Gfr Pharmaceuticals (GREY:GFRP)

New Century Subsidiary information:

New Century is a medical equipment investment management company, which mainly engages in investment and management of cancer treatment equipment and provides comprehensive services for customers with advanced radiology and oncology equipment. New Century currently owns three different devices used for radiological imaging for the brain and body and cancer treatment. The Company’s medical equipment is used in Tangdu Hospital’s Gamma Knife Therapeutic Center (the “Center”). The cases processed in the Center averaged 278 cases per month in 2011, 292 cases per month in2010.  For the year ended December 31, 2011, the Center accounted for $3,721,276, or 80% of the Company’s revenues.  See “Business – Overview of Business”.
 
 
New Century entered into its relationship with Tangdu Hospital on February 2, 2006, when it accepted the rights and responsibilities previously held by Masep Medical Science & Technology Development (Shenzhen) Co., Ltd. (“Masep”) which Masep undertook pursuant to the “Cooperation Establishment of ‘Tangdu Gamma Knife Therapeutic Center’ Agreement” by and between Masep and Tandgu Hospital, dated May 18, 2001, as amended (the “Tangdu Agreement”). Pursuant to the terms of the Tangdu Agreement, New Century received sixty percent (60%) of the profits generated by the Center during 2011. New Century’s profit sharing percentage decreases over the term of the Tangdu Agreement, which is sixteen years from the date that the Center opened in January 2002. The respective profit sharing ratios through the expiration of the agreement in 2017 are as follows:

   1.  From January 2012 through December 2014, 60% to New Century;

   2. From January 2015 through December 2017, 50% to New Century.

 
Pursuant to the Tangdu Agreement, New Century has the power to appoint the Director of the Center.
 
The Center runs at full capacity and the existing equipment capacity cannot meet the requirements of patients. In order to benefit from the improved technology of medical equipment and to keep our competitive advantage in this medical market, New Century purchased a set of PET-CT cancer examination equipment, which is amongst the most advanced cancer examination equipment in the world.  On June 21, 2011, New Century entered into the Supplemental Agreement to cooperate in exploiting the business opportunity of the PET-CT equipment (“Supplementary Agreement”). Pursuant to the Agreement, the Company agreed to provide a new set of medical equipment and the Hospital agreed to jointly operate this equipment at the existing medical center. The purchase price of this medical equipment is approximately $4,332,000 (equal to RMB28 million). The Company agreed to acquire the medical equipment in lieu of accounts receivable due from the Hospital and the Hospital agreed to make the order and payment of the medical equipment in accordance with their need and specification. In return, New Century and Tangdu Hospital agreed that the cooperation period of PET-CT is six years, commencing January 2012. The profit sharing ratio during the PET-CT cooperation period will be 7:3, with New Century receiving 70% of the profits. , The PET-CT equipment was installed in December 2011 and commenced limited operation in January 2012 as some supplemental equipment is still being tested.
 
Upon the expiration of the Tangdu Agreement and Supplementary Agreement, the Tangdu Hospital has an option to purchase the equipments subject to the Tangdu Agreement and Supplementary Agreement for fifty percent of its residual value.
 
With our competitive facilities, services, and the reputation of Tangdu Hospital in Northwest China including Shaan Xi province and four other adjacent provinces, our medical center business has good growth potential.  New Century intends to expand the operation by investing in an additional tumor therapy center or hospitals and a modernized tumor institute. However, the Company needs additional capital to finance its expansion plans for PET-CT.  The Company does not have a commitment for such additional capital and there is no assurance such capital can be obtained on terms acceptable to the Company.

The Center currently runs at full capacity of business and shows an increasing latent capacity so that the existing equipment capacity cannot meet the requirements of patients. The Company intends to invest in the construction and management of cancer treatment equipment in the next few years.

Company needs additional capital to finance its expansion plans. The Company presently does not have a commitment for such additional capital and there is no assurance such capital can be obtained on terms acceptable to the Company.

GeoTeam Note: Fourth quarter 2010 vs 2009 EPS was $0.02 vs $0.01.

The Company intends to continue to invest in the construction and management of cancer treatment equipment in the next few years. With its resources, technologies and services, the Company believes it will seize market opportunities, gradually expand the treatment capacity and improve profitability by the addition of cancer treatment centers or hospitals.

The Company may build an integrated service center with prevention, screening, treatment and rehabilitation capabilities in the Northwest of China. The Company needs additional capital to finance its expansion plans.