China Hospitals Inc Ipo

China hospitals inc ipo


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As filed with the Securities and Exchange Commission on February 14, 2005

Registration No. [            ]

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


Form F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933


CHINA HOSPITALS, INC.
(Exact Name of Registrant as Specified in its Charter)

CAYMAN ISLANDS
(State or Other Jurisdiction of
Incorporation or Organization)
8062
(Primary Standard Industrial
Classification Code Number)
Not Applicable
(I.R.S.

Ipe 100 ar tizon kft

Employer
Identification Number)


SUITE 2501, CHINA WORLD TOWER 1, CHINA WORLD TRADE CENTER
1 JIAN GUO MEN WAI AVENUE
BEIJING 100004, PEOPLE'S REPUBLIC OF CHINA
86-10-65059999
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)


FRANK HU
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SUITE 2501, CHINA WORLD TOWER 1, CHINA WORLD TRADE CENTER
1 JIAN GUO MEN WAI AVENUE
BEIJING 100004, PEOPLE'S REPUBLIC OF CHINA
86-10-65059999
(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:
Lynne Bolduc, Esq.
Oswald & Yap
16148 Sand Canyon Avenue
Irvine, CA92618
(949) 788-8900
Louis E.

Taubman, Esq.
Law Offices of Louis E. Taubman, P.C.
225 Broadway, Suite 1200
New York, NY10007
(212) 732-7184


Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.


        If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ý

        If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

o

        If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

        If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

o

        If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. o


CALCULATION OF REGISTRATION FEE


Title of Each Class of
Securities to be Registered

Amount to be
Registered

Proposed Maximum
Offering Price
Per Unit

Proposed Maximum
Aggregate Offering
Price(1)

Amount of
Registration Fee


Units, consisting of one share of common stock, par value $0.001 per share, and one warrant to purchase one share of common stock[            ]$[            ]$100,000,000$11,770

Common stock, par value $0.001 per share, included in the units

Warrants to purchase common stock included in the units

Shares of common stock, par value $0.001 per share, underlying the warrants included in the units(2)

Representative's warrants to purchase units[            ]$[            ]

Common stock, par value $0.001 per share, to be sold by selling stockholders[            ]$[            ]$20,000,000$2,354

Totals:$120,000,000$14,124


(1)
Estimated pursuant to Rule 457(o) solely for the purpose of calculating the amount of the registration fee.

Includes [            ] units that the underwriters have the option to purchase to cover over-allotments, if any.

(2)
In connection with the sale of units, we are granting to the representative of the underwriters a warrant to purchase up to [            ] units at a per unit purchase price equal to 165% of the public offering price of a unit. No registration fee is required pursuant to Rule 457(g).

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Pursuant to Rule 416 under the Securities Act, there are also being registered hereby such additional indeterminate number of shares as may become issuable pursuant to any antidilution provisions of the warrants.



The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.


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.

China hospitals inc ipo

This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where such offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED FEBRUARY    , 2005

[                        ] Units
Each unit consisting of one share and one warrant

CHINA HOSPITALS, INC.
SUITE 2501, CHINA WORLD TOWER 1, CHINA WORLD TRADE CENTER
1 JIAN GUO MEN WAI AVENUE
BEIJING 100004, PEOPLE'S REPUBLIC OF CHINA
86-10-65059999


        This is the initial public offering of China Hospitals, Inc., a Cayman Islands corporation.

We are offering a minimum of [            ] and a maximum of [            ] units, each unit consisting of one share of common stock and one warrant to purchase one share of common stock. Each warrant will entitle its holder to purchase one share of common stock at an exercise price equal to 120% of the unit offering price. The warrants are exercisable at any time after the date of this prospectus until three years after the date of this prospectus.

We may redeem some or all of the warrants at a price of $0.02 per warrant, by giving not less than 30 days' notice to the holders of the warrants, which we may do at any time after the closing price for our stock on the principal exchange on which the stock trades has equaled or exceeded 125% of exercise price of the warrants for at least 20 consecutive trading days.

        We expect that the offering price will be $[            ] per unit. No public market currently exists for our shares. We plan to apply to the NASDAQ National Market to list our shares. There will be no separate trading market for the units or the warrants.

        We are also registering [            ] shares of common stock for sale by certain of our stockholders and [            ] shares of common stock underlying warrants to be issued to our underwriters.

Selling stockholders may sell their shares at then prevailing prices in the event that our shares become listed on the NASDAQ National Market or in privately negotiated transactions.

Investing in these units involves significant risks.

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See "Risk Factors" beginning on page 10.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.



Per Unit
Total

Public offering price$[            ]$[            ]

Underwriting commission$[            ]$[            ]

Proceeds to us, before expenses$[            ]$[            ]

        We expect total cash expenses for this offering to be approximately $[            ].

The units are being offered on a best efforts, minimum/maximum basis. The underwriters expect to deliver the units to purchasers on [                        , 2005]. We have granted the underwriters a 45-day option to purchase up to [            ] additional units to cover over-allotments. We have also agreed to sell to the representative underwriters' warrants to purchase up to an additional [            ] units.

Adamson Brothers, Inc.

Prospectus dated [                        ], 2005.

China Hospitals, Inc.



YOUR RELIANCE ON INFORMATION CONTAINED IN THIS PROSPECTUS

        We have not authorized anyone to provide you with information different from that contained in this prospectus. These securities may be sold only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the securities.

You must not consider that the delivery of this prospectus or any sale of the securities covered by this prospectus implies that there has been no change in our affairs since the date of this prospectus or that the information contained in this prospectus is current or complete as of any time after the date of this prospectus.


FORWARD-LOOKING INFORMATION
Cautionary Statement Pursuant to Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995:

        Except for the historical information presented in this document, the matters discussed in this prospectus, or otherwise incorporated by reference into this document, contain "forward-looking statements" (as such term is defined in the Private Securities Litigation Reform Act of 1995).

These statements are identified by the use of forward-looking terminology such as "believes,""plans,""intend,""scheduled,""potential,""estimates,""hopes,""goal,""objective," expects," "may,""should," or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties.

The safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, apply to forward-looking statements made by us.

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We caution you that no statements contained in this prospectus should be construed as a guarantee or assurance of future performance or results.

These forward-looking statements involve risks and uncertainties, including those identified within this prospectus. These factors include, but are not limited to: (i) the highly competitive nature of the health care business; (ii) the efforts of insurers, health care providers and others to contain health care costs; (iii) possible changes in Chinese medical insurance programs that may further limit reimbursements to health care providers and insurers; (iv) changes in governmental, provincial or local regulation affecting the health care industry; (v) the possible enactment of governmental or provincial health care reform; (vi) the departure of any of our key executive officers; (vii) claims and legal actions relating to professional liability; (viii) changes in accounting practices; (ix) changes in general economic conditions; and (x) other risks described in this Prospectus.

The actual results that we achieve may differ materially from any forward-looking statements due to such risks and uncertainties. These forward-looking statements are based on current expectations, and, except as required by law, we assume no obligation to update this information whether as a result of new information, future events or otherwise. Readers are urged to carefully review and consider the various disclosures made by us in this prospectus and in our other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business.

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TABLE OF CONTENTS

PROSPECTUS SUMMARY6
Our Company6
The Offering8
Summary Financial Information9
RISK FACTORS10
Risks Related to Our Business10
Foreign Operational Risks13
Risks Associated with this Offering15
REASONS FOR OFFER AND USE OF PROCEEDS16
DIVIDEND POLICY16
CAPITALIZATION17
DILUTION18
COMPARATIVE DATA19
SELECTED CONSOLIDATED FINANCIAL DATA21
OUR BUSINESS22
History and Development22
Our Industry22
Our Business23
Our Strategy26
Competition27
Effect of Governmental Regulation28
Employees29
Property29
Legal Proceedings29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS30
Overview30
Factors affecting Our Operations30
Factors affecting Our Acquisition Plans31
Corporate Structure and Arrangements with Consolidated Affilia31
Revenue and Volume Trends of the Planned Hospital Acquisitions32
Results of Operations33
Liquidity and Capital Resources34
Off-Balance Sheet Arrangements35
Principal Accountant Fees and Services35
Quantitative and Qualitative Disclosures About Market Risk35
Critical Accounting Policies and Estimates36
OUR MANAGEMENT37
Executive Officers And Directors37
Board of Advisors38
Executive Compensation38
Summary Compensation Table39
Stock Option Plan and Grants39
Director Duties39
Director Compensation40
Employment Agreements40
Limitation of Director and Officer Liability40

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RELATED PARTY TRANSACTIONS41
Arrangements with Affiliated Chinese Entities41
Powers of Attorney41
Exclusive Business Cooperation Agreement41
Share Pledge Agreements41
Exclusive Option Agreements41
Loan Agreements42
Other Related Party Transactions42
PRINCIPAL STOCKHOLDERS43
DESCRIPTION OF SECURITIES43
Common Stock43
Preferred Stock44
Limitations on the Right to Own Shares44
Limitations on Transfer of Shares44
Disclosure of Shareholder Ownership44
Changes in Capital44
Differences in Corporate Law45
Mergers and Similar Arrangements45
Shareholders' Suits45
Indemnification46
Stock Option Plan46
Certain Effects of Authorized but Unissued Stock46
SELLING STOCKHOLDERS47
SHARES ELIGIBLE FOR FUTURE SALE49
Lock-Up Agreements49
Rule 14449
Rule 144(k)49
Registration Rights50
Cayman Islands Taxation50
ENFORCEABILITY OF CIVIL LIABILITIES50
UNDERWRITING51
Selling Stockholders53
LEGAL MATTERS54
EXPERTS54
WHERE YOU CAN FIND MORE INFORMATION54
China Hospitals, Inc.

Consolidated Financial Statements

F-1
Anqiu City People's Hospital Financial StatementsF-19
Mengzhou City People's Hospital Financial StatementsF-33
PART IIII-1
Item 6. Indemnification of Directors and Officers.II-1
Item 7. Recent Sales of Unregistered SecuritiesII-1
Item 8.

China hospitals inc ipo

Exhibits

II-2
Item 9. UndertakingsII-3
SIGNATURESII-5

4


You should rely only on the information contained in this document or to which we have referred you.

Neither we nor the selling shareholders have authorized anyone to provide you with information that is different.

This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document.


Dealer Prospectus Delivery Obligation

Until            , 2005 (25 days after the commencement of this offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus.

This is in addition to the dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.

Unless the context indicates otherwise, (1) the terms "we,""us,""our company,""our" and "China Hospitals" refer to China Hospitals, Inc., its predecessor entities and subsidiaries, and, in the context of describing our operations, also include our affiliated Chinese entities, (2) "shares" and "ordinary shares" refer to our ordinary shares, and "units" refers to our units, each of which consist of one share of common stock and one warrant to purchase one share of common stock, (3) "China" and "PRC" refer to the People's Republic of China, and for the purpose of this prospectus only, excluding Taiwan, Hong Kong and Macau, and (4) all references to "RMB" are to the legal currency of China and all references to "U.S.

dollars,""dollars,""US$" and "$" are to the legal currency of the United States.

This prospectus contains translations of certain RMB amounts into U.S.

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dollar amounts at a specified rate solely for the convenience of the reader. Unless otherwise stated, the translations of RMB into U.S. dollars have been made at the single rate of exchange of US$1 to RMB8.30. We make no representation that the RMB or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S.

China hospitals inc ipo

dollars or RMB, as the case may be, at any particular rate or at all. See "Risk Factors—Foreign Operational Risks—Fluctuation of the renminbi could materially affect our financial condition and results of operations." for discussions of the effects of fluctuating exchange rates on the value of our shares.

Any discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding.

5



PROSPECTUS SUMMARY

        You must read the following summary together with the more detailed information regarding us and the securities being offered for sale by means of this prospectus and our financial statements and notes to those statements appearing elsewhere in this prospectus.

The following summary highlights information contained elsewhere in this prospectus.


Our Company

        We are a Cayman Islands company that operates two hospitals and plans to establish a multi-province hospital chain specializing in general and acute care hospitals in urban areas in the People's Republic of China.

        Due to the current restrictions on foreign ownership of the hospital businesses in China, we conduct substantially all of our operations through our affiliated Chinese entities.

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Pursuant to an Exclusive Business Cooperation Agreement between our wholly-owned subsidiary in China, RaiseChina BioTech, Inc. ("RaiseChina"), and Beijing Dongjun Hospital Management Investment Co., Ltd ("the "Management Company"), the Management Company holds title to our hospitals and conducts our business.

This agreement provides for RaiseChina to provide the Management Company with business support services and consulting services in exchange for service fees.

        The Management Company is owned by two individuals, Min Hu and Zhengmao Hu. However we have entered into agreements with these individuals, including share pledge agreements, and powers of attorney, designed to give us control over the operations of the Management Company and secure the payment of the service fees.

China hospitals inc ipo

Pursuant to the share pledge agreements, Min Hu and Zhengmao Hu, pledge their respective equity interests in the Management Company as a guarantee for the payment by these entities of service fees to us. As a result, in the event that the Management Company breaches any of its obligations under the service agreement with us, we are entitled to take possession of the equity interests held by Min Hu and Zhengmao Hu.

In addition, Min Hu and Zhengmao Hu have each executed an irrevocable power of attorney to appoint RaiseChina as attorney-in-fact to vote on all matters on which shareholders of our affiliated entities are entitled to vote, including matters relating to the appointment of the chief executive officers of our affiliated entities.

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See "Related Party Transactions"

        The Management Company has acquired 70% of the Anqiu City People's Hospital and 100% of the Mengzhou City People's Hospital and is currently operating these hospitals. We also plan to use the funds from this Offering to acquire 29 additional hospitals. See "Our Business."

        After acquiring the additional hospitals, we plan to use the expertise of our management team to run the hospitals more efficiently using American style hospital practices to serve local populations.

We believe that we can accomplish our business plan as a result of our management's expertise in working with government health care insurance programs, experience with urban hospitals, owning and operating primary hospitals and our focus on operational and administrative efficiency by reducing overall costs. See "Management."

        We believe the following are key factors to our business strategies and operations:

    Expansion Capability.

    We plan to replicate our business model throughout China through the acquisition of additional profitable hospitals, the development of new operations and the transition of members from other hospitals.

    Carefully Selected Hospitals. We believe that the hospitals we have acquired and selected as acquisition candidates are well suited to provide emergency and primary care services to local populations in our target markets.

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    Established Hospitals. The hospitals we have acquired and plan to acquire in the future are established facilities which have strong relationships with their patients, health care related entities such as medical device and pharmaceutical companies, and government agencies.



    Proven Management Skills. We believe the experience of our management will help us improve medical outcomes for patients and lower costs of the hospitals. We plan to carefully monitor day-to-day medical management in order to provide appropriate care to patients, contain costs and ensure an efficient services network.



    Administrative Efficiency. We plan to centralize and standardize various functions and practices across the hospitals we have acquired and plan to acquire, thereby increasing our efficiency and allowing our administrative infrastructure to be scalable for rapid and cost-effective expansion in new and existing markets.

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The Offering

Units offered in this offering[            ] units, each unit consisting of one share of our common stock and one warrant to purchase one share of our common stock. We anticipate that only the shares of common stock will trade on the public market; the units and the warrants will not trade.

Common stock to be outstanding after this offering


[            ] shares

Warrants to be outstanding after this offering


Warrants to purchase up to [            ] shares of common stock.

Term of warrants


The warrants are exercisable at any time from the effective date of this prospectus until they expire three years from the effective date of this prospectus, unless earlier redeemed.

Exercise price of warrants


$[            ]

Redemption of warrants


At any time after the date of this prospectus, we may redeem some or all of the warrants at a price of $0.02 per warrant, upon 30 days' notice so long as the last reported sales price per share of our common stock as reported by the principal exchange or trading market on which our common stock trades equals or exceeds 125% of the then effective exercise price of the warrants for at least 20 consecutive trading days.

Proposed NASDAQ National Market symbol


Common stock: CNHP

Risk factors


Investing in these securities involves a high degree of risk.

As an investor, you should be able to bear a complete loss of your investment. You should carefully consider the information set forth in the "Risk Factors" section of this prospectus.


Gross proceeds:



Direct offering; if maximum is sold Selling stockholders


[$            ]
All proceeds from the sale of [            ] shares held by the selling stockholders will go directly to the selling stockholders

Use of proceeds


The net proceeds payable to us from this offering will be used as follows: (i) the remaining payment on the acquisition of the first hospital; (ii) payments toward future hospital acquisitions; and (iii) for working capital and other general corporate purposes.

See "Use of Proceeds."

        We are also registering [            ] shares of our common stock held by certain of our stockholders. A list of the securities being registered in this prospectus and the people and entities that own them appears in the "Selling Stockholders" section of this prospectus.

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Selling stockholders may sell their shares at market prices if and when our securities are listed on the NASDAQ National Market or at privately negotiated prices.

        Unless the context indicates otherwise, all share and per-share information in this prospectus assumes no exercise of:

8


    the over-allotment option to purchase up to [            ] units;

    warrants to purchase up to [            ] units granted to the representative in connection with this offering; and

    outstanding options to purchase a total of 800,000 shares of common stock, which have an exercise price of $3.50 per share.


Summary Financial Information

        In the table below, we provide you with historical selected financial data for the six months ended June 30, 2004 and June 30, 2003 and for the fiscal years ended December 31, 2003 and December 31, 2002.

This information is derived from our consolidated financial statements included elsewhere in this prospectus. Historical results are not necessarily indicative of the results that may be expected for any future period.

When you read this historical selected financial data, it is important that you read along with it the historical financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.

Statements of Income Data

Six Months ended
June 30, 2004
(Audited)

Year ended
December 31, 2003
(Audited)

Six Months ended
June 30, 2003
(Unaudited)

Year ended
December 31, 2002
(Audited)

Revenues$5,031,712$$$
Expenses$4,822,976$340,504$53,037$
Net income (loss) before minority interest$208,736$(340,504)$(53,037)$
Net income (loss) after minority interest$126,083$(340,504)$(53,037)$

        The table below sets forth a summary of our balance sheet data as of June 30, 2004, December 31, 2003, June 30, 2003 and December 31, 2002, derived from our consolidated financial statements included elsewhere in this prospectus.

Balance sheet Data

As of
June 30, 2004
(Audited)

As of
December 31, 2003
(Audited)

As of
June 30, 2003
(Unaudited)

As of
December 31, 2002
(Audited)

Cash and cash equivalents$2,680,996$210,166$65,107$
Total current assets$4,085,709$211,599$65,107$66,270
Total assets$18,570,816$282,852$131,993$66,270
Total stockholders' equity$2,538,268$28,018$30,873$28,790

9



RISK FACTORS

Investment in our securities involves a high degree of risk.

You should carefully consider the risks described below together with all of the other information included in this prospectus before making an investment decision. The risks and uncertainties described below are not the only ones we face. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer.

In that case, you may lose all or part of your investment.


Risks Related to Our Business

We have a limited operating history making it difficult to evaluate our business.

        We were incorporated in the Cayman Islands on July 20, 2004 and have an operating history limited only to the two hospitals which we have acquired.

You should evaluate the likelihood of financial and operational success in light of the uncertainties and complexities present in a development company, many of which are beyond our control, including:

    our potential inability to acquire hospitals in China;

    the significant investment to achieve our business plan objectives;