OVERVIEW
We are a provider of ophthalmic services in Hong Kong and in the PRC. Founded in 2005, we currently operate three Medical Centres in Hong Kong under various trade names — ‘‘Clarity Eye Centre (清晰眼科中心)’’, ‘‘Hong Kong LASIK (香港矯視中心)’’, ‘‘Hong Kong Cataract Centre (香
港白內障中心)’’, ‘‘Hong Kong Centre For Presbyopia (香港老花中心)’’, ‘‘Hong Kong Oculoplastic Centre (香港眼部整形中心)’’, ‘‘HK Retina Institute (視網膜及黃斑點專科手術中心)’’ and ‘‘Hong Kong International Eye Centre (香港國際眼科中心)’’. We also sell spectacles under the trade names of ‘‘Dr. T Vision Centre (Dr. T 視力中心)’’ and ‘‘Dr. T Vision Centre for Children (Dr. T 小 童視力中心)’’. We provide comprehensive ophthalmic services for clients with various eye conditions, in particular cataract and refractive errors.
According to the Frost & Sullivan Report, cataract surgery is the major type of ophthalmic surgery, representing approximately 68.7% of the total number of ophthalmic surgeries performed by the public and private sector in Hong Kong in 2014. The number of cataract surgery performed in Hong Kong increased at a CAGR of approximately 2.2% from 48,618 in 2010 to 53,118 in 2014, and is estimated to increase at a CAGR of approximately 3.1% to 61,941 in 2019 from 2014.
Refractive error is considered as an eye focusing disorder instead of an eye disease and thus is excluded from the scope of public health care. Hence, related vision correction surgeries are generally carried out by the private sector. The number of vision correction surgeries performed in Hong Kong increased at a CAGR of approximately 6.0% from 14,211 in 2010 to 17,914 in 2014, and is estimated to increase at a CAGR of approximately 6.5% to 24,519 in 2019 from 2014.
In China, according to the Frost & Sullivan Report, it is estimated that 1.46 million cataract operations were performed in 2014, giving the average national cataract surgical rate of approximately 1,067 per million population in that year.
Since February 2014, we have expanded our ophthalmic services to the PRC through cooperation with the New Vision Eye Hospital to provide ophthalmic services, including consultation and treatment services, at its clinic in Shanghai. Since May 2015, we have entered into cooperation agreements with BJ Hai Run, the sole agent of the ‘‘Oculentis’’ IOL in the PRC, pursuant to which (i) we have been appointed as its exclusive distributor for sales and distribution of various models of ‘‘Oculentis’’ IOL to public medical institutions in Shanghai, Jiangsu, Henan, Anhui, Guangdong, Jilin, Liaoning and Heilongjiang and a private medical group in Shanghai, the PRC from January 2016 to December 2020 (which may be terminated by either party by three months’ written notice to the other party); and (ii) we and BJ Hai Run agreed to cooperate in distribution of ‘‘Oculentis’’ IOL in other parts of the PRC from January 2016 to December 2020 (which may be terminated in case of breach by either party) as a condition for us to obtain our exclusive distribution rights in respect of ‘‘Oculentis’’ IOL. In June 2015, Vision JV entered into framework agreements for a term of three years from June 2015 to June 2018 with two hospitals located in Henan Province, the PRC for cooperation in providing ophthalmic services. Pursuant to the framework agreements, Vision JV will provide ophthalmic management consultancy services to those hospitals.
The Directors expect our business to grow with the increase in public awareness on health of eyes, increase in population with cataract or refractive errors and our continuous introduction of advanced medical devices. Our revenue grew by approximately 41.3% to approximately HK$59.1 million for the year ended 31 March 2015 from approximately HK$41.8 million for the year ended 31 March 2014 and by approximately 17.4% to approximately HK$37.1 million for the seven months ended 31 October 2015 from approximately HK$31.6 million for the seven months ended 31 October 2014.
OUR COMPETITIVE STRENGTHS
We attribute the success of our business to the following principal competitive strengths: Ability to provide a wide spectrum of ophthalmic services
We provide a variety of ophthalmic services for clients of all age groups suffering from cataract, refractive errors or other eye problems. For cataract surgery, in addition to the common type which is known as phacoemulsification, we offer the choice of femtosecond laser-assisted phacoemulsification to enhance the accuracy and safety of the surgery. For vision correction, we offer different surgeries for clients with refractive errors, such as, LASIK surgery using microkeratome, femtosecond LASIK, SMILE surgery, ICL implantation surgery and Raindrop surgery. Clients may be recommended one of the above treatments or a mixture of them according to their eye conditions. In addition, we provide treatments for other eye problems such as macular degeneration, retinal detachment, amblyopia, chalazion, pterygium, tear duct blockage and squint, as well as sale of spectacles.
With the increase in public awareness on the health of eyes and the increase in population with cataract or refractive error, it is expected that the demand for cataract and vision correction surgery is on a rising trend. We believe the variety and well positioning of our services would enable us to capture the rising demand trend mentioned above.
Continuous exploration and introduction of improved technology
We are devoted to introduce advanced devices to improve our services. During the Track Record Period, we introduced three new diagnostic devices, namely, CIRRUS Photo 800, Oculus Pentacam, Daytona funduscamera, and four new medical devices, namely, WaveLightTM EX500 Excimer Laser, VisuMax Femtosecond Laser System 90°, LensAR Laser System and Constellation Vision System, to our Medical Centres to enhance the accuracy, predictability and safety for surgeries and broaden the treatment choices of our clients.
Our Group is keen to explore new technological breakthrough in ophthalmic industry. We encourage our Medical Practitioners to stay abreast of new knowledge and skill in the industry through local and international seminars and to introduce relevant new treatments to our clients. We have provided Raindrop surgery since July 2014 which adopts a new technology involving implanting transparent corneal inlay to correct presbyopia. We believe the introduction of advanced medical devices, in conjunction with up-to-date knowledge and skills of our team, would enable us to deliver high quality services.
Easily accessible locations of our Medical Centres strategically located in Hong Kong Our Medical Centres are strategically located at easily accessible locations in Hong Kong including Central, Mongkok and Tai Wai. These locations are accessible by various public transportations.
Experienced and dedicated management team
We have an experienced and dedicated management team for the management of our daily operations and implementation of our business plans. Dr. Tse, our founder and executive Director, has over [20] years of medical practicing experience, including over [12] years in the ophthalmic field since becoming a Specialist in ophthalmology in Hong Kong. Dr. Lau and Dr. Hui, our executive Directors, have over [12] years of medical practicing experience, including over [4] to [5] years in the ophthalmic field respectively since becoming Specialists in ophthalmology in Hong Kong. For details of the qualifications and experiences of Dr. Tse, Dr. Lau and Dr. Hui, please refer to the section headed ‘‘Directors, Senior Management and Employees’’ of this [REDACTED].
Dr. Lo, our employee who joined us in March 2015, has over [12] years of medical practicing experience, including over [5] years in the ophthalmic field since becoming a Specialist in ophthalmology in Hong Kong. Dr. Lo obtained a degree of Bachelor of Medicine and Bachelor of Surgery from the University of Hong Kong in December 2002, a degree of Master of Medicine (Ophthalmology) from the National University of Singapore in May 2005 and a Diploma in Advances in Medicine from the Chinese University of Hong Kong in March 2008. He was admitted to the associate fellowship of the College of Ophthalmologists of Hong Kong in June 2005, following that he became a fellow of the Royal College of Surgeons of Edinburgh in the specialty of Ophthalmology in May 2008 and a fellow of the Hong Kong Academy of Medicine in the specialty of Ophthalmology in December 2009, respectively. The College of Ophthalmologists of Hong Kong admitted Dr. Lo as their fellow in May 2010. He has been a Registered Medical Practitioner in Hong Kong since July 2003 and a Specialist in ophthalmology in Hong Kong since April 2010. Prior to joining our Group, Dr. Lo served as resident at the Hospital Authority from July 2003 and was promoted to associate consultant in June 2012 until he left in April 2015. He has also been appointed by the Chinese University of Hong Kong as Clinical Assistant Professor (honorary) in the Department of Ophthalmology and Visual Sciences from November 2012 to June 2015.
Our Directors believe that their in-depth knowledge of the industry, understanding on clients’ needs, experience in business management and established professional network in the ophthalmic industry, in combination with our strong team of staff, have been the key to our strong results.
We are also dedicated to provide continuous training to our staff in order to equip them with up-to-date professional knowledge and necessary skills required for their duties, including our Medical Centre’s daily operation management, skills on new medical device, latest knowledge in ophthalmic industry and related treatments.
With the leadership of our senior management, we believe we have successfully executed our business strategies throughout the years and have become one of the leading providers of ophthalmic services in Hong Kong.
Stable supply of major materials
IOL is a major material required in our operation which accounted for approximately 48.2% and 43.3% of our cost of inventories used for the two years ended 31 March 2015 and approximately 43.9% and 36.5% of our cost of inventories used for the seven months ended 31 October 2014 and 31 October 2015, respectively. We have entered into consignment agreements with our major suppliers pursuant to which these suppliers will be obliged to maintain a specific amount of various types of IOL with stated specifications at our designated Medical Centres from time to time. We have entered into a long term agreement with an IOL supplier for IOL and related consumable products. Save as the abovementioned, we generally do not enter into long term contracts with our suppliers as we have established long term relationships with them and are able to maintain stable source of major materials required for our operation.
OUR BUSINESS STRATEGIES
We intend to pursue the following strategies to capitalise on our strengths so as to enhance our business prospects and profitability, with Hong Kong remaining as our primary focus while exploring business opportunities in the PRC:
(i) to enhance our Medical Centres in Hong Kong;
(ii) to expand and strengthen our presence in Hong Kong; and
(iii) to expand into PRC businesses that include distribution of IOL, provision of ophthalmic services, ophthalmic management consultancy services and other ophthalmic related businesses.
Further details of our business strategies and future plans are set out in the section headed ‘‘Future plans and use of proceeds’’of this [REDACTED].
OUR BUSINESS MODEL
Our Central Medical Centre, Mongkok Medical Centre and Tai Wai Medical Centre are located at easily accessible locations in Hong Kong Island, Kowloon and the New Territories respectively, and are well equipped with advanced medical devices for provision of our services.
We serve clients of all age groups suffering from various eye conditions including (i) cataract; (ii) refractive errors such as myopia, hyperopia, astigmatism and/or presbyopia; or (iii) other eye problems such as macular diseases, glaucoma and amblyopia.
OUR SERVICES
We principally engage in the provision of ophthalmic services in Hong Kong. Since February 2014, we have cooperated with New Vision Eye Hospital to provide ophthalmic services at its clinic in Shanghai, the PRC.
Set out below are breakdowns of our revenue by services for the Track Record Period: Year ended 31 March Seven months ended 31 October 2014 2015 2014 2015
HK$’000 % HK$’000 % HK$’000 % HK$’000 %
Services
Consultation services 3,084 7.4 4,074 6.9 2,124 6.7 3,139 8.5 Treatment services 35,402 84.6 51,025 86.3 27,322 86.5 31,297 84.4 (i) Cataract surgeries 21,321 51.0 28,369 48.0 15,908 50.4 16,956 45.7 (ii) Vision correction
surgeries 7,779 18.6 15,838 26.8 8,382 26.5 9,601 25.9 (iii) Surgeries for other
eye problems 3,935 9.4 4,103 6.9 1,713 5.4 3,329 9.0 (iv) Laser procedure
treatments 2,367 5.6 2,715 4.6 1,319 4.2 1,411 3.8 Prescription 2,796 6.7 3,381 5.7 1,751 5.6 2,338 6.3 Sale of spectacles 546 1.3 639 1.1 387 1.2 298 0.8 Total 41,828 100.0 59,119 100.0 31,584 100.0 37,072 100.0
Year ended 31 March Seven months ended 31 October 2014 2015 2014 2015
HK$’000 % HK$’000 % HK$’000 % HK$’000 %
Cataract surgeries With the implantation of
(a) Premium IOL 12,707 59.6 22,363 78.8 11,874 74.6 13,813 81.5 (b) Standard IOL 8,614 40.4 6,006 21.2 4,034 25.4 3,143 18.5 Total 21,321 100.0 28,369 100.0 15,908 100.0 16,956 100.0
Year ended 31 March Seven months ended 31 October 2014 2015 2014 2015
HK$’000 % HK$’000 % HK$’000 % HK$’000 %
Vision correction surgeries
LASIK surgeries 7,075 90.9 6,622 41.8 4,572 54.5 1,784 18.6 SMILE surgeries(Note 1) — — 8,625 54.4 3,315 39.6 7,577 78.9 Raindrop surgeries(Note 2) — — 233 1.5 146 1.7 117 1.2 ICL implantation surgeries 704 9.1 358 2.3 349 4.2 123 1.3
Total 7,779 100.0 15,838 100.0 8,382 100.0 9,601 100.0
Notes:
1. Introduced in June 2014. 2. Introduced in July 2014.
Set out below are the average fees of each type of our treatment services charged during the Track Record Period:
Year ended 31 March
Seven months ended 31 October Treatment services 2014 2015 2014 2015 Approximate HK$ Approximate HK$ Approximate HK$ Approximate HK$
(i) Cataract surgeries With the implantation
of
(a) Premium IOL 28,000 30,000 29,000 31,000 (b) Standard IOL
(Note 1) 13,000 13,000 17,000 15,000 (ii) Vision correction
surgeries
LASIK surgeries (Note 2) 14,000 15,000 15,000 17,000
SMILE surgeries — 27,000 26,000 28,000
Raindrop surgeries
(Note 2) — 14,000 12,000 29,000 ICL implantation
surgeries 35,000 30,000 35,000 31,000
(iii) Surgeries for other eye
problems 14,000 14,000 11,000 14,000
(iv) Laser procedure
treatments 9,000 10,000 12,000 11,000
Notes:
1. The average fee charged during the Track Record Period was lower than our fee range of cataract surgery of HK$20,000 to HK$47,000 stated under the section headed ‘‘Business — Pricing Policy’’ because discount package was offered to elderly customers with less financial affordability.
2. The average fee of LASIK surgeries and Raindrop surgeries charged during the Track Record Period was lower than our fee range of vision correction surgery of HK$19,000 to HK$85,000 stated under the section headed‘‘Business —Pricing Policy’’ because discount package was offered to customers with less financial affordability.
Our largest income stream derives from cataract surgeries, followed by vision correction surgeries. For the Track Record Period, revenue generated from cataract surgeries accounted for approximately 51.0%, 48.0% and 45.7% of our total revenue, while revenue generated from vision correction surgeries accounted for approximately 18.6%, 26.8% and 25.9% of our total revenue respectively.
Our Directors consider that the breakeven point should be the point where our profit after deducting the variable costs (‘‘variable margin’’) could cover the fixed costs. For the year ended 31 March 2015 and the seven months ended 31 October 2015, our total fixed costs, including consulting fees (fixed portion), staff costs, depreciation, other expenses (excluding non-recurring [REDACTED] expenses) and finance costs were approximately HK$24.3 million and HK$18.3 million, respectively. Using the variable margin for the year ended 31 March 2015 and the seven months ended 31 October 2015, which were approximately 69.6% and 68.9% respectively, the revenue to cover the total fixed costs, being the total fixed costs divided by the variable margin, were approximately HK$34.9 million and HK$26.6 million, respectively.
Hong Kong
Consultation services
We provide medical consultation and examination services to our clients through our team of Medical Practitioners, optometrists, enrolled nurse and/or nurse assistants. Examination services mainly include assessments on eye condition such as visual acuity, refraction, anterior segment examination, fundal examination and intraocular pressure measurement. Following consultation and diagnosis on our clients based on their specific conditions, needs and concerns, Medication may be prescribed and/or treatments may be recommended to the clients by our Medical Practitioners. Follow up consultation services may be provided depending on the condition of the clients after taking the recommended Medication and/or completion of treatment.
Treatment services
We provide a range of ophthalmic treatments at our Surgery Centres or in the Hospitals, depending on the complexity of the treatment, the need of general anaesthesia and/or the choice of our clients. The table below summarises the treatment services which may be recommended to our clients after the diagnosis through consultation, taking into consideration a number of factors, in particular, the age and condition of client, the safety, effectiveness, risks and possible side-effects of relevant treatment. Clients may be recommended one or more than one type of treatment depending on their respective eye problems and our Medical Practitioners will explain to clients the associated benefits and potential risks of each recommended treatment and any alternative treatment choice. All the treatment services are performed by our Medical Practitioners assisted by other frontline staff:
Treatment services Eye problems Treatment description Note
Degenerative eye problems:
(i) Cataract surgery: Cataract Cataract is corrected by extraction of the cataractous lens from the eye, followed by implantation of IOL.
Treatment services Eye problems Treatment description Note —Phacoemulsification —It is a common type of
cataract surgery in which ultrasonic energy is delivered by a device called phacoemulsifer to break up and remove the cataractous lens through small cornea incision(s). —Femtosecond
laser-assisted
phacoemulsification
—It is a cataract surgery in which femtosecond laser is used to open small cornea incision(s) and break the cataractous lens into tiny fragments to facilitate
phacoemulsification.
—Compared to surgical knife, the femtosecond laser provides a more accurate and customised treatment and thus delivers a more consistent and safer result.
—In addition to cataract, clients may suffer from different refractive error. Clients can choose the types of IOL to implant in order to solve both their cataract and respective refractive error.
—Limbal relaxing incision for treating astigmatism may be performed together with cataract surgery.
(ii) Vision correction surgery:
Refractive error: Refractive error is corrected either by changing the shape thus the refractive angle of the cornea, or by changing intraocular reflection by various types of implants.
Treatment services Eye problems Treatment description Note —LASIK surgery —Myopia, hyperopia
and/or astigmatism
(a) microkeratome —It is a common type of LASIK surgery in which a corneal flap is created by using surgical blade called microkeratome. The flap will be opened and excimer laser will then be used to ablate the lower corneal layer (corneal stroma) to achieve the required shape. After the laser surgery is completed, the flap is returned to its original position. (b) Femtosecond
LASIK
—The corneal flap as mentioned above is created by femtosecond laser instead of surgical blade.
—Compared to LASIK surgery using microkeratome, Femtosecond laser surgery achieves a more accurate and safe result due to enhanced accuracy and consistency. —SMILE surgery —Myopia and/or
astigmatism
—A part of central cornea is cut by using
femtosecond laser without interrupting the corneal surface. No corneal flap is created. The lenticule is then removed through a 2 mm partial incision.
—Compared to LASIK surgery, the SMILE surgery is a flapless procedure which minimises the surgical impact on the corneal stability and enhance predictability of the refractive outcome. The wound is smaller and thus vision recovery is more rapid. Potential side effects of LASIK surgery, in particular dry eye syndrome, can generally be reduced significantly. —Raindrop surgery —Presbyopia with or
without myopia, hyperopia and/or astigmatism —Implantation of a piece of microscopic transparent hydrogel inlay within the cornea.
—Raindrop surgery may be performed together with LASIK surgery to solve both presbyopia and other refractive error.
Treatment services Eye problems Treatment description Note —Implantation of ICL
surgery
—High degree myopia and/or astigmatism
—Suitable for clients with high degree of myopia and astigmatism but not suitable to accept LASIK surgery or SMILE surgery, for example, clients with corneal scar, myopia or astigmatism too high, or cornea too thin for corneal surgery.
Other eye problems:
(iii) Surgeries for other eye problems
Other eye problems, mainly include: macular degeneration, retinal detachment, amblyopia, chalazion, pterygium, tear duct blockage, squint, dry eye and eyelid anomalies
—Surgeries or treatments based on diagnosis
(iv) Laser procedure treatments
Eye problems including glaucoma, minor retinal tear, diabetic eye diseases and various retinal diseases
—Treatments for narrow angle glaucoma, retinal degenerations including tears and holes, proliferative diabetic retinopathy and retinal vessel obstructions
Prescription
Medication is prescribed by our Medical Practitioners to our clients following diagnosis, if necessary, after consultation or treatment services. Our Medical Practitioners are required to adhere to the following procedures upon prescription of Medication to clients:
. Full prescription shall be recorded in the client’s record in chronological sequence with notes of the consultation;
. Prescription shall be written clearly and legibly, with indication of the generic name, frequency, dosage and treatment period of the prescribed Medication;
. Prescription date shall be clearly stated with the signature of our responsible Medical Practitioner.
To ensure that correct Medication are given to clients, we conduct several checks before Medication is dispensed to the clients. Our Medical Centre staff are required to check the expiry dates, information on the labels and client’s identities during dispensation and deliver the prescribed Medication to the relevant Medical Practitioner for checking and signing. Medical Centre staff will conduct final check of the Medication and explain to the clients the correct methods for using the Medication.
Sale of spectacles
We operate an optical shop in each of our Central Medical Centre and Mongkok Medical Centre for sale of spectacles to our clients generally. Our optometrists provide optometric examination and recommend the suitable frames and lens to our clients. After clients’ confirmation, we will place order for the required frames and lens with the relevant manufacturers.
The PRC
Ophthalmic services
We entered into a cooperation agreement with New Vision Eye Hospital in Shanghai for a term from February 2014 to 31 December 2016, subject to renewal. Pursuant to the agreement, we shall designate Medical Practitioners to provide consultation and treatment services to patients at the department of ophthalmology in New Vision Eye Hospital at least 4 days per month for an agreed share ranging from 20% to 65% of the consultation, examination and surgery fees received from the patients. New Vision Eye Hospital is responsible for providing operation theatres, qualified optometrists, nursing and supporting staff, examination, medical devices, medication, consumables and other necessities required for our services. As professional knowledge is crucial to the quality of our services, the aforesaid ophthalmic services are provided by our Medical Practitioners who are Registered Medical Practitioners and Specialists in ophthalmology. Further, we provide technical ophthalmologists and nursing staff in New Vision Eye Hospital. For the Track Record Period, revenue generated from this cooperation agreement amounted to approximately HK$60,000 (since February 2014), HK$226,000 and HK$312,000, representing approximately 0.1%, 0.4% and 0.8% of our total revenue respectively.
As advised by our PRC legal advisers, pursuant to Regulations on Handling Medical Incidents promulgated by the State Council on 4 April 2002 and effective from 1 September 2002, any compensation for a medical incident shall be paid by the medical institution responsible for the medical incident. New Vision Eye Hospital is the only medical institution covered by these regulations. None of the Group or any of our Medical Practitioners shall be liable for any such claims from patients of New Vision Eye Hospital.
The aforesaid regulations further states that in case of a medical incident, the health administration department in the PRC shall give a warning to the responsible medical institution according to the grade and situation of the medical incident. If the circumstances are serious, the health administration department shall order the medical institution to suspend business for rectification within the specified time limit or the original license-issuing department shall revoke
the license for practice, and the medical workers responsible therefor shall, pursuant to the relevant law, be investigated for criminal liability. For medical incidents of a less serious nature, administrative or disciplinary sanctions may be given. In addition to the punishment imposed mentioned above, the health administration department may concurrently order the medical workers responsible for a medical incident to suspend their practicing activities for not less than six month but not more than one year. If the circumstances are serious, their certificates for practice in the PRC shall be revoked.
Our Medical Practitioners provide ophthalmic service at the New Vision Eye Hospital in their own capacity as licensed doctors in the PRC. Each of them has purchased at his/her own cost professional indemnity insurance from The Medical Protection Society Limited and therefore has medical indemnity insurance coverage against his/her own clinical negligence claims around the world. As confirmed by our PRC legal advisers, our role under the cooperation agreement is to designate Medical Practitioners to provide consultation and treatment services to patients at the ophthalmology department of New Vision Eye Hospital. We are not a medical institution in the PRC and thus shall not be liable for any medical incident relating to the service provided by our Medical Practitioners at the New Vision Eye Hospital.
Management consultancy service
In April 2015, Vision JV was established in the PRC and is equally owned by us and Bo Hong for provision of ophthalmic management consultancy service to hospitals in the PRC.
Bo Hong is principally engaged in the provision of corporate consultancy, corporate branding and marketing strategy services in the PRC. It has assigned a representative responsible for the operation of Vision JV who is also a director and the legal representative of Vision JV. The representative is a medical doctor who was graduated from Xin Xiang Medical School in June 1990 and qualified as associate chief physician in the PRC in May 2004. We expect that Vision JV will be able to benefit from Bo Hong’s contribution through its (i) medical expertise; (ii) relationship with hospitals in the PRC; and (iii) relationship with financial institutions which provide medical device finance leases in the PRC.
The target clients of Vision JV include hospitals which intend to set up ophthalmic department but lack the required equipment, medical practitioners and/or experience in operation. Apart from our expertise in operating ophthalmic medical centres and our business network with the equipment suppliers established through our Hong Kong business, we have engaged the PRC Consultant (as defined below) to assist us in the management consultancy service.
In June 2015, Vision JV entered into framework agreements with two hospitals, 沁陽市婦幼保 健院 (Qinyang City Hospital for Woman & Child) and 浚縣社會福利醫院 (Social Welfare Hospital of Xun County), both located in Henan Province, the PRC for providing ophthalmic services for a term of three years from June 2015 to June 2018. Pursuant to those framework agreements, Vision JV will provide ophthalmic management consultancy service to those hospitals which will mainly include (i) set up of comprehensive ophthalmic unit with operating and training facilities; (ii) set up of platform for remote ophthalmic diagnosis; and (iii) devices required for the abovementioned
platform and ophthalmic service. In addition, Vision JV will arrange qualified ophthalmic experts to participate in the remote ophthalmic diagnosis and provide marketing materials to those hospitals. Management fees payable by each of those hospitals to Vision JV is expected to be an agreed share of the fees received by those hospitals from its clients. Since Sure Excel PRC obtained its Medical Device Business Operations Permit in December 2015, our Directors decided that our Group should devote time and effort in establishing our sales network to capture the market for our sales and distribution of IOL business in the PRC. Thus, we will delay our commencement in providing ophthalmic management service to hospitals in the PRC until the second half of 2016. As at the [Latest Practicable Date], Vision JV has not yet entered into any cooperation agreement with qualified ophthalmic experts, our Directors confirmed that the agreed share of fees is still under negotiation and has not been finalised and no revenue has been generated from Vision JV.
As advised by our PRC legal advisers, Vision JV as a provider of ophthalmic management consultancy service will not be liable for any medical malpractice of those hospitals, their doctors or qualified ophthalmic experts arranged by Vision JV mentioned above.
Exclusive distributor of IOL Brand — ‘‘Oculentis’’
a. Background of exclusive distribution agreement and Distribution cooperation agreement
‘‘Oculentis’’ IOL is one of the major materials used in our cataract operations. During the year ended 31 March 2015 and the seven months ended 31 October 2015, we used 170 and 265 pieces of ‘‘Oculentis’’ IOL for cataract surgeries, representing approximately 23.3% and 58.0% of our costs of IOL used during such year/period respectively.
According to information published by the National Health and Family Planning Commission of the PRC, the total amount of cataract surgeries performed in Shanghai, Jiangsu, Henan, Auhui, Guangdong, Jilin, Liaoning and Heilongjiang, the PRC had increased from 320,000 cases in 2011 to approximately 550,000 cases in 2014, representing a CAGR of approximately 19.8%.
We have gauged the PRC market by attending and participating in ophthalmic forums, seminars and meetings in various regions of the PRC and have received positive feedbacks on surgical applications of ‘‘Oculentis’’ IOL. Given (i) the proven acceptance of ‘‘Oculentis’’ IOL in our operations; (ii) the common usage in cataract surgeries worldwide and (iii) the cataract surgery market potential in the PRC, we have entered into (i) exclusive distribution agreements with BJ Hai Run, the sole agent of ‘‘Oculentis’’ IOL in the PRC, for sales and distribution of ‘‘Oculentis’’ IOL to public medical institutions in Shanghai, Jiangsu, Henan, Auhui, Guangdong, Jilin, Liaoning and Heilongjiang and a private medical group in Shanghai, the PRC; and (ii) distribution cooperation agreement in respect of ‘‘Oculentis’’ IOL.
b. Sure Excel PRC
Sure Excel PRC, our wholly owned subsidiary established in the PRC, obtained a Medical Device Business Operations Permit in December 2015 as required under the relevant PRC laws and regulations for trading of IOL in the PRC. For details of the regulations relating to the medical device operation in the PRC, please refer to the section headed ‘‘Regulatory Overview — Regulations Relating to the Medical Device Operation’’.
c. BJ Hai Run
BJ Hai Run has obtained a Medical Device Registration Certificate issued by the China Food and Drug Administration for models of ‘‘Oculentis’’ IOL distributed by us. The manufacturer of ‘‘Oculentis’’ IOL has obtained ISO 13485 certification in recognition of quality management system. Such certification defines explicitly the needs and requirements of an overarching management control system concerning the design and manufacture of medical devices.
d. Exclusive distribution agreements
In May 2015, we entered into a cooperation agreement with BJ Hai Run setting out the preliminary terms of our exclusive sales and distribution rights of various models of ‘‘Oculentis’’ IOL in the PRC for a quarterly licence fee to BJ Hai Run. This was superseded after Sure Excel PRC obtained a Medical Device Business Operations Permit in December 2015 when we entered into two exclusive distribution agreements in December 2015 and January 2016 respectively for exclusive sales and distribution rights of various models of ‘‘Oculentis’’ IOL to public medical institutions in Shanghai, Jiangsu, Henan, Auhui, Guangdong, Jilin, Liaoning and Heilongjiang and a private medical group in Shanghai, the PRC from January 2016 to December 2020.
As at 20 December 2015, being the date immediately before the entering into of the new exclusive distribution agreement and distribution cooperation agreement, our Group paid a total amount of RMB300,000 to BJ Hai Run for such licence fee arrangement.
The major terms of the exclusive distribution agreements are set out as follows: (i) Purchase target and obligation
We have agreed to purchase specific quantity of ‘‘Oculentis’’ IOL from BJ Hai Run at agreed prices during the term of the agreements. Our total purchase target is approximately RMB124.5 million for the whole term of the agreement.
Should the Directors decide to terminate the exclusive distribution agreements after taking into consideration our performance in this new business for the year ending 31 March 2016, we are able to terminate the agreements by giving three months’ written notice to BJ Hai Run and, depending on the IOL models being purchased, our inventory purchase obligation would be approximately RMB1.0 million.
(ii) Termination
The agreements may be terminated on the occurrence of events, including:
. a party giving three months’ written notice of termination to the other party; or . if a non-defaulting party gives written notice to the other party of any breach of the
agreements and the parties fail to resolve the issue within one month, the non-defaulting party may terminate the agreements; or
. when the distribution cooperation agreement (the major terms of which are mentioned below) between BJ Hai Run and the Group terminates (only applicable to distribution rights in Shanghai, Anhui, Henan and Jiangsu).
The purchase obligation under the termination of agreements should not give rise to any contingent liability.
e. Distribution cooperation agreement
To pursue a prudent market development approach and to allow us to tap into the market in other parts of the PRC with greater flexibility, we entered into a distribution cooperation agreement with BJ Hai Run in December 2015 as a condition for us to obtain our exclusive distribution rights in respect of ‘‘Oculentis’’ IOL.
The major terms of the distribution cooperation agreement are set out as follows: (i) Purchase target and storage fee
We agree to purchase and maintain specific levels of ‘‘Oculentis’’ IOL, which BJ Hai Run shall be responsible for storage and sale to those parts of the PRC not covered by our Group’s exclusive distribution right. Our total purchase target of ‘‘Oculentis’’ IOL to be purchased and maintained for the whole term of the agreement is approximately RMB29.4 million.
Upon selling of any of our inventory by BJ Hai Run, it shall pay a service fee to us and replenish the inventory to keep it at the same level for us.
From February 2016, we are required to pay BJ Hai Run a monthly storage fee of RMB20,000 for the storage service provided to us.
(ii) Termination
In case of breach by BJ Hai Run, we are entitled to terminate the agreement and to distribute our inventory stored by BJ Hai Run to those parts of the PRC where BJ Hai Run has distribution rights.
In case of breach by us, BJ Hai Run may terminate the agreement, and is entitled to deal with the Group’s IOL inventory in its custody. As advised by our PRC Legal Advisers, under PRC law, BJ Hai Run is required to return to the Group the balance of the sale proceeds of such inventory after deducting the damages due from the Group to it.
f. Product supply agreement for downstream distribution
We entered into a product supply agreement with our downstream distributor in January 2016. The major terms of the agreement are as follows:
(i) Geographical Coverage
The distributor has been appointed as the exclusive distributor for sales and distribution of various models of ‘‘Oculentis’’ IOL to a private medical group in Shanghai, the PRC from January 2016 to December 2020.
(ii) Purchase Target
The distributor has agreed to purchase specific quantity of ‘‘Oculentis’’ IOL from us at agreed prices during the term of the agreement.
(iii) Termination
The agreements may be terminated on the occurrence of any of the following events: . a party giving three months’ written notice of termination to the other party; or . if a non-defaulting party gives written notice to the other party of any breach of the
agreement and the parties fail to resolve the issue within one month, the non-defaulting party may terminate the agreement.
g. Breakeven analysis
Our Directors consider that the breakeven point for our sales and distribution of ‘‘Oculentis’’ IOL should be the point where our profit after deducting the variable costs (‘‘variable margin’’) could cover the overhead costs. Based on (i) our agreements entered into with BJ Hai Run; (ii) the product supply agreement entered into with our downstream distributors; and (iii) our Director’s estimates of our first year overhead costs, including staff costs, depreciation and rental expense are approximately RMB1.7 million. The variable margin, which was approximately 39.6% and, the revenue to cover the total overhead costs, being the total overhead costs divided by the variable margin, is approximately RMB4.2 million.
h. Latest development
Distribution cooperation agreement
As at the [Latest Practicable Date], we had purchased approximately RMB11.7 million of ‘‘Oculentis’’ IOL for storage by BJ Hai Run (representing approximately 39.8% of the total purchase obligation set out in such agreement) and received service fee of approximately RMB500,000 since this agreement taking effect in January 2016.
i. Business feasibility and alternative plan for unsold inventory
In view of (i) the amount of revenue required to cover our overhead costs for our new business is relatively low; (ii) the growth in demand for IOL in cataract surgeries; (iii) our total purchase target under the distribution cooperation agreement represents only approximately 3.1% of the market share in regions of the PRC we have distribution rights in 2014; (iv) the proven acceptance of ‘‘Oculentis’’ IOL in our operations in the Track Record Period; (v) the common usage in cataract surgeries worldwide and (vi) the positive feedbacks received from interested parties in the regions which our Group has exclusive distribution rights, our Directors believe the new business will have great potential in the PRC market and there will be adequate demand to fulfil our purchase targets and to cover the overhead costs for our new business.
However, in the unlikely event that there is inadequate demand for ‘‘Oculentis’’ IOL in the PRC, our Directors estimate that 82.8% of the unsold inventory committed under the distribution cooperation agreement could be consumed by our Group’s cataract surgeries over 5 years, and the remaining 17.2% (equivalent to approximately RMB5.4 million) might have to be written off due to the expiry of the useable period.
We will engage PRC legal advisers by second half of 2016 to advise us on all legal matters relating to our PRC business. The financial management and marketing activities of our PRC business are managed by our financial controller and business development manager. We plan to increase the number of staff in the PRC as required in the future to cater for business expansion. In particular, we have recruited a sales manager, who had worked in the Shanghai headquarters of a medical technology company in the United States from December 2012 to August 2015. She holds a master degree of science in neuro-biology from Shanghai Jiao Tong University and a bachelor degree in Chinese pharmacy from Harbin Medical University. She, together with our business development manager, will set up a sales and marketing team of about 5 staff for sales and distribution of medical devices in the PRC, at this stage mainly for ‘‘Oculentis’’ IOL. The sales and marketing team will use our network with hospitals and doctors in the PRC established since our Group expanded into the PRC market in February 2014, and participate in various academic forums, seminars and marketing events to promote our IOL products. As at the [Latest Practicable Date], we had entered into product supply agreement with a distributor in Shanghai.
OUR MEDICAL CENTRES
Our Central Medical Centre, Mongkok Medical Centre and Tai Wai Medical Centre are at easily accessible locations in Hong Kong Island, Kowloon and the New Territories respectively. The table below set out the types of services provided at our respective Medical Centres:
Services Central Medical Centre Mongkok Medical Centre Tai Wai Medical Centre Consultation services ✓ ✓ ✓ Treatment services
(i) Cataract surgery ✓ ✓ (ii) Vision correction surgeries ✓
(iii) Surgeries for other problems ✓ ✓ ✓ (iv) Laser procedure treatments ✓ ✓
Prescription ✓ ✓ ✓
Sale of spectacles ✓ ✓
Medical devices
We have various devices required for provision of our services at our Medical Centres. All the medical devices at our Medical Centres are purchased from medical device manufacturers which, to the best knowledge, information and brief of our Directors, are Independent Third Parties. The table below summarises the functions and characteristics of our major devices, which we have one item each:
Medical device Year of purchase Functions Description
Constellation Vision System
4/2015 PPV This high speed vitrectomy machine is designed to treat various vitreoretinal diseases such as vitreous haemorrhage, retinal detachment, epiretinal membrane, macular hole and etc.
CIRRUS Photo 800 4/2015 Ocular coherence tomography and fundus fluorescein angiography
To assess glaucoma optic nerve damage and various macula diseases by its tomographic function. To examine the retinal blood vessel conditions and blood flow by its angiographic function.
Daytona fundus camera
11/2014 Retinal imaging and scanning
This retinal imaging machine has ultra-widefield scanning laser technology.
Oculus Pentacam 4/2014 Measurement of the anterior and posterior corneal surfaces
This anterior segment tomography provides an overall view of the anterior segment of the eye. Measurement of the anterior and posterior corneal surfaces supplies the true refractive power of the cornea which is essential for a precise laser refractive surgery. The data on the posterior surface also supports the detection of the early ectatic changes.
LensAR Laser System
4/2014 Cataract surgery An advanced technology platform for cataract surgery which provides a customised treatment by using femtosecond laser to create a small incision at the cornea and break the cataractous lens into tiny fragments to facilitate extraction.
Medical device Year of purchase Functions Description
VisuMax Femtosecond Laser System 90°
7/2014 Femtosecond LASIK A femtosecond laser platform to assist bladeless LASIK surgery via creating corneal flap by femtosecond laser, and exposing the corneal stroma for LASIK treatment.
SMILE surgery A single step femtosecond laser is used to cut the pre-calculated lenticule in the stromal layer inside the intact cornea and a small incision for removal of such lenticule. No corneal flap is created.
WaveLightTMEX500 Excimer Laser
8/2013 LASIK surgery An advanced LASIK platform which uses laser at 500Hz in LASIK surgery, includes customized ablation profiles and has advanced eye tracker system.
Our purchase cost of the above major devices amounted to approximately HK$15.9 million. We have maintained a warranty plan for LensAR Laser System. The remaining useful life of the devices, as estimated by our Directors based on their experience, is estimated to be more than 5 years. We currently have no replacement schedule of them. Replacement may be considered when new and more advanced devices are introduced to the industry.
Medical Practitioners
All the consultations and treatments provided at our Medical Centres are performed by our Medical Practitioners with assistance of frontline staff. All of our Medical Practitioners are Registered Medical Practitioners and Specialists in ophthalmology, whose qualifications can be viewed at the Medical Council’s website. Particulars of their qualifications and experience are set out in the section headed ‘‘Directors, Senior Management and Employees’’ of this [REDACTED] and in the paragraph headed ‘‘Experienced and dedicated management team’’ in this section.
Prior to 1 April 2015, each of our Medical Practitioners, through their respective wholly-owned service companies, entered into the Consultancy Agreements with us for provision of medical services to the Group in consideration of payment of agreed professional fees.
Under the Consultancy Agreements, each of the service companies of our Medical Practitioners (WIT, Metro Grace, Starry Profit and Giant Sight respectively) agreed to provide medical consultancy services to our Group at our Medical Centres through their respective sole managing consultants (Dr. Tse, Dr. Lau, Dr. Hui and Dr. Lo respectively). During the period of engagement, apart from WIT which was entitled to a fixed monthly consulting fee of HK$100,000, the Company paid Metro Grace, Starry Profit and Giant Sight a monthly consulting fee of HK$130,000 to HK$140,000, subject to adjustment based on, among others, (i) whether the Medical Practitioners comply with required working hours and (ii) the net income from consultations and treatment services provided during the month. When the revenue generated by the respective Medical Practitioner exceeded a certain threshold, the excess amount, after deducting the related cost borne by the Group, was multiplied by a certain percentage to arrive at the amount of adjustment.
As part of the Reorganisation, on 1 April 2015, Dr. Tse, Dr. Lau and Dr. Hui formed a partnership of medical practice, which Dr. Lo has joined as an employee. The Partnership entered into the Management Agreement with Saintford on 1 April 2015 to continue to provide medical services at the Medical Centres for a term of three years commencing on 1 April 2015 and expiring on 31 March 2018, in consideration of payment of agreed professional fees to the Partnership equal to their total fees under their respective Consultancy Agreements which were terminated with effect on 1 April 2015. For details of their remunerations, please refer to the section headed ‘‘History, Reorganisation and Corporate Structure — Reorganisation — Management Agreement — Remunerations’’ of this [REDACTED].
The table below set out the revenue contribution from each of our Medical Practitioners, for the two years ended 31 March 2015 and the seven months ended 31 October 2014 and 2015 respectively:
Year ended 31 March Seven months ended 31 October 2014 2015 2014 2015 HK$000 % HK$000 % HK$000 % HK$000 % (unaudited) Dr. Tse 18,566 44.4 23,751 40.2 13,556 42.9 11,882 32.1 Dr. Lau 12,537 30.0 17,922 30.3 8,617 27.3 8,776 23.7 Dr. Hui 10,179 24.3 16,501 27.9 9,024 28.6 10,984 29.6 Dr. Lo — — 306 0.5 — — 5,132 13.8
Note: Balance of 1.3%, 1.1%, 1.2% and 0.8% of our total revenue for the two years ended 31 March 2015 and the seven months ended 31 October 2014 and 2015, respectively, were revenue from sale of spectacles which were not directly attributable to the ophthalmic services provided by our Medical Practitioners.
Dr. Tse, Dr. Lau and Dr. Hui had been with the Group throughout the Track Record Period. As shown in the table above, approximately 44% and 40% of our revenue for the two years ended 31 March 2015 was contributed by Dr. Tse, while the remaining 24% to 30% of our revenue for these years were contributed by Dr. Lau and Dr. Hui. For the seven months ended 31 October 2015, revenue contribution by Dr. Tse, Dr. Lau and Dr. Hui became more even, amounting to approximately 32.1%, 23.7% and 29.6% of our revenue, respectively. Our reliance on their revenue contribution has been further lessened with the joining of Dr. Lo in March 2015 who contributed approximately 13.8% of our revenue for the seven months ended 31 October 2015.
Under the Management Agreement, Dr. Tse, Dr. Lau and Dr. Hui, through the Partnership, have undertaken to devote substantially the whole of their energy and time to serve our clients and will conduct business at our Medical Centres only except with the prior written consent of Saintford. Such consent will only be given by Saintford to the Medical Practitioners under or employed by the Partnership for work to be carried out for the Group at the Hospitals or medical institutions in the PRC as assigned by the Group. In addition, according to the respective service
agreements of Dr. Tse, Dr. Lau and Dr. Hui entered on [.] 2016, each of them, as our Director, is subject to the following non-competition undertakings for a period of one year after his/her ceasing to be our Director:
(a) not to engage or be engaged, whether directly or indirectly, in the provision of ophthalmic consultation and treatment services or any other business carried on by the Group at the time of termination of their employment in Hong Kong or other territories that the Group operates;
(b) not to take employment with competing business;
(c) not to solicit or entice away or attempt to solicit or entice away any employee, officer or manager of the Group; and
(d) not to solicit business from any clients of the Group.
In the case of Dr. Lo, during his employment with the Partnership up to 31 March 2017, which shall continue unless terminated by Dr. Lo or the Partnership by giving three months’ prior written notice, he shall not directly or indirectly carry on or be engaged or interested in any competitive medical practice or take employment with, or provide any service similar to any of his duties to the Partnership to, any person firm company or organisation. As Dr. Lo is an employee, the Partnership does not impose any non-competition undertaking on him upon termination of his employment agreement.
With an aim to further lessen our reliance on our existing Medical Practitioners, we plan to set up a new medical centre in the New Territories, Hong Kong in late 2017 and recruit 2 new Registered Medical Practitioners. In addition, we have stepped into the PRC market to explore new income streams. Apart from ophthalmic services provided at New Vision Eye Hospital since February 2014, we entered into a cooperation agreement with BJ Hai Run and two hospitals in Henan Province respectively in mid 2015 with an aim to commence IOL distribution business and ophthalmic management consultancy services in the PRC.
Taking into account (i) the trend of gradually even revenue contribution from our existing Medical Practitioners over the Track Record Period; (ii) our expansion and plan of expansion of our team of Medical Practitioners in Hong Kong; and (iii) our development of ophthalmic-related business in the PRC, including provision of ophthalmic service and management consultancy service and IOL distribution business, our Directors believe that the potential risk of our reliance on revenue contribution by any particular Medical Practitioner has been minimised.
Dr. Tse, Dr. Lau and Dr. Hui, as partners under the Partnership, are obliged to devote the whole of their energy and time to develop our business, and as Directors have to comply with their non-competition undertakings pursuant to their respective service agreements. Dr. Tse is not only our top revenue generator during the Track Record Period, but also our founder, Controlling Shareholder, chief executive officer and executive Director. Dr. Lau and Dr. Hui have shown their commitment to our Group through their [REDACTED] investment which are subject to lock-up for
18 months after the [REDACTED], and through their joining us as executive Directors. Hence, the Directors consider that the possibility that the Management Agreement or the respective employment of any Medical Practitioners will not be renewed upon expiry is low.
In order to facilitate our business growth, we will recruit additional Registered Medical Practitioners. The selection criteria include, inter alia, the practitioners’ academic background and professional qualifications, reputation, years of experience and integrity in professional conduct. Further details of our business plans are set out in the section headed ‘‘Future Plans and Use of Proceeds’’ of this [REDACTED].
Medical Practitioners’ liability
As our Medical Practitioners are Registered Medical Practitioners, they are required to adhere to the Code of Professional Conduct as well as to remain fit and proper (as considered by the Medical Council) throughout the period of their practice and they must not be subject to any suspension or removal from the General Register or other actions or proceedings which may affect their propriety or registration to act as Registered Medical Practitioners.
Negligence during the course of our business may result in claims for medical negligence and malpractice, which may cause an adverse impact on the reputation and operation of our Medical Practitioners and our Group. To minimize the potential impact on any claims and incidences of medical malpractice associated with our Medical Practitioners, each of our Medical Practitioners has purchased at his/her own cost professional indemnity insurance from The Medical Protection Society Limited, and therefore has medical indemnity insurance coverage against his/her own clinical negligence claims around the world. Our Directors believe that our current insurance coverage is sufficient for our business nature and is in line with industry standards. For details of the insurance policy, please refer to the section headed ‘‘Business — Insurance’’ of this [REDACTED].
Other frontline staff
Apart from our Medical Practitioners, we have a team of frontline staff, including optometrists, nursing and other operational staff to support our Medical Centres’ operation. As at the [Latest Practicable Date], we had 24 frontline staff, including 4 optometrists, 1 enrolled nurse and 19 operational staff. Optometrists are principally involved in providing optometric services, pre-operative assessment including detailed measurement on clients’ eyes and input of respective data into medical devices. The nursing and the operational staff are principally responsible for assisting our Medical Practitioners in provision of consultation and treatment services, stock inspection, dispensation of Medication to clients according to our Medical Practitioners’ instructions and daily operation of our Medical Centres, such as management of clients’ booking and appointment, registration and follow-up arrangements. Further details of our staff and remuneration policies are set out in the section headed ‘‘Directors, Senior Management and Employees’’of this [REDACTED].
Hospitals
Besides performing treatment services in our Surgery Centres, our Medical Practitioners operate in operation theatres in the Hospital for our clients (i) whose procedures require general anaesthesia; and/or (ii) who are children or in weak physical conditions.
SERVICES PROCESS Consultation services
Treatment services
Sale of spectacles
OUR CLIENTS
Set out below are the breakdown of our client visits by (i) existing and new clients; and (ii) consultation services and various kinds of treatment services for the Track Record Period:
Year ended 31 March
Seven months ended 31 October 2014 2015 2014 2015
Client visit
— existing clients 3,319 4,845 3,576 4,960
— new clients (Note 1) 7,858 11,244 5,682 5,608
Total 11,177 16,089 9,258 10,568
Consultation services 9,003 13,552 7,879 9,164
Treatment services
(i) Surgeries for degenerative eye problems:
Cataract surgeries with
implantation of 1,099 1,195 650 660
— Premium IOL 451 738 409 447
—Standard IOL 648 457 241 213
(ii) Vision correction surgeries: 535 786 457 385
LASIK surgeries 515 433 306 105
SMILE surgeries(Note 2) — 324 129 272
Raindrop surgeries(Note 3) — 17 12 4
ICL implantation surgeries 20 12 10 4
(iii) Surgeries for other eye
problems 286 296 162 234
(iv) Laser procedure treatments 254 260 110 125
2,174 2,537 1,379 1,404
Total 11,177 16,089 9,258 10,568
Notes:
1. The number of visits by new clients included the first and subsequent visits by the same clients during the year/period.
2. Available since June 2014. 3. Available since July 2014.
Our largest income stream derives from cataract surgeries. The number of cataract surgeries we performed in the Track Record Period amounted to 1,099, 1,195 and 660 respectively, accounting for more than half of the total number of surgeries we performed during the Track Record Period. The number of cataract surgeries with the implantation of Premium IOL increased by 63.6% in the year ended 31 March 2015 from the previous year and 9.3% for the seven months ended 31 October 2015 from the same period in 2014.
Our clients are individual patients with a mixture of different age groups. The following chart summarises the profile of our new clients by age for the two years ended 31 March 2015 and the seven months ended 31 October 2014 and 2015:
Year ended 31 March 2014–2015 Number of new clients by age
Seven months ended 31 October 2014–2015 Number of new clients by age
Our clients generally pay in HK$ by cash, EPS, credit cards or cheques. In general, no credit terms are offered to them. For credit card and EPS payments, the relevant banks will normally settle the payment with us in one or two days after the date of transaction. In the event of surgeries or treatments performed in the Hospitals, the Hospitals will collect the surgery and other fees from our clients on our behalf and generally settle with us within 30 days in the following month.
For the Track Record Period, the percentage of revenue derived from our largest client was less than 0.5%, 0.5% and 0.5%, respectively and the percentage of revenue derived from our five largest clients in aggregate was less than 1.8%, 1.4% and 2.2% respectively. To the best knowledge of our Directors, none of our Directors, their respective close associates or any Shareholders owning more than 5% of our issued Shares as at the [Latest Practicable Date] had any interest in any of our five largest clients during the Track Record Period.
We encourage our Medical Practitioners to participate in the Cataract Surgeries Programme to provide cataract surgery to those in need. Under such programme, the maximum cataract surgery fee is HK$13,000, of which up to HK$8,000 is usually payable by the patient upon completion of the surgery and the balance of HK$5,000 is subsidised by the Hospital Authority. Patients, who are comprehensive social security assistance recipients or holders of valid full medical fee waiver certificates, will be offered cataract surgery with no co-payment of HK$8,000 mentioned above. Settlement is generally made by the Hospital Authority within 6 months after our application for
the relevant amount of subsidy as supported by a confirmation of completion of cataract surgery by patients and us. For the Track Record Period, our revenue generated from this programme amounted to approximately HK$0.4 million, HK$0.4 million and HK$0.1 million respectively.
We maintain medical records of our clients. According to the Code of Professional Conduct, all medical records should be kept secure. This includes ensuring that unauthorised persons do not have access to the information contained in the records and that there are adequate procedures to prevent improper disclosure or amendment.
In addition, we have established policies and procedures in accordance with the Personal Data (Privacy) Ordinance (‘‘PDPO’’), which requires any person (the ‘‘data user’’) who controls the collection, holding, processing or use of the data to comply with the data protection principles prescribed by the PDPO. In collecting, holding, storing, or even erasing personal data, our Medical Practitioners and staff must comply with the following data protection principles of the PDPO, which are:
Principle 1 — Purpose and manner of collection of personal data. Personal data shall be collected for a purpose directly related to a function and activity of the data user, the way of data collection shall be lawful and fair, and the data subjects shall be informed of the purpose for which the personal data are collected and to be used.
Principle 2 — Accuracy and duration of retention of personal data. All practicable steps shall be taken to ensure the accuracy of personal data, and the personal data shall be deleted upon fulfilment of the purpose for which the data are used.
Principle 3 — Use of personal data. Unless the data subject has given prior consent, personal data shall only be used for the purpose for which they were originally collected or a directly related purpose.
Principle 4 — Security of personal data. All practicable steps shall be taken to ensure that personal data are protected against unauthorised or accidental access, processing or erasure.
Principle 5 — Data users shall formulate and provide policies and practices in relation to personal data.
Principle 6 — Access to personal data. individuals shall be entitled to request access to and correction of their personal data. Data users should comply with data access or data correction request within the time limit, unless reasons for rejection prescribed in the PDPO are applicable.
Furthermore, training on personal data privacy policy is provided to ensure all our Medical Practitioners and staff are familiar with the requirement of our internal control policies. Our policies require (i) patient records to be kept in a secured place and only our staff can access; (ii) access to electronic patient records that are stored in computer system and software is only granted to authorised staff with password protection; and (iii) no medical records shall be left unattended in an unsecured location and all medical records shall be properly packed or covered when transferring between Medical Centres. When receiving patient’s compliant on leakage of information or discovering the possibility of information leakage, an investigation team as led by chief operation officer would be formed immediately to carry out proper investigation and remedial action, if applicable. Annual review of the policies will be performed among our Medical Practitioners and relevant staff.
PRICING POLICY Hong Kong
The pricing of our services is determined as follows:
Consultation services — Consultation fees are charged at a range of HK$500 to HK$1,000 per visit, depending on the duration and complexity of the consultation and prevailing market prices. A premium consultation fee will be charged for consultation at non-business hours. Examination fees are charged at a range of HK$350 to HK$4,800 per session, depending on the complexity, equipment costs and skills required, duration of the examination and prevailing market prices.
Treatment services — Price is determined based on several factors including, inter alia, (i) types of treatment; (ii) complexity of the treatment; (iii) treatment technology involved; (iv) cost of treatment consumables, IOL and/or Medication; (v) whether designated Medical Practitioner is required; and (vi) market price of the services, with reference to the price of similar services in the market.
The fees of our treatment services are as follows:
(i) Cataract surgery — The fees for cataract surgery per eye are charged at a range of HK$20,000 to HK$47,000, subject to adjustments depending on the medical technologies and equipment employed for the surgery, the types of IOL used, whether limbal relaxing incision or any adjunctive treatment is required. In general, the charge for femtosecond laser assisted cataract surgery and implantation of Premium IOL such as multifocal toric lens, are higher.
(ii) Vision correction surgery — The fees for vision correction surgery for both eyes are charged at a range of approximately HK$19,000 to HK$85,000, depending on the types of medical technologies and equipment for the surgery (i.e. SMILE surgery, LASIK surgery or Raindrop surgery, or a combination of any of them) and whether the client requires implantation of ICL.
(iii) Laser procedure treatment — The fees for laser procedure treatment for one or both eyes are charged at a range of approximately HK$5,000 to HK$15,000, depending on whether one or both eyes require treatment and the type of laser procedure involved. (iv) Surgery for other eye problems — the fees for surgery for other eye problems are
charged at a range of HK$1,200 to HK$150,000, depending on the complexity and medical technologies for the surgery.
Prescription — Prescribed Medication is priced on a cost-plus basis and with reference to their market prices.
Sale of spectacles — Prices of spectacles are determined on a cost-plus basis and with references to their market prices.
The pricing of our services is reviewed by our management at least annually. In addition, our pricing policy may be reviewed in between the regular review period under the following circumstances:
. introduction of new techniques or medical devices (the pricing of existing similar treatment services would also be reviewed simultaneously);
. change in demand of our existing treatment services;
. increase in purchase cost of Medication, medical machines and/or consumables charged by our suppliers; and
. change in market price of similar treatment services. The PRC
Professional fees from ophthalmic services
The professional fees payable by New Vision Eye Hospital to our Group is an agreed share of the consultation, examination and surgery fees received from the clients at its department of ophthalmology served by us. Under the cooperation agreement with New Vision Eye Hospital, we are entitled to receive 20% to 65% of the service fees for various types of services provided by our Medical Practitioners.
Management fees from management consultancy services
The management fees payable by 沁陽市婦幼保健院 (Qinyang City Hospital for Women & Children) and 浚縣社會福利醫院 (Social Welfare Hospital of Xun County) to Vision JV are expected to be a share of the fees received by those hospitals from their clients to be agreed between them. Since Sure Excel PRC obtained its Medical Device Business Operations Permit in December 2015, our Group has devoted time and effort to establishing our sales network to capture the market for our sales and distribution of IOL business in the PRC. Thus, we will delay our
commencement in providing ophthalmic management service to hospitals in the PRC until the second half of 2016. As at the [Latest Practicable Date], Vision JV has not yet entered into any cooperation agreement with qualified ophthalmic experts, the agreed share of fees is still under negotiation and has not been finalised and no revenue has been generated from Vision JV.
Distribution of ‘‘Oculentis’’ IOL
Our Group intends to determine the prices of various models of ‘‘Oculentis’’ IOL on a cost-plus basis and with references to the market prices of similar products.
CASH RECEIPTS CONTROL AND MANAGEMENT POLICY
We receive cash from clients at our Medical Centres in our daily operation. We have implemented a check and balance system at our Medical Centres to ensure that fees are accurately received and recorded. Our designated staff conduct daily cash count and check against income reports and lock the cash in safes in our Medical Centres. Cash received is generally deposited into banks on the next Business Day. Our accounting department keeps record of the relevant amounts of cash transactions and movements.
During the Track Record Period and up to the [Latest Practicable Date], we had not encountered any issues in connection with our sales receipt control and management policy which would have had material impact on our business, financial condition or results of operations. MARKETING
Our client base has mainly been built by word-of-mouth referrals from our existing clients. Pursuant to the Code of Professional Conduct which imposes several restrictions on promotion or dissemination of service information to the public, we do not conduct any proactive marketing activities or advertisement of our services. Instead, we are very much reliant on, inter alia, the following to maintain our clientele:
(i) building and sustaining the reputation of the services provided by our Medical Centres in the industry as providers of reliable services;
(ii) increasing operational efficiency and service excellence to enhance client experience; (iii) offering price reduction to the elderly and providing convenience to needy in the society
by enrolling in the Cataract Surgeries Programme; and (iv) through the word of mouth of existing clients.
