Acquisition of Medical Accelerator Systems and Operating Rights

3 Months Ended

Jun. 30, 2011

Acquisition of Medical Accelerator Systems and Operating Rights

NOTE 3 - ACQUISITION OF MEDICAL ACCELERATOR SYSTEMS AND OPERATING RIGHTS

On March 30, 2011, in order to settle a long outstanding accounts receivable, a subsidiary of the Company, Changdu Huiheng acquired from its major customer, Jiancheng, medical equipment, specifically, medical accelerator systems and the operating rights of four medical centers which utilize these medical accelerator systems. The medical centers are located in different hospitals in PRC and provide radiotherapy treatments to local patients. Changdu Huiheng will share a percentage of net income with the hospitals from each medical center effective January 1, 2011 for one medical center and March 30, 2011 for three medical centers.

The consideration of the acquisition of the medical equipment and operating rights were approximately $8.25 million (RMB 54,000,000) and settled by offsetting the accounts receivable from Jiancheng. The cost of medical accelerator systems and operating rights were based on the fair value estimated by an independent appraisal firm which amounted in the aggregate to $11,277,310. The independent appraisal firm utilized the income approach to determine the fair value of the medical accelerator systems and operating rights acquired.

At the completion of acquisition during the period, the medical accelerator systems are recognized as medical radiotherapy equipment under property, plant and equipment category. The assets were recorded at fair value which amounted to $650,238 and depreciated with straight-line method over the estimated useful life ranging from seven to ten years.

The operating rights were recognized as intangible assets in the total amount of $10,627,072 and amortized on straight-line basis over the contractual period from seven to ten years.

As a result of the acquisition of assets, in accordance with ASC 845-10-30, the Company has recognized a gain on the acquisition amounting to $3,019,137 representing the difference between the fair value of assets acquired versus the amount of accounts receivable offset.

Acquisition information which translated at closing rate of March 30, 2011 is presented as follows:

	Contractual	Value of medical	Value of operating
Name of hospital	period	accelerator systems	rights	Total
Dali 60 Military Hospital of China	93 months	$ -	$ 3,398,096	$ 3,398,096
Liaocheng Hospital of Traditional
Chinese Medicine	84 months	283,713	1,523,050	1,806,763
Heze Huici Hospital	108 months	193,691	3,379,463	3,573,154
Lianyungang Shengan Hospital	116 months	172,834	2,326,463	2,499,297
Total		$ 650,238	$ 10,627,072	$ 11,277,310

HUIHENG MEDICAL, INC. 10-Q/A