China Pharmaceuticals Manufacturing & Distribution

Jade Pharmaceuticals Inc. (JPI), a subsidiary of Radient Pharmaceuticals Corporation,  is currently valued at approximately $28M on the Company's balance sheet.   The Company's executive management team is currently working to re-classify JPI as a strategic investment with plans to de-consolidate the subsidiary during the third quarter FY2009.  The ultimate business objective is to  gain the best possible valuation from this asset.

To accomplish this, Radient Pharmaceuticals anticipates it will monetize JPI through an Asia-based IPO or by selling the assets by FY2011. (Various China-based investors have expressed an interest in purchasing equity stake in JPI.  JPI’s management is also in the process of retaining a China-based investment bank to proceed toward a public listing on the Shenzhen or Hong Kong stock exchange before year-end FY2011.

Through this time period, JPI’s senior management team anticipates reporting its quarterly results and other business development activities to Radient Pharmaceuticals to provide on-going insight into JPI's operations.

Our China-based pharmaceutical manufacturing and distribution business is engaged in the manufacture and distribution of generic and homeopathic pharmaceutical products and supplements, as well as cosmetic products. We operate this business division through our wholly-owned subsidiary, JPI, which in turn, operates through a wholly-owned Chinese subsidiary, Jiangxi Jiezhong Bio-Chemical Pharmacy Company Limited (“JJB”).  Prior to June 26, 2009, we also owned and operated Yangbian Yiqiao Bio-Chemical Pharmacy Company Limited (“YYB”). YYB was sold on June 26, 2009 and had been accounted for as discontinued operations and in connection with the sale of YYB we transferred certain of JJB’s land use rights to the buyer of YYB, in which the bank has a secured interest. JPI acquired the businesses currently conducted by YYB and JJB in 2005 along with certain assets and liabilities of a predecessor to JJB (JiangXi Shangrao KangDa Biochemical Pharmacy Co. Ltd).  YYB was sold  to a Chinese national for 16 million RMB (or $2,337,541 U.S. Dollars) in the form of an agreement whereby the buyer of YYB will  pay this amount to Chinese International Bank of Commerce in order to partially satisfy outstanding bank loans at JJB.

During the second quarter of 2009, our management became aware of internal disputes in China that resulted in a deterioration of both operational and financial controls by JPI’s management over the operating entity JJB. Although we are currently taking steps to resolve these issues, we have recently begun discussions to divest and deconsolidate all or a portion of our China based operations. The management of both JPI and JJB has indicated that they believe the most prudent path to raising additional capital for our Chinese operating division is for JJB to complete one or more private placements of equity during the third and fourth quarters of 2009. They have also indicated that they believe the best path for us to monetize our investments in JPI and JJB would be for JJB to seek a public listing on the Growth Enterprise Market (“GEM”) located in Shenzhen or a similar Asia based market by the third quarter of 2012.  Our executive management and board of directors are in agreement with JPI and JJB’s management on this “spin-off” strategy and anticipate working with JPI and JJB to seek to complete their plans that are currently under development and designed to provide a path for a potential financial return for us in the future from this business unit.

On or before September 30, 2009, our management anticipate signing a binding agreement with JPI and JJB and their management that will begin the deconsolidation process.   We currently anticipate that we will complete various agreements with the management of JPI/JJB relating to the plan for the deconsolidation which will lead to JPI/JJB management owning a mutually agreed upon percentage of the JPI stock, following certain planned financings of JPI, and us ultimately  owning a minority ownership interest in JPI and JJB.  We currently plan to enter into the following agreements with JPI and the management of JPI/JJB:

• Shareholders Agreement between the current management of JPI/JJB and us, which will detail the rights and duties of the parties pending completion of the Deconsolidation Plan;
• Debt Conversion Agreement between to convert certain accrued salaries and expenses currently owed to JPI/JBB management into shares of JPI;
• Share Exchange Agreement intended to exchange certain shares of our stock currently held by these parties for stock of JPI; and
• Debt Conversion Agreement and Promissory Note between us and JPI in order to restructure certain debts of JPI/JJB that are owed to our company.

There can be no assurance that these proposed agreements will be entered into in the time period we anticipate, if at all.   In addition, the deconsolidation process of JPI and JJB is anticipated to materially and adversely affect our 2009 earnings and sales.  We may record a loss excluding one-time charges from the sales of YYB and the deconsolidation of JPI and JJB of a yet to be determined amount. In addition, there can be no assurance that we will ever realize any significant value from our equity interest in JPI and JJB.

Despite the planned deconsolidation of JPI and JJB, we still believe JPI and JJB have a promising future. We anticipate that we may be able to sell off a portion or all of our ownership in JPI and JJB during the next 30 months; alternatively we would seek an exit from our investment at or after any public listing. We also could retain all or a portion of our remaining equity stake in JPI and JJB, if ownership continues to look promising. The goal is to gain the best valuation possible for this strategic asset. Additionally, we also believe that JPI/JJB’s business and brand recognition make it a potential buyout target.

For more information visit the Jade Pharmaceuticals website.