current portion | 3,719 | 3,582 | 525 | |||||||||||||||||||||
Accrued expenses and other liabilities | 42,444 | 44,221 | 6,479 | |||||||||||||||||||||
Income tax payable | 17,041 | 22,864 | 3,349 | |||||||||||||||||||||
Deferred revenue, current portion | 12,656 | 13,395 | 1,962 | |||||||||||||||||||||
Payable for acquisition of business components | 28,016 | 6,500 | 952 | |||||||||||||||||||||
Dividends payable | 6 | 10,788 | 35,428 | 5,190 | — | — | ||||||||||||||||||
Amounts due to related parties | 10 | 3,607 | 1,607 | 235 | ||||||||||||||||||||
Total current liabilities | 190,533 | 238,060 | 34,874 | |||||||||||||||||||||
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Table of Contents
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares)
As at | ||||||||||||||||||||||||
December 31 | As at September 30, | Pro Forma as at September 30, | ||||||||||||||||||||||
Note | 2008* | 2009 | 2009 | 2009 | 2009 | |||||||||||||||||||
RMB | RMB | US$ | RMB | US$ | ||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Non-Current Liabilities: | ||||||||||||||||||||||||
Long-term bank borrowings, non-current portion | 5 | 52,120 | 104,912 | 15,369 | ||||||||||||||||||||
Deferred revenue, non-current portion | 6,314 | 5,470 | 801 | |||||||||||||||||||||
Obligations under capitalized leases, non-current portion | 11,656 | 8,719 | 1,277 | |||||||||||||||||||||
Lease deposit | 3,215 | 3,269 | 479 | |||||||||||||||||||||
Deferred tax liabilities, non-current portion | 20,078 | 18,189 | 2,665 | |||||||||||||||||||||
Total liabilities | 283,916 | 378,619 | 55,465 | |||||||||||||||||||||
Commitments and Contingencies | 12 | |||||||||||||||||||||||
Series A contingently redeemable convertible preferred shares (par value of US$0.01 per share; Authorized — 200,000 shares as at December 31, 2008 and September 30, 2009; Issued and outstanding — 176,942 shares as at December 31, 2008 and September 30, 2009; pro forma nil (unaudited)) | 6 | 254,358 | 269,017 | 39,410 | ||||||||||||||||||||
Series B contingently redeemable convertible preferred shares (par value of US$0.01 per share; Authorized — 300,000 shares as at December 31, 2008 and September 30, 2009; Issued and outstanding — 233,332 shares as at December 31, 2008 and September 30, 2009; pro forma nil (unaudited)) | 6 | 411,101 | 434,036 | 63,584 | ||||||||||||||||||||
Shareholders’ Equity: | ||||||||||||||||||||||||
Ordinary shares (par value of US$0.0001 per share at December 31, 2008 and September 30, 2009; Authorized — 450,000,000 shares at December 31, 2008 and September 30, 2009; Issued and outstanding — 70,428,100 shares at December 31, 2008 and September 30, 2009, 111,455,500 shares for pro forma) | 55 | 55 | 8 | 83 | 12 | |||||||||||||||||||
Additional paid-in capital | 1,113,150 | 1,113,204 | 163,078 | 1,816,229 | 266,068 | |||||||||||||||||||
Accumulated other comprehensive loss | (3,822 | ) | (4,037 | ) | (592 | ) | (4,037 | ) | (592 | ) | ||||||||||||||
Accumulated deficit | (544,363 | ) | (517,640 | ) | (75,831 | ) | (517,640 | ) | (75,831 | ) | ||||||||||||||
Total shareholders’ equity | 565,020 | 591,582 | 86,663 | 1,294,635 | 189,657 | |||||||||||||||||||
Total liabilities and shareholders’ equity | 1,514,395 | 1,673,254 | 245,122 | |||||||||||||||||||||
* | Amounts for the year ended December 31, 2008 were derived from the December 31, 2008 audited consolidated financial statements. |
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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
Note | For the Nine Months Ended September 30, | |||||||||||||||
2008 | 2009 | 2009 | ||||||||||||||
RMB | RMB | US$ | ||||||||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||||||
Revenues, Net of Business Tax, Value-Added Tax and Related Surcharges: | ||||||||||||||||
Lease and management services | 94,296 | 184,937 | 27,092 | |||||||||||||
Management services | 7,519 | 20,096 | 2,944 | |||||||||||||
Other, net | 178 | 624 | 91 | |||||||||||||
Total net revenues | 101,993 | 205,657 | 30,127 | |||||||||||||
Cost of Revenues: | ||||||||||||||||
Lease and management services | (14,671 | ) | (42,144 | ) | (6,174 | ) | ||||||||||
Amortization of acquired intangibles | (13,671 | ) | (20,388 | ) | (2,987 | ) | ||||||||||
Management services | (19 | ) | (9 | ) | (1 | ) | ||||||||||
Total cost of revenues | (28,361 | ) | (62,541 | ) | (9,162 | ) | ||||||||||
Gross profit | 73,632 | 143,116 | 20,965 | |||||||||||||
Operating Expenses: | ||||||||||||||||
Selling expenses | (3,275 | ) | (4,463 | ) | (654 | ) | ||||||||||
General and administrative expenses | (12,468 | ) | (19,687 | ) | (2,884 | ) | ||||||||||
Operating Income | 57,889 | 118,966 | 17,427 | |||||||||||||
Interest expense (including related party amounts of RMB2,425 and RMB 54 (US$8) for the nine months ended September 30, 2008 and 2009, respectively) | 10 | (5,293 | ) | (4,880 | ) | (715 | ) | |||||||||
Change in fair value of convertible notes | (464 | ) | — | — | ||||||||||||
Foreign exchange loss | (13 | ) | (218 | ) | (32 | ) | ||||||||||
Gain from disposal of equipment | 392 | — | — | |||||||||||||
Interest income | 116 | 823 | 121 | |||||||||||||
Income before income taxes | 52,627 | 114,691 | 16,801 | |||||||||||||
Income tax expense | 8 | (12,611 | ) | (25,734 | ) | (3,770 | ) | |||||||||
Net income | 40,016 | 88,957 | 13,031 | |||||||||||||
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Table of Contents
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
For the Nine Months Ended September 30, | ||||||||||||||||
Note | 2008 | 2009 | 2009 | |||||||||||||
RMB | RMB | USD | ||||||||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||||||
Accretion of Series A contingently redeemable convertible preferred shares | 6 | (262,286 | ) | (23,851 | ) | (3,494 | ) | |||||||||
Accretion of Series B contingently redeemable convertible preferred shares | 6 | — | (38,383 | ) | (5,623 | ) | ||||||||||
Net (loss) income attributable to ordinary shareholders | (222,270 | ) | 26,723 | 3,914 | ||||||||||||
Income (loss) per share Basic and diluted | 14 | (3.67 | ) | 0.38 | 0.06 | |||||||||||
Weighted Average Number of Ordinary Shares Outstanding: | ||||||||||||||||
Basic and diluted shares | 14 | 60,621,700 | 70,428,100 | 70,428,100 | ||||||||||||
Pro forma income per share Basic and diluted on an as converted basis | 14 | 0.80 | 0.12 | |||||||||||||
Weighted Average Number of Ordinary Shares Outstanding Used in Computation of: | ||||||||||||||||
Pro forma basic and diluted on an as converted basis | 14 | 111,455,500 | 111,455,500 | |||||||||||||
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For the Nine Months Ended September 30, | ||||||||||||
2008 | 2009 | 2009 | ||||||||||
RMB | RMB | US$ | ||||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
Net income | 40,016 | 88,957 | 13,031 | |||||||||
Adjustments to reconcile net income to net cash generated from operating activities: | ||||||||||||
Share-based compensation | 4,215 | — | — | |||||||||
Imputed interest on amounts due to related parties (note 10) | 2,425 | 54 | 8 | |||||||||
Depreciation of property, plant and equipment | 9,413 | 35,101 | 5,142 | |||||||||
Amortization of acquired intangible assets | 13,671 | 20,388 | 2,987 | |||||||||
Gain on disposal of equipment | (392 | ) | — | — | ||||||||
Deferred tax benefit | (2,830 | ) | (2,014 | ) | (295 | ) | ||||||
Change in fair value of convertible notes | 464 | — | — | |||||||||
Interest expense | 895 | — | — | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Increase in accounts receivable | (12,623 | ) | (26,355 | ) | (3,861 | ) | ||||||
Increase in prepayments and other current assets | (49,570 | ) | (10,828 | ) | (1,586 | ) | ||||||
Increase in other non-current assets | (500 | ) | (1,035 | ) | (152 | ) | ||||||
Increase in accounts payable | 340 | 3 | — | |||||||||
Increase (decrease) in accrued expenses and other liabilities | 16,057 | (5,543 | ) | (812 | ) | |||||||
Increase (decrease) in deferred revenue | 5,898 | (105 | ) | (15 | ) | |||||||
Decrease in lease deposit | 12 | 54 | 8 | |||||||||
(Decrease) increase in income tax payable | (121 | ) | 5,823 | 853 | ||||||||
Net cash generated from operating activities | 27,370 | 104,500 | 15,308 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
Purchase of subsidiaries, net of cash acquired | (219,163 | ) | (21,534 | ) | (3,155 | ) | ||||||
Deposits with Chang’an Hospital and its affiliated companies (note 15) | (300 | ) | (11,800 | ) | (1,729 | ) | ||||||
Acquisition of property, plant and equipment | (12,439 | ) | (74,033 | ) | (10,845 | ) | ||||||
Deposits for the purchase of non-current assets | (71,406 | ) | (116,059 | ) | (17,002 | ) | ||||||
Proceeds from disposal of property, plant and equipment | 2,616 | — | — | |||||||||
Net cash used in investing activities | (300,692 | ) | (223,426 | ) | (32,731 | ) | ||||||
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For the Nine Months Ended September 30, | ||||||||||||
2008 | 2009 | 2009 | ||||||||||
RMB | RMB | US$ | ||||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
Proceeds from issuance of convertible notes | 140,241 | — | — | |||||||||
Proceeds from issuance of Series A contingently redeemable convertible preferred shares (net of paid issuance costs of RMB2,449) | 67,671 | — | — | |||||||||
Payment of issuance cost of convertible shares | — | (529 | ) | (77 | ) | |||||||
Payment of deferred initial public offering costs | — | (3,355 | ) | (491 | ) | |||||||
Proceeds from short-term bank borrowings | — | 19,000 | 2,783 | |||||||||
Proceeds from long-term bank borrowings | — | 128,780 | 18,866 | |||||||||
Repayment of obligations under capitalized leases | (2,703 | ) | (3,074 | ) | (450 | ) | ||||||
Repayment of long-term bank borrowings | (17,260 | ) | (70,948 | ) | (10,393 | ) | ||||||
Repayment of short-term bank borrowings | — | (9,800 | ) | (1,436 | ) | |||||||
Increase in amounts due to related parties | (11,000 | ) | (2,000 | ) | (293 | ) | ||||||
Increase in restricted cash | — | (7,245 | ) | (1,061 | ) | |||||||
Proceeds from exercise of share options | 101,458 | — | — | |||||||||
Net cash generated from financing activities | 278,407 | 50,829 | 7,448 | |||||||||
Exchange rate effect on cash | (5,949 | ) | (191 | ) | (29 | ) | ||||||
Net decrease in cash | (864 | ) | (68,288 | ) | (10,004 | ) | ||||||
Cash at beginning of period | 39,792 | 353,991 | 51,858 | |||||||||
Cash at end of period | 38,928 | 285,703 | 41,854 | |||||||||
Supplemental schedule of cash flows information: | ||||||||||||
Income tax paid | (7,346 | ) | (20,787 | ) | (3,045 | ) | ||||||
Interest paid | (1,671 | ) | (4,771 | ) | (699 | ) | ||||||
Supplemental schedule of non-cash activities: | ||||||||||||
Acquisition of property, plant and equipment included in accrual for purchase of property, plant and equipment | — | 18,957 | 2,777 | |||||||||
Acquisition of property, plant and equipment through utilization of deposits | 14,712 | 152,181 | 22,294 | |||||||||
Conversion of convertible notes into Series A contingently redeemable convertible preferred shares | 176,082 | — | — |
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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”))
Accumulated | Retained | |||||||||||||||||||||||
Number of | Additional | Other | Earnings | Total | ||||||||||||||||||||
Ordinary | Ordinary | Paid-in | Comprehensive | (Cumulative | Shareholders’ | |||||||||||||||||||
Shares | Shares | Capital | Income(loss) | Deficit) | Equity | |||||||||||||||||||
RMB | RMB | RMB | RMB | RMB | RMB | |||||||||||||||||||
Balance as of December 31, 2007 | 50,000,000 | 41 | 443,016 | 147 | (48,326 | ) | 394,878 | |||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||
Net income | — | — | — | — | 40,016 | 40,016 | ||||||||||||||||||
Foreign currency translation adjustments | — | — | — | (5,810 | ) | — | (5,810 | ) | ||||||||||||||||
Total comprehensive income | 34,206 | |||||||||||||||||||||||
Imputed interest on related parties’ loan (note 10) | — | — | 2,425 | — | — | 2,425 | ||||||||||||||||||
Exercise of share options | 21,184,600 | 15 | 114,591 | — | — | 114,606 | ||||||||||||||||||
Redesignation of 756,500 ordinary shares to Series A contingently redeemable convertible preferred shares | (756,500 | ) | (1 | ) | 1 | — | — | — | ||||||||||||||||
Share-based compensation | — | — | 4,215 | — | — | 4,215 | ||||||||||||||||||
Recognition of beneficial conversion feature upon issuance of Series A contingently redeemable convertible preferred shares | — | — | 253,317 | — | — | 253,317 | ||||||||||||||||||
Accretion of Series A contingently redeemable convertible preferred shares (note 6) | — | — | — | — | (262,286 | ) | (262,286 | ) | ||||||||||||||||
Balance as of September 30, 2008 | 70,428,100 | 55 | 817,565 | (5,663 | ) | (270,596 | ) | 541,361 | ||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||
Net income | — | — | — | — | 39,053 | 39,053 | ||||||||||||||||||
Foreign currency translation adjustments | — | — | — | 1,841 | — | 1,841 | ||||||||||||||||||
Total comprehensive income | 40,894 | |||||||||||||||||||||||
Imputed interest on related parties’ loan | — | — | 566 | — | — | 566 | ||||||||||||||||||
Recognition of beneficial conversion feature upon issuance of Series B contingently redeemable convertible preferred shares | — | — | 295,019 | — | — | 295,019 | ||||||||||||||||||
Accretion of Series A contingently redeemable convertible preferred shares | — | — | — | — | (8,057 | ) | (8,057 | ) | ||||||||||||||||
Accretion of Series B contingently redeemable convertible preferred shares | — | — | — | — | (304,763 | ) | (304,763 | ) | ||||||||||||||||
Balance as of December 31, 2008 | 70,428,100 | 55 | 1,113,150 | (3,822 | ) | (544,363 | ) | 565,020 | ||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||
Net income | — | — | — | — | 88,957 | 88,957 | ||||||||||||||||||
Foreign currency translation adjustments | — | — | — | (215 | ) | — | (215 | ) | ||||||||||||||||
Total comprehensive income | 88,742 | |||||||||||||||||||||||
Imputed interest on related parties’ loan (note 10) | — | — | 54 | — | — | 54 | ||||||||||||||||||
Accretion of Series A contingently redeemable convertible preferred shares (note 6) | — | — | — | — | (23,851 | ) | (23,851 | ) | ||||||||||||||||
Accretion of Series B contingently redeemable convertible preferred shares (note 6) | — | — | — | — | (38,383 | ) | (38,383 | ) | ||||||||||||||||
Balance as of September 30, 2009 | 70,428,100 | 55 | 1,113,204 | (4,037 | ) | (517,640 | ) | 591,582 | ||||||||||||||||
Balance as of September 30, 2009, in US$ | 8 | 163,078 | (590 | ) | (75,831 | ) | 86,664 | |||||||||||||||||
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amount in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares)
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amount in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
• | In April 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”)805-20, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies” to amend SFAS 141 (revised 2007) “Business Combinations.” ASC805-20 addresses the initial recognition, measurement and subsequent accounting for assets and liabilities arising from contingencies in a business combination, and requires that such assets acquired or liabilities assumed be initially recognized at fair value at the acquisition date if fair value can be determined during the measurement period. If the acquisition-date fair value cannot be determined, the asset acquired or liability assumed arising from a contingency is recognized only if certain criteria are met. ASC805-20 also requires that a systematic and rational basis for subsequently measuring and accounting for the assets or liabilities be developed depending on their nature. The Company does not anticipate that the adoption of this statement will have a material impact on its consolidated financial statements, absent any material business combinations. | |
• | In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140” (“SFAS 166”). SFAS 166 seeks to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. Specifically, SFAS 166 eliminates the concept of a qualifying special-purpose entity, creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies other sale-accounting criteria, and changes the initial measurement of a transferor’s interest in transferred financial assets. The Company does not anticipate that the adoption of this statement will have a material impact on its consolidated financial statements. | |
• | In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”). SFAS 167 amends FASB Interpretation No. 46(R), “Variable Interest Entities” for determining whether an entity is a variable interest entity (“VIE”) and requires an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a VIE. Under SFAS 167, an enterprise has a controlling financial interest when it has a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. SFAS 167 also requires an enterprise to assess whether it has an implicit financial responsibility to ensure that a VIE operates as designed when determining whether it has power to direct the activities of the VIE that most significantly impact the entity’s economic performance. SFAS 167 also requires ongoing assessments of whether an enterprise is the primary beneficiary of a VIE, requires enhanced disclosures and eliminates the scope exclusion for qualifying special-purpose entities. The Company is currently evaluating the impact the adoption of SFAS 167 will have on its consolidated financial statements. | |
• | In June 2009, the FASB issuedASC 105-10, “Generally Accepted Accounting Principles,” previously referenced as FASB Statement No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162. This statement modifies the Generally Accepted Accounting Principles (“GAAP”) hierarchy by establishing only two levels of GAAP, authoritative and nonauthoritative accounting literature. Effective July 2009, the FASB Accounting Standards CodificationTM (“ASC”), also known collectively as the “Codification,” is considered |
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amount in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
the single source of authoritative U.S. accounting and reporting standards, except for additional authoritative rules and interpretive releases issued by the SEC. Nonauthoritative guidance and literature would include, among other things, FASB Concepts Statements, American Institute of Certified Public Accountants Issue Papers and Technical Practice Aids and accounting textbooks. The Codification was developed to organize U.S. GAAP pronouncements by topic so that users can more easily access authoritative accounting guidance. It is organized by topic, subtopic, section, and paragraph, each of which is identified by a numerical designation. This statement applies beginning in third quarter 2009. All accounting references have been updated, and therefore U.S. GAAP standards have been replaced with ASC references. This standard had no impact on the Company’s financial position, results of operations or cash flows. |
• | In August 2009, the FASB issued Accounting Standards UpdateNo. 2009-5, “Measuring Liabilities at Fair Value” (“ASU2009-05”). ASU2009-05 amends Accounting Standards Codification Topic 820, “Fair Value Measurements.” Specifically, ASU2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following methods: 1) a valuation technique that uses a) the quoted price of the identical liability when traded as an asset or b) quoted prices for similar liabilities or similar liabilities when traded as assetsand/or 2) a valuation technique that is consistent with the principles of Topic 820 of the Accounting Standards Codification (e.g. an income approach or market approach). ASU2009-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to adjust to include inputs relating to the existence of transfer restrictions on that liability. The Company does not anticipate that the adoption of this statement will have a material impact on its consolidated financial statements. | |
• | In September 2009, the Emerging Issues Task Force (EITF) reached final consensus on ASC605-25, “Revenue Arrangements with Multiple Deliverables.” ASC605-25 addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting, and how the arrangement consideration should be allocated among the separate units of accounting.EITF 08-1 may be applied retrospectively or prospectively for new or materially modified arrangements and early adoption is permitted. The Company does not anticipate that the adoption of this statement will have a material impact on its consolidated financial statements. |
2. | BUSINESS COMBINATION |
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amount in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
Nine Months Ended September 30, 2008 | ||||||||
RMB | US$ | |||||||
Revenues, net | 164,867 | 24,152 | ||||||
Net income | 67,573 | 9,899 | ||||||
Net loss attributable to ordinary shareholders | (194,274 | ) | (28,460 | ) | ||||
Net loss per common share — basic and diluted | (3.20 | ) | (0.47 | ) | ||||
3. | PROPERTY, PLANT AND EQUIPMENT, NET |
December 31, | ||||||||||||
2008 | September 30, 2009 | |||||||||||
RMB | RMB | US$ | ||||||||||
(unaudited) | (unaudited) | |||||||||||
Medical equipment | 299,100 | 524,514 | 76,838 | |||||||||
Electronic and office equipment | 1,895 | 2,154 | 316 | |||||||||
Motor vehicles | 178 | 520 | 76 | |||||||||
Leasehold improvement and building improvement | 1,182 | 2,552 | 375 | |||||||||
Construction in progress | 65,029 | 79,883 | 11,702 | |||||||||
Total | 367,384 | 609,623 | 89,307 | |||||||||
Less: Accumulated depreciation | (18,263 | ) | (52,190 | ) | (7,646 | ) | ||||||
349,121 | 557,433 | 81,661 | ||||||||||
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amount in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
4. | DEPOSITS FOR NON-CURRENT ASSETS |
December 31, 2008 | September 30, 2009 | |||||||||||
RMB | RMB | US$ | ||||||||||
(unaudited) | (unaudited) | |||||||||||
Deposit for purchase of property, plant and equipment* | 128,749 | 98,822 | 14,477 | |||||||||
Deposit held by a related party ** | 17,630 | 16,420 | 2,405 | |||||||||
Other *** | 20,821 | 32,609 | 4,777 | |||||||||
167,200 | 147,851 | 21,659 | ||||||||||
* | Represents interest-free non-refundable partial payments to suppliers associated with contracts the Group enters into for the future scheduled delivery of medical equipment to customers. As at September 30, 2009, the remaining contractual obligations associated with these purchase contracts are approximately RMB102,688 (US$15,043) which is included in the amount disclosed as Purchase commitments in note 12. The risk of loss arising from non-performance by or bankruptcy of the suppliers is assessed prior to ordering the equipment. To date, the Group has not experienced any loss on deposit to suppliers. | |
** | On October 31, 2008, the Group entered into a long-term sale and purchase agreement with Our Medical New Technology, under which the Group agreed to purchase gamma knife systems at agreed upon prices and Our Medical New Technology also agreed to provide the Group relevant maintenance and repair services and training. Our Medical New Technology is controlled by an individual who is a relative of a shareholder of the company. (See note 10.) | |
*** | The Group has entered into two distinct framework agreements with Chang’an Hospital Co. Ltd. (“Chang’an”) and Chang’an Information Industry (Group) Co., Ltd., (“Chang’an Information”) towards the development and construction of the following two medical facilities: |
5. | BANK BORROWINGS |
December 31, 2008 | September 30, 2009 | |||||||||||
RMB | RMB | US$ | ||||||||||
(unaudited) | (unaudited) | |||||||||||
Total bank borrowings | 112,760 | 179,792 | 26,339 | |||||||||
Comprised of: | ||||||||||||
Short-term | 20,800 | 30,000 | 4,395 | |||||||||
Long-term, current portion | 39,840 | 44,880 | 6,575 | |||||||||
60,640 | 74,880 | 10,970 | ||||||||||
Long-term, non-current portion | 52,120 | 104,912 | 15,369 | |||||||||
112,760 | 179,792 | 26,339 | ||||||||||
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amount in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
6. | CONTINGENTLY REDEEMABLE CONVERTIBLE PREFERRED SHARES |
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amount in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
7. | RESTRICTED NET ASSETS |
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amount in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
8. | TAXATION |
9. | EMPLOYEE SHARE OPTIONS |
10. | RELATED PARTY TRANSACTIONS |
Name of Related Parties | Relationship with the Group | |
Mr. Haifeng Liu | A relative of shareholder of the Company | |
Mr. Jianyu Yang | Director and shareholder of the Company | |
Mr. Zheng Cheng | Director and shareholder of the Company | |
Mr. Yaw Kong Yap | Director and shareholder of the Company | |
Shenzhen Hai Ji Tai Technology Co., Ltd. (“Haijitai”) | A company owned by Mr. Haifeng Liu | |
Beijing Medstar Hi-Tech Investment Co., Ltd. (“Beijing Medstar”) | A company under the control of Mr. Zheng Cheng | |
Our Medical New Technology Co., Ltd (“Our Medical”) | A company under the control of Mr. Haifeng Liu |
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amount in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
b) | The Group had the following related party transactions for the nine months ended September 30, 2008 and 2009: |
Nine Months Ended September 30, | ||||||||||||
2008 | 2009 | |||||||||||
RMB | RMB | US$ | ||||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||
Short-term interest-free loans borrowed from: | ||||||||||||
Mr. Jianyu Yang | 4,000 | — | — | |||||||||
Repayment of interest-free loans borrowed from: | ||||||||||||
Haijitai | 12,000 | — | — | |||||||||
Mr. Jianyu Yang | 3,000 | — | — | |||||||||
Mr. Haifeng Liu | — | 2,000 | 293 | |||||||||
Non-current deposits made to: | ||||||||||||
Our Medical | 126 | 11,442 | 1,676 | |||||||||
Purchase of radioactive material source through utilization of non-current deposits from : | ||||||||||||
Our Medical | — | 12,652 | 1,853 |
December 31, 2008 | September 30, 2009 | |||||||||||
RMB | ||||||||||||
RMB | US$ | |||||||||||
(unaudited) | (unaudited) | |||||||||||
Amount due to related parties: | ||||||||||||
Beijing Medstar | 196 | 196 | 28 | |||||||||
Mr. Haifeng Liu | 2,000 | — | — | |||||||||
Mr. Zheng Cheng | 1,351 | 1,351 | 198 | |||||||||
Mr. Yaw Kong Yap | 60 | 60 | 9 | |||||||||
3,607 | 1,607 | 235 | ||||||||||
Deposits held by a related party: | ||||||||||||
Our Medical | 17,630 | 16,420 | 2,405 | |||||||||
11. | EMPLOYEE DEFINED CONTRIBUTION PLAN |
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amount in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
12. | COMMITMENTS AND CONTINGENCIES |
RMB | US$ | |||||||
Three months ended December 31, | ||||||||
2009 | 1,336 | 196 | ||||||
Year ended December 31, | ||||||||
2010 | 5,148 | 754 | ||||||
2011 | 4,763 | 698 | ||||||
2012 | 2,305 | 338 | ||||||
13,552 | 1,986 | |||||||
13. | SEGMENT REPORTING |
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amount in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
14. | (LOSS) INCOME PER SHARE (UNAUDITED) |
Nine Months Ended September 30, | ||||||||||||
2008 | 2009 | |||||||||||
(amounts in thousands except for the number of shares and per share data) | ||||||||||||
RMB | RMB | US$ | ||||||||||
Numerator: | ||||||||||||
Net (loss) income attributable to ordinary shareholders used in calculating loss per ordinary share — basic and diluted | (222,270 | ) | 26,723 | 3,914 | ||||||||
Denominator: | ||||||||||||
Weighted average number of ordinary shares outstanding used in calculating basic and diluted loss per share | 60,621,700 | 70,428,100 | 70,428,100 | |||||||||
Basic and diluted (loss) income per share | (3.67 | ) | 0.38 | 0.06 | ||||||||
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amount in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
For the Nine | ||||
Months Ended | ||||
September 30, | ||||
2009 | ||||
(pro forma) | ||||
RMB | ||||
(amounts in | ||||
thousands except | ||||
for the number of | ||||
shares and per | ||||
share data) | ||||
Numerator | ||||
Net income attributable to ordinary shareholders | 26,723 | |||
Pro forma adjustments: | ||||
Series A contingently redeemable convertible preferred shares — accretion to redemption amount | 23,851 | |||
Series B contingently redeemable convertible preferred shares — accretion to redemption amount | 38,383 | |||
Net income for pro forma basic and diluted income per share | 88,957 | |||
Denominator | ||||
Weighted average number of ordinary shares outstanding used in calculating basic income per share | 70,428,100 | |||
Conversion of Series A preferred shares | 17,694,200 | |||
Conversion of Series B preferred shares | 23,333,200 | |||
Weighted average number of ordinary shares outstanding used in calculating basic and diluted income per share | 111,455,500 | |||
Pro forma income per share — basic and diluted | 0.80 | |||
Pro forma income per share — basic and diluted (in US$) | 0.12 | |||
15. | ARRANGEMENT WITH CHANG’AN HOSPITAL CO., LTD. |
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amount in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amount in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
Nine Months Ended September 30, | ||||||||||||
2008 | 2009 | 2009 | ||||||||||
RMB | RMB | US$ | ||||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||
Management services revenue: | ||||||||||||
Medical Equipment Entrusted Management Agreement | 6,135 | 10,921 | 1,600 | |||||||||
Entrusted Management Contract | — | 9,024 | 1,322 | |||||||||
Lease and management service revenue: | — | 2,036 | 298 | |||||||||
Total revenue | 6,135 | 21,981 | 3,220 | |||||||||
Accounts receivable due from Chang’an | 4,000 | 21,981 | 3,220 | |||||||||
December 31, | September 30, | September 30, | ||||||||||
2008 | 2009 | 2009 | ||||||||||
RMB | RMB | US$ | ||||||||||
(unaudited) | (unaudited) | |||||||||||
Current — Entrusted Management Contract | 15,000 | 15,000 | 2,197 | |||||||||
Non-current — Proton Center and CCICC | 20,821 | 32,615 | 4,778 | |||||||||
Total | 35,821 | 47,615 | 6,975 | |||||||||
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amount in thousands of Renminbi (“RMB”) and United States Dollar (“US$”),
except for number of shares) — (Continued)
16. | SUBSEQUENT EVENTS |
• | To distribute an interim dividend to the holders of the ordinary shares as at November 17, 2009 in the sum of (i) US$2,391,534 to the holders of the ordinary shares; and (ii) US$1,590,676 to the holders of the Series A and B Preferred Shares, such dividend to be payable in cash on or about November 27, 2009. | |
• | Amended the Articles of Association to reflect a 100-for-one stock split of the Company’s ordinary shares whereby each ordinary share of the Company is subdivided into 100 shares at a par value of US$0.0001. All shares and per share amounts presented in the accompanying consolidated financial statements have been revised on a retroactive basis to reflect the effect of the share split. The par value per ordinary share has been retroactively revised as if it had been adjusted in proportion to the100-for-one share split. | |
• | Amended the Company’s 2008 Share Incentive Plan, to increase the total number of ordinary shares that may be issued under the 2008 Incentive Plan from 1,321,800 ordinary shares to 4,765,800 ordinary shares |
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As at | ||||||||||||||||
December 31, | As at July 31, | |||||||||||||||
Notes | 2007 | 2008 | 2008 | |||||||||||||
RMB | RMB | US$ | ||||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash | 25,926 | 19,584 | 2,869 | |||||||||||||
Accounts receivable | 21,038 | 49,731 | 7,285 | |||||||||||||
Prepayment and other current assets | 4 | 3,780 | 7,477 | 1,095 | ||||||||||||
Deferred tax assets | 8 | 58 | 261 | 38 | ||||||||||||
Current assets held for sale | 9 | 4,410 | — | — | ||||||||||||
Total current assets | 55,212 | 77,053 | 11,287 | |||||||||||||
Non-current assets: | ||||||||||||||||
Property, plant and equipment, net | 5 | 216,918 | 284,699 | 41,707 | ||||||||||||
Deposits for property, plant and equipment | 58,678 | 83,505 | 12,233 | |||||||||||||
Deferred tax assets | 8 | 7,747 | 7,526 | 1,103 | ||||||||||||
Non-current assets held for sale | 9 | 316 | — | — | ||||||||||||
Other non-current assets | 8,435 | 7,229 | 1,059 | |||||||||||||
Total assets | 347,306 | 460,012 | 67,389 | |||||||||||||
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As at | ||||||||||||||||
December 31, | As at July 31, | |||||||||||||||
Notes | 2007 | 2008 | 2008 | |||||||||||||
RMB | RMB | US$ | ||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Short-term bank borrowings | 6 | 21,500 | 21,500 | 3,150 | ||||||||||||
Long-term bank borrowings, current portion | 6 | 12,623 | 19,320 | 2,830 | ||||||||||||
Accounts payable | 6,733 | 30,238 | 4,430 | |||||||||||||
Accrual for purchase of property, plant and equipment | 192 | 8,595 | 1,259 | |||||||||||||
Accrued expenses and other liabilities | 7 | 7,032 | 20,825 | 3,051 | ||||||||||||
Income tax payable | 3,605 | 4,743 | 694 | |||||||||||||
Deferred revenue, current portion | 737 | 4,622 | 677 | |||||||||||||
Current liabilities of discontinued operation | 9 | 90 | — | — | ||||||||||||
Amounts due to related parties | 11 | 1,591 | 13,881 | 2,033 | ||||||||||||
Total current liabilities | 54,103 | 123,724 | 18,124 | |||||||||||||
Non-current liabilities: | ||||||||||||||||
Long-term bank borrowings, non-current portion | 6 | 89,600 | 103,070 | 15,099 | ||||||||||||
Deferred revenue, non-current portion | 3,683 | 3,344 | 490 | |||||||||||||
Lease deposits | 2,118 | 3,185 | 467 | |||||||||||||
Total liabilities | 149,504 | 233,323 | 34,180 | |||||||||||||
Commitments and contingencies | 13 | |||||||||||||||
Minority interests | 2,179 | — | — | |||||||||||||
Shareholders’ equity: | ||||||||||||||||
Share capital (Issued and outstanding — 27,564,138 shares as at December 31, 2007 and July 31, 2008; nil par value) | 1 | 129,557 | 129,557 | 18,979 | ||||||||||||
Additional paid-in capital | 19,237 | 21,962 | 3,218 | |||||||||||||
Accumulated other comprehensive loss | (929 | ) | (682 | ) | (100 | ) | ||||||||||
Retained earnings | 47,758 | 75,852 | 11,112 | |||||||||||||
Total shareholders’ equity | 195,623 | 226,689 | 33,209 | |||||||||||||
Total liabilities and shareholders’ equity | 347,306 | 460,012 | 67,389 | |||||||||||||
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Year Ended | ||||||||||||||||
December 31, | Seven Month Period Ended | |||||||||||||||
Notes | 2007 | July 31, 2008 | ||||||||||||||
RMB | RMB | US$ | ||||||||||||||
Revenues, net of business tax, value-added tax and related surcharge: | ||||||||||||||||
Lease and management services | 65,357 | 48,745 | 7,141 | |||||||||||||
Management services | — | 7,980 | 1,169 | |||||||||||||
Other, net | 3,094 | 6,148 | 900 | |||||||||||||
Total net revenues | 68,451 | 62,873 | 9,210 | |||||||||||||
Cost of revenues: | ||||||||||||||||
Lease and management services | (23,484 | ) | (14,806 | ) | (2,169 | ) | ||||||||||
Management services | — | (63 | ) | (9 | ) | |||||||||||
Others | (4,781 | ) | — | — | ||||||||||||
Total cost of revenues | (28,265 | ) | (14,869 | ) | (2,178 | ) | ||||||||||
Gross profit | 40,186 | 48,004 | 7,032 | |||||||||||||
Operating expenses: | ||||||||||||||||
Selling expenses | (2,911 | ) | (1,581 | ) | (232 | ) | ||||||||||
General and administrative expenses | (17,224 | ) | (8,340 | ) | (1,221 | ) | ||||||||||
Operating profit | 20,051 | 38,083 | 5,579 | |||||||||||||
Interest income | 351 | 32 | 5 | |||||||||||||
Interest expense | (5,204 | ) | (1,585 | ) | (233 | ) | ||||||||||
Loss from disposal of property, plant and equipment | (400 | ) | — | — | ||||||||||||
Foreign exchange loss | (49 | ) | (230 | ) | (34 | ) | ||||||||||
Other expenses | (5 | ) | (200 | ) | (29 | ) | ||||||||||
Income from continuing operations before income taxes | 14,744 | 36,100 | 5,288 | |||||||||||||
Income tax expense | 8 | (922 | ) | (8,445 | ) | (1,237 | ) | |||||||||
Income from continuing operations | 13,822 | 27,655 | 4,051 | |||||||||||||
Discontinued operations: | ||||||||||||||||
Loss from discontinued operations, net of taxes | 9 | (193 | ) | (683 | ) | (100 | ) | |||||||||
Gain on disposal of discontinued operations, net of taxes | 9 | — | 1,122 | 164 | ||||||||||||
(Loss) gain from discontinued operations | (193 | ) | 439 | 64 | ||||||||||||
Net income | 13,629 | 28,094 | 4,115 | |||||||||||||
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Year Ended | ||||||||||||
December 31, | Seven Month Period Ended | |||||||||||
2007 | July 31, 2008 | |||||||||||
RMB | RMB | US$ | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
Net income | 13,629 | 28,094 | 4,115 | |||||||||
Add/less: net loss (income) from discontinued operations | 193 | (439 | ) | (64 | ) | |||||||
Income from continuing operations | 13,822 | 27,655 | 4,051 | |||||||||
Adjustments to reconcile income from continuing operations to net cash generated from operating activities: | ||||||||||||
Share-based compensation | 1,529 | 2,725 | 399 | |||||||||
Depreciation and amortization | 23,180 | 14,857 | 2,176 | |||||||||
Loss on disposal of property, plant and equipment | 400 | — | — | |||||||||
Deferred tax (benefit) expense | (4,776 | ) | 18 | 3 | ||||||||
Changes in operating assets and liabilities: | ||||||||||||
Increase in accounts receivable | (11,196 | ) | (28,694 | ) | (4,204 | ) | ||||||
Increase in prepayment and other current assets | (803 | ) | (1,083 | ) | (159 | ) | ||||||
Decrease in other non-current assets | 10,613 | 1,205 | 177 | |||||||||
(Decrease) increase in accounts payable and note payables | (1,803 | ) | 23,506 | 3,444 | ||||||||
Increase in accrued expenses and other liabilities | 270 | 1,964 | 288 | |||||||||
(Decrease) increase in deferred revenue | (826 | ) | 3,545 | 519 | ||||||||
Increase in amounts due to related parties | 188 | 108 | 16 | |||||||||
Increase in long term lessee deposits | 117 | 1,068 | 156 | |||||||||
(Decrease) increase in income tax payable | (762 | ) | 1,138 | 167 | ||||||||
Net cash generated from operating activities from continuing operations | 29,953 | 48,012 | 7,033 | |||||||||
Net cash used in operating activities from discontinued operations | (4,684 | ) | 413 | 61 | ||||||||
Net cash generated from operating activities | 25,269 | 48,425 | 7,094 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
Acquisition of property, plant and equipment, net of related payables | (19,661 | ) | (26,351 | ) | (3,860 | ) | ||||||
Deposits for the purchase of property, plant and equipment | (81,637 | ) | (72,713 | ) | (10,652 | ) | ||||||
Proceeds from disposal of fixed assets | 158 | — | — | |||||||||
Net cash used in investing activities from continuing operations | (101,140 | ) | (99,064 | ) | (14,512 | ) | ||||||
Net cash used in investing activities from discontinued operations | (317 | ) | (77 | ) | (11 | ) | ||||||
Net cash used in investing activities | (101,457 | ) | (99,141 | ) | (14,523 | ) | ||||||
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Year Ended | Seven Month Period | |||||||||||
December 31, | January 1 to | |||||||||||
2007 | July 31, 2008 | |||||||||||
RMB | RMB | US$ | ||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
Decrease in restricted cash | 10,500 | — | — | |||||||||
Proceeds from short-term bank borrowings | 21,500 | — | — | |||||||||
Proceeds from long-term bank borrowings | 135,200 | 53,780 | 7,878 | |||||||||
Loans from Ascendium and other unrelated parties (note 7) | — | 12,000 | 1,758 | |||||||||
Loans from related party | — | 12,274 | 1,798 | |||||||||
Repayment of long-term bank borrowings | (103,985 | ) | (33,613 | ) | (4,924 | ) | ||||||
Repayment of short-term bank borrowings | (14,222 | ) | — | — | ||||||||
Net cash used in financing activities from continuing operations | 48,993 | 44,441 | 6,510 | |||||||||
Net cash generated from financing activities from discontinued operations | 2,350 | — | — | |||||||||
Net cash generated from financing activities | 51,343 | 44,441 | 6,510 | |||||||||
Exchange rate effect on cash | 3,384 | (67 | ) | (10 | ) | |||||||
Net decrease in cash | (21,461 | ) | (6,342 | ) | (929 | ) | ||||||
Cash at beginning of the year | 47,387 | 25,926 | 3,798 | |||||||||
Cash at end of the year | 25,926 | 19,584 | 2,869 | |||||||||
Supplemental schedule of cash flow information: | ||||||||||||
Income tax paid | (4,502 | ) | (5,979 | ) | (876 | ) | ||||||
Interest paid | (5,204 | ) | (1,585 | ) | (232 | ) | ||||||
Supplemental schedule of non-cash activities: | ||||||||||||
Acquisition of property, plant and equipment included in accrued expenses and other liabilities | — | 8,403 | 1,231 | |||||||||
Acquisition of property, plant and equipment and other intangible assets through utilization of deposits | 75,809 | 47,885 | 7,015 |
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Accumulated | ||||||||||||||||||||||||
Number of | Additional | Other | Total | |||||||||||||||||||||
Ordinary | Share | Paid-In | Comprehensive | Retained | Shareholder’s | |||||||||||||||||||
Shares | Capital | Capital | Income (Loss) | Earnings | Equity | |||||||||||||||||||
RMB | RMB | RMB | RMB | RMB | ||||||||||||||||||||
Balance as of January 1, 2007 | 27,564,138 | 129,557 | 17,708 | (353 | ) | 34,129 | 181,041 | |||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||
Net income | — | — | — | — | 13,629 | 13,629 | ||||||||||||||||||
Foreign currency translation adjustments | — | — | — | (576 | ) | — | (576 | ) | ||||||||||||||||
Total comprehensive income | 13,053 | |||||||||||||||||||||||
Share-based compensation (note 10) | — | — | 1,529 | — | — | 1,529 | ||||||||||||||||||
Balance as of December 31, 2007 | 27,564,138 | 129,557 | 19,237 | (929 | ) | 47,758 | 195,623 | |||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||
Net income | — | — | — | — | 28,094 | 28,094 | ||||||||||||||||||
Foreign currency translation adjustments | — | — | — | 247 | — | 247 | ||||||||||||||||||
Total comprehensive income | 28,341 | |||||||||||||||||||||||
Share-based compensation (note 10) | — | 2,725 | — | — | 2,725 | |||||||||||||||||||
Balance as of July 31, 2008 | 27,564,138 | 129,557 | 21,962 | (682 | ) | 75,852 | 226,689 | |||||||||||||||||
Balance as of July 31, 2008, in US$ | 18,979 | 3,218 | (100 | ) | 11,112 | 33,209 | ||||||||||||||||||
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1. | ORGANIZATION AND BASIS OF PRESENTATION |
Percentage of Ownership by the Company | ||||||||||||||||||
Date of | Place of | December 31, | July 31, | |||||||||||||||
Company | Establishment | Establishment | 2007 | 2008 | Principal Activities | |||||||||||||
MSC | March 21, 2003 | PRC | 100% | 100% | Leasing and sales of medical equipment, provision of management services | |||||||||||||
Anti-Aging | September 29, 2007 | PRC | 53% | — | Provision of technology and consultancy services |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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Category | Estimated Useful Life | Estimated Residual Value | |||||
Medical equipment | Shorter of customer contract or 6-12 years | — | |||||
Electronic and office equipment | 5 years | 5-10 | % | ||||
Leasehold improvement | Shorter of lease term or 5 years | — |
* | The cost of the asset is amortized over the lease term. However, if ownership is transferred at the end of the lease term, the cost of the asset is amortized over the shorter of customer contract or 6-12 years. |
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3. | CONCENTRATION OF RISKS |
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4. | PREPAYMENT AND OTHER CURRENT ASSETS |
As at December 31, | As at July 31, | |||||||||||
2007 | 2008 | 2008 | ||||||||||
RMB | RMB | US$ | ||||||||||
Advance to suppliers | 2,564 | 2,564 | 376 | |||||||||
Receivable arising from disposal of a subsidiary (note 9) | — | 2,950 | 432 | |||||||||
Others | 1,216 | 1,963 | 287 | |||||||||
3,780 | 7,477 | 1,095 | ||||||||||
5. | PROPERTY, PLANT AND EQUIPMENT, NET |
As at December 31, | As at July 31 | |||||||||||
2007 | 2008 | 2008 | ||||||||||
RMB | RMB | US$ | ||||||||||
Medical equipment | 210,176 | 286,581 | 41,983 | |||||||||
Electronic and office equipment | 448 | 448 | 66 | |||||||||
Leasehold improvement and building improvement | 528 | 528 | 77 | |||||||||
Construction in progress | 73,485 | 79,718 | 11,678 | |||||||||
Total | 284,637 | 367,275 | 53,804 | |||||||||
Less: Accumulated depreciation | (67,719 | ) | (82,576 | ) | (12,097 | ) | ||||||
216,918 | 284,699 | 41,707 | ||||||||||
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6. | BANK BORROWINGS |
As at December 31, | As at July 31 | |||||||||||
2007 | 2008 | 2008 | ||||||||||
RMB | RMB | US$ | ||||||||||
Short-term | 21,500 | 21,500 | 3,150 | |||||||||
Long-term, current portion | 12,623 | 19,320 | 2,830 | |||||||||
34,123 | 40,820 | 5,980 | ||||||||||
Long-term, non-current portion | 89,600 | 103,070 | 15,099 | |||||||||
123,723 | 143,890 | 21,079 | ||||||||||
7. | ACCRUED EXPENSES AND OTHER LIABILITIES |
As at December 31, | As at July 31 | |||||||||||
2007 | 2008 | 2008 | ||||||||||
RMB | RMB | US$ | ||||||||||
Unrecognized tax benefit and related interest and penalty (note 8) | 2,692 | 4,056 | 594 | |||||||||
Loans from Ascendium and other unrelated parties* | — | 12,000 | 1,758 | |||||||||
Others | 4,340 | 4,769 | 699 | |||||||||
7,032 | 20,825 | 3,051 | ||||||||||
* | The amount represents interest-free loans borrowed from an unrelated party. Such loan is for working capital purpose and is repayable on demand. The balance was settled by the end of December 31, 2008. |
8. | TAXATION |
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Period From | ||||||||||||
Year Ended December 31, | January 1 to July 31, | |||||||||||
2007 | 2008 | |||||||||||
RMB | RMB | US$ | ||||||||||
Non-PRC | (9,175 | ) | (3,392 | ) | (497 | ) | ||||||
PRC | 23,919 | 39,492 | 5,785 | |||||||||
14,744 | 36,100 | 5,288 | ||||||||||
Year Ended | Period From | |||||||||||
December 31, | January 1 to July 31, | |||||||||||
2007 | 2008 | |||||||||||
RMB | RMB | US$ | ||||||||||
Current tax expense | 5,698 | 8,427 | 1,234 | |||||||||
Deferred tax (benefit) expense | (4,776 | ) | 18 | 3 | ||||||||
922 | 8,445 | 1,237 | ||||||||||
Year Ended | Period From | |||||||||||
December 31, | January 1 to July 31, | |||||||||||
2007 | 2008 | |||||||||||
RMB | RMB | US$ | ||||||||||
Income from continuing operations before income taxes | 14,744 | 36,100 | 5,288 | |||||||||
Income tax computed at applicable tax rates (33% or 25%) | 4,866 | 9,025 | 1,322 | |||||||||
Non-deductible expenses | 3,285 | 1,572 | 230 | |||||||||
Effect of preferential tax rate | (6,431 | ) | (3,009 | ) | (441 | ) | ||||||
Effect of tax rate changes | (1,137 | ) | 168 | 25 | ||||||||
Interest and penalty on unrecognized tax benefits | 339 | 689 | 101 | |||||||||
922 | 8,445 | 1,237 | ||||||||||
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Unrecognized Tax Benefits | ||||||||
RMB(’000) | US$(’000) | |||||||
Balance — January 1, 2007 | 1,192 | 175 | ||||||
Additions based on tax positions related to the current year | 427 | 62 | ||||||
Balance — December 31, 2007 | 1,619 | 237 | ||||||
Additions based on tax positions related to the current period | 675 | 99 | ||||||
Balance — July 31, 2008 | 2,294 | 336 | ||||||
As at December 31, | As at July 31, | |||||||||||
2007 | 2008 | |||||||||||
RMB | RMB | US$ | ||||||||||
Deferred tax assets, current portion | ||||||||||||
Accounts receivable | — | 216 | 32 | |||||||||
Deferred revenue | 58 | 45 | 6 | |||||||||
Deferred tax assets, current portion, net | 58 | 261 | 38 | |||||||||
Deferred tax assets, non-current portion | ||||||||||||
Accounts receivable | 4,917 | 3,810 | 558 | |||||||||
Deferred cost, non-current portion | (1,664 | ) | (1,198 | ) | (175 | ) | ||||||
Property, plant and equipment | 4,174 | 4,642 | 680 | |||||||||
Deferred revenue, non-current portion | 320 | 272 | 40 | |||||||||
Deferred tax assets, non-current portion, net | 7,747 | 7,526 | 1,103 | |||||||||
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9. | DISCONTINUED OPERATIONS |
As at December 31, | ||||
2007 | ||||
RMB | ||||
Current assets held for sale | ||||
Cash | 4,211 | |||
Prepayment and other current assets | 199 | |||
Current assets held for sale | 4,410 | |||
Non-current assets held for sale | ||||
Property, plant and equipment, net | 316 | |||
Current liabilities | ||||
Accrued expenses and other liabilities | 90 | |||
10. | SHARE BASED COMPENSATION |
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Weighted-Average | Weighted Average | |||||||||||||||||||
Share Options | Weighted-Average | Grant-Date Fair | Remaining | Aggregated | ||||||||||||||||
granted to | Exercise Price | Value | Contractual Term | Intrinsic Value | ||||||||||||||||
employees | Number of Shares | (GB pound) | (GB pound) | (Years) | (GB pound) | |||||||||||||||
Outstanding, January 1, 2007 | 872,853 | 0.78 | 0.36 | 9.9 | — | |||||||||||||||
Outstanding, January 1, 2008 | 872,853 | 0.78 | 0.36 | 8.9 | — | |||||||||||||||
Cancellation | (872,853 | ) | 0.78 | 0.36 | 8.3 | — | ||||||||||||||
Outstanding, July 31, 2008 | — | |||||||||||||||||||
Risk-free interest rate | 4.7 | % | ||||||
Dividend yield | Nil | |||||||
Expected volatility range | 37 | % | ||||||
Expected life | 6.5 years |
11. | RELATED PARTY TRANSACTIONS |
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Name of related parties | Relationship with the Group | |
Mr. Zheng Cheng | Director of the Company | |
Mr. Yap Yaw Kong | Director of the Company | |
Beijing Medstar Hi-Tech Investment Co., Ltd. (“Beijing Medstar”) | A company under the control of a director of the Company |
As at December 31, | As at July 31, | |||||||||||
2007 | 2008 | |||||||||||
RMB | RMB | US$ | ||||||||||
Amount due to related parties: | ||||||||||||
Beijing Medstar | 196 | 196 | 29 | |||||||||
Mr. Zheng Cheng | 1,191 | 1,191 | 174 | |||||||||
Mr. Yap Yaw Kong | 204 | 220 | 32 | |||||||||
Ascendium | — | 12,274 | 1,798 | |||||||||
1,591 | 13,881 | 2,033 | ||||||||||
12. | EMPLOYEE DEFINED CONTRIBUTION PLAN |
13. | COMMITMENTS AND CONTINGENCIES |
RMB | US$ | |||||||
Period from August 1 to December 31, 2008 | 866 | 127 | ||||||
2009 | 1,362 | 199 | ||||||
2010 | 94 | 14 | ||||||
2,322 | 340 | |||||||
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for the Year Ended December 31, 2008
(Amounts in thousands of Renminbi (“RMB”) except for number of shares)
Pro forma | Pro forma | |||||||||||||||||||
Concord Medical | China Medstar | Adjustment | Notes | Combined | ||||||||||||||||
For the seven | ||||||||||||||||||||
For the Year Ended | month period | |||||||||||||||||||
December 31, | ended July 31, | |||||||||||||||||||
2008 | 2008 | 2008 | ||||||||||||||||||
RMB | RMB | RMB | RMB | |||||||||||||||||
Revenue, net of business tax, value-added tax and related surcharges: | ||||||||||||||||||||
Lease and management services | 155,061 | 48,745 | 203,806 | |||||||||||||||||
Management services | 12,677 | 7,980 | 20,657 | |||||||||||||||||
Other, net | 4,051 | 6,148 | 10,199 | |||||||||||||||||
Total net revenues | 171,789 | 62,873 | 234,662 | |||||||||||||||||
Cost of revenue: | ||||||||||||||||||||
Lease and management services | (25,046 | ) | (14,806 | ) | 5,624 | (1 | ) | (34,228 | ) | |||||||||||
Amortization of acquired intangibles | (20,497 | ) | — | (5,743 | ) | (1 | ) | (26,240 | ) | |||||||||||
Management services | (54 | ) | (63 | ) | (117 | ) | ||||||||||||||
Total cost of sales | (45,597 | ) | (14,869 | ) | (60,585 | ) | ||||||||||||||
Gross profit | 126,192 | 48,004 | 174,077 | |||||||||||||||||
Operating expenses: | ||||||||||||||||||||
Selling expenses | (5,497 | ) | (1,581 | ) | (7,078 | ) | ||||||||||||||
General and administrative expenses | (18,869 | ) | (8,340 | ) | (27,209 | ) | ||||||||||||||
Operating income | 101,826 | 38,083 | 139,790 | |||||||||||||||||
Interest expense | (7,455 | ) | (1,585 | ) | (9,040 | ) | ||||||||||||||
Change in fair value of convertible notes | (464 | ) | — | (464 | ) | |||||||||||||||
Foreign exchange loss | (325 | ) | (230 | ) | (555 | ) | ||||||||||||||
Loss from disposal of equipment | 658 | — | (658 | ) | ||||||||||||||||
Interest income | 430 | 32 | 462 | |||||||||||||||||
Other income (expense) | 7,734 | (200 | ) | 7,534 | ||||||||||||||||
Income before income taxes | 102,404 | 36,100 | 138,385 | |||||||||||||||||
Income tax expense | (23,335 | ) | (8,445 | ) | 21 | (2 | ) | (31,759 | ) | |||||||||||
Net income from continuing operations | 79,069 | 27,655 | 106,626 | |||||||||||||||||
Pro forma income per share from continuing operations | ||||||||||||||||||||
Basic and diluted | 1.38 | 1.85 | ||||||||||||||||||
Weighted average number of ordinary shares outstanding: | ||||||||||||||||||||
Basic and diluted | 57,481,400 | 57,481,400 | ||||||||||||||||||
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RMB | US$ | |||||||
Goodwill | 21,210 | 3,107 | ||||||
Current assets | 77,053 | 11,287 | ||||||
Long-term receivable | 9,397 | 1,377 | ||||||
Property, plant and equipment | 217,965 | 31,931 | ||||||
Other intangible assets- customer relationships | ||||||||
and operating leases | 52,380 | 7,673 | ||||||
Deposit for property, plant and equipment | 83,505 | 12,233 | ||||||
Deferred tax assets, non-current portion | 23,089 | 3,382 | ||||||
Deferred tax liabilities, non-current portion | (12,529 | ) | (1,835 | ) | ||||
Liabilities assumed | (233,323 | ) | (34,180 | ) | ||||
Total consideration paid | 238,747 | 34,975 | ||||||
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ITEM 6 | INDEMNIFICATION OF DIRECTORS AND OFFICERS |
ITEM 7 | RECENT SALES OF UNREGISTERED SECURITIES |
Underwriting | ||||||||||
Date of Sale or | Consideration in | Discount and | ||||||||
Purchaser | Issuance | Number of Securities | U.S. dollars | Commission | ||||||
Certain director of the registrant | November 27, 2007 | 1 ordinary share* | $ | 0.05 | n/a | |||||
Notable Enterprise Limited | March 8, 2008 | 225,000 ordinary shares(1) | $ | 2,250 | n/a | |||||
Dragon Image Investment Ltd. | March 8, 2008 | 37,500 ordinary shares(1)* | $ | 375 | n/a | |||||
Daketala International Investment Holdings Ltd. | March 8, 2008 | 37,500 ordinary shares(1)* | $ | 375 | n/a | |||||
Certain directors of the registrant and other minority shareholders | March 8, 2008 | 199,999 ordinary shares(1)* | $ | 1,999.99 | n/a | |||||
Carlyle Asia Growth Partners III, L.P. | April 3, 2008 | 53,292 Series A contingently redeemable convertible preferred shares(2) | $ | 4,808,250 | n/a | |||||
CAGP III Co-Investment, L.P. | �� | April 3, 2008 | 2,125 Series A contingently redeemable convertible preferred shares(2) | $ | 191,750 | n/a | ||||
CICC Sun Company Limited | April 3, 2008 | 26,535 Series A contingently redeemable convertible preferred shares | $ | 5,000,000 | n/a | |||||
Carlyle Asia Growth Partners III, L.P. | April 10, 2008 | convertible loan promissory note(3) | $ | 19,233,000 | n/a | |||||
CAGP III Co-Investment, L.P. | April 10, 2008 | convertible loan promissory note(4) | $ | 767,000 | n/a | |||||
CZY Investments Limited | August 18, 2008 | 109,736 ordinary shares(5)* | $ | 8,669,144 | n/a | |||||
Daketala International Investment Holdings Ltd. | August 18, 2008 | 47,030 ordinary shares(5)* | $ | 3,715,370 | n/a | |||||
Thousand Ocean Group Limited | August 18, 2008 | 32,624 ordinary shares(5)* | $ | 2,577,296 | n/a | |||||
Dragon Image Investment Ltd. | August 18, 2008 | 16,524 ordinary shares(5)* | $ | 1,305,396 | n/a | |||||
Top Mount Group Limited | August 18, 2008 | 5,932 ordinary shares(5)* | $ | 468,628 | n/a |
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Underwriting | ||||||||||
Date of Sale or | Consideration in | Discount and | ||||||||
Purchaser | Issuance | Number of Securities | U.S. dollars | Commission | ||||||
Carlyle Asia Growth Partners III, L.P. | October 20, 2008 | 93,493 Series B contingently redeemable convertible preferred shares | $ | 24,041,250 | n/a | |||||
CAGP III Co-Investment, L.P. | October 20, 2008 | 3,728 Series B contingently redeemable convertible preferred shares | $ | 958,750 | n/a | |||||
CICC Sun Company Limited | October 20, 2008 | 38,889 Series B contingently redeemable convertible preferred shares | $ | 10,000,000 | n/a | |||||
Starr Investments Cayman II, Inc. | October 20, 2008 | 97,222 Series B contingently redeemable convertible preferred shares | $ | 25,000,000 | n/a |
(1) | Issued in connection with a share swap with Ascendium Group Limited as part of the reorganization to establish Concord Medical Services Holding Limited as our ultimate holding company. | |
(2) | The numbers of Series A contingently redeemable convertible preferred shares issued to Carlyle Asia Growth Partners III, L.P. and CAGP III Co-Investment, L.P. on April 3, 2008 also include Series A contingently redeemable convertible preferred shares issued as a result of the conversion of two convertible loan promissory notes issued on November 16, 2007 by our predecessor, Our Medical Services, Ltd., or OMS, plus accrued interest. OMS received consideration for the issuance of such convertible loan promissory notes in the amount of $4,808,250 and $191,750 from Carlyle Asia Growth Partners III, L.P. and CAGP III Co-Investment, L.P., respectively. | |
(3) | The convertible loan promissory note was converted into 84,072 of our Series A contingently redeemable convertible preferred shares on July 30, 2008. | |
(4) | The convertible loan promissory note was converted into 3,353 of our Series A contingently redeemable convertible preferred shares on July 30, 2008. | |
(5) | Issued as settlement for the share options issued to certain of our directors under the share option plan adopted by our predecessor company, Our Medical Services Limited, on November 17, 2007. | |
* | Does not take into account the share split effective on November 17, 2009 whereby all of our issued and outstanding 704,281 ordinary shares of a par value of US$0.01 per share were split into 70,428,100 ordinary shares of US$0.0001 par value per share and the number of our authorized ordinary shares were increased from 4,500,000 to 450,000,000. |
ITEM 8 | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
ITEM 9 | UNDERTAKINGS |
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By: | /s/ Jianyu Yang |
Title: | Director, Chief Executive Officer and President |
Signature | Title | |||
/s/ Jianyu Yang Name: Jianyu Yang | Director, Chief Executive Officer and President (principal executive officer) | |||
/s/ Zheng Cheng Name: Zheng Cheng | Co-Chairman and Chief Operating Officer | |||
/s/ Steve Sun Name: Steve Sun | Co-Chairman and Chief Financial Officer (principal financial and accounting officer) | |||
/s/ Jing Zhang Name: Jing Zhang | Director and Executive President | |||
/s/ Yaw Kong Yap Name: Yaw Kong Yap | Director and Financial Controller |
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Signature | Title | |||
/s/ Shirley Chen Name: Shirley Chen | Director | |||
/s/ Feng Xiao Name: Feng Xiao | Director | |||
/s/ Elaine Zong Name: Elaine Zong | Director | |||
/s/ Wai Hong Ku Name: Wai Hong Ku | Director |
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By: | /s/ Donald J. Puglisi |
Title: | Managing Director |
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Exhibit | ||
Number | Description of Document | |
1.1* | Form of Underwriting Agreement | |
3.1 | Second Amended and Restated Memorandum and Articles of Association of the Registrant, as currently in effect | |
3.2 | Secretary’s Certificate of the Registrant dated as of November 17, 2009 as to the Amendment to the Second Amended and Restated Memorandum and Articles of Association of the Registrant | |
3.3* | Form of Third Amended and Restated Memorandum and Articles of Association of the Registrant | |
4.1* | Form of Registrant’s American Depository Receipt (included in Exhibit 4.3) | |
4.2 | Specimen Certificate for Ordinary Shares of the Registrant | |
4.3* | Form of Deposit Agreement among the Registrant, the Depositary and Owners and Beneficial Owners of the American Depository Shares issued thereunder | |
4.4 | Series A Preferred Shares Subscription Agreement, dated as of February 5, 2008, as amended on April 2, 2008 and on October 20, 2008, among CICC Sun Company Limited, Carlyle Asia Growth Partners III, L.P., CAGP III Co-Investment, L.P., Liu Haifeng, Steve Sun, Yang Jianyu, Bona Liu, Our Medical Services, Ltd., Ascendium Group Limited, Shenzhen Aohua Medical Services Co., Ltd. and Concord Medical Services Holdings Limited | |
4.5 | Amendment No. 1 to Series A Preferred Shares Subscription Agreement, dated as of April 2, 2008, among CICC Sun Company Limited, Carlyle Asia Growth Partners III, L.P., CAGP III Co-Investment, L.P., Liu Haifeng, Steve Sun, Yang Jianyu, Bona Liu, Our Medical Services, Ltd., Ascendium Group Limited, Shenzhen Aohua Medical Services Co., Ltd. and Concord Medical Services Holdings Limited | |
4.6 | Amendment No. 2 to Series A Preferred Shares Subscription Agreement, dated as of October 20, 2008, among CICC Sun Company Limited, Carlyle Asia Growth Partners III, L.P., CAGP III Co-Investment, L.P., Liu Haifeng, Steve Sun, Yang Jianyu, Bona Liu, Our Medical Services, Ltd., Ascendium Group Limited, Shenzhen Aohua Medical Services Co., Ltd. and Concord Medical Services Holdings Limited | |
4.7 | Series B Preferred Shares Subscription Agreement, dated as of October 10, 2008, as amended on October 20, 2008, among CICC Sun Company Limited, Carlyle Asia Growth Partners III, L.P., CAGP III Co-Investment, L.P., Starr Investments Cayman II, Inc., Concord Medical Services Holdings Limited and other persons named therein | |
4.8 | Amendment to Series B Preferred Shares Subscription Agreement, dated as of October 20, 2008, among CICC Sun Company Limited, Carlyle Asia Growth Partners III, L.P., CAGP III Co-Investment, L.P., Starr Investments Cayman II, Inc., Concord Medical Services Holdings Limited and other persons named therein | |
4.9 | Amended and Restated Shareholders Agreement, dated as of October 20, 2008, among Concord Medical Services Holdings Limited, Carlyle Asia Growth Partners III, L.P., CAGP III Co-Investment, CICC Sun Company Limited, Perfect Key Holdings Limited, Starr Investments Cayman II, Inc. and certain other persons named therein | |
4.10 | Share Charge, dated as of November 10, 2008, by CZY Investments Limited in favor of CICC Sun Company Limited, Carlyle Asia Growth Partners III, L.P., CAGP III Co-Investment, L.P. and Starr Investments Cayman II, Inc. | |
4.11 | Share Charge, dated as of November 10, 2008, by Daketala International Investment Holdings Ltd. in favor of CICC Sun Company Limited, Carlyle Asia Growth Partners III, L.P., CAGP III Co-Investment, L.P. and Starr Investments Cayman II, Inc. | |
4.12 | Share Charge, dated as of November 10, 2008, by Dragon Image Investment Ltd. in favor of CICC Sun Company Limited, Carlyle Asia Growth Partners III, L.P., CAGP III Co-Investment, L.P. and Starr Investments Cayman II, Inc. | |
4.13 | Share Charge, dated as of November 10, 2008, by Notable Enterprise Limited in favor of CICC Sun Company Limited, Carlyle Asia Growth Partners III, L.P., CAGP III Co-Investment, L.P. and Starr Investments Cayman II, Inc. | |
4.14 | Share Charge, dated as of November 10, 2008, by Thousand Ocean Group Limited in favor of CICC Sun Company Limited, Carlyle Asia Growth Partners III, L.P., CAGP III Co-Investment, L.P. and Starr Investments Cayman II, Inc. |
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Exhibit | ||
Number | Description of Document | |
4.15 | Share Charge, dated as of November 10, 2008, by Top Mount Group Limited in favor of CICC Sun Company Limited, Carlyle Asia Growth Partners III, L.P., CAGP III Co-Investment, L.P. and Starr Investments Cayman II, Inc. | |
4.16 | Deed of Amendment, dated as of September 14, 2009, among CICC Sun Company Limited, Carlyle Asia Growth Partners III, L.P., CAGP III Co-Investment, L.P., Starr Investments Cayman II, Inc. and Notable Enterprise Limited | |
4.17 | Deed of Partial Release, dated as of September 14, 2009, by CICC Sun Company Limited, Carlyle Asia Growth Partners III, L.P., CAGP III Co-Investment, L.P. and Starr Investments Cayman II, Inc. in favor of CZY Investment Limited | |
4.18* | Amendment to Amended and Restated Shareholders Agreement, dated as of November 17, 2009, among Concord Medical Services Holdings Limited, Carlyle Asia Growth Partners III, L.P., CAGP III Co-Investment, CICC Sun Company Limited, Perfect Key Holdings Limited, Starr Investments Cayman II, Inc. and certain other persons named therein | |
5.1* | Opinion of Walkers regarding the validity of the ordinary shares being registered | |
8.1* | Opinion of Walkers regarding certain Cayman Islands tax matters (included in Exhibit 5.1) | |
8.2 | Opinion of Simpson Thacher & Bartlett LLP regarding certain U.S. tax matters | |
10.1 | 2008 Share Incentive Plan adopted as of October 16, 2008 | |
10.2* | Form of Indemnification Agreement with the Registrant’s directors and officers | |
10.3 | Form of Medical Equipment Lease Agreement | |
10.4 | Form of Equipment Management Services Agreement | |
10.5 | Form of Service-only Management Agreement | |
10.6 | Summary of the Oral Agreement entered into between China Medstar Pte. Ltd. and Beijing Medstar Hi-Tech Investment Co., Ltd. | |
10.7 | Summary of the Oral Agreement entered into between China Medstar Pte. Ltd. and Cheng Zheng | |
10.8 | Summary of the Oral Agreement entered into between China Medstar Pte. Ltd. and Yaw Kong Yap | |
10.9† | Translation of Medical Equipment Lease Agreement, dated as of August 25, 2009, by and between Medstar (Shanghai) Leasing Co., Ltd. and Chang’an Hospital Co., Ltd. | |
10.10† | Translation of Service-Only Management Agreement, dated as of August 1, 2008, among CMS Hospital Management Co., Ltd., Xi’an Wanjiechangxin Medical Services Company Limited and Chang’an Hospital Co., Ltd. | |
10.11† | Translation of Agreement Concerning the Establishment of the Aohai Radiotherapy Treatment and Diagnosis Research Center, dated as of September 19, 1995, by and between the Chinese People’s Liberation Army Navy General Hospital and Beijing Our Medical Equipment Development Company, which transferred its interest in the agreement to Shenzhen Aohua Medical Services Co., Ltd. | |
10.12† | Translation of Supplemental Agreement Concerning the Development of the Aohai Radiotherapy Treatment and Diagnosis Research Center, dated as of March 18, 1999, by and between Shenzhen Aohua Medical Services Co., Ltd. and the Chinese People’s Liberation Army Navy General Hospital. | |
10.13† | Translation of Supplemental Agreement Concerning the Development of the Aohai Radiotherapy Treatment and Diagnosis Research Center, dated as of September 27, 2003, by and between Shenzhen Aohua Medical Services Co., Ltd. and the Chinese People’s Liberation Army Navy General Hospital. | |
10.14† | Translation of Medical Equipment Lease Agreement, dated as of September 29, 2006, by and between Shanghai Medstar Investment Management Co., Ltd., the predecessor of Medstar (Shanghai) Leasing Co., Ltd., and the Chinese People’s Liberation Army Navy General Hospital. | |
10.15† | Translation of Supplemental Agreement Concerning the Development of the Aohai Radiotherapy Treatment and Diagnosis Research Center, dated as of July 8, 2009, by and between Shenzhen Aohua Medical Services Co., Ltd. and the Chinese People’s Liberation Army Navy General Hospital. | |
10.16 | Translation of Supplemental Agreement to the Service-only Management Agreement, dated as of August 1, 2008, among Xi’an Wanjiechangxin Medical Services Company Limited, Chang’an Hospital Co., Ltd. and CMS Hospital Management Co., Ltd. | |
10.17 | Translation of Agreement Regarding the Transfer of Equity in Aohai Radiotherapy Treatment and Diagnosis Research Center, dated as of May 5, 1997, among Beijing Our Medical Equipment Development Company, Shenzhen Aohua Medical Services Co., Ltd. and the Chinese People’s Liberation Army Navy General Hospital. |
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Exhibit | ||
Number | Description of Document | |
10.18 | Translation of Supplemental Agreement to the Supplemental Agreement Concerning the Development of the Aohai Radiotherapy Treatment and Diagnosis Research Center, dated as of September 15, 2004, by and between Shenzhen Aohua Medical Services Co., Ltd. and the Chinese People’s Liberation Army Navy General Hospital. | |
10.19 | Translation of Supplemental Agreement to the Cooperation Contract Concerning the Aohai Radiotherapy Treatment and Diagnosis Research Center, dated as of August 16, 2003, by and between Shenzhen Aohua Medical Services Co., Ltd. and the Chinese People’s Liberation Army Navy General Hospital. | |
21.1 | Subsidiaries of the Registrant | |
23.1 | Consent of Independent Registered Public Accounting Firm | |
23.2* | Consent of Walkers (included in Exhibit 5.1) | |
23.3 | Consent of Simpson Thacher & Bartlett LLP (included in Exhibit 8.2) | |
23.4 | Consent of Jingtian & Gongcheng Attorneys At Law | |
23.5 | Consent of Frost & Sullivan | |
24.1 | Powers of Attorney (included on the signature page in Part II of this registration statement) | |
99.1* | Code of Business Conduct and Ethics | |
99.2* | Form of Opinion of Jingtian & Gongcheng Attorneys At Law |
* | To be submitted by amendment | |
† | Confidential treatment has been requested for portions of this document. |
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