S-1/A

As Filed with the Securities and Exchange Commission April 18, 2008            

Registration No.: 333-146975

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1 on Form S-1 to

Form SB-2

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

HUIHENG MEDICAL, INC.

(Formerly Mill Basin Technologies, Ltd.)

(Name of registrant as specified in its charter)

Huiheng Building, Gaoxin 7 Street South, Keyuannan Road,

Nanshan District, Shenzhen Guangdong, P.R. China 518057

Telephone: 86-755-25331366

(Address and telephone number of principal executive offices)

Nevada	5047	20-4078899
(State or jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

Li Bo

Huiheng Building, Gaoxin 7 Street South, Keyuannan Road,

Nanshan District, Shenzhen Guangdong, P.R. China 518057

Telephone: 86-755-25331366

(Name, address and telephone number of agent for service)

WITH A COPY TO

Douglas J. Rein Sagar Brahmbhatt c/o DLA Piper US LLP 4365 Executive Drive, Suite 1100 San Diego, CA 92121 (858) 677-1400 (858) 677-1401 (facsimile) Mitchell S. Nussbaum, Esq. Loeb & Loeb LLP 345 Park Avenue New York, New York 10154 (212) 407-4000 (212) 407-4990 (facsimile)

APPROXIMATE DATE 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, please check the following box: o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please 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

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (check one):

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x

Calculation of Registration Fee

Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price (2)		Amount of Registration Fee (3)
Common Stock, par value $0.001(1)		—		—
Underwriter’s Purchase Option to purchase shares of common stock		—		—
	$	34,500,000	$	1,060 (4	)

(1)Includes the shares of common stock issuable upon exercise of a purchase option to be sold to the Company’s underwriter (Chardan Capital Markets, LLC) in connection with this offering.

(2)Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act.

(3)Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price and includes the offering price of shares that the underwriters have the option to purchase to cover over-allotments, if any.

(4)Previously paid.

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 there after 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 Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

Explanatory Note: The registrant is amending a registration statement originally filed on Form SB-2 before the effective date of the amendments contained in Release 33-8876. Pursuant to the transition provisions in that release, the registrant has elected to continue using the disclosure format and content based on Form SB-2.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective.  This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED APRIL ___, 2008

PRELIMINARY PROSPECTUS

4,000,000 SHARES

COMMON STOCK

HUIHENG MEDICAL, INC.

This is a prospectus for the offer and sale by us of up to 4,000,000 shares of our common stock.

Our common stock is quoted on the Over-the-Counter Bulletin Board maintained by NASD (“OTCBB”) under the ticker symbol HHGM. We have applied to list our shares on the Nasdaq Capital Market. On April ___, 2008, the last reported sale price of our common stock was $________ per share.

Investing in our common stock involves a high degree of risk.  Before buying any shares, you should read the discussion of material risks in investing in our common stock.  See “Risk Factors” beginning on page 8 of this prospectus.

	Per Share	Total
Public offering price	$	$
Underwriting discounts and commissions	$	$
Proceeds, before expenses, to us	$	$

The underwriters may also purchase up to an additional [______] shares from us at the public offering price, less the underwriting discounts and commissions, within 45 days from the date of this prospectus to cover over-allotments.  If the underwriters exercise this option in full, the total underwriting discounts and commissions will be $[_____], and our total proceeds, before expenses, will be $[________]. We will also sell the underwriters a purchase option for the purchase of up to [____] shares at $[____] per share (115% of the per share offering price to investors), commencing on _________, 2008 (six months from the date of the offering) and expiring on _________, 2013 (five years after the date of the offering).

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

The underwriters expect to deliver the shares against payment in [_____, ___] on[____________], 2008.

CHARDAN CAPITAL MARKETS, LLC

____________________, 2008

You should only rely on the information contained in this prospectus.  We have not, and the underwriters have not, authorized anyone to provide you with additional information or information different from that contained in this prospectus.  We are offering to sell, and seeking offers to buy, shares 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 shares of our common stock.

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TABLE OF CONTENTS

Prospectus Summary	5
Risk Factors	9
Note Regarding Forward Looking Statements	21
Use of Proceeds	21
Market for our Shares	22
Summary Financial Data	23
Management’s Discussion and Analysis or Plan of Operation	24
Business	33
Directors, Executive Officers, Promoters and Control Persons	44
Principal Shareholders	47
Executive Compensation	49
Certain Relationships and Related Person Transactions	51
Description of Capital Stock	57
Legal Matters	59
Experts	59
Where you can Find More Information	59
Financial Statements	F-1

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PROSPECTUS SUMMARY

This summary highlights selected information appearing elsewhere in this prospectus and may contain all of the information that is important to you.  This prospectus includes information about the shares of common stock we are offering as well as information regarding our business and detailed financial data.  You should read this prospectus and the registration statement of which this prospectus is part in their entirety, especially the risks of investing in our common stock which we discuss under “Risk Factors,” and our financial statements and related notes beginning on page F-1.

Unless the context requires otherwise, the words “Huiheng,” “Huiheng Medical,” “we,” “us,” “our” and “our company” refer to Huiheng Medical, Inc. and its subsidiaries.

You should read the entire prospectus carefully before deciding to invest in shares of our common stock.

Our Business

We design and sell precision radiotherapy equipment used for the treatment of cancer and tumors in The People’s Republic of China (“PRC”). Our patented line of gamma treatment systems (“GTS”) quickly and accurately deliver a well-defined conforming dose of radiation to the target tissue while sparing surrounding normal tissue. We have approximately 17 patents issued in the PRC and internationally covering our product line.

Our customers are health care providers and third party hospital equipment investors, with the hospital as end user. We also offer our customers comprehensive post-sales services for our products as well as third party manufactured products. These post sales services include radioactive cobalt source replacement and disposal, medical expert training, clinical trial analysis, patient tumor treatment analysis, software upgrades and patient care consulting.

Our net revenues increased from $9.8 million in 2005 to $12.3 million in 2006 and to $15.94 in 2007. Our net income increased from $4 million in 2005 to $6.8 million in 2006 and to $9.02 in 2007. Over the last 5 years, management of Huiheng believes (based solely upon its knowledge of the industry) that it has sold more GTS units in China than any other company, as a result of the high quality, high performance and low-cost of its products.

We were founded in 2001 by Hui Xiaobing, who was a pioneer in the GTS industry in the PRC. Mr. Hui served as president and Chairman of Shenzhen OUR Technology, Co., Ltd., the first PRC company to develop a gamma treatment system. Mr. Hui is also the former CEO of Everbright Securities, a major Chinese financial institution.

Our Strategies

Our goal is to gain a greater market share in the GTS market in the PRC, by pursuing the following strategies:

· broadening our product offering, including the launch of four new products estimated to be released between Q2 2008 and Q4 2009;

· exploring opportunities to develop international markets in South America, Eastern Europe and Southeast Asia;

· expanding our sales and distribution force;

· pursuing relationships with foreign medical equipment technology leaders;

· continuing to offer high quality, low cost development services; and

· augmenting our strong commitment to R&D for the development of state-of-the-art equipment to maintain technological competitiveness.

Our Strengths

We believe, based solely on management’s knowledge of our industry, that we are a leader in the GTS market in the PRC. We consider our core competitive strengths to be:

· experienced and market savvy leadership;

· strong customer relationships and network;

· proprietary technology;

· production model and relationships;

· high quality product line;

· strong gross margins and pricing flexibility;

· consistent, high quality post sale customer service and support;

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· experienced research and development team; and

· strong R&D partnerships with Beijing University, China Science & Technology University and Public Healthcare Institute of Jilin University.

Our Industry

The market for medical equipment and supplies in the PRC is segmented into geographical regions. Hospitals with greater spending power tend to be located in large towns and cities in the eastern part of the PRC, where rapid economic growth has taken place during the last two decades and where the population tends to have higher income. Medical equipment and supplies distribution is a very specialized and localized sector in the PRC. Distributors of medical equipment and supplies operate in the PRC within various relatively small and geographically dispersed markets, each based in a wealthy eastern city to cover the surrounding areas, with few distributors willing or able to cover the entire country. Most distributors focus on the PRC’s eastern cities, where the bulk of purchasing power is concentrated, while the western part of the PRC has very limited coverage by distributors. The fact that different areas of the PRC have their own medical and insurance practices, purchasing policies and regulatory issues further increases the complexity of medical equipment and supplies distribution in the PRC.

The medical device market in the PRC was estimated to be approximately $5.0 billion in 2006. This market is expected to grow at a compound annual growth rate of almost 24 percent till 2010. In particular, the country is expected to see an increased demand for digital imaging devices, owing to the developments of information technology. And as a result of the 2003 SARS crisis the government has further heightened its awareness of the need to improve the country’s healthcare infrastructure, making healthcare a top national priority for years to come.

The PRC’s aging population and the popularization of private hospitals and clinics coupled with the demand for the high-quality medical devices and efficient healthcare services are some of the key factors contributing to the growth of the medical device market in the country. Additionally, initiatives by the government, such as reforms in the national medicine system, are also fueling growth in the industry.

The PRC radiotherapy industry has the following characteristics:

· decreasing fragmentation of market as small suppliers find it difficult to compete;

· high degree of government regulation with respect to unit pricing;

· low penetration rates of less than one radiotherapy system per million persons;

· large discrepancy between demand and access to radiation oncology systems;

· high barriers to entry due to both high technology requirement and established relationship contacts; and

· cancer continuing to be the leading cause of death in the PRC in the years 2004, 2005 and 2006.

Our Market

The Ministry of Health has identified cancer as the leading cause of death in the PRC for the years 2004, 2005 and 2006. To the extent that cancer-related illness and death are caused by environmental factors, the air and water pollution associated with the PRC’s rapid industrial expansion are expected to increase the rate of both. As a result, effective treatment of cancer is a high priority for the PRC healthcare system.

Radiotherapy is used in approximately 50% of all cancer treatments worldwide. In 2006, there were 0.6 radiotherapy units per million people in the PRC. The World Health Organization recommends 6 radiotherapy units per million people for “developed” countries. The United States, for example, has 13 units per million people.

· According to the World Health Organization between 2000 and 2020 approximately 150 million people will be diagnosed with cancer, of which 100 million should be treated with radiation therapy. Overall, the Asia Pacific region has the greatest discrepancy between the estimated need and supply wherein only 1,147 radiotherapy systems are available for a current demand of 4000 systems.

· Trends in the radiotherapy market in the PRC include:

· increasing ability of PRC medical community to detect cancer at treatable stages;

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· increasing acceptance of use of western style medicine;

· emerging middle class with increased financial ability to pay for medical procedures and demand for improved cancer care; and

· government indications to increase permissible spending on medical device procurement.

Corporate Structure

We are a Nevada holding company and conduct all of our business through our operating subsidiaries as described in the below chart. We own 100% of the equity interest of Allied Moral Holdings, Ltd. (“Allied Moral”), a British Virgin Islands company that, in turn, owns 100% of the equity interest of Tibet Changdu Huiheng Development Company, Ltd. (“Changdu Huiheng”), a Tibetan holding company that, in turn, directly owns 100%, 75% and 50%, respectively, of our operating subsidiaries, Wuhan Kangqiao Medical New Technology Company, Ltd. (“Wuhan Kangqiao”), a PRC company, Shenzhen Hyper Technology Company, Ltd. (“Shenzhen Hyper”), a PRC company and Beijing Yuankang Kbeta Nuclear Technology Co., Ltd. (“Beijing Kbeta”), a PRC company. Wuhan Kangqiao focuses on research and development and managing production of the Head Gamma System and Body Gamma System. Shenzhen Hyper focuses on research and development and production management of the Super Gamma System and linear accelerators. Beijing Kbeta focuses on installation and replacement of the Cobalt 60 sources. The remaining equity interests in Shenzhen Hyper and Beijing Kbeta are owned by unrelated unaffiliated parties.

Previous Operations

Prior to the change of control transaction in September 2006, we were engaged in the business of importing molding and door components and our corporate name was Pinewood Imports, Ltd. In September 2006, we changed our corporate name to Mill Basin Technologies, Ltd. In May 2007, we were subject to another change of control transaction, in which we acquired Allied Moral.

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Corporate Information

Our principal executive office is located at Huiheng Building, Gaoxin 7 Street South, Keyuannan Road, Nanshan District, Shenzhen Guangdong, P.R. China 518057. Our telephone number at that address is 86-755-25331366. Our website address is www.huihengmedical.com. The information on our website is not a part of this prospectus.

The Offering

Shares of common stock offered by us	4,000,000
Shares of common stock to be outstanding after this offering	17,800,137 (1)
Use of proceeds	Product development, construction of manufacturing facilities and working capital. See “Use of Proceeds.”
Risk factors	The purchase of our common stock involves a high degree of risk. See “Risk Factors”
Trading Market	OTCBB: Ticker symbol HHGM

(1) The number of shares of common stock to be outstanding after the closing of the offering is based on 13,800,137 shares of common stock outstanding as of March 31, 2008.

Except as otherwise indicated, all information in this prospectus assumes no exercise by the underwriters of their over-allotment option.

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RISK FACTORS

Investment in our common stock involves risk. You should carefully consider the risks we describe below before deciding to invest. Our business, financial condition or results of operations could be affected materially and adversely by any of the risks discussed below and any others not foreseen. The market price of our common stock could decline due to any of these risks, in which case you could lose all or part of your investment. In assessing these risks, you should also refer to the other information included in this prospectus, including our consolidated financial statements and the accompanying notes. You should pay particular attention to the fact that we are a holding company with substantial operations in China and are subject to legal and regulatory environments that in many respects differ from that of the United States. This discussion contains forward-looking statements.

Risks Related to our Business

Adverse trends in the medical equipment industry, such as an overall decline in sales or a shift away from the therapies that our products support, may reduce our revenues and profitability.

Our business depends on the continued vitality of the radiotherapy equipment industry, which is subject to technological change, short product life cycles and margin pressures. It is possible that innovations in other means of treatment of tumors or improvements in radiotherapy equipment developed by others will make our products unattractive in relative terms, reducing our revenues and profits.

We do not have long-term purchase commitments from customers and have to rely on maintaining a steady stream of new orders for our products.

Our medical equipment is generally sold one unit at a time to a particular customer, and most of our customers do not reorder our products. As a result, the continued growth of our business involves making sales to an increasing number of new customers each year, rather than being able to rely on continuing orders from existing customers. The failure to find and sell to a significant number of new customers each year would limit our revenues and profits.

We also make significant decisions, including determining the levels of business that we will seek and accept, production schedules, component procurement commitments, facility requirements, personnel needs and other resource requirements, based upon our estimates of future sales. Because many of our costs and operating expenses are fixed, a reduction in customer demand can reduce our gross margins and operating results. Additionally, from time to time, we may purchase quantities of supplies and materials greater than required by customer orders to secure more favorable pricing, delivery or credit terms. These purchases can expose us to losses from cancellation costs, inventory carrying costs or inventory obsolescence if the expected demand does not materialize , and hence adversely affect our business and operating results.

Failure to optimize our sourcing activities and cost structure could materially increase our overhead, causing a decline in our margins and profitability.

We strive to utilize our suppliers of parts and manufacturing services in an efficient manner. The efficiency of our operations depend in part on our success in accurately forecasting demand of our sales and planning component parts and outsourced manufacturing services for new products that we intend to produce. Failure to optimize our sourcing activities and cost structure could materially and adversely affect our business and operating results.

Moreover, our cost structure is subject to fluctuations from inflationary pressures. China is currently experiencing dramatic growth in its economy. This growth may lead to continued pressure on wages and salaries that may exceed increases in productivity. In addition, these may not be compensated for and may be exacerbated by exchange rate movements.

Our business is subject to intense competition, which may reduce demand for our products and materially and adversely affect our business, financial condition, results of operations and prospects.

The medical device market is highly competitive, and we expect the level of competition to remain at its current level or intensify. We face direct competition in China and will do so in other markets should we expand internationally. This competition is across all product lines and at all price points. Our competitors also vary significantly according to business segment. For domestic sales, our competitors include publicly traded and privately held multinational companies, as well as domestic Chinese companies. For international sales, which we are planning to commence in the near future, our competitors are primarily publicly traded and privately held multinational companies. We also face competition in international sales from companies that have local operations in the markets in which we sell our products. Some of our larger competitors especially the multinational company, have, among them:

· greater financial and other resources;

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· A larger variety of products;

· more products that have received regulatory approvals;

· more extensive research and development and technical capabilities;

· patent portfolios that may present an obstacle to our conduct of business;

· greater knowledge of local market conditions where we seek to increase our international sales;

· stronger brand recognition; and

· larger sales and distribution networks.

As a result, we may be unable to offer products similar to, or more desirable than, those offered by our competitors, market our products as effectively as our competitors or otherwise respond successfully to competitive pressures. In addition, our competitors may be able to offer discounts on competing products as part of a “bundle” of non-competing products, systems and services that they sell to our customers, and we may not be able to match those discounts while retaining profitability. Furthermore, our competitors may develop technologies and products that are more effective than those we currently offer or that render our products obsolete or uncompetitive. In addition, the timing of the introduction of competing products into the market could affect the market acceptance and market share of our products. Our failure to compete successfully could materially and adversely affect our business, financial condition, results of operation and prospects.

Moreover, some of our internationally-based competitors have established or are in the process of establishing production and research and development facilities in China, while others have entered into cooperative business arrangements with Chinese manufacturers. If we are unable to develop competitive products, obtain regulatory approval or clearance and supply sufficient quantities to the market as quickly and effectively as our competitors, market acceptance of our products may be limited, which could result in decreased sales. In addition, we may not be able to maintain our outsourced manufacturing cost advantage.

In addition, we believe that corrupt practices in the medical device industry in China still occur, although it is difficult to know how frequently. To increase sales, certain manufacturers or distributors of medical devices may pay kickbacks or provide other benefits to hospital personnel who make procurement decisions. Our company policy prohibits these practices. As a result, as competition intensifies in the medical device industry in China, we may lose sales, customers or contracts to competitors who engage in these practices, and there may be no remedy we can pursue to prevent this.

We may fail to effectively develop and commercialize new products, which would materially and adversely affect our business, financial condition, results of operations and prospects.

The medical device market is developing rapidly and related technology trends are constantly evolving. This results in frequent introduction of new products, relatively short product life cycles and significant price competition. Consequently, our success depends on our ability to anticipate technology development trends and identify, develop and commercialize in a timely and cost-effective manner new and advanced products that our customers demand. Moreover, it may take an extended period of time for our new products to gain market acceptance, if at all. Furthermore, as the life cycle for a product matures, the average selling price generally decreases. Although we have previously offset the effect of declining average sales prices through increased sales volumes and reductions in outsourced manufacturing costs, we may be unable to continue to do so. Lastly, during a product’s life cycle, problems may arise regarding regulatory, intellectual property, product liability or other issues which may affect its continued commercial viability.

Whether we are successful in developing and commercializing new products is determined by our ability to:

· accurately assess technology trends and customer needs and meet market demands;

· optimize our procurement processes to predict and control costs;

· manufacture and deliver products in a timely manner;

· increase customer awareness and acceptance of our products;

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· minimize the time and costs required to obtain required regulatory clearances or approvals;

· anticipate and compete effectively with other medical device companies;

· price our products competitively; and

· effectively integrate customer feedback into our research and development planning.

If we fail to obtain or maintain applicable regulatory clearances or approvals for our products, or if such clearances or approvals are delayed, we will be unable to commercially distribute and market our products at all or in a timely manner, which could significantly disrupt our business and materially and adversely affect our sales and profitability.

The sale and marketing of our products are subject to regulation in the PRC and in most other countries where we intend to conduct business. For a significant portion of our sales, we need to obtain and renew licenses and registrations with the PRC State Food and Drug Administration, or SFDA, and its equivalent in other markets. The processes for obtaining regulatory clearances or approvals can be lengthy and expensive, and the results are unpredictable. We recently have experienced unexpected delays in obtaining regulatory approval for our new products, and we cannot be certain how long the additional delays will be. In addition, the relevant regulatory authorities may introduce additional requirements or procedures that have the effect of delaying or prolonging the regulatory clearance or approval for our existing or new products. For example, the SFDA introduced a new safety standard to its approval process for new medical devices which we believe has increased the typical time period required to obtain such approval by approximately three months. If we are unable to obtain clearances or approvals needed to market existing or new products, or obtain such clearances or approvals in a timely fashion, our business would be significantly disrupted, and our sales and profitability could be materially and adversely affected.

In particular, as we enter foreign markets, we lack the experience and familiarity with both the regulators and the regulatory regimes, which could make the process more difficult, more costly, more time consuming and less likely to succeed.

Failure to manage our growth could strain our management, operational and other resources, which could materially and adversely affect our business and prospects.

Our growth strategy includes building our brand, increasing market penetration of our existing products, developing new products, increasing our targeting of hospitals in the PRC, and expanding internationally. Pursuing these strategies has resulted in, and will continue to result in, substantial demands on management resources. In particular, the management of our growth will require, among other things:

· continued enhancement of our research and development capabilities;

· information technology system enhancement;

· stringent cost controls and sufficient liquidity;

· strengthening of financial and management controls and information technology systems;

· increased marketing, sales and sales support activities; and

· hiring and training of new personnel.

If we are not able to manage our growth successfully, our business and prospects would be materially and adversely affected.

We extend credit to our customers and may not be able to collect all receivables due to us, and our inability to collect such receivables may have an adverse effect on our immediate and long-term liquidity.

The typical terms on which we sell our products provides for the customer to make a deposit at the time that the order is placed and to make progress payments at various stages of the manufacturing, shipping, installation and testing process. The final payment is not due until after the testing is complete and the customer accepts the product as meeting the specifications. We have limited ability to compel that final payment from the customer. Legal action is available, but the time it takes and the outcome of any litigation is inherently uncertain, particularly in the PRC, where the civil justice system continues to evolve. Should we be unable to collect on these accounts, it would reduce our liquidity and profitability.

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We generate a significant portion of our revenues from a small number of products, and a reduction in demand for any of these products could materially and adversely affect our financial condition and results of operations.

We derive a substantial percentage of our revenues from a small number of products. As of December 31, 2007, we had just four products in our portfolio. In 2007, we shipped our first multileaf collimator, increasing our portfolio to four products. As a result, continued market acceptance and popularity of these products is critical to our success. A reduction in demand due to, among other factors, the introduction of competing products, the entry of new competitors, or end-users’ dissatisfaction with the quality of our products, could materially and adversely affect our financial condition and results of operations.

If we experience a significant number of warranty claims, our costs could substantially increase and our reputation and brand could suffer.

We typically sell our products with warranty terms covering 12 months after purchase. Our product warranty requires us to repair all mechanical malfunctions and, if necessary, replace defective components. We accrue liability for potential warranty claims at the time of sale based on historical experience. If we experience an increase in warranty claims or if our repair and replacement costs associated with warranty claims increase significantly, we may have to accrue a greater liability for potential warranty claims. Moreover, an increase in the frequency of warranty claims could substantially increase our costs and harm our reputation and brand. Our business, financial condition, results of operations and prospects may suffer materially if we experience a significant increase in warranty claims on our products.

We may need additional capital, and we may be unable to obtain such capital in a timely manner or on acceptable terms, or at all.

For us to grow, remain competitive, develop new products and expand our distribution network, we may require additional capital. Our ability to obtain additional capital is subject to a variety of uncertainties, including:

· our future financial condition, results of operations and cash flows;

· general market conditions for capital raising activities by medical device and related companies; and

· economic, political and other conditions in China and elsewhere.

We may be unable to obtain additional capital in a timely manner or on acceptable terms or at all. Furthermore, the terms and amount of any additional capital raised through issuances of equity securities may result in significant shareholder dilution.

Products we develop may contain design or manufacturing defects, which could result in reduced demand for our services and customer claims, causing us to sustain additional costs, loss of business reputation and legal liability.

Our products are highly complex and may at times contain design or manufacturing errors or failures. Any defects in the products we develop, whether caused by a design, manufacturing or component failure or error, may result in claims, delayed shipments to customers or reduced or cancelled customer orders. If these defects occur, we will incur additional costs, and if in they occur in large quantity or frequently, we may sustain additional costs, loss of business reputation and legal liability.

Any product recall could have a material adverse effect on our business, results of operations and financial condition.

Complex medical devices, such as our radiotherapy systems, can experience performance problems that require review and possible corrective action by the manufacturer. From time to time, we receive reports from users of our products relating to performance problems they have encountered. We expect that we will continue to receive customer reports regarding performance problems they encounter through the use of our products. Furthermore, component failures, manufacturing errors or design defects that could result in an unsafe condition or injury to the patient might occur. Any serious failures or defects could cause us to withdraw or recall products, which could result in significant costs such as repair and product replacement costs. We cannot assure you that market withdrawals or product recalls will not occur in the future, which could have a material adverse effect on our business, financial condition and results of operations. We are currently unable to ensure against this type of liability in China.

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We could become involved in intellectual property disputes, resulting  in substantial costs and diversion of our management resources. Such disputes could materially and adversely affect our business by increasing our expenses and limiting the resources that we can devote to expansion of our business, even if we ultimately prevail.

We currently possess approximately 17 patents issued in the PRC and internationally. If one of our patents is infringed upon by a third party, we may need to devote significant time and financial resources to attempt to halt the infringement. We may not be successful in defending the patents involved in such a dispute. Similarly, while we do not knowingly infringe on patents, copyrights or other intellectual property rights owned by other parties, we may be required to spend a significant amount of time and financial resources to resolve any infringement claims against us. We may not be successful in defending our position or negotiating an alternative remedy. Any litigation could result in substantial costs and diversion of our management resources and could   reduce our revenues and profits.

We also rely on trade secrets, proprietary know-how and other non-patentable technology, which we seek to protect through non-disclosure agreements with employees. We cannot assure you that these non-disclosure agreements will not be breached, that we will have adequate remedies for any breach, or that our trade secrets, proprietary know-how and other non-patentable technology will not otherwise become known to, or be independently developed by, our competitors.

Implementation and enforcement of PRC intellectual property-related laws has historically been deficient and ineffective, and is hampered by corruption and local protectionism. Accordingly, intellectual property rights and confidentiality protections in China may not be as effective as in the United States or other countries. Policing unauthorized use of proprietary technology is difficult and expensive, and we might need to resort to litigation to enforce or defend patents issued to us or to determine the enforceability, scope and validity of our proprietary rights or those of others. The experience and capabilities of PRC courts in handling intellectual property litigation varies, and outcomes are unpredictable. Further, such litigation may require significant expenditure of cash and management efforts and could harm our business, financial condition and results of operations. An adverse determination in any such litigation will impair our intellectual property rights and may harm our business, prospects and reputation.

We may develop new products that may not gain market acceptance, and our significant costs in designing and manufacturing services for new product solutions may not result in sufficient revenue to offset those costs or to produce profits.

We operate in an industry characterized by frequent technological advances, the introduction of new products and new design and manufacturing technologies. We are expecting to introduce four new products during the period from Q2 2008 through Q4 2009. As a result, we are expending funds and committing resources to research and development activities, possibly requiring additional engineering and other technical personnel; purchasing new design, production, and test equipment; and continually enhancing design processes and techniques. Delays in product approval by regulatory authorities could increase costs. We may invest in equipment employing new production techniques for existing products and new equipment in support of new technologies that fail to generate adequate returns on the investment due to insufficient productivity, functionality or market acceptance of the products for which the equipment may be used. We could, therefore, incur significant sums in design and manufacturing services for new products that do not result in sufficient revenue to make those investments profitable.

Our limited operating history makes evaluating our business and prospects difficult.

Shenzhen Hyper commenced operations in September 2001, and delivered the first unit of our Super Gamma System (“SGS”) in that year. Wuhan Kangqiao also commenced operation in September of 2001, and it delivered the first unit of our Body Gamma Treatment System (“BGTS”) in 2003 and the first unit of our Head Gamma Treatment System (“HGTS”) in 2004. As a result, we have a limited operating history which may not provide a meaningful basis for you to evaluate our business, financial performance and prospects. We may not have sufficient experience to address the risks frequently encountered by early-stage companies, and as a result we may not be able to:

· maintain profitability;

· preserve what we believe (based solely on management’s knowledge of the industry) is our leading position in the market of Gamma Treatment System tumor therapy devices in China;

· acquire and retain customers;

· attract, train, motivate and retain qualified personnel;

· keep up with evolving industry standards and market developments;

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· increase the market awareness of our products;

· respond to competitive market conditions;

· maintain adequate control of our expenses;

· manage our relationships with our suppliers and distributors; or

· protect our proprietary technologies.

If we are unsuccessful in addressing any of these risks, our business may be materially and adversely affected.

Our component and materials suppliers may fail to meet our needs, causing us to experience outsourced manufacturing delays, which may harm our relationships with current or prospective customers and reduce sales.

We acquire many of the components of our equipment from third parties. This generally serves to reduce our commitment risk but does expose us to supply risk and to price increases that we may not be able to pass on to our customers.   There may be shortages of some of the materials and components that we use. If we are unable to obtain sufficient amounts of components or materials on a timely basis, we may experience outsourced manufacturing delays, which could harm our relationships with current or prospective customers and reduce sales.

We are subject to product liability exposure and have no product liability insurance coverage.

As our main products are medical devices used for the treatment of patients, we are exposed to potential product liability claims in the event that the use of our products causes or is alleged to have caused personal injuries or other adverse effects. A successful product liability claim against us could require us to pay substantial damages. Product liability claims against us, whether or not successful, are costly and time-consuming to defend. Also, in the event that our products prove to be defective, we may be required to recall or redesign such products. As the insurance industry in China is still in an early stage of development, we do not have any product liability insurance. A product liability claim, with or without merit, could result in significant adverse publicity against us, and could have a material adverse effect on the marketability of our products and our reputation, which in turn, could have a material adverse effect on our business, financial condition and results of operations. In addition, we do not have any business interruption insurance coverage for our operations. Any business disruption or natural disaster could result in substantial costs and diversion of resources.

New product development in the medical device and supply industry is both costly and labor-intensive and has a very low rate of successful commercialization.

Our success will depend in part on our ability to enhance our existing products and technologies and to develop and acquire new products or technologies. The development process for medical technology is complex and uncertain, as well as time-consuming and costly. Product development requires the accurate assessment of technological and market trends as well as precise technological execution. We cannot assure you that:

· our product or technology development will be successfully completed;

· necessary regulatory clearances or approvals will be granted by the SFDA or other regulatory bodies as required on a timely basis, or at all; or

· any product or technology we develop can be commercialized or will achieve market acceptance.

Also, we may be unable to locate suitable products or technologies to acquire or acquire such products or technologies on commercially reasonable terms. Failure to develop or acquire, obtain necessary regulatory clearances or approvals for, or successfully commercialize or market potential new products or technologies could have a material adverse effect on our financial condition and results of operations.

The price and the sales of our products may be adversely affected by reductions in treatment fees by the Chinese Government.

Treatment fees for our radiotherapy systems, like many other medical treatments, are subject to prices set by provincial governments in China, and these prices can be adjusted downward or upward from time to time. If the treatment fees for our products are reduced by the government, some hospitals and distributors may be discouraged from buying our products, which would reduce our sales. We may need to decrease the price of our products to provide hospitals acceptable returns on their purchases. Our business or results of operations may be adversely affected by a reduction in treatment fees for our products in the future.

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We may not be able to secure financing needed for future operating needs on acceptable terms, or on any terms at all.

From time to time, we may seek additional equity or debt financing to provide the capital required to expand our facilities and equipment and/or working capital, if cash flow from operations is insufficient to do so. We cannot predict with certainty the timing or amount of any such capital requirements or the availability of investment to meet them. If such financing is not available on satisfactory terms, we may be unable to expand our business or to develop new business at the rate desired.

Potential strategic alliances may not achieve their objectives, which could lead to wasted effort or involvement in ventures that are not profitable and could harm our company’s reputation.

We are currently exploring strategic alliances designed to enhance or complement our technology or to work in conjunction with our technology, provide additional know-how, components or supplies, and develop, introduce and distribute products and services utilizing our technology and know-how. Any strategic alliances entered into may not achieve their strategic objectives, and parties to our strategic alliances may not perform as contemplated. As a result, the alliances themselves may run at a loss, which would reduce our profitability, and if the products or customer service provided by such alliances were of inferior quality, our reputation in the marketplace could be harmed, affecting our existing and future customer relationships.

We may not be able to retain, recruit and train adequate management and production personnel. We rely heavily on those personnel to help develop and execute our business plans and strategies, and if we lose such personnel, it would reduce our ability to operate effectively.

Our success is dependent, to a large extent, on our ability to retain the services of our executive management, who have contributed to our growth and expansion to date. The executive directors play an important role in our operations and the development of our new products. Accordingly, the loss of their services, without suitable replacements, will have an adverse affect on our business generally, operating results and future prospects.

In addition, our continued operations are dependent upon our ability to identify and recruit adequate management and production personnel in China. We require trained graduates of varying levels and experience and a flexible work force of semi-skilled operators. Many of our current employees come from the more remote regions of China as they are attracted by the wage differential and prospects afforded by Shenzhen, Beijing and our operations. With the economic growth currently being experienced in China, competition for qualified personnel will be substantial, and there can be no guarantee that a favorable employment climate will continue and that wage rates we must offer to attract qualified personnel will enable us to remain competitive. Inability to attract such personnel or the increased cost of doing so could reduce our competitive advantage relative to our competitors, reducing or eliminating our growth in revenues and profits.

Risks Related to International Operations

We do not currently conduct a meaningful amount of business internationally. However, we have plans to expand our operations into international sales, and the rate and degree of that expansion could be substantial. For that reason, risks related to international operations may be relevant to your investment decision.

If China does not continue its policy of economic reforms, it could, among other things, result in an increase in tariffs and trade restrictions on products we produce or sell following a business combination, making our products less attractive and potentially reducing our revenues and profits.

China’s government has been reforming its economic system since the late 1970s. The economy of China has historically been a nationalistic, “planned economy,” meaning it has functioned and produced according to governmental plans and pre-set targets or quotas.

However, in recent years, the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform and the reduction of state ownership in business enterprises. Although we believe that the changes adopted by the government of China have had a positive effect on the economic development of China, additional changes still need to be made. For example, a substantial portion of productive assets in China are still owned by the Chinese government. Additionally, the government continues to play a significant role in regulating industrial development. We cannot predict the timing or extent of any future economic reforms that may be proposed, but should they occur, they could reduce our operating flexibility or require us to divert our efforts to products or ventures that are less profitable than those we would elect to pursue on our own.

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A recent positive economic change has been China’s entry into the World Trade Organization, the global international organization dealing with the rules of trade between nations. It is believed that China’s entry will ultimately result in a reduction of tariffs for industrial products, a reduction in trade restrictions and an increase in trading with the United States and other western countries. However, China has not fully complied with all of its WTO obligations to date, including fully opening its markets to American goods and easing the current trade imbalance between the two countries. If actions are not taken to rectify these problems, trade relations between the United States and China may be strained, and this may have a negative impact on China’s economy and our business by leading to the imposition of trade barriers on items that incorporate our products, which would reduce the revenues and profits we might otherwise generate from international sales.

The Chinese government could change its policies toward, or even nationalize, private enterprise, which could leave us unable to use the assets we have accumulated for the purpose of generating profits for the benefit of our shareholders.

Over the past several years, the Chinese government has pursued economic reform policies, including the encouragement of private economic activities and decentralization of economic regulation. The Chinese government may not continue to pursue these policies or may significantly alter them to our detriment from time to time without notice. Changes in policies by the Chinese government that result in a change of laws, regulations, their interpretation, or the imposition of confiscatory taxation, restrictions on currency conversion or imports and sources of supply could materially reduce the value of our business by making us uncompetitive or, for example, by reducing our after-tax profits. The nationalization or other expropriation of private enterprises by the Chinese government could result in the total loss of our investment in China, where a significant portion of our profits are generated.

The Chinese legal system may have inherent uncertainties that could materially and adversely impact our ability to enforce the agreements governing our operations.

The performance of the agreements and the operations of our factories are dependent on our relationship with the local government. Our operations and prospects would be materially and adversely affected by the failure of the local government to honor our agreements or an adverse change in the laws governing them. In the event of a dispute, enforcement of these agreements could be difficult in China. China tends to issue legislation , which is followed by implementing regulations, interpretations and guidelines that can render immediate compliance difficult. Similarly, on occasion, conflicts arise between national legislation and implementation by the provinces that take time to reconcile. These factors can present difficulties in our ability to achieve compliance. Unlike the United States, China has a civil law system based on written statutes in which judicial decisions have limited precedential value. The Chinese government has enacted laws and regulations to deal with economic matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. However, our experience in implementing, interpreting and enforcing these laws and regulations is limited, and our ability to enforce commercial claims or to resolve commercial disputes in China is therefore unpredictable. These matters may be subject to the exercise of considerable discretion by agencies of the Chinese government, and forces and factors unrelated to the legal merits of a particular matter or dispute may influence their determination.

International expansion may be costly, time consuming and difficult. If we do not successfully expand internationally, our profitability and prospects would be materially and adversely affected.

Our success depends to a significant degree upon our ability to expand into international markets. In expanding our business internationally, we intend to enter markets in which we have limited or no experience and in which our brand may be less recognized. To further promote our brand and generate demand for our products so as to attract distributors in international markets, we expect to spend significantly more on marketing and promotion than we do in our existing markets. We may be unable to attract a sufficient number of distributors, and our selected distributors may not be suitable for selling our products. Furthermore, in new markets we may fail to anticipate competitive conditions that are different from those in our existing markets. These competitive conditions may make it difficult or impossible for us to effectively operate in these markets. If our expansion efforts in existing and new markets are unsuccessful, our profitability and prospects would be materially and adversely affected.

We are exposed to other risks associated with international operations, including:

· political instability;

· economic instability and recessions;

· changes in tariffs;

· difficulties of administering foreign operations generally;

· limited protection for intellectual property rights;

· obligations to comply with a wide variety of foreign laws and other regulatory requirements;

· increased risk of exposure to terrorist activities;

· financial condition, expertise and performance of our international distributors;

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· export license requirements;

· unauthorized re-export of our products;

· potentially adverse tax consequences; and

· the inability to effectively enforce contractual or legal rights.

If we begin to do business internationally, we will be subject to significant worldwide political, economic, legal and other uncertainties that may make collection of amounts owed to us difficult or costly

Because we develop all of our products in the PRC, substantially all of the net book value of our total fixed assets is located there. Should we begin selling our products to customers worldwide, we will have receivables from and goods in transit to those locations. Protectionist trade legislation in the United States or other countries, such as a change in export or import legislation, tariff or duty structures, or other trade policies, could adversely affect our ability to sell products in these markets, or even to purchase raw materials or equipment from foreign suppliers.

We are also subject to numerous national, state and local governmental regulations, including environmental, labor, waste management, health and safety matters and product specifications and regulatory approvals from healthcare agencies. We are subject to laws and regulations governing our relationship with our employees, including: wage and hour requirements, working and safety conditions, citizenship requirements, work permits and travel restrictions. These include local labor laws and regulations, which may require substantial resources for compliance. We are subject to significant government regulation with regard to property ownership and use in connection with our facilities in the PRC, import restrictions, currency restrictions and restrictions on the volume of domestic sales and other areas of regulation, all of which can limit our ability to react to market pressures in a timely or effective way, thus causing us to lose business or miss opportunities to expand our business.

Fluctuation of the Renminbi could make our pricing less attractive, causing us to lose sales, or could reduce our profitability when stated in terms of another currency, such as the US dollar.

The value of the Renminbi, the main currency used in China, fluctuates and is affected by, among other things, changes in the PRC’s political and economic conditions. The conversion of Renminbi into foreign currencies such as the dollar has been generally based on rates set by the People’s Bank of China, which are set daily based on the previous day’s interbank foreign exchange market rates and current exchange rates on the world financial markets. The official exchange rate had remained stable over the past several years. However, the PRC recently adopted a floating rate with respect to the Renminbi. As a result, the exchange rate of the Renminbi to the dollar is about 7.1 from what had been about 8.25. This floating exchange rate, and any appreciation of the Renminbi that may result from such rate, could have various effects on our international business, which include making our products more expensive relative to those of our competitors than has been true in the past, or increasing our profitability when stated in dollar terms. It is not possible to predict if the net effects of the appreciation of the Renminbi, to whatever extent it occurs, would be positive or negative for our business.

Changes in foreign exchange regulations in China may affect our ability to pay dividends in foreign currency or conduct other business for which we would need access to foreign currency exchange.

Renminbi, or RMB, is not currently a freely convertible currency, and the restrictions on currency exchanges may limit our ability to use revenues generated in RMB to fund business activities outside the PRC or to make dividends or other payments in United States dollars. The Chinese government strictly regulates conversion of RMB into foreign currencies. For example, RMB cannot be converted into foreign currencies for the purpose of expatriating the foreign currency, except for purposes such as payment of debts lawfully owed to parties outside of the PRC. Over the years, foreign exchange regulations in the PRC have significantly reduced the government’s control over routine foreign exchange transactions under current accounts.

The State Administration for Foreign Exchange (“SAFE”) regulates the conversion of the RMB into foreign currencies. Currently, Foreign Invested Enterprises (“FIE”) are required to apply for “Foreign Exchange Registration Certificates,” which permit the conversion of RMB into foreign exchange for the purpose of expatriating profits earned in the PRC to a foreign country. Our PRC subsidiary, Changdu Huiheng, is a FIE that has obtained the registration certifications, and with such registration certifications, which need to be renewed annually, Changdu Huiheng is allowed to open foreign currency accounts including a “current account” and “capital account.” Currently, conversion within the scope of the “current account”, e.g. remittance of foreign currencies for payment of dividends, etc., can be effected without requiring the approval of SAFE. However, conversion of currency in the “capital account,” e.g. for capital items such as direct investments, loans, securities, etc., still requires the approval of SAFE. In accordance with the existing foreign exchange regulations in the PRC, Changdu Huiheng is able to pay dividends in foreign currencies, without prior approval from the SAFE, by complying with certain procedural requirements.

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In addition, on October 21, 2005, SAFE promulgated Notice 75, Notice on Issues concerning Foreign Exchange Management in People’s Republic of the PRC Residents’ Financing and Return investments through Offshore Special Purpose Vehicle (“OSPV”). Notice 75 provides that Chinese residents shall apply for Foreign Exchange Investment Registration before establishing or controlling an OSPV, which is defined by Notice 75 as a foreign enterprise directly established or indirectly controlled by Chinese residents for foreign equity capital financing with their domestic enterprise assets and interests.

Notice 75 further requires that Chinese residents shall process the modification of foreign investment exchange registration for the interests of net assets held by Chinese residents in an OSPV and its alteration condition, if Chinese residents contributed their domestic assets or shares into the OSPV, or processed foreign equity capital financing after contributing their domestic assets or shares into the OSPV.

Pursuant to Notice 75, Chinese residents are prohibited, among other things, from distributing profits or proceeds from a liquidation, paying bonuses, or transferring shares of the OSPV outside of the PRC if Chinese residents have not completed or do not maintain the foreign investment exchange registration.

Hui Xiaobing, our principal executive officer and director, has filed the requisite application for foreign investment exchange registration under the relevant laws of the PRC and the regulations of Notice 75, and his registration application has been approved by SAFE. His foreign investment exchange registration is valid, legal and effective for the purpose of Notice 75.

However, we cannot provide any assurance that Chinese regulatory authorities will not impose further restrictions on the convertibility of the RMB. Since our subsidiary in the PRC currently generates virtually all of our revenue and these revenues are denominated mainly in RMB, any future restrictions on currency exchanges may limit our ability to repatriate such revenues for the distribution of dividends to our shareholders or for funding our other business activities outside the PRC.

We are subject to various tax regimes, which may adversely affect our profitability and tax liabilities in the future.

Huiheng is incorporated in the U.S., with subsidiaries and/or operations or other presence in the PRC and the British Virgin Islands, and it will be subject to the tax regimes of these countries. Although virtually all of Huiheng’s profits will be earned outside of the U.S., under U.S. tax laws most or all of Huiheng’s earnings will be subject to U.S. taxation, because U.S. companies are generally taxed on their world-wide income. That may be true even if Huiheng does not repatriate any of its foreign earnings to the U.S. As a result of the imposition of U.S. taxes, Huiheng’s after-tax profits could decrease significantly and those profits would likely be below the amount that would have been obtained if Huiheng were incorporated outside the U.S. The amount of taxes payable in the U.S. depends on the profitability of our various operations and the application of available tax credits and tax treaties. Since the effect of tax credits and tax treaties depend on the profitability of operations in various jurisdictions, the amount of the additional tax will vary over time and as the Company changes the geographic scope of its activities. Huiheng may not be able to avoid having to pay significantly higher taxes than we have paid historically. In addition, any change in tax laws and regulations or the interpretation or application thereof, either internally in one of those jurisdictions or as between those jurisdictions, may adversely affect Huiheng’s profitability and tax liabilities in the future.

Because Chinese law will govern almost all of our material agreements, we may not be able to enforce our legal rights within China or elsewhere, which could result in a significant loss of business, business opportunities, or capital.

Chinese law will govern almost all of our material agreements. We cannot assure you that we will be able to enforce any of our material agreements or that remedies will be available outside of the PRC. The system of laws and the enforcement of existing laws in the PRC may not be as certain in implementation and interpretation as in the United States. The Chinese judiciary is relatively inexperienced in enforcing corporate and commercial law, leading to a higher than usual degree of uncertainty as to the outcome of any litigation. The inability to enforce or obtain a remedy under any of our future agreements could result in a significant loss of business, business opportunities or capital.

It will be extremely difficult to acquire jurisdiction and enforce liabilities against our officers, directors and assets based in China.

Substantially all of our assets will be located outside of the United States and most of our officers and directors will reside outside of the United States. As a result, it may not be possible for United States investors to enforce their legal rights, to effect service of process upon our directors or officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties of our directors and officers under Federal securities laws. Moreover, we have been advised that the PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States. Further, it is unclear if extradition treaties now in effect between the United States and the PRC would permit effective enforcement of criminal penalties of the Federal securities laws.

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We may have difficulty establishing adequate management, legal and financial controls in the PRC, which could impair our planning processes and make it difficult to provide accurate reports of our operating results.

The PRC historically has not followed Western style management and financial reporting concepts and practices, and its access to modern banking, computer and other control systems has been limited. We may have difficulty in hiring and retaining a sufficient number of qualified employees to work in the PRC in these areas. As a result of these factors, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet Western standards, making it difficult for management to forecast its needs and to present the results of our operations accurately at all times.

Imposition of trade barriers and taxes may reduce our ability to do business internationally, and the resulting loss of revenue could harm our profitability.

We may experience barriers to conducting business and trade in our targeted emerging markets in the form of delayed customs clearances, customs duties and tariffs. In addition, we may be subject to repatriation taxes levied upon the exchange of income from local currency into foreign currency, substantial taxes of profits, revenues, assets and payroll, as well as value-added tax. Further obstacles still may arise in obtaining the approval for the use of our equipment in the health care systems of various countries.   The markets in which we plan to operate may impose onerous and unpredictable duties, tariffs and taxes on our business and products, and there can be no assurance that this will not reduce the level of sales that we achieve in such markets, which would reduce our revenues and profits.

The PRC has agreed that foreign companies will be allowed to import most products into any part of the PRC. In the sensitive area of intellectual property rights, the PRC has agreed to implement the trade-related intellectual property agreement of the Uruguay Round. There can be no assurances that the PRC will implement any or all of the requirements of its membership in the World Trade Organization in a timely manner, if at all. If the PRC does not fulfill its obligations to the World Trade Organization, we may be subject to retaliatory actions by the governments of the countries into which we sell our products, which could render our products less attractive, thus reducing our revenues and profits.

There can be no guarantee that our management will continuously meet its obligations under Chinese law to enable distribution of profits earned in the PRC to entities outside of the PRC.

A circular recently promulgated by SAFE has increased the ability of foreign holding companies to receive distributions of profits earned by Chinese operating subsidiaries. We qualify for this treatment, but remaining qualified for it will require the Chinese principals involved to meet annual filing obligations. While they have agreed to meet those annual requirements, it is possible that they will fail to do so, which could limit our ability to gain access to the profits earned by Allied. The result could be the inability to pay dividends to our stockholders or to deploy capital outside of the PRC in a manner that would be beneficial to our business as a whole.

Risks Related to our Securities.

The market price of our shares is subject to significant price and volume fluctuations.

The price of our common shares may be subject to wide fluctuations in response to variations in operating results, news announcements, trading volume, general market trends both domestically and internationally, currency movements and interest rate fluctuations or sales of common shares by our officers, directors and our principal shareholders, customers, suppliers or other publicly traded companies. Certain events, such as the issuance of common shares upon the exercise of our outstanding stock options, could also materially and adversely affect the prevailing market price of our common shares. Further, the stock markets in general have recently experienced extreme price and volume fluctuations that have affected the market prices of equity securities of many companies and that have been unrelated or disproportionate to the operating performance of such companies. These fluctuations may materially and adversely affect the market price of our common shares and the ability to resell shares at or above the price paid, or at any price.

One of our stockholders, which is controlled by our Chief Executive Officer, will own approximately 66% of our Common Stock following this offering and may act, or prevent certain types of corporate actions, to the detriment of other stockholders.

Clear Honest International Limited, a company controlled by Mr. Hui Xiaobing (our Chief Executive Officer) owns 11,750,000 shares of our common stock, which (assuming the sale of 4,000,000 shares in this offering) would represent approximately 66% of our outstanding shares of common stock following this offering. Mr. Hui will be able to exercise significant influence over all matters requiring stockholder approval, including the election of a majority of the directors and determination of significant corporate actions. This concentration could increase if the earnout shares are issued. If all 1,600,000 of the earnout shares are issued as additional consideration under the Allied Moral share exchange (which would occur, if ever, from 2008 through 2011) and assuming the sale of 4,000,000 shares in this offering and that there are no other issuances of shares, Clear Honest would own approximately 69% of our issued and outstanding common stock. This concentration of ownership could also have the effect of delaying or preventing a change in control that could otherwise be beneficial to our stockholders.

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Future Sales Of Our Common Stock May Depress Our Stock Price.

Assuming the sale of 4,000,000 shares in this offering, we will have approximately 17,800,000 shares of common stock outstanding, or approximately 18,400,000 shares if the underwriters over-allotment option is exercised in full. The 4,000,000 shares sold in this offering (or 4,650,000 shares if the underwriters over-allotment option is exercised in full) will be freely tradable without restriction or further registration under federal securities laws unless purchased by our affiliates. The remaining approximately 13,800,000 shares of common stock outstanding, and an additional approximately 2,451,000 shares of common stock issuable upon conversion of our Series A Preferred Stock, will be available for sale in the public market as follows:

Number of Shares	Date of Availability for Sale
450,000	On the date of this prospectus
15,801,000	90 days after the date of this prospectus

The above table assumes the effectiveness of the lock-up agreements under which holders of substantially all of our common stock and of our Series A Preferred Stock have agreed not to sell or otherwise dispose of their shares of common stock. Chardan Capital Markets may, in its sole discretion and at any time without notice, release all or any portion of the securities subject to lock-up agreements.

If our stockholders sell substantial amounts of shares in the public market, or if the market perceives that these sales may occur, the market price of our common stock may decline. In addition, as soon as practicable after the completion of this offering, we intend to file a registration statement under the Securities Act covering up to 1,566,666 shares of common stock issuable under our stock plan. Accordingly, shares registered under that registration statement will be available for sale in the open market, subject to the contractual lock-up agreements described above that prohibit the sale or other disposition of the shares of common stock underlying the options for a period of 90 days after the date of this prospectus.

Our Articles of Incorporation authorize our board of directors to issue new series of preferred stock that may have the effect of delaying or preventing a change of control, which could adversely affect the value of your shares.

Our articles of incorporation, provide that our board of directors will be authorized to issue from time to time, without further stockholder approval, up to 700,000 additional shares of preferred stock in one or more series and to fix or alter the designations, preferences, rights and any qualifications, limitations or restrictions of the shares of each series, including the dividend rights, dividend rates, conversion rights, voting rights, rights of redemption, including sinking fund provisions, redemption price or prices, liquidation preferences and the number of shares constituting any series or designations of any series. Such shares of preferred stock could have preferences over our common stock with respect to dividends and liquidation rights. We may issue additional preferred stock in ways which may delay, defer or prevent a change of control of our company without further action by our stockholders. Such shares of preferred stock may be issued with voting rights that may adversely affect the voting power of the holders of our common stock by increasing the number of outstanding shares having voting rights, and by the creation of class or series voting rights.

There may not be an active, liquid trading market for our common stock .

Our common stock is currently traded on the Over the Counter Bulletin Board, and we have filed an application for listing on The Nasdaq Capital Market.We believe we meet all of the requirements for listing except for the required number of round lot holders. We plan to meet this requirement when one of our shareholders, Boom High Management Ltd. consummates a transfer via gift of 100 shares of the Company’s common stock to each of 300 individuals, for a total transfer of 30,000 shares of common stock. Although we believe we will meet all of the listing criteria, our application may not be accepted. If we do not succeed in securing a listing on the Nasdaq Capital Market, it could limit the ability to trade our common stock and result in a reduction of the price that can be obtained for shares being sold.

Compliance with the applicable provisions of the Sarbanes-Oxley Act may be a further condition of continued listing or trading. If we are granted a listing on the Nasdaq Capital Market, we may not always be able to meet the listing requirements. Failure to continually meet the Nasdaq Capital Market listing requirements could result in the delisting of our common stock, which may adversely affect the liquidity of our shares, the price that can be obtained for them or both.

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We may not pay dividends.

We may not pay dividends in the future. Instead, we expect to apply earnings toward the further expansion and development of our business. The likelihood of our paying dividends is further reduced by the fact that, in order to pay dividends, we would need to repatriate profits earned outside of the U.S., and in doing so those profits would become subject to U.S. taxation. Thus, the liquidity of your investment is dependent upon your ability to sell stock at an acceptable price, rather than receiving an income stream from it. The price of our stock can go down as well as up, and fluctuations in market price may limit your ability to realize any value from your investment, including recovering the initial purchase price.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains certain forward-looking statements. When used in this prospectus, statements which are not historical in nature, including the words “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend” “may,” “project,” “plan” or “continue,” and similar expressions are intended to identify forward-looking statements. They also include statements containing anticipated business developments, a projection of revenues, earnings or losses, capital expenditures, dividends, capital structure or other financial terms.

The forward-looking statements in this prospectus are based upon our management’s beliefs, assumptions and expectations of our future operations and economic performance, taking into account the information currently available to them. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties, some of which are not currently known to us that may cause our actual results, performance or financial condition to be materially different from the expectations of future results, performance or financial condition we express or imply in any forward-looking statements. These forward-looking statements are based on our current plans and expectations and are subject to a number of uncertainties and risks that could significantly affect current plans and expectations and our future financial condition and results.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this filing might not occur. We qualify any and all of our forward-looking statements entirely by these cautionary factors. As a consequence, current plans, anticipated actions and future financial conditions and results may differ from those expressed in any forward-looking statements made by or on our behalf. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented herein.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares offered hereby are estimated to be approximately $25 million. We expect to use approximately $13 million to develop new products and new manufacturing plant construction, approximately $5 million for research and development and the remainder for working capital.

Development of New Products and Construction of Manufacturing Facilities - $13 Million

Over the next few years, Huiheng expects to make a significant volume of its products including SGS and linear accelerator (LINAC) sales in both domestic and foreign markets. To meet the requirements from the US FDA for SGS and LINAC manufacturing, Huiheng plans to construct an advanced manufacturing and assembly and testing facility. Huiheng has obtained the approval to acquire rights to a piece of property for industrial purposes in Wuhan City, Hubei Province, China. Huiheng will establish an assembly and testing line for its products, the estimated cost of which is $13 million, which includes the purchase price of the property and the construction of facilities.

Research & Development - $5 Million

Huiheng plans to invest $5 million for research and development activities. The new products under such activities include an integrated medical LINAC and multi-leaf collimeter, the SGS-III, an advanced MRI machine and a linear accelerator used in industrial applications.

Working Capital - $7 Million

Huiheng plans to utilize approximately $7 million as working capital. This will include sales and marketing expenses for both new and existing products and the cost for clinical trials and US FDA and SFDA filings. Huiheng is also actively seeking strategic acquisition opportunities in both China and abroad that offer new technologies and/or synergies to enhance and strengthen the current product line of the Company.

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MARKET FOR OUR SHARES

Our common stock is currently listed for trading in the over-the-counter market on the NASD “Electronic Bulletin Board” (Symbol: “HHGM”). After we initially registered shares for public trading in 2006, our common stock did not have any trading volume or bid prices listed. Our common stock has only had bid prices entered since the second quarter of 2007, following the share exchange we consummated with Allied Moral Holdings Limited.

The following table shows the high and low bid information for our stock since May 2007 (these amounts reflect inter-dealer prices, without retail mark-ups, mark-downs, or commissions and do not necessarily represent actual transactions):

Fiscal 2007	High		Low
Second Quarter	$	9.00	$	9.00
Third Quarter	$	8.00	$	7.50
Fourth Quarter	$	13.00	$	8.00

Fiscal 2008	High		Low
First Quarter	$	10.00	$	7.20

There are no outstanding options or warrants that can be converted into our common equity. As provided in the Allied Moral Holdings share exchange agreement, if Huiheng achieves certain profit targets for 2008 through 2011, we may distribute some or all of 1,600,000 shares of common stock to those persons who were the holders of Allied Moral’s common stock at the time of the share exchange.

We have approximately 340 record holders of our common stock. This number excludes any estimate by us of the number of beneficial owners of shares held in street name, the accuracy of which cannot be guaranteed.

Dividends

In January 2007, our subsidiary (Allied Moral) paid a dividend of approximately $9.16 million to the sole shareholder of Allied Moral’s common stock at the time, Mr. Hui Xiaobing, our Chief Executive Officer. This dividend was paid upon the completion of a restructuring transaction in which Mr. Hui became such sole shareholder of Allied Moral’s common stock. The dividend was intended to distribute the retained earnings that had accumulated before the restructuring. Huiheng has no plans to distribute additional dividends for at least the immediate future, as it plans to retain any profit to support its growth plans.

All of our business is conducted through our subsidiaries based in China. As stated above in the Risk Factors section, Renminbi, or RMB, is not a freely convertible currency currently, and the restrictions on currency exchanges may limit our ability to make dividends or other payments in United States dollars. However, in accordance with the existing foreign exchange regulations in China, Allied Moral is able to pay dividends in foreign currencies, without prior approval from the SAFE, by complying with certain procedural requirements. There can be no assurance that the current foreign exchange measures will not be changed in a way that will make payment of dividends and other distributions outside of China more difficult or unlawful. As a result, if we intend to distribute profits outside of China, there can be no assurance that we will be able to obtain sufficient foreign exchange to do so. Additionally, we cannot provide any assurance that China regulatory authorities will not impose further restrictions on the convertibility of the RMB. Since our subsidiaries in China, both direct and indirect, generate virtually all of our revenue, and these revenues are currently denominated in RMB, any future restrictions on currency exchanges may limit our ability to repatriate such revenues for the distribution of dividends to our shareholders.

SAFE regulations have required extensive documentation and reporting, some of which was burdensome and slowed payments. If there is a return to burdensome payment restrictions and reporting, the ability of a company with its principal operations in China to attract investors will be reduced. Also, current investors may not be able to obtain the profits of the business in which they own for other reasons. Relevant Chinese law and regulation permit payment of dividends only from retained earnings, if any, determined in accordance with Chinese accounting standards and regulations. It is possible that Chinese tax authorities may require changes in our reported income that would limit our ability to pay dividends and other distributions. Chinese law requires companies to set aside a portion of net income to fund certain reserves, which amounts are to distributable as dividends. These rules and possible changes could restrict a company in China from repatriating funds to us and our shareholders as dividends.

Securities authorized for issuance under equity compensation plans

At present, Huiheng Medical has 1,566,666 shares authorized for issuance under its equity compensation plan. However, no options for such shares have been granted as yet.

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The following summary of selected historical consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the notes thereto that are included elsewhere in this report. Historical results are not necessarily indicative of the results that may be expected for any future period.

	Years Ended December 31,
	2006		2007
Statement of Income Data:
Total revenues	$	12,346,672		15,939,614
Income from operations		8,169,476		10,300,950
Net income (after Minority Interest)		6,816,474		9,015,769
Weighted average shares outstanding		13,450,000		13,450,000

	Years Ended December 31,
	2006			2007
Balance Sheet Data:
Cash	$	338,039			866,585
Working capital (deficit)		(1,356,477	)		11,079,651
Total assets		9,506,645			18,860,353
Long-term debt		0			0
Stockholders’ equity (deficit)		895,973			14,357,896

Exchange Rate Information

The following table sets forth certain information concerning exchange rates between Renminbi and U.S. dollars for the periods indicated:

Period	Period End		Average		High		Low
2006		7.8041		7.9579		8.0702		7.8041
2007		7.2946		7.5973		7.8041		7.2946

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MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements, including as a result of those matters set forth under “Risk factors” and elsewhere in this prospectus.

OVERVIEW

We are a China-based medical device company that develops, designs and markets radiation therapy systems used for the treatment of cancer. We currently have four products; the Super Gamma System (“SGS”), the Body Gamma Treatment System (“BGTS”), the Head Gamma Treatment System (“HGTS”) and a multileaf collimator device (“MLC”) used in conjunction with a linear accelerator.

In 2006, we established Allied Moral Holdings, Ltd. in the British Virgin Islands as a holding company and transferred 100% of the ownership interests of Changdu Huiheng to Allied Moral as part of an ownership restructuring to facilitate investments by foreign investors. As discussed below in the “Business - Huiheng’s Background” section, the shareholders of Allied Moral engaged in a share exchange transaction with Huiheng in May 2007.

In 2005, the ownership interests of Shenzhen Hyper, Wuhan Kangqiao and Beijing Kbeta were reorganized under Changdu Huiheng. Upon the completion of the reorganization, Changdu Huiheng owned 75% of the equity interest in Shenzhen Hyper, 100% of the equity interest of Wuhan Kangqiao and 50% of the equity interest of Beijing Kbeta.

Our company is led by Hui Xiaobing, the former CEO of Everbright Securities, a major Chinese financial institution. Through his experience and relationships, Mr. Hui maintains access to China’s hospitals and the Company’s principal customers. As a result of his leadership, we have successfully developed a strong sales and marketing force, which covers the entire country and maintains relationships with China’s top medical institutions.

Our expansion plans include broadening our product offering. Our research and development team is focused on developing and producing technologically advanced radiotherapy and GTS products. We currently have 17 patents issued in the PRC and internationally and additional patent applications pending. Our SGS and BGTS products are approved for use in China by the State Food and Drug Administration, an agency of the Ministry of Healthcare of the PRC.

Currently, the focus of the research and development efforts has been on four main projects. The first project is the development of the next generation SGS unit that will incorporate what the Company believes (based solely on management's knowledge of the industry) are the world’s most advanced functional radiotherapy technologies through the addition of an Image Guided System (“IGS”), which improves the targeting of the radiation beam through use of computer-generated images, and Respiration Tracking System (“RTS”), which automatically adjusts the targeting of the radiation to compensate for the patient’s breathing. We plan to install the first next generation SGS unit in the second quarter of 2008. The other major projects include the development of an integrated linear accelerator (“LINAC”) plus multileaf collimator unit, another type of radiotherapy device that is used in less demanding applications, an advanced magnetic resonance imaging (“MRI”) device and an industrial LINAC unit that is used for, among other things, preserving food through irradiation. These projects are in various stages of development.

We sell our products directly to hospitals and to third party investors in China that install our systems in hospitals. We also offer comprehensive post-sales services for our medical equipment to our customers. The service contracts are negotiated and signed independently and separately from the sales of medical equipment. Our post sales services include radioactive cobalt source replacement and disposal, training, product maintenance, software upgrades, and consulting.

Many of the key research and development personnel who developed our products are currently employed by our company.

We have also begun pursuing relationships with foreign medical capital equipment technology leaders to offer the management of high quality, low cost manufacturing services and China-based distribution for their products.

Shenzhen Hyper. Shenzhen Hyper was established in September of 2001 as a domestic Chinese company based in Shenzhen China. From inception, it has been engaged in designing, developing and servicing radiotherapy medical equipment used for the treatment of tumors for customers throughout China. Shenzhen Hyper developed the Super Gamma System (“SGS”), our most advanced and versatile technology, in 2001. The SGS is a radiotherapy device that uses gamma radiation to non-invasively treat tumors located in the head and the body and to treat certain functional disorders of the head and neck areas. It utilizes stereotactic, or three-dimensional imaging, principles to enhance the accuracy of the targeting of the radiation beams. Our first SGS device was installed in 2001 and our SGS device was approved by the SFDA in 2004. As of the end of 2007, we have a total installed base of 24 SGS units, all of which are located in China. We estimate that over 14,000 patients have been treated with our SGS product. Shenzhen Hyper has also developed a multileaf collimator (“MLC”) device that is used in conjunction with a linear accelerator (“LINAC”) to provide conformal shaping of radiotherapy treatment beams, which increases the precision of the beam and reduces the damage caused to surrounding tissues. Our first MLC was installed in March of 2007 in China for a clinical trial. We are currently developing our own LINAC with which we will integrate our MLC.

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Shenzhen Hyper is currently working on the development of additional radiotherapy and diagnostic equipment that will be sold in China and abroad, including the next generation SGS unit, capable of treating tumors in the head and body by advanced radiotherapy functions.

Wuhan Kangqiao. Wuhan Kangqiao was established in September of 2001 as a domestic Chinese company based in Wuhan China. From inception, it has been engaged in designing, developing and servicing radiotherapy medical equipment for customers throughout China. Wuhan Kangqiao developed BGTS in 2003 and the HGTS in 2004 and currently designs, markets and services these products.

The BGTS is a stereotactic radiotherapy device that uses gamma sourced radiation to non-invasively treat tumors located in the body. Our first BGTS device was installed in 2003 and in 2004 it was approved by the SFDA. As of the end of 2007, we have a total installed base of 8 BGTS units.

The HGTS is a stereotactic radiotherapy device that uses gamma sourced radiation to non-invasively treat tumors in the head and to treat other functional disorders of the head and neck area. Our first HGTS device was installed in 2004. We have completed clinical trials on the HGTS and have submitted a final report to the SFDA. Subject to a favorable review by the SFDA, we expect to receive SFDA approval of the HGTS in 2008.As of the end of 2007, we had a total installed base of 6 HGTS units.

Beijing Kbeta. Beijing Kbeta was established in December 2004 and supplies the Cobalt-60 radioactive material used as the radioactive source in the SGS, BGTS and HGTS.

PRICING

Treatment fees for radiotherapy are set by provincial governments in China, a factor we consider when pricing our systems. To gain market penetration, we price our radiotherapy treatment systems at levels that we believe offer attractive economic returns to distributors and hospitals, taking into account the prices of competing products in the market. We market and sell our products to distributors at a price that is lower than the price that hospitals pay for our products. We believe that our products are competitively priced compared to other radiotherapy devices available in China.

The provincial governments in China set the treatment fee rates for radiotherapy, and they may adjust the fee rates from time to time. If they reduce the fee rates, some hospitals and third party investors may be discouraged from purchasing our products, which would reduce our sales. In that event, we may need to decrease the price of our systems to provide our customers acceptable returns on their purchases. We cannot assure you that our business, financial condition and results of operations will not be adversely affected by any reduction in treatment fees for radiotherapy in the future.

REVENUES

We derive our revenues from selling our products to hospitals and third party investors and from selling service contracts to the buyers of our products.

Our net revenues are net of Value Added Tax (“VAT”), but include VAT refunds on the sales of self-developed software embedded in our medical equipment products. In addition, our revenues include regional VAT and Business tax subsidies.

The sales price of our devices includes basic training and installation services. These services are ancillary to the purchase of medical equipment by our customers and are normally considered by the customers to be an integral part of the acquired equipment. As the delivered items (training and installation services) do not have determinable fair values, revenues for the entire arrangement is recognized upon customer acceptance, which occurs after delivery and installation.

Our revenue recognition policies, as disclosed in our financial statements, state that revenue is recognized when products are delivered, collection is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. Typically we require our customers to pay 90% of the sales price in installments based upon placement of the order; delivery of the product, installation, testing and acceptance by the customer. The 90% is recognized as a liability until such time as the products are delivered and the customer takes ownership and risk of loss. The remaining 10% of the arrangement is typically paid within one year of acceptance by the customer.

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The use of the installment method with regards to collection impacts our revenue recognition policies in that we must determine if collection is probable prior to recognizing revenue for each arrangement. We have not experienced any material bad debts, and accordingly generally recognize revenue from our arrangements in full when the devices have been installed, tested and accepted by our customers.

We typically require our customers to pay 30% of the sales price as a down-payment when a purchase order is placed, another 30% of the sale price when the product is shipped, and another 30% of the sale price after the device has been installed, tested and is accepted by the customer. The remaining 10% balance is typically paid by the customer within one year of acceptance.

Our revenues, growth and results of operations depend on several factors, including the level of acceptance of our products among doctors, hospitals and patients and our ability to maintain prices for our products at levels that provide favorable margins. The level of acceptance among doctors, hospitals and patients is influenced by the performance and pricing of our products, our ability to educate distributors and the medical community about our products, our relationships with hospitals and major distributors, government reimbursement levels as well as other factors.

Our sales have historically been achieved on a unit-by-unit basis. We expect that in any given period a relatively small, and changing, number of third party investors will continue to account for a significant portion of our revenues. For the fiscal year ended December 31, 2006, sales to our top four customers accounted for 89% of our revenues. For the year ended December 31, 2007, two customers accounted for 76% of our revenues.

COSTS

Cost of revenues

Our cost of revenues primarily consists of material and component costs. It also includes amortization of intangible assets and direct costs incurred in the assembly, installation and service of our products, such as salaries and related personnel expenses and depreciation costs of plant and equipment used for production purposes. Depreciation of property, plant and equipment attributable to manufacturing activities is capitalized and expensed as cost of revenues when product is sold.

As we source a significant portion of our components and raw materials in China, we currently have a relatively low cost base compared to medical technology companies in more developed countries. We expect the costs of components and raw materials in China will increase in the future as a result of further economic development in China. In addition, our focus on new generations and applications of our products may require higher cost components and raw materials. We plan to offset increases in our cost of raw materials and components through more efficient product designs and product assembly enhancements as well as through savings due to economies of scale.

Operating expenses

Our operating expenses primarily consist of research and development expenses, sales and marketing expenses and general and administrative expenses.

Research and development Research and development expenses primarily consist of costs associated with the design, development, testing and enhancement of both our existing products and our new product development. These costs consist of expenditures for purchases of supplies, clinical trials, salaries and related personnel expenses, and other relevant costs. Going forward, we expect to increase our research and development expenses, both on an absolute basis and as a percentage of revenue, to develop new products and applications and to improve the product designs of our existing products.

Sales and marketing Sales and marketing expenses consist primarily of salaries and related expenses for personnel engaged in sales, marketing and customer support functions and costs associated with advertising and other marketing activities. Similar to most China-based medical device companies, our sales are made primarily to third party investors. As a result, our sales and marketing expenses as a percentage of revenues are significantly lower than medical device companies that operate their own marketing and distribution networks and sell directly to hospitals. Going forward, we expect to increase our expenditures on sales and marketing, both on an absolute basis and as a percentage of revenue, to promote our products in China. Furthermore, we anticipate aggressively pursuing new markets outside the PRC and expect to increase our expenditures on sales and marketing for this purpose as well.

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General and administrative General and administrative expenses consist primarily of salaries and benefits and related costs for our administrative personnel and management, fees and expenses of our outside advisers, including legal, audit and valuation expenses, expenses associated with our administrative offices and the depreciation of equipment used for administrative purposes. We expect that our general and administrative expenses will increase, both on an absolute basis and as a percentage of revenue, as we hire additional personnel and incur costs related to the anticipated growth of our business and our becoming a publicly listed company in the U.S.

TAXES AND INCENTIVES

Allied Moral Holdings

Under the current laws of the British Virgin Islands, we are not subject to tax on our income or capital gains. In addition, no British Virgin Islands withholding tax will be imposed on payments of dividends by us to our shareholders.

Changdu Huiheng

Under the current PRC laws, Changdu Huiheng is subject to the Enterprise Income Tax (“EIT”) and the VAT. Changdu Huiheng is established in the western region of the PRC and, as such, it is currently subject to an EIT rate of 15%, compared to a statutory rate of 33% for most companies in China. However, pursuant to an agreement with the Tibet Finance Bureau, Changdu Huiheng will be refunded any amounts of its annual EIT payment that exceed RMB 900,000 (USD 126,709). In addition, the Tibet Finance Bureau will refund Changdu Huiheng’s annual 31% business tax payment and its 38.75% VAT payment under the condition that the total annual business tax and VAT owed exceeds RMB 1 million (USD 140,788) and RMB 1.5 million (USD 211,181), respectively. This tax incentive policy will be valid for 5 years from the commencement of the tax refund, which began in fiscal 2006.

Shenzhen Hyper

Shenzhen Hyper is classified as a high technology company and currently operates in an approved economic-technological development area. As such, it is currently subject to an EIT rate of 15%, compared to a statutory rate of 33% for most companies in China. Furthermore, this classification, according to local tax regulations, entitles Shenzhen Hyper to a tax-free period for two years, commencing on it first profitable year, and a 50% reduction in EIT for the following six years. Although Shenzhen Hyper was profitable in 2007, accumulated losses from prior years eliminated its tax liability for 2007. As a result, 2007 does not qualify as the first year of its tax free period according to local tax regulations. We expect Shenzhen Hyper to begin the first year of its tax free period in 2008.

VAT is charged based on the selling price of products at a general rate of 17% and revenues are recorded net of this VAT. Shenzhen Hyper, however, is entitled to a 14% refund of VAT on the sales of self-developed software embedded in device systems. This is a result of a PRC government program to promote the development of the high technology sector of China’s economy. The program phases out for companies after five years of profitable operations.

The VAT refund is recorded as part of net revenues under U.S. GAAP. For the fiscal year ended December 31, 2007, no VAT refunds were booked as revenues for the period due to the refund application process extending past the end of the year. As a result, we expect the refunds that we applied for in 2007 to be booked as revenue in 2008. VAT refunds amounted to $169,643 (RMB 1.35 million) for the fiscal year ended 2006. There were no VAT refunds for fiscal year ending December 31, 2005.

Wuhan Kangqiao

Wuhan Kangqiao is classified as a high technology company and currently operates in an approved economic-technological development area. As such, it is currently subject to an EIT rate of 15%, compared to a statutory rate of 33% for most companies in China. Furthermore, this classification, according to local tax regulations, entitles Wuhan Kangqiao to a tax-free period for two years, commencing the first year the company is established. Wuhan Kangqiao’s EIT rate for the years ending December 31, 2005, 2006 and 2007 were 15%, 15% and 15%, respectively.

The PRC tax system is subject to uncertainties and has been subject to recently enacted changes, the interpretation and enforcement of which are also uncertain. There can be no assurance that changes in PRC tax laws or their interpretation or their application will not subject us to tax increases in the future.

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SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies and Estimates

The discussion and analysis of our financial condition presented in this section are based upon our financial statements, which have been prepared in accordance with the generally accepted accounting principles in the United States. During the preparation of our financial statements we are required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to sales, returns, pricing concessions, bad debts, inventories, investments, fixed assets, intangible assets, income taxes and other contingencies. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under current conditions. Actual results may differ from these estimates under different assumptions or conditions.

In response to the SEC’s Release No. 33-8040, “Cautionary Advice Regarding Disclosure About Critical Accounting Policy,” we identified the most critical accounting principles upon which our financial status depends. We determined that those critical accounting principles are related to the use of estimates, inventory valuation, revenue recognition, income tax and impairment of intangibles and other long-lived assets. We present these accounting policies in the relevant sections in this management’s discussion and analysis, including the Recently Issued Accounting Pronouncements discussed below.

(a) Principles of Consolidation

The consolidated financial statements include the Company and its three subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

(b) Cash

Cash consists of cash on hand and in bank.

(c) Accounts Receivable

Accounts receivable are recorded at the invoiced amount, net of allowances for doubtful accounts sales returns, trade discounts and value added tax. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on historical write-off experience, customer specific facts and economic conditions. Bad debt expense is included in general and administrative expenses. The allowance for doubtful accounts approximated $5,059 at December 31, 2007.

Outstanding account balances are reviewed individually for collectibility. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure to its customers.

(d) Inventories

The Company values inventories, consisting of work in process and raw materials, at the lower of cost or market. Cost of material is determined on the weighted average cost method. Cost of work in progress includes direct materials, direct production cost and an allocated portion of production overhead.

(e) Property, Plant, and Equipment

Property and equipment are recorded at cost less accumulated depreciation. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to general and administrative expenses as incurred. Depreciation of property and equipment is computed by the straight-line method (after taking into account their respective estimated residual values) over the assets estimated useful lives ranging from three to twenty years. Building improvements, if any, are amortized on a straight-line basis over the estimated useful life. Depreciation of property and equipment are stated at cost less accumulated depreciation. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in operations. Construction in progress represents the costs of property, plant and equipment under construction or installation . The accumulated costs are reclassified as property, plant and equipment when installation or construction is completed. All borrowing costs, which include interest and foreign exchange differences incurred that are attributable to qualifying assets, are capitalized as cost of construction in progress. Capitalization of borrowing costs ceases when the construction is completed and the constructed or installed asset is ready for its intended use.

The estimated useful lives of the assets are as follows:

	Years
Building improvements		3-5
Buildings		20
Production equipment		3-5
Furniture, fixtures and office equipment		3-5
Motor vehicles		5-10

(f) Intangible Assets

Intangible assets were contributed to the Company and are stated at cost, representing the fair value at the time of contribution by minority owner of a subsidiary. Fair value was supported by cash contributed contemporaneously by another investor. Cost is net of accumulated amortization and impairment losses. Amortization expense is recognized on the straight-line basis over the estimated respective useful lives of these intangible assets as follows:

	Years
Patented technology		20
Software		5

(g) Investment in affiliated company

The Company owns 50% equity interest of Beijing Kbeta and is accounted for used the equity method of accounting because the Company has the ability to exercise significant influence over the investee, but does not have a controlling financial interest.

If circumstances indicate that the carrying value of the Company’s investment in Beijing Kbeta may not be recoverable, the Company would recognize an impairment loss by writing down its investment to its estimated net realizable value if management concludes such impairment is other than temporary.

(h) Impairment of Long-Lived Assets

Long-lived assets, which include property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of the asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of, if any, are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated.

No impairment loss was recognized in 2006 and 2007.

(i) Fair value of financial instruments

The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. The carrying amounts of financial assets and liabilities, such as cash, accounts receivable, current income tax assets, prepayments and other current assets, accounts payable, income taxes payable, accrued expenses and other current liabilities, approximate their fair values because of the short maturity of these instruments and market rates of interest.

(j) Revenue Recognition

The Company generates revenue primarily from sales of medical equipment and maintenance and support services. Revenue is recognized as follows:

The Company recognizes revenue when products are delivered and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. The sales price of the medical equipment includes the training and installation services. These services are ancillary to the purchase of medical equipment by customers and are normally considered by the customers to be an integral part of the acquired equipment. As training and installation services do not have separately determinable fair values, the Company recognizes revenue for the entire arrangement upon customer acceptance, which occurs after delivery and installation.

In the PRC, value added tax ("VAT") of 17% on invoice amount is collected in respect of the sales of goods on behalf of tax authorities. The VAT collected is not revenue of the Company; instead, the amount is recorded as a liability on the balance sheet until such VAT is paid to the authorities.

Pursuant to the laws and regulations of the PRC, Shenzhen Hyper is entitled to a refund of VAT on the sales of self-developed software embedded in medical equipment. The VAT refund represents the amount of VAT collected from customers and paid to the authorities in excess of 3% of relevant sales. The amount of VAT refund is calculated on a monthly basis. As the refund relates directly to the sale of self-developed software that is embedded in the Company’s products, the Company recognizes the VAT refund at the time the product is sold. The amount is included in the line item "Revenues, net" in the consolidated statements of income and is recorded on an accrual basis.

Pursuant to the document dated December 16, 2004 with No.173 issued by Tibet Finance Bureau, the profits tax payment of Changdu Huiheng in excess of RMB 900,000 for a year will be refundable by Tibet Finance Bureau. The 31% and 38.75% of business tax payment and value added tax payment respectively for a year will be refundable by Tibet Finance Bureau provided that the business tax payment and value added tax payment should be arrived at RMB 1 million and RMB 1.5 million for a year respectively. Such tax incentive policy will be valid for five (5) years from the year of commencement of tax refund, starting from September 2006.

The medical equipment sold by the Company has embedded self-developed software. In all cases, the medical equipment is marketed and sold based on its performance and functionality as a whole. The self-developed software can also be sold on a standalone basis.

The Company also provides comprehensive post-sales services to certain distributors for medical equipment used by hospitals. These contracts are negotiated and signed independently and separately from the sales of medical equipment. According to the agreements, the Company provides comprehensive services including exchange of cobalt, training to users of the medical equipment, maintenance of medical equipment, upgraded software and consulting. Fees for the services are recognized over by the life of the contract on a monthly basis.

(k) Research and Development Costs

(l) Income Taxes

The Company accounts for income taxes under FASB Statement No. 109, Accounting for Income Taxes. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

(m) Retirement and Other Postretirement Benefits

Contributions to retirement schemes (which are defined contribution plans) are charged to consolidated statements of operations as and when the related employee service is provided.

(n) Warranty

The Company provides a product warranty to its customers to repair any product defects that occur within twelve months of the date of sale. Based on the limited number of actual warranty claims and the historically low cost of such repairs, the Company has not recognized a liability for warranty claims, but rather recognizes such costs when product repairs are made.

(o) Use of Estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates.

(p) Foreign currency translation

Assets and liabilities of foreign subsidiaries are translated at the rate of exchange in effect on the balance sheet date; income and expenses are translated at the average rate of exchange prevailing during the year. The related transaction adjustments are reflected in " Accumulated other comprehensive income (loss)" in the stockholders' equity section of our consolidated balance sheet.

The average monthly for 2007 and the closing rate as at 31 December 2007 is Rmb 7.5973 and Rmb 7.2946 to one USD respectively. The average monthly for 2006 and the closing rate as at 31 December 2006 is Rmb 7.9579 and Rmb 7.8041 to one USD respectively.

(p) Comprehensive income

The Company has adopted SFAS No. 130 Reporting Comprehensive Income. This statement establishes rules for the reporting of comprehensive income and its components. Comprehensive income consists of net income and foreign currency translation adjustments and is presented in the Consolidated Statements of Income and the Consolidated Statement of Stockholders’ Equity.

(q) Earning Per Share

Basic earnings per share are computed based on the weighted-average number of shares of our common stock outstanding. Diluted earnings per share are computed based on the weighted-average number of shares of our common stock and other dilutive securities. See also "Earnings Per Share" note below.

All information in this report relating to the number of shares, price per share and per share amounts of common stock gives retroactive effect to the May 2007 of our common stock.

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations :

	2007		2006
	USD		USD
Numerator:
Net income		9,015,769		6,816,474
Denominator:
Weighted-average shares outstanding used for basic earnings per share		13,450,000		13,450,000
Weighted-average shares outstanding used for diluted earnings per share		13,716,666		13,716,666

(r) Commitments and contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

(s) Segment reporting

The Company has no operating segments, as that term is defined in FASB Statement No. 131, Disclosure About Segments of an Enterprise and Related Information. All of the Company's operations and customers are in the PRC. Accordingly, no geographic information is presented.

(t) Deferred Offering Costs

Deferred offering costs are those costs directly attributable to the Company's proposed public offering. Such costs consist principally of professional fees and will be charged to stockholders' equity upon receipt of the capital raised. Should the proposed offering prove to be unsuccessful, the deferred costs will be charged to operations.

Incentive Share and After-Tax Profit Targets

As an additional purchase price under the Allied Moral Holdings share exchange, the previous shareholders of common stock of Allied Moral Holdings will be issued, on an all or none basis per year, an aggregate of 1,600,000 shares of common stock of Huiheng (400,000 shares each year for four years), if on a consolidated basis, Huiheng has after-tax profits in the following amounts for the indicated 12-month periods ending December 31:

Years Ending December 31	After Tax Profit
2008		13,100,000
2009		18,500,000
2010		26,200,000
2011		34,060,000

OUR SELECTED RESULTS OF OPERATIONS

Operating revenues

For the year ended December 31, 2007, net revenues amounted to $15.94million, an increase of $3.59 million, or 29%, compared to $12.35 million for the same period of the prior year. This increase in total revenues was due to an increase in revenues from product sales, services, and tax refunds and subsidies in 2007 compared with 2006. The next two paragraphs discuss these changes in greater detail.

Total revenues from product sales were $9.53 million for 2007, an increase of $2.92 million or 44%, compared to $6.61 million for the same period of the prior year. In 2007, we sold 11 units and in 2006 we sold a total of 8 units. This increase in unit sales and revenues from unit sales in 2007 compared with 2006 was due to an increased demand in the market for our products.

Total revenues from services were $5.04 million for 2007, an increase of $0.36 million or 7.7%, compared to $4.68 million for the same period of the prior year. For the years ended December 31, 2006 and 2007, we managed a total of 26 service contracts. Of the 26 contracts, three were signed at the beginning of the second quarter of 2006. As a result, we generated revenue on those three contracts for three quarters in 2006 and for an entire year in 2007, resulting in an increase in service revenues in 2007 compared with 2006.

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Of the $15.94 million of net revenues, approximately $1.38 million related to tax refunds and subsidies, an increase of approximately $320,000or 30% over the $1.06million in tax refunds and subsidies for the same period of the prior year. Tax refunds and subsidies accumulate each current year and are paid to us, and recognized as revenue, the following year. Since our total revenue and taxable income in 2007 was higher than in 2006, our revenues from tax refunds and subsidies will be larger in 2008 than in 2007. 

Revenue Backlog

Revenue backlog represents the total amount of unrecognized revenue associated with existing purchase orders for our products. Any deferral of revenue recognition is reflected in an increase in backlog as of the end of current period. The backlog as of December 31, 2007 amounted to $2.4 million, representing a decrease of 56%, compared to $5.41 million as of December 31, 2006. The decrease in backlog was due to negotiations over new purchase contracts extending past the end of the year in 2007, which resulted in a smaller backlog at the end of 2007 compared with at the end of 2006. However, in the first quarter of 2008, we received a total of 10 purchase orders, all of which were under negotiation before January 1^st, 2008, which has increased our backlog to $12.24 million as of March 31, 2008. These purchase orders are not cancelableand we expect that all of them will be filled in 2008.

Cost of revenues

The total cost of revenues amounted to $3.76 million, an increase of $1.11 million or 41.9%, compared to $2.65 million for the same period of the prior year. The increase was due to increased number of units sold in 2007 compared with 2006.

Gross margin

As a percentage of total revenues, the overall gross margin decreased to 76.4% for the year ended December 31, 2007 from 78.5% for the same period in the prior year. The decrease in the gross margin was due to product sales accounting for a larger percentage of total revenues in 2007 compared with 2006, during which time higher margin service revenues accounted for a larger percentage of total revenues. We anticipate that revenue from product sales will continue to increase as a percentage of total revenue in 2008. As a result, we anticipte that our gross margins will decrease slightly in 2008 compared with 2007. 

Operating expenses

Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and related expenses for personnel engaged in sales, marketing and customer support functions and costs associated with advertising and other marketing activities.

Sales and marketing expenses were approximately $82,000 for the year ended December 31, 2007, a decrease of 34%, or roughly $41,000 compared to approximately $123,300 for the same period of the prior year. The decrease was due to a fewer commissions paid to sales staff as senior management was responsible for several sales and were not paid any commissions.

This relatively low overall expenditure toward sales and marketing is due to our direct marketing strategy which primarily includes expenses for salaries, commissions and travel fees for our marketing staff. We have established guidelines to monitor and evaluate sales performance for its products to customers in different industries and regions to control selling expenses. We expect that our selling expenses will remain at or increase above the 2007 levels as we increase our efforts to expand sales, particularly internationally, where our brand is not as well known and the resources devoted to establish a presence in new markets will be greater.

General and administrative expenses. General and administrative expenses consist primarily of salaries and benefits and related costs for our administrative personnel and management, fees and expenses of our outside advisers, including legal, audit and valuation expenses, expenses associated with our administrative offices. General and administrative expenses amounted to approximately $1.53 million for the year ended December 31, 2007, an increase of roughly $250,000 compared to approximately $1.28 million for the same period of the prior year, representing an increase of 19.5%. The increase in general and administrative expenses was due primarily to increased expenses associated with human resources, increased administrative expenses resulting from our growth over that period and from additional expenses resulting from becoming a publicly listed company in the U.S.

Research and development expenses. Research and development expenses comprise mostly employee compensation, materials consumed and experiment expenses for specific new product research and development, and any expenses incurred for basic research on advanced technologies. Research and development expenses were $263,300 for the year ended December 31, 2007, compared to $124,300 in the same period of the prior year. This was due to new product development including our MLC, linear accelerator and next generation SGS device.

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Income tax provision

Our effective tax rate was 9.12% for the year ended December 31, 2007, compared to 17.07% for the year ended December 31, 2006. This decrease in effective tax rate resulted from a combination of factors. The tax rate payable at each level of our operations is different. In 2007, the tax rate payable at Changdu Huiheng was 15%, at Wuhan Kangqiao it was 15% and at Shenzhen Hyper it was 0%. Compared with 2006, a greater percentage of the Company’s income was earned at Shenzhen Hyper, and therefore subject to a 0% tax rate, for two reasons: Shenzhen Hyper sold proportionally more SGS units in 2007 than in 2006 relative to the sales of BGTS and HGTS units by Wuhan Kangqiao in those years, and it sold those products to Changdu Huiheng at a higher price. As a result, more of the Company’s taxable revenue was earned at the Shenzhen Hyper level, the most favorable tax jurisdiction, which produced a reduction in 2007 relative to 2006, when a larger proportion of the Company’s income was generated in the less favorable tax jurisdictions. In addition to reducing the effective tax rate, that shift in income generation also reduced the income tax expense for 2007 compared with 2006 by nearly 33%, to $938,000 from $1.4 million, respectively. The tax rate payable at each level of our operations is expected to remain the same in 2008, although the effective tax rate may change should the income generated at each level be different.

Net Income

For the year ended December 31, 2007, the Company’s net income amounted to $9.02 million, an increase of 2.2 million compared to $6.82 million for the prior year, or 32.26%. This increase was attributable primarily to the increase in product sales.

Comprehensive Income

For the year ended December 31, 2007, the Company’s comprehensive income amounted to $9.72 million, an increase of $2.89 million or 42% compared to $6.82 million for the prior year. The increase was due to an increase in net income and foreign currency translation adjustments over the period.

LIQUIDITY AND CAPITAL RESOURCES

To date, the Company has financed its operations primarily through cash flows from operations. We currently do not have any outstanding short term or long term debt. We generate sufficient capital from our operating revenues and shareholder investments to cover our operating cash flow needs. We require that our customers pay us 30% of the sale price at the time the order is placed and the purchase order is signed. In addition, our customers pay us an additional 30% once the unit has been built and tested. The final 40% is paid in two installments, 30% on the date of installation and acceptance by the customer and the final 10% on 1 year following the installation date. As we operate with relatively high margins, this scenario provides us with sufficient cash to purchase various raw materials, meet our component inventory needs and pay our vendors. In addition, there are very few direct costs associated with our service business which further enhances our cash position. We have longstanding, positive relationships with our vendors and are given favorable payment terms. Also, we believe that we can defer certain tax payments, if we choose to do so. We plan to raise additional capital that will help finance a number of expansion initiatives including new product development.

As of December 31, 2007, the Company had total assets of $18.86 million, of which cash amounted to $866,585, accounts receivable amounted to $8.25 million, prepayment and other current assets amounted to $3.27 million and inventories amounted to $1.07 million. Working capital was approximately $11.08 million. The quick ratio was approximately 4.18:1.

Comparison of years ended December 31, 2006 and 2007

Net cash from operating activities totaled approximately $5.11 million for the year ended December 31, 2007, a decrease by $6.01 million compared to $11.12 million for the same period in the prior year. This decrease resulted primarily from the following changes in the operating assets and liabilities:

· $5.6 million increase in accounts receivables;

· $553,000 decrease in inventories;

· $486,000 increase in prepayments and other receivables;

· $76,850 increase in accounts payable;

· $620,000 decrease in tax payable;

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· $521,000 increase in accrued expenses and other current liabilities;

Cash collected from accounts receivable for the year ended December 31, 2007 was significantly lower than cash collected from accounts receivables for the year ended December 31, 2006. This was due to an abnormal, large accounts receivable payment made by one of the company’s major customers during the year ended December 31, 2006.

Net cash from investing activities was ($10.23) million and ($1.75) million for the years ended December 31, 2007 and 2006, respectively. The cash used by investing activities was used to equip our new office facility into which we moved to support our growing operations and torepay advances by related parties that were used to complete the acquisition of Tibet Changdu by Allied Moral.

Cash flows provided by financing activities amounted to $5.65 million and ($9.16) million for the years ended December 31, 2007 and 2006, respectively. For the years ended December 31, 2007, cash flows generated by financing activities consisted of $9.12 million of contributed capitaland ($3.58) million as a payment for redemption of common shares.

OPERATING LEASE COMMITMENTS

Rental expenses for obligations under operating leases were $44,746 (RMB 356,088)and $52,504 (RMB 372,778) for the years ended December 31, 2006 and 2007, respectively. As of December 31, 2007, the total future minimum lease payments under non-cancellable operating leases in respect of premises are $5.22 million (RMB 37.1 million). While our new facilities have a lower cost per square meter, they are larger than the office space we previously occupied. As a result, our total rental expense will increase from $4,006 (RMB 31,880) per month to $21,934 (RMB 160,000) per month.

Quantitative information about market risk and qualitative information about market risk

Transaction Risk and Currency Risk Management

Our operations do not employ financial instruments or derivatives which are market sensitive, and therefore we are not subject to the financial market risks associated with such instruments and derivatives.

Exchange Rate Sensitivity

We do not currently sell our products internationally, so we are not subject to substantial risk from changes in exchange rates. There is a limited impact from exchange rate fluctuations as a result of the fact that we purchase some components and materials internationally. However, after a fairly stable period when the RMB was pegged to the US Dollar, the trend over the past few years has been appreciation of the RMB. This has the result of reducing our costs when stated in RMB terms, as it requires fewer RMB to acquire the same dollar value of goods compared to periods when the RMB was weaker.

Our production base is in China, which results in a substantial portion of our operating expenses being denominated in Renminbi, although the majority of our international purchases are made in U.S. dollars.

We currently do not engage in hedging or other activities to control the risk of our foreign currency exposure.

Exchange Controls

Chinese law allows enterprises owned by foreign investors to remit their profits, dividends and bonuses earned in China to other countries, and the remittance does not require prior approval by the State Administration on Foreign Exchange. SAFE regulations formerly required extensive documentation and reporting, some of which was burdensome and slowed payments. If there is a return to payment restrictions and reporting, the ability of a Chinese company to attract investors will be reduced. Also, current investors may not be able to obtain the profits of the business which they own as a result of other restrictions that the Chinese government may impose. Relevant Chinese laws and regulations permit payment of dividends only from retained earnings, if any, determined in accordance with Chinese accounting standards and regulations. It is possible that the Chinese tax authorities may require changes in our reported income that would limit our ability to pay dividends and other distributions. Chinese law requires companies to set aside a portion of net income to fund certain reserves which amounts are to distributable as dividends. These rules and possible changes could restrict a company in China from repatriating funds to us and our shareholders as dividends.

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Interest Rate Risk

We are equity financed and have only limited debt that is subject to interest rate change risk.

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BUSINESS

Overview

We design and sell precision radiotherapy equipment used for the treatment of cancer and tumors in the PRC. Our patented line of gamma treatment systems (“GTS”) quickly and accurately deliver a well-defined conforming dose of radiation to the target tissue while sparing surrounding normal tissue. We have 17 patents issued in the PRC and internationally and additional patent applications which cover our product line.

Our GTS product line is capable of treating tumors with sophisticated radiation therapy techniques, such as stereotactic radiosurgery, intensity-modulated radiotherapy and 3D conformal radiotherapy. Management of Huiheng believes, based solely upon the high quality, high performance and low-cost of our products, that we have sold more GTS devices in the PRC over the last five years than any other company. Our R&D operations have developed additional products that we will introduce through 2009. We also plan to expand our sales and distribution beyond the PRC.

Our business is focused on the development and design of devices used in the treatment of cancer. The Ministry of Health has identified cancer as the leading cause of death in the PRC for the years 2004, 2005 and 2006. To the extent that cancer-related illness and death are caused by environmental factors, the air and water pollution associated with China’s rapid industrial expansion are expected to increase the rate of both. As a result, effective treatment of cancer is a high priority for China’s healthcare system.

Our customers are health care providers and third party hospital equipment investors, with the end user being the hospital. We also offer our customers comprehensive post-sales services for our products as well as third party manufactured products. These post sales services include radioactive cobalt source replacement and disposal, medical expert training, clinical trial analysis, patient tumor treatment analysis, software upgrades, and patient care consulting.

Our net revenues increased from $12.3 million in 2006 and to $15.9 million in 2007. Our net income increased from $6.8 million in 2006 to $9.02 million in 2007. From 2003 through June 2007, we sold what we believe, based solely on management’s knowledge of the industry, are 70% (36 of 50) of the total number of radiotherapy devices sold in the PRC.

We conduct our business principally through the three operating subsidiaries of Changdu Huiheng:

· Shenzhen Hyper, which is engaged in our principal research and development activities along with the production and servicing of the SGS system;

· Wuhan Kangqiao, which also conducts research and development and focuses on the production and servicing of our HGTS and BGTS products; and

· Beijing Kbeta is engaged in research on radiotherapy techniques. Beijing Kbeta is a collaboration between Chengdu Huiheng, the Beijing Shuangyuan Isotope Technology Co., Ltd. and Beijing Taihai Tonghui Culture Technology Co., Ltd., which are privately held businesses incorporated in China.

Industry Background

The conventional and most commonly used treatment methods for cancer in China and elsewhere are surgery, radiotherapy and chemotherapy. High intensity focused ultrasound, radio frequency ablation, microwave thermo-coagulation and cryosurgery are some of the major new cancer treatment methods developed and commercialized in recent years. Biotherapy and gene therapy are currently still in experimental stages and are not currently available to patients generally. The selection of a particular treatment method for a patient depends on various factors, including the tumor’s receptivity to the treatment method, the location of the tumor, the stage of the tumor and the patient’s state of health. Cancer patients are usually treated by a combination of various treatment methods.

There are two primary types of radiation therapy. The first type, which represents the majority of radiation treatments, is external beam radiation therapy. In this type of radiation therapy, a beam of energy originating outside the patient’s body is focused on the tumor. The second type of radiation therapy is internal radiation therapy, commonly referred to as brachytherapy, which involves implanting radioactive materials in the patient’s body at the site of the tumor. Huiheng’s GTS products are external beam radiation therapy devices.

External radiation therapy can be divided into two main categories, common radiotherapy and precision radiotherapy. Common radiotherapy involves the use of a linear accelerator to deliver high energy X-rays to a tumor target. This X-ray beam is relatively wide. This type of common radiotherapy may be employed to treat relatively large, localized tumors, but it affects surrounding tissues, making it inappropriate for tumors in sensitive areas.

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Precision radiotherapy devices deliver either high energy gamma or x-ray energy to tumor targets in a precise manner, limiting radiation exposure to surrounding tissue. Precision radiotherapy devices include the various gamma treatment systems, such as Huiheng’s GTS product line and various other devices capable of Stereotactic Radiosurgery, Conformal Radiotherapy Treatments (“CRT”) and Intensity-Modulated Radiation Therapy (“IMRT”).

In general, gamma treatment systems are precision stereotactic radiotherapy devices that deliver low dose beams of high energy gamma ray energy to tumor targets for the purposes of destroying tumor cells. In the case of Huiheng’s GTS products, numerous gamma ray beams, arranged across an arc frame, are irradiated and collimated from a source of Cobalt-60, to the treatment target. The gamma ray beams intersect, precisely, at the tumor target and generate a high dosage gradient between the target and the surrounding tissue, minimizing radiation exposure outside the target.

The PRC Market

In order to improve the country’s healthcare situation, the PRC government intends to make large investments over the next decade.

Market Size

The medical device market of the PRC has grown during the past few years. According to National Development and Reform Commission, the total revenue of Chinese medical devices industry was about $4.16 billion in 2005, which increased at a compound annual growth rate of 20.9% from 2000 to 2005. The market touched $5.16 billion in 2006.

Note: (E)-Estimated; Source: Kalorama Information Market Intelligence Report: “Asian Medical

Devices,” Publication Date: May 2007 (“Kalorama Information Report”)

Market Projections

According to National Development and Reform Commission (NDRC), the Chinese medical devices industry is expected to grow at a compound annual growth rate of 24% to about $12.19 billion until 2010. ¹

¹ Source: Kalorama Information Report

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Note: (E)-Estimated; Source: Kalorama Information Report

Trends

The Chinese medical device market is expected to grow substantially in the near future. With an increase in the standard of living of the people, better medical care is expected in the country.

The number of doctors per 1,000 people increased from 1.47 in 2002 to 1.52 in 2005. This trend is expected to have a positive impact on the medical device market in the future. ²

² Source: Kalorama Information Report

Source: Kalorama Information Report

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Factors Affecting the Market

Growth Drivers

Owing to unprecedented economic growth and rise in per capita income, the demand for high-quality medical care is increasing in the PRC. Recent threats such as Severe Acute Respiratory Syndrome (SARS) and avian flu have prompted the government to make significant investments in the healthcare sector.

Increasing Expenditure on Healthcare

In 2005, the healthcare expenditure of the PRC (with a population of 1.3 billion persons) accounted for 5.7% of the GDP ($2.3 trillion) as compared to 15.9% of the GDP ($12 trillion) in the US (with a population of 300 million). We believe that this indicates that expenditure on healthcare is likely to increase in the future. ³

³ Source: Kalorama Information Report

Demand for High quality Medical Devices and Efficient Healthcare Services

Three types of public healthcare insurance schemes are available in the urban areas of the PRC. The first type, known as the Government Insurance System, provides free healthcare and medical benefits to approximately 34 million public sector employees. The second type, known as the labor safety healthcare scheme, provides compulsory coverage for approximately 148 million employees of state-owned enterprises and some collectively owned enterprises with coverage including a 50% contribution towards medical expenses incurred by dependent relatives of the employee, according to Medistat. As the PRC’s economy has grown, more private sector companies have emerged whose workers are covered by the third type, the compulsory healthcare insurance scheme. Under this scheme, a worker normally pays 2% of his or her wages into an insurance fund, while the employer contributes an additional 6% of the worker’s wages.

One of the major benefits of the economic boom in the PRC is the increase in the per capita income of people in the country. The annual per capita income in the PRC reached $1,740 by the end of 2005⁴, a significant increase from $960 in 2004. This number is expected to continue to grow as the GDP continues to rise. Therefore, the population at large, demands better and more efficient health services resulting in a higher demand for high, medium and low-tech medical devices. Moreover, the endeavor of the government to provide better health services to its citizens is resulting in large investments in big hospitals. These investments are directly related to the investments in medical devices as well.

⁴ Source: Kalorama Information Report

Reform in National Medicine System Fuels Growth of Medical Devices

In the recent years, the government has replaced the self-procurement system of hospitals with a centralized public bidding system. As a result, hospitals are now required to provide better services and upgrade their hardware, to increase their revenue. Hence, the demand for mid or high-end medical devices will be one of the main growth drivers for this market in the PRC. The recent medical system reforms in the PRC have increased the demand for medical devices in hospitals. According to an official market survey, about 15% of all medical devices were manufactured in the 1970s, and 60% in the 1980s, which means that there is a potential market for product replacements.

Healthcare Insurance - Catalyst for High quality Healthcare Services

The PRC has opened its market to foreign insurance companies, thereby providing affordable healthcare insurance options to the middle-class in the country. This prompts the healthcare service providers to purchase better quality machines to cater to the increasing demand. Since the PRC’s entry into WTO in December 2001, insurance companies have been offering improved services and risk coverage to meet international standards as well as the intensifying competition.

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Private Hospitals and Clinics Becoming More Popular

The key strategy of private hospitals and clinics is to use advanced technologies or devices to attract customers. Private hospitals and clinics therefore, through the use of high quality healthcare devices, have more market share as compared to state-owned hospitals.

Aging Population

As a result of the “one-child policy”, the country has entered an “aging” phase since 2001. According to the PRC Research Center on Aging, it is estimated that there will be 5.96 million senior citizens (above 60 years of age) added every year from 2001 to 2020. This means that by 2020 the number of senior citizens is estimated to reach 248 million, according to an estimate by the Hong Kong Trade Development Counsel.

Other Threats and Epidemics

Threats such as SARS and avian flu have led the government to increase awareness on healthcare services among people and equip them to deal with emergencies. The Chinese government has made significant investments in the country’s healthcare infrastructure. While it is impossible to determine how much money was injected into the healthcare sector as a direct result of the SARS epidemic, many government policies were changed in the wake of the epidemic. For example, the government re-established subsidies for a cooperative medical scheme in the poorer provinces after an absence of almost 20 years. Beijing also created a medical assistance fund for persons with debilitating diseases.

Our Products

Huiheng is involved principally in radiotherapy, which uses an external radiation source to destroy or inhibit the growth of tumor tissues. Radiotherapy is often used as a complement to surgery. Although radiotherapy is used to treat a wide range of cancer types, different types of tumor tissues have different sensitivities to radiation, and different patients have different levels of tolerance for radiation, both of which play a role in determining if radiotherapy is an appropriate treatment. Radiation therapy is the primary treatment option for localized cancerous tumors.

Huiheng’s line of gamma treatment systems include the Head Gamma Treatment System (“HGTS”), the Body Gamma Treatment System (“BGTS”) and the Super Gamma System (“SGS”). They each deliver gamma radiation to tumor targets in an optimally precise and effective manner. The BGTS is used to treat a variety of tumors located throughout the body and is not used for intracranial tumors. Similarly, the HGTS treats only tumors of the head and other functional disorders of the head, especially those that cannot be treated with conventional surgery. The SGS, on the other hand, can effectively treat tumors of both the head and body with accuracy and precision, and this wide range of applicability is what sets it apart from other GTS products on the market. In addition, Huiheng’s GTS products are capable of performing a wide range of treatment options, including stereotactic radiosurgery, stereotactic radiotherapy, intensity-modulated radiotherapy (“IMRT”) and 3D-conformal radiotherapy (“CRT”).

Prior to October 2005, our business had been organized differently. While we had the production operations described above, a significant part of our business involved the operation of treatment centers within Chinese hospitals. These treatment centers would either purchase or lease our products on favorable terms and we would participate in the revenue stream generated from the treatments delivered in the center, an arrangement that facilitated the hospital’s purchase of these capital items. However, following our reorganization in 2005, we shifted our business model to one in which our revenues and profits are derived from the sale of our medical devices and from servicing those devices after sale.

Since the inception of Shenzhen Hyper in 2001, our revenues have grown steadily, with the shift in the business model leading to substantially greater revenues and profits compared with prior years. This was due to both the continued expansion of our business and the change in accounting treatment accorded to sales of equipment, with revenue recognized upon acceptance of the equipment by the customer, versus the revenues associated with the income stream produced over a period of years by the treatment centers.

Our relatively strong competitive position is reflected in our gross margins, which were in excess of 50% for both 2006 and 2007. We believe that these large margins will allow us to meet pricing pressure without a loss of sales volumes or to decrease pricing in order to increase volumes as our production capacity increases. This pricing flexibility will also provide us with significant assistance in entering foreign markets where our products are not as well known and our pricing power is not as great.

Practices in our industry that have an effect on working capital requirements relate to the method of payment by customers for our products. Normally we obtain a deposit or down payment from the customer with the order and before we begin production of the device. Progress payments are made until the device is delivered, installed and tested for conformity with specifications. When the device passes testing and the customer accepts it, the final payment is due. Generally speaking, the progress payments made by customers during the development of the device are adequate to cover the costs of making it, reducing or eliminating altogether the need for working capital to support development operations. We will need working capital to expand capacity or to enter international markets, as well as for research and development. These working capital needs have historically been met through a combination of cash flow and equity financing.

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Research and Development

R&D is a major priority for Huiheng. Our R&D is primarily focused on the next generation developments of existing products and new product launches. As China’s economy and social structure continues its development and evolution, Huiheng understands that its products must continue to reflect technological advancements if it wants to maintain its position as what it believes (based solely on management’s knowledge of the industry) to be a leader in China’s radiotherapy industry.

Huiheng is currently working to complete the development of the next generation SGS, as well as an integrated linear accelerator and MLC, an advanced MRI and an industrial linear accelerator. The addition of these products will bolster the overall product line and keep the company at the forefront of the China’s radiotherapy and medical capital equipment industry.

We have spent $124,283 and $263,314 during 2006 and 2007, respectively, on research and development efforts to improve existing products and processes and to develop new products. These amounts may appear low by developed country standards, but they have been adequate to support the development of significant improvements in our products and the development of new products.

Regulation

Our GTS products are medical devices and are subject to regulatory controls governing medical devices. Our SGS and BGTS products are authorized by the State Food and Drug Administration (SFDA), which is the regulatory institution for medical devices in the PRC. As a developer of medical equipment we are subject to regulation and oversight by different levels of the SFDA. We are also subject to other government laws and regulations which are applicable to developer in general. SFDA requirements include obtaining production permits, compliance with clinical testing standards, development practices, quality standards, applicable industry and adverse reporting, and advertising and packing standards.

On April 1, 2000, SFDA formulated a set of regulations for the medical device market - “Regulations for the Supervision and Administration of Medical Devices” - which included general provisions, administration of medical devices, administration of production, distribution and use of medical devices, supervision of medical devices, penalties, and supplementary provisions. Recent regulatory changes in the PRC include improvements in the supervision and efficiency of medical devices testing, introduction of a new pricing policy for medical devices, and introduction of a new regulation - “Provisions on Daily Supervision and Administration of Medical Devices Manufacturing Enterprises,” by SFDA in 2006.

Classification of medical devices

In China, medical devices are classified into three different categories, Class I, Class II and Class III, depending on the degree of risk associated with each medical device and the extent of control needed to ensure safety and effectiveness. Classification of a medical device is important because the class to which a medical device is assigned determines, among other things, whether a developer needs to obtain a production permit and the level of regulatory authority involved in obtaining such permit. Classification of a device also determines the types of registration required and the level of regulatory authority involved in effecting the registration.

Class I devices are those with low risk to the human body and are subject to “general controls.” Class I devices are regulated by the city level food and drug administration where the manufacturer is located. Class II devices are those with medium risk to the human body and are subject to “special controls.” Class II devices require product certification, usually through a quality system assessment, and are regulated by the provincial level food and drug administration where the manufacturer is located. Class III devices are those with high risk to the human body, such as life-sustaining, life-supporting or implantable devices, and are regulated by the SFDA under the strictest regulatory control.

Our GTS product is classified as a Class III device, and it therefore is subject to all regulatory controls governing Class III medical devices.

Production permit for medical devices

A developermust obtain a production permit from the provincial level food and drug administration before commencing the development of Class II or Class III medical devices. A production permit, once obtained, is valid for four years and is renewable upon expiration. To renew a production permit, a developer needs to submit to the provincial level food and drug administration an application to renew the permit, along with required information six months before the expiration date of the permit. In September 2007 we applied for a renewal of our production permit which was promptly renewed in December 2007.

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Registration requirements of medical devices

In accordance with the "Administration Measures Regarding Medical Device Registration" implemented on August 9, 2004, before a medical device can be developed for commercial distribution, a developer must obtain medical device registration by establishing, to the satisfaction of respective levels of the food and drug administration, the safety and effectiveness of the medical device. In addition, in order to conduct a clinical trial on a Class II or Class III medical device, the SFDA requires developers to apply and to obtain in advance a favorable inspection result for the device from a third party inspection center approved by the SFDA. The application to the inspection center must be supported by required data, such as animal and laboratory testing results, as well as certain pre-clinical and clinical trial data. If approved, the medical device registration is valid for four years.

According to the "Provisions Regarding Medical Device Clinical Trials" implemented on April 1, 2004, clinical trials for our GTS products are also subject to SFDA regulation governing GTS medical devices. Under these regulations, the minimum clinical trial period for a medical device is one year, with a minimum of 100 subjects participating and using at least two units of the GTS. Compliance with these SFDA regulations also require satisfactory clinical reports from at least 2 institutions that have participated in the clinical trial. Other areas subject to these regulations include proper labeling of the medical device, obtaining informed consent from each subject, and the proper record-keeping.

Under existing regulations, we are permitted to install a limited number of items of sample equipment and to be reimbursed for the equipment and installation costs prior to the receipt of a medical device registration.  Those installations frequently are used to conduct clinical trails.   While those limited installations are not considered sales or commercial distribution for regulatory purposes, they do result in revenues as a result of the cost reimbursements

The SFDA occasionally changes its policies, adopts additional regulations, revises existing regulations or tightens enforcement, each of which could block or delay the approval process for a medical device.

We have received SFDA approval for our SGS and BGTS products. Our products under development have not been approved by the SFDA, and we will need to conduct clinical trials (none of which have commenced) in order to obtain any such approval. Under existing rules, we are permitted to install equipment to conduct clinical trials, but those installations are not considered sales under the regulations.

Continuing SFDA regulations

We are subject to continuing regulation by the SFDA. In the event of significant modification to an approved medical device, its labeling or its manufacturing process, a new pre-market approval or pre-market approval supplement may be required. Our GTS products are subject to, among others, the following regulations:

· SFDA’s quality system regulations, which require developers to create, implement and follow certain design, testing, control, documentation and other quality assurance procedures;

· medical device reporting regulations, which require that developers report to the SFDA certain types of adverse reactions and other events involving their products; and

· SFDA’s general prohibition against promoting products for unapproved uses.

Class II and III devices may also be subject to special controls applicable to them, such as supply purchase information, performance standards, quality inspection procedures and product testing, which may not be required for Class I devices. We believe we are in compliance with the applicable SFDA guidelines, but we could be required to change our compliance activities or be subject to other special controls if the SFDA changes or modifies its existing regulations or adopts new requirements.

We are also subject to inspection and market surveillance by the SFDA to determine compliance with regulatory requirements. If the SFDA decides to enforce its regulations and rules, the agency can institute a wide variety of enforcement actions, such as:

· fines, injunctions and civil penalties;

· recall or seizure of our products;

· the imposition of operating restrictions, partial suspension or complete shutdown of production; and

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· criminal prosecution.

Regulatory requirements for developing international markets

We believe that the regulatory requirements of some international markets will be satisfied at least substantially by the regulatory approvals granted by the SFDA. We believe that compliance with regulatory requirements in international markets that we have been making efforts to develop will ultimately be the responsibility of the local distributor, especially in markets where regulators will rely on the SFDA approval process. We have not fully evaluated the regulatory requirements of these markets and our ability to comply with the requirements of a jurisdiction will be a factor in our expansion plans.

Customers

Our customer base consists of hospitals and clinics that diagnose and treat various type of tumors, although, as noted above, our equipment is currently purchased by distributors that place the device in the hospital or clinic, through a financing arrangement that facilitates the hospital’s acquisition of the equipment. While we have a limited number of distributors (with two distributors accounting for 76% of revenues for the year ended December 31, 2007), the health care institutions that are the end users for our products are located in most of the provinces in China. While we are developing our own sales and marketing capabilities and an internal distribution network to facilitate direct sales, we will still need to cooperate with distributors who provide lease financing for the health care institutions.

In an effort to expand our customer base outside of China, we have entered into distribution agreements with companies located in India, Argentina, Ukraine, Chile, Russia, Hungary, South Korea and Peru. Based on our experience with our distributor in India (where obtaining regulatory approval took more than two years), we expect that it will take two to three years from commencement of the agreement before sales commence in those countries, and longer if the applicable regulatory authorities require clinical trials or additional data beyond what was required to obtain SFDA approval.

Materials and Components

We obtain components for our products and assembly services from a network of third party suppliers located in Shenzen, Beijing, Wuhan and Chengdu, which are considered some of the industrialized areas of China. We obtain our Cobalt 60 sources from Beijing Shuangyuan Isotope Co. Ltd. and Chengdu Zhonghe Isotope Co. Ltd.; electrical cabinets from Wuhan Shankuo Mechanical & Electrical Equipment Co. Ltd; main engines from Jiangsu Duoling Numerical Control Machine Tool Co. Ltd and Chengdu Aviation Plastic Modeling Co. Ltd; and positioning beds from Shenzhen Tianda High-Tech Material Co. Ltd. Although we work closely with these organizations, component shortages may occur from time to time. We do not have long term agreements with our suppliers. Instead, we obtain these products and services on a purchase order basis. Because of the close relationships that have developed with our suppliers and their knowledge of our requirements, we would have some difficulties, in the short run, replacing a supplier.

Our major assembly processes are “dry,” meaning that they do not involve significant quantities of solvents, plating solutions or other types of materials that lead to the generation of large amounts of hazardous wastes, process wastewater discharges or air pollutant emissions. Our GTS devices do use radioactive isotopes, and the proper handling of that material, both prior to installation and after removing it from a device for replacement, which must occur periodically, is initially our responsibility. However, under current Chinese law and the arrangements that we have with our waste handler, the responsibility and liability for management of that waste containing particular terms negotiated at the time transfers to the waste handler with the waste itself.

Our manufacturing activities are outsourced and performed by our suppliers. We periodically review the performance of our suppliers, which includes an evaluation of any quality issues and corrective actions.

Competition

The international market for radiotherapy devices is currently dominated by just a few companies, the leaders being companies such as Elekta and Accuray. It has traditionally been centered in Europe, where the GTS was first developed and where large multinational corporations such as Siemens make many of the components needed to build such equipment.

Huiheng believes (based solely on management’s knowledge of the industry) that it is the leading Chinese developer of radiotherapy equipment, having a total installed base of 41 GTS devices in China as of December 31, 2007. As the sophistication of China’s medical equipment industry increases and its familiarity with the practices required by western governmental approval authorities grows, we anticipate an increase in the amount of such development that will be done in China, both for domestic Chinese sales and for export to foreign markets.

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As with most other products, competitive advantages in radiotherapy equipment derives from a favorable combination of price, quality and customer service. We believe that we are well-positioned to compete effectively in all three of those areas. China’s well-known labor cost advantages relative to other regions in which competing devices are manufactured enables us to remain competitively priced while enjoying favorable margins. The combination of features that our products contain is also an advantage relative to the products of many of our competitors. These advantages have enabled us to put price pressure on our foreign rivals, thereby helping us to gain market share in the PRC while maintaining profitability and margins, as our financial results show.

Intellectual Property

We have been issued 15 patents in China covering radiotherapy devices, switching devices, and various other aspects of the Gamma Treatment System. The first such Chinese patent will expire in 2010, with the remainder expiring at various times from 2013 through 2027. We have also been issued one patent in the United States and one patent in the European Union. These foreign patents expire between 2020 and 2027. We intend to patent our new inventions both in China and internationally and have filed a total of approximately 15 patent applications in the PRC, U.S. and EU.

Our patents cover the intellectual property we use in our products; we do not license patent rights from others for our products. Management is not aware of any current or previous infringement of the existing patents. If any infringement occurs, our management intends to vigorously prosecute actions to halt the infringement and recover damages if the value of the patent is judged at the time to be sufficient to justify that effort.

Properties

We currently operate our business out of two properties located in the PRC. Wuhan Kangqiao is headquartered in Wuhan, China where it owns a 287 square meter office building that houses management, research and development personnel, marketing, finance and administrative support staff. Shenzhen Hyper is headquartered in Shenzhen, China, where it leases office space of 4,000 square meters, with a monthly rental of $21,934 (RMB 160,000) per month, that houses management, research and development personnel, marketing, finance and administrative support staff. This lease will expire at the end of December 2027. We relocated to this space at the beginning of 2008.

Neither facility contains equipment or specialized improvements that would be difficult to move to a new location. If we decided to relocate, we believe that there are many facilities in these locations that would be suitable for our needs.

Employees

As of December 31, 2007, we had 98 employees, of which 69 are full-time employees and 29 are part-time employees. Of such employees, 52 are in research and development, 21 are in sales and customer support, and 25 are in finance and administration. We consider our relations with our employees to be good.

Legal Proceedings

Neither we nor any of our direct or indirect subsidiaries is a party to, nor is any of our property the subject of, any legal proceedings other than ordinary routine litigation incidental to their respective businesses. There are no proceedings pending in which any of our officers, directors, promoters or control persons are adverse to us or any of our subsidiaries or in which they are taking a position or have a material interest that is adverse to us or any of our subsidiaries.

Neither we nor any of our subsidiaries is a party to any administrative or judicial proceeding arising under federal, state or local environmental laws or their Chinese counterparts.

Huiheng Medical’s Background

The Acquisition of Allied Moral

On May 15, 2007, we entered into a share exchange agreement to acquire (i) all of the issued and outstanding shares of the common stock of Allied Moral Holdings, Ltd. in exchange for 13,000,000 shares of our common stock, and (ii) all of the issued and outstanding Series A Preferred Stock of Allied Moral in exchange for 266,666 shares of our Series A Preferred Stock. In connection with the share exchange, we agreed to change our name from “Mill Basin Technologies, Ltd.” to “Huiheng Medical, Inc.” As part of this transaction, holders of some of our outstanding shares issued prior to May 15, 2007 contributed shares to the company so that there were 450,000 shares of our common stock issued and outstanding immediately prior to the share exchange. Taking into account the shares issued in the share exchange, at that time we had 13,450,000 shares of common stock issued and outstanding, 13,000,000 (96.65%) of which were owned by Allied Moral’s former shareholders, with the balance being held by Mill Basin’s prior shareholders, along with 266,666 shares of our Series A Preferred Stock, all of which are owned by former holders of Allied Moral’s Series A Preferred Stock.

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The share exchange is regarded as a reverse merger, since Allied Moral’s former shareholders obtained control of Mill Basin. As a result, Allied Moral was considered to be the acquirer for accounting purposes.

Allied Moral

As a result of the share exchange, Huiheng Medical owns all of the issued and outstanding stock of Allied Moral, which was incorporated in the British Virgin Islands on July 26, 2006. Allied Moral, holds all of the issued and outstanding stock of Changdu Huiheng, which in turn owns 100% of the issued and outstanding stock of Wuhan Kangqiao, 75% of the issued and outstanding stock of Shenzhen Hyper and 50% of the issued and outstanding stock of Beijing Kbeta. Private companies in China own the other interests in these subsidiaries.

Changdu Huiheng was founded in November 2004. At its inception, the Company's name was Tibet Changdu Shengfeng Industrial Development Co., Ltd. and it changed its name in 2007. As a Tibet-based holding company, it enjoys certain financial subsidies from the local government in Tibet. Its sole purpose is to hold the operating subsidiaries of Allied Moral.

Shenzhen Hyper was founded in September 2001. It is engaged in the business of research, development and servicing of the Super Gamma System, a medical device that uses precisely targeted bursts of radiation in the treatment of cancerous tumors. Shenzhen Hyper is also the subsidiary that conducts the majority of the company’s research and development activities for product improvements and new products.

Wuhan Kangqiao was founded in September 2001. It is engaged in the research and development, production and servicing of the company’s Head Gamma Treatment System and Body Gamma Treatment System.

Beijing Kbeta was founded in December 2004 as a collaboration between Changdu Huiheng, the Beijing Shuangyuan Isotope Technology Co., Ltd. and Beijing Taihai Tonghui Culture Technology Co., Ltd. The purpose of this arrangement is to develop and maintain standards for radiation oncology technologies and materials in China, including determining appropriate dosages of Cobalt 60 radiation delivered by gamma treatment systems and to install and change new Cobalt 60 sources for the gamma treatment centers.

In 2005, the ownership interests of Shenzhen Hyper, Wuhan Kangqiao and Beijing Kbeta were reorganized under Changdu Huiheng, a Chinese holding company established in Tibet. Upon the completion of the reorganization, Changdu Huiheng owned 75% of the equity interest in Shenzhen Hyper, 100% of the equity interest of Wuhan Kangqiao and 50% of the equity interest of Beijing Kbeta. Remaining equity interests in Shenzhen Hyper and Beijing Kbeta are owned by unrelated and unaffiliated parties.

Until August 2006, Changdu Huiheng was 90% owned by Shenzhen Jiancheng Investment Co. Ltd (“SZ Jiancheng”), a Chinese investment company, and 10% owned by Shenzhen Huiheng Industry Co. Ltd. (“Huiheng Industry”), also a Chinese investment company. Mr. Hui Xiaobing, our Chairman and CEO, in turn, owned 96.4% of Huiheng Industry and 3.6% of SZ Jiancheng. Subsequently, SZ Jiancheng sold 89% of its 90% interest in Changdu Huiheng to Huiheng Industry for $5,702,130 (RMB 44,500,000), making it a 99% owner of Changdu Huiheng, with the other 1% having been acquired by Hui Xiaobing for $64,069 (RMB 500,000). In order to move ownership of the Company offshore, on August 21, 2006, Huiheng Industry and Hui Xiaobing transferred their respective ownership interests in Changdu Huiheng to Allied for $6,406,889 (RMB 50,000,000), which at the time was 100% owned by Clear Honest Holdings Limited (“Clear Honest”), a British Virgin Island company that is 100% owned by Mr. Hui Xiaobing.

As part of this overall restructuring, SZ Jiancheng sold its 40% interest in Shenzhen Hyper to Changdu Huiheng for $2,050,204 (RMB 16,000,000), which already owned 20% of Shenzhen Hyper. Changdu Huiheng also acquired the 15% interest of Shenzhen Hyper held by Huang Jian for $768,827 (RMB 6,000,000), giving Changdu Huiheng its current 75% ownership interest in Shenzhen Hyper. The remaining 25% is owned by Shenzhen OUR International Technology Development Co. Ltd. Prior to this reorganization, Wuhan Kangqiao had been 36% owned by Hui Xiaobing and 64% owned by Huiheng Industry. As part of the reorganization, these ownership interests in Wuhan Kangqiao were transferred to Changdu Huiheng for $1,014,851 (RMB 7,920,000) and $1,804,180 (RMB 14,080,000), respectively, making Wuhan Kangqiao a 100% owned subsidiary of Changdu Huiheng.

The 50% ownership of Beijing Kbeta now held by Changdu Huiheng had originally been split 30% Changdu Huiheng and 20% Wuhan Kangqiao. To further enhance the tax benefits associated with Changdu Huiheng’s acting as the direct holding company of Beijing Kbeta, Wuhan Kangqiao transferred its 20% interest to Changdu Huiheng for $25,627 (RMB 200,000). The remaining 50% continues to be owned by Beijing Shuangyuan Isotope Technology Co., Ltd. and Beijing Taihai Tonghui Culture Technology Co., Ltd. 30% and 20%, respectively.

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In January 2007, Allied Moral received an equity investment with gross proceeds of US $10 million, in exchange for which it issued 2,666,666 shares of Series A Preferred Stock. As a result of this investment, on a common-share equivalent basis Clear Honest held 80% of the issued and outstanding stock of Allied Moral and the holders of the Series A Preferred Stock held 20%

Previous History of Mill Basin

Mill Basin Technologies, Ltd. was, prior to the share exchange with the stockholders of Allied Moral, an inactive company seeking merger opportunities or business operations. On September 5, 2006 Mill Basin had ceased operations and discontinued all previous business activities.

Mill Basin was formed under the name Pinewood Imports, Ltd. as a limited liability company in the State of Nevada in November 2002 and was converted into a Nevada corporation on August 29, 2005. As a limited liability company, the results of the company’s operations were, for tax purposes, passed through to its members. The company imported from Brazil molding and door component products, such as framing materials, made from pine wood and sold the imported products to retailers and/or distributors serving the residential building distribution industry throughout the United States and Canada.

On September 1, 2006, Keith S. Barton and Michelle M. Barton (the principal stockholders of Pinewood Imports) and 33 other stockholders, as sellers, entered into a Securities Purchase Agreement with Harborview Master Fund LP (“Harborview”) and Diverse Trading Ltd. The sellers sold an aggregate of 10,044,600 shares of the company’s common stock, representing 98.96% of the outstanding shares, to Harborview and Diverse Trading. All proceeds were paid to the sellers. No proceeds were paid to the company. On September 1, 2006, Keith S. Barton and Michelle M. Barton, who had been officers and directors of Pinewood Imports, resigned from those positions and the principals of Harborview were elected as officers and directors of the company.

The company transferred the discontinued operations and the assets relating to those operations to Keith S. Barton, former officer, director and stockholder of the company, in consideration of Mr. Barton’s assuming all of the liabilities relating to such operations and assets. The transfer to Mr. Barton and his assumption of the liabilities were effected on September 5, 2006. Mr. Barton and his wife, Michelle M. Barton, a former officer and director of the company, agreed to indemnify the company against any loss or expense relating to the transferred operations or assets and also released the company from any claims which either of them may have had against the company. Among the assets transferred to Mr. Barton was the name “Pinewood Imports, Ltd.,” and Mr. Barton has the right to use that name or any similar name in the conduct of the transferred business operations. On September 6, 2006, the company filed an amendment to its certificate of incorporation changing the company’s name to “Mill Basin Technologies, Ltd.” It then commenced its search for a business with which to merge or otherwise combine.

Prior to the share exchange, Mill Basin had not conducted any operations since September 2006. As a result of the share exchange, the operations of Allied Moral’s subsidiaries became our principal operations under the name Huiheng Medical, Inc., and therefore all of the information provided in this Business section relates to the operations of Allied Moral’s subsidiaries.

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DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

In connection with the share exchange, Mill Basin’s officers and directors resigned and were completely replaced with Allied Moral’s officers and directors.

The following table and text set forth the names and ages (as of March 31, 2008) of all of our directors and executive officers. The Board of Directors is comprised of only one class. All of the directors will serve until the next annual meeting of shareholders and until their successors are elected and qualified, or until their earlier death, retirement, resignation or removal. There are no family relationships among directors and executive officers. Each of our directors, other than Mr. Hui, is “independent” under the independence standards adopted by the Nasdaq Capital Market. Also provided herein are brief descriptions of the business experience of each director and executive officer during the past five years and an indication of directorships held by each director in other companies subject to the reporting requirements under the Federal securities laws.

Name	Age	Position
Hui Xiaobing	54	Chairman and CEO
Huang Jian	54	Vice President and Director
Li Bo	35	Corporate Secretary
Richard Shen	42	Chief Financial Officer
Cui Zhi	38	Chief Technology Officer
Tang Sucheng	45	Director of Marketing
Joe Chang	43	Director
Kenneth Borow	59	Director
Edward Meng	40	Director
Li Daxi	59	Director
Peter Slate	41	Director

Hui Xiaobing, Chairman of the Board and Chief Executive Officer

Mr. Hui currently serves as Chairman of the Board and Chief Executive Officer of Huiheng, positions he has held (including with Allied Moral) since the inception of that company in 2006, and Chairman of the Board and Chief Executive Officer of Changdu Huiheng, positions he has held since 2005. In addition, Mr. Hui has been the Chief Executive Office of Huiheng Industry since 2004. Mr. Hui also served from 1999 to 2006 as the President and Chairman of the Board of Shenzhen OUR Technology Co., Ltd., the pioneer of the radiotherapy industry in China. Mr. Hui holds a Masters degree in Regional Economics from Tongji University.

Mr. Huang Jian, Director

Mr. Huang Jian, a director since November 2007, has a background in business and management. He currently serves as the Vice President of the Company, a position he assumed in 2007. Mr. Huang is also the President and Director of Wuhan Kangqiao, positions he has held since 2006. In addition, Mr. Huang has been a director of Shenzhen Hyper since 2006 and has been the President of Shenzhen Hyper since 2001. Mr. Huang has a degree from Beijing Broadcast and Television University.

Li Bo, Corporate Secretary

Mr. Li Bo has a background in business and engineering and holds a Ph.D in management from Huazhong University of Science and Technology. Since 2005, Mr. Li has served as the Assistant to the CEO of Huiheng. He was obtaining his Ph.D. degree from 2002 through 2004. Prior to that, from 1998 to 2001, Mr. Li was the Assistant to the President of Wuhan Huazhong Numerical Control System Co., Ltd.

Richard Shen, Chief Financial Officer

Mr. Shen serves as Chief Financial Officer of Huiheng. In addition, he is also a managing partner of Sunlight Investment Limited, an asset management and investment consultant business, where he has served since 2005. From 2002 through 2005, Mr. Shen was a Vice President and Director of New Tech & Telecom Investment Limited. Previously, he served as the General Manager of Touchstone Investment Limited. Mr. Shen received his MBA from York University in Toronto, Canada.

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Mr. Cui Zhi, Chief Technology Officer

Mr. Cui Zhi oversees Changdu Huiheng’s research and development operations as the Chief Technology Officer, a position he has held since 2005. From 2002 to 2005, Mr. Cui was the Chief Engineer for Shenzhen Hyper, where he played a key role in the development of the Super Gamma System. Mr. Cui holds a Ph.D in Physics from China Science and Technology University.

Tang Sucheng, Director of Marketing

Mr. Tang is responsible for the sales and marketing functions of Tibet Chengdu as Director of Marketing, a position he has held since 2005. From 2000 to 2005, Mr. Tang was the Vice General Manager of SZ Jiancheng Investment Co., Ltd., a former affiliate of Huiheng. Mr. Tang studied at the Austria National Science and Technology Academy, where he earned a Ph.D. degree in physics.

Dr. Joe Chang, Director

Dr. Joe Chang, a director since November 2007, presently serves as Associate Professor and the Clinical Service Chief of Thoracic Radiation Oncology at the University of Texas M.D. Anderson Cancer Center in Houston, Texas, a position he has held since 2006, and is responsible for clinical operation for thoracic service. Dr. Chang has worked as an attending physician in the MD Anderson Cancer Center for the past six years. In recent years, he has received a Radiology Society of North America Research Scholar grant and the Career Development Award from the University of Texas MD Anderson Cancer Center lung cancer SPORE (NIH grant), amongst other research grants, honors and awards. He has published more than 110 papers, book chapters in the field of cancer biology and radiotherapy. Dr. Chang earned his medical degree at Shanghai Medical University in the PRC in 1985 and his Ph.D. from the University of Texas in 1997.

Dr. Kenneth Borow, Director

Dr. Kenneth M. Borow has been a director since November 2007. For the seven years beginning in 2000 he was President and Chief Executive Officer at Encorium Group, Inc., a NASDAQ small cap listed company. He is currently Encorium's President and Chief Medical and Strategic Development Officer. Dr. Borow is an internist, pediatrician, adult cardiologist and pediatric cardiologist with over 30 years of clinical research experience. He earned his medical degree at The Temple University School of Medicine in 1974. He completed his post doctoral training at the Brigham & Women's Hospital, The Children's Hospital Medical Center, and Harvard Medical School in Boston. Subsequently, he was Professor of Medicine and Pediatrics at the University of Chicago Medical Center. Dr. Borow has more than 100 medical/scientific publications. After completion of a 20 year academic career, Dr. Borow was responsible for Clinical Research Operations in the United States and Puerto Rico for Merck Research Laboratories. In this role, he oversaw clinical research studies for over 200 different protocols conducted at more than 2,500 investigative sites. Since coming to Encorium Group he has been involved in the design and conduct of more than 50 clinical trials, many of them multinational in scope. Dr. Borow has been a senior consultant to numerous pharmaceutical and biotechnology companies, medical imaging companies, and venture capital firms providing due diligence services for medical products as well as expertise in the design and conduct of clinical development programs in cardiovascular disease, hyperlipidemias, oncology, medical imaging, diabetes, pulmonary arterial hypertension, osteoporosis and multiple vaccines.

Mr. Edward Meng, Director

Mr. Edward Meng, a director since November 2007, is the CFO and a director of NavStar Media Holdings, Inc. He has over ten years of experience in managing, leading and advising corporations through complex restructurings, international market expansion and capital markets transactions. Mr. Meng’s previous positions include Senior Financial Consultant at Shell (China) Limited; CFO of Koch Materials (China) Co., a subsidiary of Koch Industries, Inc.; and Director of Finance of Intelsat Global Services Co. Mr. Meng earned his MBA from Georgetown University.

Dr. Li Daxi, Director

Dr. Li Daxi, a director since November 2007, founded the Chinese Association of Science and Business, a organization devoted to bridging science with business and bridging China with the world, in 1997. Dr. Li has 14 years experience in investment banking and venture capital, including ten years on Wall Street with Salomon Brothers and Lehman Brothers. He is a director of the United Orient Bank where he oversees investments and auditing of the bank. In March 2005, he was invited as an overseas representative to participate in the China National Chinese People’s Political Consultative Conference. He is also a co-founder of the Shenzhen Overseas Chinese Student Venture Park, a joint-venture with the Shenzhen city government, which hosts 250 high-tech startup companies. Dr. Li received a Ph.D. in high energy physics from the City University of New York.

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Mr. Peter Slate, Director

Mr. Peter Slate, a director since November 2007, is the President & CEO of International Orthopedic Alliance. Previously, Mr. Slate was the President & CEO of Arizona Technology Enterprises, LLC. Mr. Slate has extensive experience as an advisor and board member for emerging companies. He has held senior executive positions with both public and private companies including Baxter International, Inc. and Zenith Electronics, Inc. Mr. Slate was also a corporate attorney with Katten, Muchin & Zavis (now Katten Muchin Rosenman, LLP) specializing in mergers, acquisitions and securities and private equity transaction. Mr. Slate received his BA from University of Michigan, JD from George Washington University and MBA from Northwestern University.

Involvement in Certain Legal Proceedings

To the best of our knowledge, during the past five years, none of our directors or executive officers were involved in any of the following: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

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PRINCIPAL SHAREHOLDERS

As used in this section, the term beneficial ownership with respect to a security is defined by Rule 13d-3 under the Securities Exchange Act of 1934, as amended, as consisting of sole or shared voting power (including the power to vote or direct the vote) and/or sole or shared investment power (including the power to dispose of or direct the disposition of) with respect to the security through any contract, arrangement, understanding, relationship or otherwise, subject to community property laws where applicable.

As of April 1, 2008, we had a total of 13,800,137 shares of common stock outstanding and 233,333 shares of Series A Preferred Stock issued and outstanding.

Common Stock

The following table sets forth, as of April 1, 2007: (a) the names and addresses of each beneficial owner of more than five percent of our common stock known to us, the number of shares of common stock beneficially owned by each such person, and the percent of our common stock so owned; and (b) the names and addresses of each director and executive officer, the number of shares our common stock beneficially owned, and the percentage of our common stock so owned, by each such person, and by all of our directors and executive officers as a group. Unless otherwise indicated, the business address of each of our directors and executive offices is c/o Huiheng Medical, Inc., Huiheng Building, Gaoxin 7 Street South, Keyaunnan Road, Nanshan District, Shenzhen Guangdong, P.R. China 51807. Each person has sole voting and investment power with respect to the shares of our common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.

Name of Beneficial Owner	Shares Owned Beneficially		Percentage Ownership
Hui Xiaobing		11,750,000		85.0	%
Huang Jian		0		*
Li Bo		0		*
Richard Shen		0		*
Cui Zhi		0		*
Tang Shucheng		0		*
Joe Chang		0		*
Kenneth Borow		0		*
Edward Meng		0		*
Li Daxi		0		*
Peter Slate		0		*
All Officers & Directors as a Group (12 person)		11,750,000		85.0	%

* Individual owns less than 1% of our securities.

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Preferred Stock

The following table sets forth, as of April, 2008: the names and addresses of each beneficial owner of more than five percent of our Series A Preferred Stock known to us, the number of shares of preferred stock beneficially owned by each such person, the percent of the preferred stock so owned, and the number of shares of common stock issuable upon conversion of the preferred stock. To our knowledge, none of our directors or executive officers have any direct or beneficial ownership interest in shares of preferred stock or shares of common stock issuable upon conversion of the preferred stock:

Name and Address	Shares Beneficially Owned		Percentage Ownership			Shares of Common Stock Issuable on Conversion
Chardan China Investments, LLC1 625 Broadway, Ste. 1111 San Diego, CA 92101		52,667		22.6	%		553,225
Platinum Partners Value Arbitrage Fund, L.P.2 152 West 57th St. New York, NY 10019		48,988		21.0	%		514,580
Kenneth Greif 240 Maple Street Englewood, NJ 07631		20,000		8.5	%		210,084
Atlas Master Fund, Ltd3 135 East 57th St. New York, NY 10022		15,087		6.5	%		158,477

¹ Richard D. Propper exercises voting and investment control over the shares of Series A Preferred Stock held by Chardan China Investments, LLC.

² Mark Nordlicht exercises voting and investment control over the shares of Series A Preferred Stock held by Platinum Partners Value Arbitrage Fund, L.P.

³ Scott Schroeder exercises voting and investment control over the shares of Series A Preferred Stock held by Atlas Master Fund, Ltd.

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EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth the information, on an accrual basis, with respect to the compensation of our and Allied Moral’s executive officers for the two fiscal years ended December 31, 2007.

Name and Principal Position	Year		Salary ($)		Bonus ($)		Stock Awards ($)	Option Awards ($)	Non- Equity Incentive Plan Compen- sation ($)	Non- Qualified Deferred Compen- sation Earnings	All Other Compen- sation ($)	Total ($)
Hui Xiaobing,		2007	$	19,200	$	2,667						$	21,867
Chief Executive Officer		2006		18,000		2,500							20,500
Huang Jian,		2007	$	16,000	$	1,333						$	17,333
Vice President		2006		15,000		1,250							16,250
Richard Shen (1)		2007	$	6,000								$	6,000
Chief Financial Officer		2006		-									-
Cui Zhi,		2007	$	13,440	$	1,333						$	14,773
Chief Technology Officer		2006		12,600		1,250							13,850
Tang Sucheng,		2007	$	7,200	$	1,200						$	8,400
Director of Marketing		2006		6,750		1,125							7,875
Li Bo,		2007	$	8,000	$	1,333						$	9,333
Secretary & Chairman’s Assistant		2006		7,500		1,250							8,750

(1) Mr. Shen joined the company in October 2007.

Options/SAR Grants Table

During the last fiscal year, neither we nor Allied Moral have granted any stock options or Stock Appreciation Rights (“SARS”) to any executive officers or other individuals listed in the table above.

Aggregated Option/SAR exercised and Fiscal year-end Option/SAR value table

Neither our executive officers nor the other individuals listed in the tables above, exercised options or SARs during the last fiscal year.

Stock Option Plan

The Company has adopted a stock option plan that reserves 1,566,666 shares for issuance upon the exercise of options. No options have been issued under the plan.

Long-term incentive plans

No Long Term Incentive awards were granted in the last fiscal year.

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Defined benefit or actuarial plan disclosure

As required by Chinese law, our Chinese subsidiaries contribute 10% of an individual employee’s monthly salary to pension insurance.

Compensation of Directors

We have recently decided to compensate our outside directors for their service through a combination of cash and stock options, in addition to the reimbursement of their expenses incurred in performing their duties. Each director (other than the Chair of the Compensation Committee or Audit Committee) will receive $3,000 per month and a stock option to purchase 30,000 shares vesting quarterly over a period of three years. The Chair of the Compensation Committee will receive $3,500 per month and options for 36,000 shares (with the same vesting schedule as the other directors) and the Chair of the Audit Committee will receive $4,000 per month and options for 36,000 shares (with the same vesting schedule as the other directors).

Employment contracts and termination of employment and change-in-control arrangements

None of our officers or employees is under an employment contract or has contractual rights triggered by a change in control of the Company.

Compensation Committee Interlocks and Insider Participation

Neither Mill Basin, Allied Moral, nor Huiheng had a compensation committee of its respective board of directors during fiscal 2006 or 2007. Huiheng intends to establish such a committee in 2008. Mill Basin did not pay any salary or other compensation during fiscal 2006. Mr. Hui, in consultation with others, determined the compensation payable to officers and employees of Allied Moral and its subsidiaries during 2006 and in 2007.

No executive officer of Allied Moral or Huiheng served as a member of the compensation committee or the equivalent of another entity during 2006 or 2007. No executive officer of Allied Moral or Huiheng served as a director of another entity, other than affiliates of Allied Moral or Huiheng, during 2006 or 2007. No executive officer of Allied Moral or Huiheng served as a member of a compensation committee or equivalent, of another entity, one of whose executive officers served as a director of the registrant.

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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

Transactions with management and others

On September 1, 2006, Keith S. Barton and Michelle M. Barton, principal stockholders of Pinewood Imports, and 33 other stockholders, entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with Harborview Master Fund LP (“Harborview”) and Diverse Trading Ltd., as purchasers. Pursuant to the terms of the Securities Purchase Agreement, the sellers sold an aggregate of 10,044,600 shares of the Company’s common stock, representing 98.96% of the outstanding shares, to the purchasers for a total of $685,000. All proceeds were paid to the sellers. No proceeds were paid to the Company. On September 1, 2006, Keith S. Barton and Michelle M. Barton, who had been officers and directors of the Company, resigned from those positions.

By Board action on September 1, 2006, Richard Rosenblum, who had been elected as a director of the Company, was elected as President, Chief Executive Officer and Chief Financial Officer of the Company, and David Stefansky was elected as Secretary of the Company and as a director of the Company. Richard Rosenblum and David Stefansky are principals of the general partner of Harborview, one of the purchasers. Neither had an employment agreement with the Company.

The Board of Directors authorized the Company to discontinue its business operations as conducted prior to the sale to Harborview and Diverse Trading and to transfer such operations and the assets relating thereto to Keith S. Barton in consideration of Mr. Barton’s assuming all of the liabilities relating to such operations and assets. The transfer to Mr. Barton and his assumption of the liabilities were effected on September 5, 2006. Mr. Barton and his wife, Michelle M. Barton, a former officer and director of the Company, indemnified the Company against any loss or expense relating to the transferred operations or assets and also released the Company from any claims which either of them may have had against the Company. Mr. Barton will have the right to use the name “Pinewood Imports, Ltd.” or any similar name in the conduct of the transferred business operations.

Clear Honest International, Ltd., a corporation owned and controlled by Mr. Hui Xiaobing, our CEO, became a holder of more than 5% of our outstanding shares as a result of the Allied Moral share exchange. As discussed more fully under the caption “Business-Huiheng Medical’s Background,” the previous holders of Allied Moral capital stock exchanged their shares for shares of our capital stock. Clear Honest, is entitled to receive approximately 96.9% of the incentive shares that may be issued pursuant to the Allied Moral share exchange agreement. This incentive share program was negotiated as part of the share exchange agreement to provide the shareholders who controlled Allied Moral with an incentive to achieve or exceed the stated growth in the Company earnings, which will benefit all of our shareholders.

In April 2006, Allied Moral (our subsidiary) paid $1,537,653 to acquire Wuhan Kangqiao from Huiheng Industry, which is controlled by Hui Xiaobing, our CEO. 

In August 2006, Allied Moral (our subsidiary) acquired the equity interests in Changdu Huiheng from Huiheng Industry (99%) and Hui Xiaobing (1%), our CEO, for $6,207,002 and $62,697 respectively. The total of $6,269,699 was fully paid in 2007. This payment is reflected in the financial statements as a payment of $6,854,386, with the difference being the results of changing exchange rates, since the underlying obligation was denominated in RMB.

As of December 31, 2006, Huiheng Industry, which is under the control of Hui Xiaobing, our CEO, owed Allied Moral a total of $688,100. This consisted of (i) an interest free and unsecured advance of $42,410 to Huiheng Industry for working capital, and (ii) $640,689 associated with the acquisition of Changdu Huiheng in 2004. This second amount was offset by a corresponding advance to Allied Moral (our subsidiary) by a company under the control of Mr. Hui. These amounts due from Huiheng Industry had increased to $685,438 and $60,045, respectively, as of December 31, 2007, principally due to exchange rate differences on amounts denominated in RMB.

In connection with the sale of Series A Preferred Stock in January and February of 2007, Allied Moral (our subsidiary) paid $3.58 million to Mr. Hui, our CEO, for the redemption of 957,265 shares of Allied Moral common stock held by Clear Honest International Limited, a company controlled by Mr. Hui.

Indebtedness of Management

There have been no borrowings by management from the Company.

UNDERWRITING

Underwriting

In accordance with the terms and conditions contained in the underwriting agreement, we have agreed to sell to each of the underwriters named below, and each of the underwriters, for which Chardan Capital Markets, LLC is acting as representative, have severally, and not jointly, agreed to purchase on a firm commitment basis the number of shares offered in this offering set forth opposite their respective names below:

Underwriters	Number of Shares
Chardan Capital Markets, LLC
Total

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Overallotment Option

We have granted to the representative of the underwriters an option, exercisable during the 45-day period commencing on the date of this prospectus, to purchase from us at the offering price, less underwriting discounts, up to an aggregate of _____________ additional shares for the sole purpose of covering over-allotments, if any. The over-allotment option will only be used to cover the net syndicate short position resulting from the initial distribution. The representative of the underwriters may exercise the over-allotment option if the underwriters sell more shares than the total number set forth in the table above. To the extent the option is exercised, each underwriter must purchase a number of additional shares approximately proportionate to that underwriter’s initial purchase commitment.

Commissions and Discounts

The underwriters propose to offer some of the shares directly to the public at the public offering price set forth on the cover page of this prospectus and some of the shares to dealers at the public offering price less a concession not to exceed $______ per share. The underwriters may allow, and dealers may reallow, a concession not to exceed $______ per share on sales to other dealers. Chardan Capital Markets, LLC has advised us that the underwriters do not intend to make sales to discretionary accounts.

The following table shows the public offering price, underwriting discount to be paid by us to the underwriters and the proceeds, before expenses, to us. This information assumes either no exercise or full exercise by the representative of the underwriters of its over-allotment option.

	Per Share	Without option	With Option
Public offering price	$
Discount payable on closing (1)	$
Non-accountable expense allowance (2)	$
Proceeds before expenses	$

(1)The underwriters are entitled to receive a fee equal to 6% ($0.___ per share) of each share sold in the offering.

(2)The underwriters are entitled to receive a non-accountable expense allowance equal to 1% ($0.____) of each share sold in the offering.

Determination of Offering Price

Although our common stock is listed on the Over-the-Counter Bulletin Board, there is a very limited volume of sales, which management does not believe reflects the actual value of our shares of common stock. Accordingly, the public offering price for our common stock was negotiated between us and the underwriter. The principal factors that were considered in determining the offering price were:

· prevailing market and general economic conditions;

· our results of operations, including, but not limited to, its recent financial performance;

· our current financial position, including, but not limited to, our stockholders' equity and the composition of assets and liabilities reflected on our balance sheet;

· our business potential and prospects in our principal market area;

· an assessment of our management; and

· the present state of our business.

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The factors described above were not assigned any particular weight. Rather, these factors, along with market valuations and the financial performance of other similarly situated publicly traded companies, were considered as a totality in our negotiation with the underwriter over our initial public offering price. Based on the initial public offering price per share of $____ , but without giving effect to the shares to be issued in this offering, the ratio of our initial public offering price per share to our earning per share for the last twelve months ended __________ is , and the ratio of our initial public offering price per share to our book value per share as of ____________ is ______.

The factors considered in determining the price were estimates of the prospects of the Company, the background and capital contributions of management and current conditions in the securities markets and the data processing industry. There is, however, no relationship between the offering price of the Common Stock and the Company's assets, earnings, book value or any other objective criteria of value.

Lock-up Agreement

We and our officers and directors and the holders of a total of 13,000,000 of our shares of common stock and all holders of Series A Preferred Stock are expected to agree that, for a period of 90 days from the date of this prospectus, we and they will not, without the prior written consent of Chardan Capital Markets, LLC, offer, sell, contract to sell, transfer, encumber, dispose of or hedge, directly or indirectly, any of our shares or any other securities convertible into or exchangeable for our shares. Chardan Capital Markets, LLC, in its sole discretion, may release any of the securities subject to these lock-up agreements at any time without notice. The 90-day lock-up period will be automatically extended if: (i) during the last 17 days of the 90-day period we issue an earnings release or announce material news or a material event; or (ii) prior to the expiration of the 90-day period, we announce that we will release earnings results during the 16-day period following the last day of the 90-day period, in which case the restrictions will continue to apply until the expiration of the 90-day period beginning on the issuance of the earnings release or the announcement of the material news or event.

Indemnification

We have agreed to indemnify the underwriters against some liabilities, including civil liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in this respect.

Listing

We have applied to list our common stock on the Nasdaq Capital Market.

Price Stabilization, Short Positions and Penalty Bids

Rules of the SEC may limit the ability of the underwriters to bid for or purchase our securities before the distribution of the securities is completed. However, the underwriters may engage in the following activities in accordance with the rules:

· Stabilizing Transactions.    The underwriters may make bids or purchases for the purpose of preventing or retarding a decline in the price of our securities, so long as stabilizing bids do not exceed the offering price of $____.

· Over-Allotments and Syndicate Coverage Transactions.  In connection with the offering, the underwriters may make short sales of the issuer’s shares and may purchase the issuer’s shares on the open market to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. Covered short sales are sales made in an amount not greater than the underwriters’ overallotment option to purchase additional shares in the offering. The underwriters may close out any covered short position by either exercising their overallotment option or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the overallotment option. “Naked” short sales are sales in excess of the overallotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering. Similar to other purchase transactions, the underwriters’ purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of our stock or preventing or retarding a decline in the market price of our stock. As a result, the price of the our stock may be higher than the price that might otherwise exist in the open market.

· Penalty Bids. The representative may reclaim a selling concession from a syndicate member when the share originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

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Stabilization and syndicate covering transactions may cause the price of the securities to be higher than they would be in the absence of these transactions. The imposition of a penalty bid might also have an effect on the prices of the securities if it discourages resales of the securities.

Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the prices of the securities. These transactions may occur on the OTC Bulletin Board, in the over-the-counter market or on any trading market. If any of these transactions are commenced, they may be discontinued without notice at any time.

The restricted period under Regulation M for this offering will have ended when all of the shares have been distributed and after any over-allotment and stabilization arrangements and trading restrictions in connection with the offering have been terminated.

Other terms

In connection with the offering, we have agreed to sell to our underwriter and/or its designees, for an aggregate of $100, a purchase option to purchase up to an aggregate of ______ shares of common stock equal to 7% of the total number of shares being sold in the offering, including the overallotment option. The underwriter’s purchase option is exercisable initially at a price of $ ______ per share (115% of the per share offering price to investors) for a period of five years commencing six months from the date of this prospectus except to the underwriter and the selected dealers and their officers, managers or members. The underwriter’s purchase option will provide for a cashless exercise and will for a period of five years after the offering contain provisions for certain demand rights and unlimited “piggyback” rights with respect to the registration under the Securities Act of the shares of common stock issuable upon the exercise of the warrant.

We have agreed to enter into a non-exclusive financial advisory agreement with Chardan Capital Markets upon completion of the offering for a period of twenty-four months whereby Huiheng will retain Chardan Capital Markets as its investment banker and financial advisor. Huiheng will pay Chardan Capital Markets a $10,000 monthly retainer for its advisory services.

In addition, Huiheng has agreed to grant to Chardan Capital Markets a right of first refusal to manage or co-manage any public underwriting or private placement of debt or equity securities with certain specified exclusions.

The underwriting agreement provides that the obligations of the underwriters to purchase the shares are subject to the following material conditions: the registration statement of which this prospectus forms a part being effective, delivery of legal opinions, the accuracy of the representations and warranties made by the company in the underwriting agreement, delivery of an accountant’s “comfort letter,” FINRA approval of the underwriters’ compensation arrangements, listing of the securities on the Nasdaq Capital Market and the execution and delivery of certain agreements including those to be filed as exhibits to the registration statement, which can be waived by the underwriters in their sole discretion. The underwriters are obligated to purchase all of the shares (other than those covered by the underwriters’ over-allotment option described below) if they purchase any of the shares. A copy of the underwriting agreement has been filed as an exhibit to the registration statement of which this prospectus forms a part.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been a very limited public market for our common stock. Future sales of our common stock in the public market, or the availability of such shares for sale in the public market, could adversely affect market prices prevailing from time to time. As described below, only a limited number of shares will be available for sale shortly after this offering due to contractual and legal restrictions on resale. Nevertheless, sales of our common stock in the public market after such restrictions lapse, or the perception that those sales may occur, could adversely affect the prevailing market price at such time and our ability to raise equity capital in the future.

Shares Issuable

A total of 2,450,977 shares of common stock are issuable upon conversion of our Series A convertible preferred stock. We do not have any stock options or warrants currently outstanding. Additionally, a total of up to 1,600,000 shares are issuable as incentive shares pursuant to the Allied Moral Holdings share exchange agreement.

Sale of Restricted Shares

Upon the closing of this offering, we will have outstanding an aggregate of 20,260,713 shares of common stock (assuming the conversion of our outstanding preferred stock and the issuance of 4,000,000 shares in this offering). Of these shares, the 4,000,000 shares of common stock to be sold in this offering will be freely tradable without restriction or further registration under the Securities Act, unless the shares are held by any of our “affiliates” as such term is defined in Rule 144 of the Securities Act. All remaining shares held by our existing stockholders were issued and sold by us in private transactions and are eligible for public sale only if registered under the Securities Act or if they qualify for an exemption from registration under Rule 144 under the Securities Act.

As a result of the lock-up agreements described below and the provisions of Rule 144 under the Securities Act, the shares of our common stock (excluding the shares sold in this offering) will be available for sale in the public market as follows:

·________ shares will be eligible for sale on the date of this prospectus; and

·________ shares will be eligible for sale 90 days after the date of this prospectus.

The remaining ____________ shares held by existing stockholders will become eligible for sale at various times on or before May 15, 2008, subject to the volume limitations of Rule 144.

Lock-up Agreements

The holders of an aggregate of approximately ______________ shares of our common stock are expected to sign lock-up agreements which prevent them from selling any of our common stock owned by them as of the date hereof for a period of 90 days from the date of this prospectus without the prior written consent of Chardan Capital Markets. In addition, holders of shares of our Series A Preferred Stock which are convertible into __________ shares of our common stock are expected to enter into similar lock-up agreements with the underwriters. Chardan Capital Markets may in its sole discretion and at any time without notice release some or all of the shares subject to lock-up agreements prior to the expiration of the 90-day period. When determining whether or not to release shares from the lock-up agreements, Chardan Capital Markets will consider, among other factors, the stockholder’s reasons for requesting the release, the number of shares for which the release is being requested and market conditions at the time.

Rule 144

In general, under Rule 144 of the Securities Act, a person deemed to be our “affiliate,” or a person holding restricted shares who beneficially owns shares that were not acquired from us or any of our “affiliates” within the previous year, is entitled to sell within any three-month period a number of shares that does not exceed the greater of either 1% of the then outstanding shares of our common stock (or approximately ___________ shares immediately after this offering assuming no exercise of the underwriters’ over-allotment option and no conversion of our Series A Preferred Stock), or the average weekly trading volume of our common stock during the four calendar weeks preceding the filing with the Securities and Exchange Commission of a notice on Form 144 with respect to such sale. Sales under Rule 144 of the Securities Act are also subject to prescribed requirements relating to the manner of sale, notice and availability of current public information about us. However, if a person, or persons whose shares are aggregated, is not deemed to be our affiliate at any time during the 90 days immediately preceding the sale, he or she may sell his or her restricted shares under Rule 144(k) without regard to the limitations described above, if at least two years have elapsed since the later of the date the shares were acquired from us or any of our “affiliates.” The SEC has adopted amendments to Rule 144 that will become effective in February 2008. In part, those amendments would shorten the holding periods and simplify Rule 144 compliance requirements for holders who are not “affiliates”.

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Stock Plans

We intend to file a registration statement on Form S-8 under the Securities Act to register 1,566,666 shares of our common stock reserved for issuance under our option plan. We expect to file the S-8 promptly after we are eligible to use that form. Accordingly, shares registered under that registration statement will be available for sale in the open market, unless such shares are subject to vesting restrictions with us or the lock-up restrictions described above.

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DESCRIPTION OF CAPITAL STOCK

Huiheng Medical, Inc. is a Nevada corporation. It is authorized to issue 74,000,000 shares of common stock and 1,000,000 shares of preferred stock.

Preferred Stock

Huiheng’s articles of incorporation authorizes the issuance of 1,000,000 shares of preferred stock with designations, rights and preferences determined from time to time by our board of directors. Our Board of Directors has created a series of preferred stock with rights and preferences described below. Accordingly, our board of directors is empowered, without stockholder approval, to issue up to 700,000 additional shares of preferred stock with voting, liquidation, conversion, or other rights that could adversely affect the rights of the holders of the common stock. Although we have no present intention to issue any additional shares of preferred stock, there can be no assurance that we will not do so in the future.

Among other rights, our board of directors may determine, without further vote or action by our stockholders:

· the number of shares and the designation of the series;

· whether to pay dividends on the series and, if so, the dividend rate, whether dividends will be cumulative and, if so, from which date or dates, and the relative rights of priority of payment of dividends on shares of the series;

· whether the series will have voting rights in addition to the voting rights provided by law and, if so, the terms of the voting rights;

· whether the series will be convertible into or exchangeable for shares of any other class or series of stock and, if so, the terms and conditions of conversion or exchange;

· whether or not the shares of the series will be redeemable and, if so, the dates, terms and conditions of redemption and whether there will be a sinking fund for the redemption of that series and, if so, the terms and amount of the sinking fund; and

· the rights of the shares of the series in the event of our voluntary or involuntary liquidation, dissolution or winding up and the relative rights or priority, if any, of payment of shares of the series.

We presently do not have plans to issue any additional shares of preferred stock. However, preferred stock could be used to dilute a potential hostile acquirer. Accordingly, any future issuance of preferred stock or any rights to purchase preferred shares may have the effect of making it more difficult for a third party to acquire control of us. This may delay, defer or prevent a change of control in our company or an unsolicited acquisition proposal. The issuance of preferred stock also could decrease the amount of earnings attributable to, and assets available for distribution to, the holders of our common stock and could adversely affect the rights and powers, including voting rights, of the holders of our common stock.

Series A 7% Convertible Preferred Stock

On May 14, 2007, the Board of Directors designated its Series A 7% Convertible Preferred Stock, consisting of 300,000 shares, par value $.001 per share. We amended the rights and preferences of the Series A stock in January 2008. These terms can be amended further with the consent of the holders of a majority of the Series A stock. There are 233,333 shares of Series A Preferred Stock outstanding.

The stated value of each share of the Series A stock is $37.50. Those shares accrue dividends at the rate of 7% per annum, which dividends are payable on the occurrence of a liquidation event.

Each share of Series A preferred is convertible at the election of the holder into 10.5402 shares of Common Stock of the Company. This ratio is subject to equitable adjustment in the event of a stock split or stock dividend of the Company’s Common Stock. The ratio will also be adjusted for certain issuances of equity securities at a price less than $3.57 per share, including if the shares offered by this prospectus are sold at less than $3.57 per share. Any outstanding shares of the Series A stock will be automatically converted into Common Stock at the same ratio if one of the following conditions is satisfied: (i) the holders of a majority of such outstanding shares consent in writing to such conversion, (ii) there is a closing of an underwritten public offering of shares of Common Stock with gross proceeds of not less than $24 million (reduced by the gross amount of any private placements consummated by the Company after the filing of the Certificate of Designations and prior to such public offering) at a public offering price of not less than $6.43 per share (subject to adjustment for stock splits, dividends or similar reclassifications), or (iii) there is a merger or business combination with a publicly traded company whose securities on listed or quoted on one of certain specified markets.

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The Company is required to have on reserve at all times a number of shares of Common Stock equal to 125% of the number of shares which would be issuable on the conversion of all of the then outstanding Series A shares. If necessary, the Company will undertake to obtain the appropriate approvals necessary to increase the authorized shares of the Company’s Common Stock.

In the event of certain “liquidation events” (such as, but not limited to, a bankruptcy or similar event, an assignment for the benefit of its creditors, the sale or transfer of all or substantially all of the Company’s assets in one transaction or in a series of related transactions, or a merger or consolidation of the Company in which the stockholders of the Company immediately before the transaction thereafter own less than 50% of voting securities of the combined or surviving entity), the shares of the Series A stock have a preference over holders of other common or preferred shares in the allocation of the Company’s assets which are distributable to shareholders of the Company.

The holders of Series A stock will vote separately as a class on all matters which may adversely alter, reduce or affect any of the preferences, rights, privileges or powers of, or the restrictions provided for the benefit of, any of the Series A stock or which increase or decrease the number of authorized shares of the Series A stock.

The Company may not take certain actions with the affirmative consent of a majority in interest of the then outstanding Series A shares. Such actions include, but are not limited to: (i) selling, transferring or disposing of all or substantially all of the Company’s undertakings or assets; (ii) entering into any partnership or joint venture with any person to which the Company devotes or commits a majority of its assets or resources; (iii) the declaration and payment of any dividend with respect to any other shares; (iv) passing any resolution for the Company’s winding up or dissolution; (v) the licensing by the Company of its technology or other rights in such a manner as to have the same economic effect as a sale or disposition of all or substantially all of the assets of the Company; (vii) the making or permitting of any material alteration (including cessation) to the general nature of the Company’s business; (viii) authorizing and approving any issuance of shares that have rights, preferences or privileges that are senior to those of the Series A shares; or (ix) the repurchase by the Company of any of its issued and outstanding shares (with certain limited exceptions).

Common Stock

Our articles of incorporation authorizes the issuance of 74,000,000 shares of common stock. The holders of our common stock:

· have equal ratable rights to dividends from funds legally available for payment of dividends when, as and if declared by the board of directors;

· are entitled to share ratably in all of the assets available for distribution to holders of common stock upon liquidation, dissolution or winding up of our affairs;

· do not have preemptive, subscription or conversion rights, or redemption or access to any sinking fund; and

· are entitled to one non-cumulative vote per share on all matters submitted to stockholders for a vote at any meeting of stockholders.

Authorized but Unissued Capital Stock

Nevada law does not require stockholder approval for any issuance of authorized shares. However, the marketplace rules of the Nasdaq Capital Market, which would apply only if our common stock were listed on the Nasdaq Capital Market, require stockholder approval of certain issuances of common stock equal to or exceeding 20% of the then outstanding voting power or then outstanding number of shares of common stock, including in connection with a change of control of Huiheng, the acquisition of the stock or assets of another company or the sale or issuance of common stock below the book or market value price of such stock. These additional shares may be used for a variety of corporate purposes, including future public offerings to raise additional capital or to facilitate corporate acquisitions.

One of the effects of the existence of un-issued and unreserved common stock may be to enable our board of directors to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of our board by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of our management and possibly deprive the stockholders of opportunities to sell their shares of our common stock at prices higher than prevailing market prices.

58

Shareholder Matters

As a Nevada corporation, we are subject to the Nevada Revised Statutes (“NRS” or “Nevada law”). Certain provisions of Nevada law create rights that might be deemed material to our shareholders. Other provisions might delay or make more difficult acquisitions of our stock or changes in our control or might also have the effect of preventing changes in our management or might make it more difficult to accomplish transactions that some of our shareholders may believe to be in their best interests.

Directors’ Duties. Section 78.138 of the Nevada law allows our directors and officers, in exercising their powers to further our interests, to consider the interests of our employees, suppliers, creditors and customers. They can also consider the economy of the state and the nation, the interests of the community and of society and our long-term and short-term interests and shareholders, including the possibility that these interests may be best served by our continued independence. Our directors may resist a change or potential change in control if they, by a majority vote of a quorum, determine that the change or potential change is opposed to or not in our best interest. Our board of directors may consider these interests or have reasonable grounds to believe that, within a reasonable time, any debt which might be created as a result of the change in control would cause our assets to be less than our liabilities, render us insolvent, or cause us to file for bankruptcy protection

Amendments to Bylaws - Our articles of incorporation provide that the power to adopt, alter, amend, or repeal our bylaws is vested exclusively with the board of directors. In exercising this discretion, our board of directors could conceivably alter our bylaws in ways that would affect the rights of our shareholders and the ability of any shareholder or group to effect a change in our control; however, the board would not have the right to do so in a way that would violate law or the applicable terms of our articles of incorporation.

Transfer Agent

The Transfer Agent for our common stock is Action Stock Transfer Company, 7069 S. Highland Drive, Suite 30, Salt Lake City, UT 84121. Its telephone number is 801-274-1088.

LEGAL MATTERS

The validity of the issuance of the shares of common stock offered hereby will be passed upon for us by Nevada counsel.

Loeb & Loeb LLP, New York, New York, is acting as counsel for the underwriters in this offering.

EXPERTS

The financial statements of Huiheng Medical as of December 31, 2007 and the years ended December 31, 2006 and 2007, included in this prospectus have been audited by independent registered public accountants and have been so included in reliance upon the report of UHY ZTHZ HK CPA Limited given on the authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

As noted above, to date, we have not registered securities pursuant to Section 12 of the Act and our Section 15(d) reporting obligations have been suspended, which means we are considered a “voluntary filer” under SEC regulations. We are, therefore, not currently obligated to file any periodic reports under the Exchange Act, to follow the SEC’s proxy rules or to distribute an annual report to our securities holders. However, we intend to file annual, quarterly and special reports, and other information with the SEC, even though we are not required to do so. We intend to become a Section 12 registrant prior to or upon the effective date of the registration statement containing this prospectus, which will subject us to the Exchange Act periodic reporting obligations (including, without limitation, the requirement to file annual reports) and the SEC proxy and annual report requirements, with which we will comply. You may read or obtain a copy of the registration statement to be filed or any other information we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information regarding the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our SEC filings are also available to the public from the SEC web site at www.sec .gov, which contains our reports, and other information we file electronically with the SEC.

59

HUIHENG MEDICAL, INC.

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

CONTENTS

	Pages
Report of Independent Registered Public Accounting Firm		F-1
Consolidated Balance Sheets		F-2
Consolidated Statements of Income		F-3
Consolidated Statements of Stockholders' Equity		F-4
Consolidated Statements of Cash Flows		F-5 - F-6
Notes to the Consolidated Financial Statements		F-7 - F-34

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS

HUIHENG MEDICAL INC.

We have audited the accompanying consolidated balance sheets of Huiheng Medical Inc. (the “Company”) and subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of income, stockholders’ equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Huiheng Medical Inc. and subsidiaries as of December 31, 2007 and 2006, and the consolidated results of their operations and their cash flows for the years then ended in conformity with U.S accounting principles.

UHY ZTHZ HK CPA LIMITED

Certified Public Accountants

David Tze Kin Ng, Auditor

Practising Certified Number P553

Hong Kong, the People’s Republic of China, March 28, 2008

F-1

HUIHENG MEDICAL, INC.

CONSOLIDATED BALANCE SHEETS

	2007		2006
	December 31		December 31
	USD		USD
Assets
Current assets
Cash (note 4)		866,585		338,039
Accounts receivable (note 5)		8,245,647		2,649,300
Prepayments and other receivables (note 6)		3,272,886		2,786,518
Due from a related party (note 15(b))		745,483		688,100
Inventories (note 7)		1,071,613		1,624,675
Deferred income tax assets (note 14)		26,383		18,879
Total current assets		14,228,597		8,105,511
Property, plant and equipment, net (note 8)		3,701,692		435,705
Intangible assets, net (note 9)		881,738		896,363
Investment in affiliated company		48,326		63,689
Deferred income tax assets (note 14)		-		5,377
Total assets		18,860,353		9,506,645
Liabilities, minority interest and stockholders' equity
Current liabilities
Accounts payable		714,837		637,984
Income taxes payable		207,660		827,828
Accrued liabilities and other payables (note 10)		2,109,287		1,588,264
Due to related parties (note 15(b))		117,162		6,407,912
Total current liabilities		3,148,946		9,461,988
Minority interest (Note 11)		1,353,511		940,630
Stockholders' equity (deficit)
Preferred stock, $0.001 par value; 1,000,000 shares authorized;
Designated Series A 7% convertible preferred stock, $0.001 par value;
300,000 shares authorized; 266,666 shares issued and oustanding
with liquidation preference of $9,999,975		267		267
Common stock, $0.001 par value; 74,000,000 shares authorized;
23,150,000 shares issued and 13,450,000 shares outstanding		13,450		13,450
Treasury stock, 9,700,000 shares at $0.001 par value		-		-
Additional paid-in capital		7,498,086		(1,617,271	)
Retained earnings		6,147,877		712,279
Accumulated other comprehensive income
Foreign currency translation difference		698,216		(4,698	)
Total owners' equity (deficit)		14,357,896		(895,973	)
Total liabilities, minority interest and
stockholders' equity		18,860,353		9,506,645
See accompanying notes to consolidated financial statements.

F-2

HUIHENG MEDICAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2007 AND 2006

	2007			2006
	USD			USD
Revenues, net (note 13)		15,939,614			12,346,672
Cost of revenues		(3,764,077	)		(2,652,695	)
Gross profit		12,175,537			9,693,977
General and administrative expenses		(1,530,074	)		(1,276,910	)
Sales and marketing expenses		(81,199	)		(123,308	)
Research and development costs		(263,314	)		(124,283	)
Operating income		10,300,950			8,169,476
Interest income		5,269			1,175
Equity in (loss)/income of affiliated company		(19,023	)		5,942
Income before income taxes and
minority interest		10,287,196			8,176,593
Income tax expense (note 14)		(938,078	)		(1,395,786	)
Net income before minority interest		9,349,118			6,780,807
Minority interest		(333,349	)		35,667
Net income after minority interest		9,015,769			6,816,474
Translation adjustments		702,914			3,992
Net income/Comprehensive		9,718,683			6,820,466
Net income per common shares
- Basic		0.67			0.51
- Diluted		0.66			0.50
Weighted common shares outstanding
- Basic		13,450,000			13,450,000
- Diluted		13,716,666			13,716,666

See accompanying notes to consolidated financial statements.

F-3

HUIHENG MEDICAL, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 2007 AND 2006

	Series A 7% Preferred Stock $0.001 Par Value				Common Stock, $.001 Par Value				Treasury Stock					Additional						Accumulated Other			Total
	Number of				Number of				Number of					Paid-in			Retained			Comprehensive			Stockholders'
	Shares		Amount		Shares		Amount		Shares			Amount		Capital			Earnings			Income			Equity
Balance, December 31, 2005		266,666	$	267		13,450,000	$	13,450		(9,700,000	)	$	-	$	(1,617,271	)	$	3,060,671		$	(8,690	)	$	1,448,427
Comprehensive income:
Net income																		6,816,474						6,816,474
Foreign currency translation gain																					3,992			3,992
Total comprehensive income																								6,820,466
Dividends declared (Note 12c)																		(9,164,866	)					(9,164,866	)
Balance, December 31, 2006		266,666		267		13,450,000		13,450		(9,700,000	)		-		(1,617,271	)		712,279			(4,698	)		(895,973	)
Comprehensive income:
Net income																		9,015,769						9,015,769
Foreign currency translation gain																					702,914			702,914
Total comprehensive income																								9,718,683
Contribution to capital, net															9,115,357									9,115,357
Payment for redemption of common shares																		(3,580,171	)					(3,580,171	)
Balance, December 31, 2007		266,666	$	267		13,450,000	$	13,450		(9,700,000	)	$	-	$	7,498,086		$	6,147,877		$	698,216		$	14,357,896

See accompanying notes to the consolidated financial statements.

F-4

HUIHENG MEDICAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2007 AND 2006

	2007			2006
	USD			USD
Cash flows from operating activities:
Net income		9,718,683			6,820,466
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of property, plant and equipment		79,399			164,810
Amortization of intangible assets		14,625			143,057
Minority interest		412,881			(35,667	)
Equity in losses/(earnings) of affiliated company		15,363			(5,942	)
Deferred taxes		(415	)		2,637
Translation adjustments		423,446			334,465
Changes in assets and liabilities:
Accounts receivable		(5,596,347	)		4,727,915
Prepayments and other receivables		(486,368	)		356,878
Inventories		553,062			(184,542	)
Accounts payable		76,853			(90,015	)
Income taxes payable		(620,168	)		556,852
Accrued liabilities and other payables		521,023			(1,672,898	)
Net cash provided by operating activities		5,112,037			11,118,016

F-5

HUIHENG MEDICAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

YEARS ENDED DECEMBER 31, 2007 AND 2006

	2007			2006
	USD			USD
Cash flows from investing activities:
Investment in affiliated company		-			7,958
Capital expenditures on addition of
Property, plant and equipment		(3,371,037	)		-
Advances to related parties		-			(688,100	)
Advance to third parties		-			(655,109	)
Advance (to)/from related parties		(9,322	)		640,689
Payment of the acquisition of a subsidiary		(6,854,386	)		(1,537,653	)
Advances from third parties		-			480,496
Net cash used in investing activities		(10,234,745	)		(1,751,719	)
Cash flows from financing activities:
Contribution to capital		9,115,357			-
Payment for redemption of common shares		(3,580,171	)		-
Repayment of redemption of common shares		116,068			-
Dividend paid		-			(9,164,866	)
Net cash from/(used in) financing activities		5,651,254			(9,164,866	)
Net increase in cash		528,546			201,431
Cash as of January 1		338,039			136,608
Cash as of December 31		866,585			338,039
Supplemental disclosures of cash flow and non-cash information:
Interest paid		-			-
Income tax paid		1,558,246			856,120

See accompanying notes to consolidated financial statements.

F-6

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

1. Organization and Operations

Huiheng Medical, Inc. (the “Company” or “Huiheng”) formerly known as Mill Basin Technologies Limited (the "Mill Basin") is a China-based medical device company that, through its subsidiaries, designs, develops and markets radiation therapy systems used for the treatment of cancer. The Company is a Nevada holding company and conducts all of its business through operating subsidiaries.

In 2005, the ownership interests of Shenzhen Hyper Technology Company, Ltd. (“Shenzhen Hyper”), Wuhan Kangqiao Medical New Technology Company, Ltd. (“Wuhan Kangqiao”) and Beijing Yuankang Kbeta Nuclear Technology Company, Ltd. (“Beijing Kbeta”) were reorganized under Tibet Changdu Huiheng Industry Development Company, Ltd. (“Changdu Huiheng”), a Chinese holding company established in Tibet. Upon the completion of the reorganization, Changdu Huiheng owned 75% of the equity interest in Shenzhen Hyper, 100% of the equity interest of Wuhan Kangqiao and 50% of the equity interest of Beijing Kbeta. Remaining equity interests in Shenzhen Hyper and Beijing Kbeta are owned by unrelated and unaffiliated parties.

In 2006, Mr. Hui Xiaobing, the sole owner of Changdu Huiheng, established Allied Moral Holdings, Ltd. ("the Allied Moral')in the British Virgin Islands as a holding company and transferred 100% of the ownership interests of Changdu Huiheng to Allied Moral as part of an ownership restructuring to facilitate investments by foreign investors.

In May 2007, Mill Basin entered into a share exchange agreement to acquire (I) all of the issued and outstanding shares of the common stock of Allied Moral Holdings, Ltd. in exchange for 13,000,000 shares of Huiheng's common stock, and (ii) all of the issued and outstanding Series A Preferred Stock of Allied Moral in exchange for 266,666 shares of Huiheng's Series A Preferred Stock. In connection with the share exchange, Mill Basin agreed to change the name from "Mill Basin Technologies, Limited" to "Huiheng Medical, Inc.". As part of this transaction, holders of some of Mill Basin's outstanding shares issued prior to May 15, 2007 contributed shares to Mill Basin so that there were 450,000 shares of Mill Basin's common stock issued and outstanding immediately prior to the share exchange. Taking into account the shares issued in the share exchange, Mill Basin now have 13,450,000 shares of common stock issued and outstanding, 13,000,000 (96.65%) of which are owned by Allied Moral's former shareholders, with the balance being held by Mill Basin's prior shareholders, along with 266,666 shares of our Series A Preferred Stock, all of which are owned by former holders of Allied Moral's Series A Preferred Stock.

F-7

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

1. Organization and Operations (…/Cont'd)

On September 28, 2007 Huiheng Medical, Inc. filed a Certificate of Correction to correct the Certificate of Designation of the Series A Preferred Stock. The filing corrected the initial Conversion Price from $3.75 to $3.57 per share and corrected the initial conversion rate from 10.0 to 10.5042 shares of common stock for each share of Series A Preferred Stock.

The share exchange is regarded as a reverse merger, since Allied Moral's former shareholders obtained control of Huiheng Medical, Inc. (formerly known as Mill Basin). As a result, Allied Moral was conidered to be the acquirer for accounting purposes.

As a result of the share exchange, Huiheng owns all of the issued and outstanding stock of Allied Moral, which was incorporated in the British Virgin Islands on July 26, 2006. Allied Moral, holds all of the issued and outstanding stock of Changdu Huiheng Development Co., Ltd. (“Changdu Huiheng”), which in turn owns 100% of the issued and outstanding stock of Wuhan Kangqiao Medical New Technology Co., Ltd. (“Wuhan Kangqiao”), 75% of the issued and outstanding stock of Shenzhen Hyper Technology Co., Ltd (“Shenzhen Hyper”) and 50% of the issued and outstanding stock of Beijing Yuankang Kbeta Nuclear Technology Co., Ltd. (“Beijing Kbeta”). Private companies in China own the other interests in these subsidiaries.

2. Basis of Presentation and summary of significant accounting policies

The Company's consolidated financial statements for the years ended December 31, 2007 and 2006 are presented in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") for the interest of the investors.

Because the Company, Changdu Huiheng, Wuhan Kangqiao and Shenzhen Hyper were under common control, the Company's acquisition of Changdu Huiheng and Changdu Huiheng's acquisition of Wuhan Kangqiao and Shenzhen Hyper has been accounted for in a manner similar to a pooling of interests. Accordingly, the assets and liabilities of Changdu Huiheng and its Subsidiaries transferred to the Company have been recognized at their historical carrying amount.

In a reverse acquisition all accounting history becomes, that of the accounting acquirer, therefore all historical information prior to the acquisition is that of Allied Moral. The shares issued to the shareholders of Allied Moral have been stated retroactively. The reverse merger adjustment is therefore all the shares held by Mill Basin shareholders prior to the acquisition.

F-8

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

2. Basis of Presentation and summary of significant accounting policies (…/Cont'd)

The consolidated financial statements include all accounts of the Company and its wholly-owned and majority-owned subsidiaries. All material inter-company balances and transactions have been eliminated.

Reverse Acquisition Merger

Prior to the May 2007 share exchange, Huiheng was a non-reporting privately held company. The post-acquisition Company is accounted for as a recapitalization of Huiheng using accounting principles applicable to reverse acquisitions with Huiheng being treated as the accounting parent (acquirer) and Allied Moral Holdings Ltd ("Allied Moral"), the legal parent, being treated as the accounting subsidiary (acquiree). Prior to the consummation of the acquisition in May 2007, Mill Basin had been an inactive public shell with no material assets, liabilities, or net stockholders' equity. Huiheng is regarded as the predecessor entity. In accordance with the provisions governing the accounting for reverse acquisitions, the historical figures presented are those of the Huiheng.

	Common Stock						Additional Paid-In
	Shares			Amount			Capital
Discount on capital issuance		-			-			(1,577,555	)
Public company shares already
outstanding on date of Merger,
(May 15, 2007) par value $0.001		10,150,000			10,150			-
Share issued - Merger
- Common stock		13,000,000			13,000			(13,000	)*
- Series A 7% convertible preferred stock		-			-			(267	)
Treasury stock		(9,700,000	)		(9,700	)		9,700
Contribution to capital, net
- Share premium		-			-			9,973,333
- Less: Transaction cost		-			-			(1,014,642	)
- Elimination of Allied Moral		-			-			156,666
Absorb balances from Mill Basin		-			-			(36,149	)
Reverse acquisition recapitalization
adjustment, net		13,450,000			13,450			7,498,086

F-9

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

3. Summary of Significant Accounting Policies

(a) Principles of Consolidation

The consolidated financial statements include the Company and its three subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

(b) Cash

Cash consists of cash on hand and in bank.

(c) Accounts Receivable

Accounts receivable are recorded at the invoiced amount, net of allowances for doubtful accounts sales returns, trade discounts and value added tax. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on historical write-offexperience, customer specific facts and economic conditions. Bad debt expense is included in general and administrative expenses. The allowance for doubtful accounts approximated $5,059 at December 31, 2007.

Outstanding account balances are reviewed individually for collectibility. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure to its customers.

(d) Inventories

The Company values inventories, consisting of work in process and raw materials,at the lower of cost or market. Cost of material is determined on the weighted average cost method. Cost of work in progress includes direct materials, direct production cost and an allocated portion of production overhead.

F-10

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

3. Summary of Significant Accounting Policies (.../Cont'd)

(e) Property, Plant, and Equipment

Property and equipment are recorded at cost less accumulated depreciation. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to general and administrative expenses as incurred. Depreciation of property and equipment is computed by the straight-line method (after taking into account their respective estimated residual values) over the assets estimated useful lives ranging from three to twenty years. Building improvements, if any, are amortized on a straight-line basis over the estimated useful life. Depreciation of property and equipment are stated at cost less accumulated depreciation. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in operations. Construction in progress represents the costs of property, plant and equipment under construction or installation . The accumulated costs are reclassified as property, plant and equipment when installation or construction is completed. All borrowing costs, which include interest and foreign exchange differences incurred that are attributable to qualifying assets, are capitalized as cost of construction in progress. Capitalization of borrowing costs ceases when the construction is completed and the constructed or installed asset is ready for its intended use. The estimated useful lives of the assets are as follows:

	Years
Building improvements		3-5
Buildings		20
Production equipment		3-5
Furniture, fixtures and office equipment		3-5
Motor vehicles		5-10

F-11

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

3. Summary of Significant Accounting Policies (.../Cont'd)

(f) Intangible Assets

Intangible assets were contributed to the Company and are stated at cost, representing the fair value at the time of contribution by minority owner of a subsidiary. Fair value was supported by cash contributed contemporaneouslybyanotherinvestor.Costis net of accumulated amortizationand impairmentlosses.Amortization expense is recognized on the straight-line basis over the estimated respective useful lives of these intangible assets as follows:

	Years
Patented technology		20
Software		5

(g) Investment in affiliated company

The Company owns 50% equity interest of Beijing Kbeta and is accounted for used the equity method of accounting because the Company has the abilityto exercise significant influence over the investee, but does not have a controlling financial interest.

If circumstancesindicate that the carryingvalue of the Company’sinvestmentin Beijing Kbeta may not be recoverable, the Company would recognize an impairment loss by writing down its investment to its estimated net realizable value if management concludes such impairment is other than temporary.

F-12

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

3. Summary of Significant Accounting Policies (.../Cont'd)

(h) Impairment of Long-Lived Assets

Long-lived assets, which include property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of the asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of, if any, are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated.

No impairment loss was recognized in 2006 and 2007.

(i) Fair value of financial instruments

The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. The carrying amounts of financial assets and liabilities, such as cash, accounts receivable, current income tax assets, prepayments and other current assets, accounts payable, income taxes payable, accrued expenses and other current liabilities, approximate their fair values because of the short maturity of these instruments and market rates of interest.

F-13

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

3. Summary of Significant Accounting Policies (.../Cont'd)

(j) Revenue Recognition

The Company generates revenue primarily from sales of medical equipment and maintenance and support services. Revenue is recognized as follows:

The Company recognizes revenue when products are delivered and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. The sales price of the medical equipment includes the training and installation services. These services are ancillary to the purchase of medical equipment by customers and are normally considered by the customers to be an integral part of the acquired equipment. As training and installation services do not have separately determinable fair values, the Company recognizes revenue for the entire arrangement upon customer acceptance, which occurs after delivery and installation.

In the PRC, value added tax ("VAT") of 17% on invoice amount is collected in respect of the sales of goods on behalf of tax authorities. The VAT collected is not revenue of the Company; instead, the amount is recorded as a liability on the balance sheet until such VAT is paid to the authorities.

Pursuant to the laws and regulations of the PRC, Shenzhen Hyper is entitled to a refund of VAT on the sales of self-developed software embedded in medical equipment. The VAT refund represents the amount of VAT collected from customers and paid to the authoritiesin excessof 3% of relevantsales.The amount ofVAT refund is calculatedon a monthlybasis. As the refund relates directlyto the sale of self-developedsoftwarethat is embedded in the Company’sproducts, the Companyrecognizesthe VAT refund atthe time the product is sold. The amount is included in the line item "Revenues, net" in the consolidated statements of income and is recorded on an accrual basis.

F-14

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

3. Summary of Significant Accounting Policies (.../Cont'd)

(j) Revenue Recognition (…/Cont'd)

Pursuant to the document dated December 16, 2004 with No.173 issued by Tibet Finance Bureau, the profits tax payment of Changdu Huiheng in excess of RMB 900,000 for a yearwill be refundable by Tibet Finance Bureau. The 31% and 38.75% of business tax payment and value added tax payment respectively for a year will be refundable by Tibet Finance Bureau provided that the business tax payment and value added tax payment should be arrived at RMB 1 million and RMB 1.5 million for a year respectively. Such tax incentive policy will be valid for five (5) years from the year of commencement of tax refund, starting from September 2006.

The medical equipment sold by the Company has embedded self-developed software. In all cases, the medical equipment is marketed and sold based on its performance and functionality as a whole. The self-developed software can also be sold on a standalone basis.

The Company also provides comprehensive post-salesservices to certain distributors for medical equipment used by hospitals. These contracts are negotiated and signed independently and separately from the sales of medical equipment. According to the agreements, the Company provides comprehensive services including exchange of cobalt, training to users of the medical equipment, maintenance of medical equipment, upgraded software and consulting. Fees for the services are recognized over by the life of the contract on a monthly basis.

(k) Research and Development Costs

Research and development costs are charged to expense as incurred. Research and developement costs mainly consist of remuneration for research and development staff and material costs for research and development. The Company incurred $263,314 and $124,283 for the years ended 31 December, 2007 and 2006 respectively.

F-15

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

3. Summary of Significant Accounting Policies (.../Cont'd)

(l) Income Taxes

The Company accounts for income taxes under FASB Statement No. 109, Accounting for Income Taxes. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.Deferredtax assetsand liabilitiesare measuredusing enactedtax ratesexpected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

(m) Retirement and Other Postretirement Benefits

Contributions to retirement schemes (which are defined contribution plans) are charged to consolidated statements of operations as and when the related employee service is provided.

(n) Warranty

The Company provides a product warranty to its customers to repair any product defects that occur within twelve months of the date of sale. Based on the limited number of actual warranty claims and the historically low cost of such repairs, the Company has not recognized a liability for warranty claims, but rather recognizes such costs when product repairs are made.

(o) Use of Estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates.

F-16

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

3. Summary of Significant Accounting Policies (.../Cont'd)

(p) Foreign currency translation

Assets and liabilities of foreign subsidiaries are translated at the rate of exchange in effect on the balance sheet date; income and expenses are translated at the average rate of exchange prevailing during the year. The related transaction adjustments are reflected in " Accumulated other comprehensiveincome (loss)"in the stockholders'equitysection of our consolidated balance sheet.

The average monthly for 2007 and the closing rate as at 31 December 2007 is Rmb 7.5973 and Rmb 7.2946 to oneUSD respectively.The averagemonthlyfor2006 and the closing rate as at 31 December 2006 is Rmb 7.9579 and Rmb 7.8041 to one USD respectively.

(p) Comprehensive income

The Company has adopted SFAS No. 130 Reporting Comprehensive Income. This statement establishes rules for the reporting of comprehensive income and its components. Comprehensive income consists of net income and foreign currency translation adjustments and is presented in the Consolidated Statements of Income and the Consolidated Statement of Stockholders’ Equity.

(q) Earning Per Share

Basic earnings per share are computed based on the weighted-averagenumber of shares of our commonstock outstanding. Diluted earnings per share are computed based on the weighted-average number of shares of our common stock and other dilutive securities. See also "Earnings Per Share" note below.

All information in this report relating to the number of shares, price per share and per share amountsof common stock gives retroactive effect to the May2007 of our common stock.

F-17

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

3. Summary of Significant Accounting Policies (.../Cont'd)

(q) Earning Per Share (…/Cont'd)

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations :

	2007		2006
	USD		USD
Numerator:
Net income		9,015,769		6,816,474
Denominator:
Weighted-average shares outstanding
used for basic earnings per share		13,450,000		13,450,000
Weighted-average shares outstanding
used for diluted earnings per share		13,716,666		13,716,666

(r) Commitments and contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

(s) Segment reporting

The Company has no operating segments,as thattermisdefined in FASB Statement No. 131, Disclosure About Segments of an Enterprise and Related Information. All of the Company's operations and customers are in the PRC. Accordingly, no geographic information is presented.

(t) Deferred Offering Costs

Deferred offering costs are those costs directly attributable to the Company's proposed public offering. Such costs consist principally of professional fees and will be charged to stockholders' equity upon receipt of the capital raised. Should the proposed offering prove to be unsuccessful, the deferred costs will be charged to operations.

F-18

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

3. Summary of Significant Accounting Policies (.../Cont'd)

(u)  Recently Issued Accounting Standards

In July 2006, the FASB issued FASB Interpretation Number 48, Accounting for Uncertainty in Income Taxes, a Interpretation of FASB Statement No. 109 ("FIN 48"). FIN 48 precribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken in a tax return. The Company must determine whether it is "more-likely-than-not" that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Once it is determined that a position meets the more-likely-than-not recognition threshold, the position is measured to determine the amount of benefit to recognize in the financial statements. FIN 48 applies to all tax positions related to income taxes subject to FASB Statement No. 109, Accounting for Income Taxes. The interpretation clearly scopes out income tax positions related to FASB Statement No. 5, Accounting for Contingencies. The Company adopted the provisions of this statement in 2007. The adoption of this statement did not have a material effect on the Company's financial condition and results of operations.

On September 15, 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 is effective as of the beginning of the first fiscal year beginning after November 15, 2007. The Company does not anticipate that the adoption of this statement will have a material effect on the Company’s financial condition and results of operations.

In September 2006, FASB issued SFAS No. 158, Employers' Accounting for Defined Benefit Pension and Other PostretirementPlans, an amendment of FASB StatementsNo 87, 88, 106 and 132(R) (SFAS 158). SFAS 158 requires the recognition of the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in the statement of financial position and the recognition of changes in that funded status in the year in which the changes occur through comprehensive income. SFAS 158 also requires the measurement of the funded status of a plan as of the date of the year-end statement of financial position. The Company does not anticipate that the adoption of this statement will have a material effect on the Company’s financial condition and results of operations.

F-19

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

3. Summary of Significant Accounting Policies (.../Cont'd)

(t) Recently Issued Accounting Standards (…/Cont'd)

On February 15, 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities: Including an amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 permits all entities to elect to measure many financial instruments and certain other items at fair value with changes in fair value reported in earnings. SFAS 159 is effective as of the beginning of the first fiscal year that begins after November 15, 2007, with earlier adoption permitted. The Company does not anticipate that the adoption of this statement will have a material effect on the Company’s financial condition and results of operations.

In December 2007, The FASB issued SFAS No. 141 (revised 2007), "Business Combinations" ("SFAS 141R"), which replaces FASB Statement no. 141. SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired. The Statement also establishes disclosure requirements that will enable users to evaluate the nature and financial effects of the business combination. SFAS 141R is effective as of the beginning of an entity's fiscal year that begins after December 15, 2008, which will be the Company's fiscal year 2010. The Company is currently evaluating the potential impact, if any, of the adoption of SFAS 141R on the Company's financial condition, results of operations and cash flows.

In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51 (SFAS 160)." SFAS 160 requires that accounting and reporting for minority interests will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS 160 also establishes reporting requirements that provide sufficient disclosures that clearlyidentify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will affect only those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. This statement is effective as of the beginning of an entity's first fiscal year beginning after December 15, 2008. Based upon the December 31, 2007 balance sheet, the impact of adopting SFAS 160 would be to reclassify in minority interests in consolidated subsidiaries from total liabilities to a separate component of stockholder's equity.

F-20

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

3. Summary of Significant Accounting Policies (.../Cont'd)

(t) Recently Issued Accounting Standards (…/Cont'd)

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.

4. Cash

Cash represents cash in bank and cash on hand. There were no cash equivalents as of December 31, 2006 and 2007.

Renminbi is not a freely convertible currency and the remittance of funds out of the PRC is subject to the exchange restrictions imposed by the PRC government.

5. Accounts Receivable

The Company performs ongoing credit evaluations of its customers' financial conditions.The Company generally requires its customers to provide advanced cash deposits for their purchases. The Company has historically been able to collect all of its receivable balances, and accordingly, has not provided any allowance for doubtful accounts as of December 31, 2006 and 2007.

6. Prepayments and Other Receivables

	2007		2006
	USD		USD
Prepayments to suppliers		2,165,876		1,568,007
Advances to third parties (a)		181,230		169,398
Other receivable (b)		925,780		1,049,113
		3,272,886		2,786,518

(a) Advances to third parties are unsecured, interest-free advances for working purposes. Advances to third parties during 2007 and 2006 approximated $181,230 and $169,398, respectively. Repayments from third parties during 2007 approximated $192,207 (none in 2006).

(b) Included in other receivables at December 31, 2007 and 2006 is $479,807 and $640,689, respectively, due from Shenzhen Jiancheng. Such amounts are due on demand without interest.

F-21

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

7. Inventories

Inventories as of December 31, 2006 and 2007 consist of the following:

	2007		2006
	USD		USD
Raw materials		338,637		844,835
Work-in-progress		732,976		779,840
		1,071,613		1,624,675

8. Property, Plant and Equipment

	2007			2006
	USD			USD
Building improvements		161,192			150,668
Buildings		103,316			96,570
Production equipment		531,506			364,952
Furniture, fixtures and office equipment		182,002			148,761
Motor vehicles		175,301			124,997
		1,153,317			885,948
Accumulated depreciation		(617,175	)		(450,243	)
		536,142			435,705
Construction in progress#		3,165,550			-
		3,701,692			435,705

Construction in progress included cost for refurbishing the new office and the refurbishment was completed at the beginning of 2008. No more construction cost shall be incurred.

F-22

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

9. Intangible Assets

The following table summarizes the Company's net amortized carrying value of its intangible assets as of December 31, 2006 and 2007.

	Patented
	technology			Software			Total
	USD			USD			USD
Balance as of January 1, 2006		936,616			102,804			1,039,420
Amortization		(57,856	)		(85,201	)		(143,057	)
Balance as of December 31, 2006		878,760			17,603			896,363
Foreign currency translation gain		77,133			-			77,133
Amortization		(74,155	)		(17,603	)		(91,758	)
Balance as of December 31, 2007		881,738			-			881,738

Patented technology represents a patent for the production of a component of the radiation treatment system.The patent was applied prior to its injection to Shenzhen Hyperas acapital contribution. Pursuant to the patent certificate, the patent was valid for 20 years from the application date, May 1999. Therefore it was amortized over the rest of the valid patent period, which is the estimated remaining useful life.

Software is utilized in the manufacture of medical equipment and is amortized over its estimated useful life.

Estimated amortization expenses for the years ending December 31, 2008, 2009, 2010, 2011 and 2012 is USD 74,155 each year which based on the average rate in 2007.

F-23

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

10. Accrued Liabilities and Other Payables

Accrued liabilities and other payables as of December 31, 2006 and 2007 consist of the following:

	2007		2006
	USD		USD
VAT, other taxes payable and surcharges		1,136,565		859,073
Accrued expenses		364,503		99,858
Accrued payroll and welfare		264,391		159,872
Customer deposits		343,828		300,558
Advances from third party		-		168,903
		2,109,287		1,588,264

Advances from third party represented unsecured, interest-free advances which are repayable on demand.

11. Minority interest

Minority interest represents the share of 25% equity interest of Shenzhen Hyper owned by Shenzhen OUR International Limited as of December 31, 2006 and 2007.

12. Stockholders' Equity

(a) Stockholders' capital

Common stock at $0.001 par value; 74,000,000 shares authorized; 23,150,000 shares issued and 13,450,000 shares were outstanding.

Preferred stock at $0.001 par value; 1,000,000 shares authorized with 300,000 shares designated as Series A 7% convertible preferred stock, 266,666 shares issued and outstanding with liquidation preference of $9,999,975.

F-24

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

12. Stockholders' Equity

(b) Retained earnings

(i) Retained earnings include the following:

Retained earnings for the yearsended December 31, 2006 and December 31, 2007 include a General Reserve Fund of USD 1,310,516 for both year, less dividends paid in 2006.

(ii) General reserve fund includes statutory surplus reserve and statutory public welfare reserve.

Statutory surplus reserve

In accordance with PRC Company Law, Changdu Huiheng is required to appropriate at least 10% of the profit arrived at for each year to the statutory surplus reserve. Appropriation to the statutory surplus reserve by Changdu Huiheng is based on profit arrived at under PRC accounting standards for business

The profit arrived at must be set off against any accumulated losses sustained by Changdu Huiheng in prior years, before allocation is made to the statutory surplus reserve. Appropriation to the statutory surplus reserve must be made before distribution of dividends to owners. The appropriation is required until the statutory surplus reserve reaches 50% of the registered capital. This statutory surplus reserve is not distributable in the form of cash dividends.

Statutory public welfare reserve (…/Cont'd)

In accordance with PRC Company Law, Changdu Huiheng appropriates 5% of the profit arrived at for each year to the statutory public welfare reserve prior to December 31, 2005. No statutory public welfare reserve is mandatory after December 31, 2005. Appropriation to the statutory public welfare reserve by Changdu Huiheng is based on profit arrived at under PRC accounting standards for business enterprises for each year.

F-25

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

12. Stockholders' Equity

(b) Retained earnings

(ii) General reserve fund includes statutory surplus reserve and statutory public welfare reserve.

The fund can only be utilized for capital items for the collective benefit of Changdu Huiheng's employees such as construction of dormitories, canteens and other staff welfare facilities. This fund is non-distributable other than on liquidation. The transfer to this fund must be made before distribution of any dividends.

According to PRC Company Law, a Foreign Investment Enterprise is not required to make aprovision for statutory public welfare reserve.

(c) Dividend

Pursuant to the resolution passed at the Board of Directors' meeting in 2006, total dividends of USD 9,164,866 were declared and paid to Changdu Huiheng's equity owner prior to the restructuring. The dividend is based on retained earnings arrived at under PRC accounting standards for business enterprise. It is also a payment before the restructing of the Company. No dividend has been declared for the year of 2007.

F-26

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

13. Revenues

Revenues for the years ended December 31, 2006 and 2007 consist of the following:

	2007		2006
	USD		USD
Product sales		9,530,071		6,605,273
Service income		5,034,683		4,681,669
Tax refunds and others		1,374,860		1,059,730
		15,939,614		12,346,672

Other revenue includes the high and new technology business subsidy granted by the government authorities to Shenzhen Hyper which can be used for enterprise development and technology innovation purposes.

14. Income Taxes

All of the Company's income is generated in the PRC.

Income tax expense for the years ended December 31, 2006 and 2007:

	2007			2006
	USD			USD
Current income tax expense		938,493			1,393,149
Deferred income tax benefit (expense)		(415	)		2,637
Total income tax expense		938,078			1,395,786

As Changdu Huiheng is located in the western area in the PRC and is within the industry specified by relevant laws and regulations of the PRC, the tax rate applicable to the Company is 10%.

Wuhan Kangqiao is a high-tech enterprise with operations in an economic-technological development area in the PRC, the applicable tax rate is 15%.

F-27

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

14. Income Taxes (…/Cont'd)

Shenzhen Hyper is a high-tech manufacturing company located in Shenzhen special economic region. Therefore, the applicable tax rate is also 15%. According to local tax regulation, Shenzhen Hyper is entitled to a tax-free period for the first two years, commencing from the first profit-making year and a 50% reduction in state income tax rate for the next six years.

A reconciliationof the expected income tax expense to the actual income tax expense for the years ended December, 2006 and 2007 are as follows:

	2007			2006
	USD			USD
Income before minority interest and income tax		10,287,196			8,176,593
Expected PRC income tax expense at statutory tax rate
of 33%		3,394,775			2,698,276
Non-deductible expenses
- Non-deductible entertainment expenses		(116,450	)		-
- Others		(49,385	)		31,893
Non-taxable income		-			(35,855	)
Temporary difference		(415	)		-
Others		52,020			173,259
Tax rate differences		(2,342,467	)		(1,471,787	)
Actual income tax expense		938,078			1,395,786

The PRC tax system is subject to substantial uncertainties and has been subject to recently enacted changes, the interpretation and enforcement of which are also uncertain. There can be no assurance that changes in PRC tax laws or their interpretation or their application will not subject the Company to substantial PRC taxes in the future.

F-28

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

14. Income Taxes (…/Cont'd)

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets as of December 31, 2006 and 2007 are presented below.

	2007		2006
	USD		USD
Current deferred tax assets:
Provisions for other receivables		26,383		18,879
Current deferred tax assets		26,383		18,879
Non-current deferred tax assets:
Deferred expenses		-		5,377
Non-current deferred tax assets		-		5,377
Total deferred tax assets		26,383		24,256

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible or utilized. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income,and tax planning strategies in making this assessment. Based upon an assessment of the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are tested whether they are deductible orcan be utilized, management believes that the deferred tax assets as of December 31, 2007 are more likely than not that it will not be realized.

The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income are reduced.

F-29

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

15. Related Party Transactions

(a) Summary of significant related party transactions

The significant related party transactions of the Company are summarized as follows:

	2007		2006
	USD		USD
Sales of medical equipment (i)		-		1,933,251
Cash advance to related party (ii)		12,635		47,410
Payments to related party (iii)		6,854,386		1,537,653
Acquisition of Changdu Huiheng (iv)		-		6,269,699
Redemption of shares from related party (v)		3,580,171		-

(i) Represents the sales of medical equipment and income from service provided to Shenzhen Jiancheng prior to October 1, 2005. Shenzhen Jiancheng was owned by Mr. Hui Xiaobing until it was sold to third parties effective from October 1, 2005.

(ii) Amount is unsecured, interest-free advance for working capital purposes to/from Shenzhen Huiheng Industry Co., Ltd. ("Huiheng Industry"), which is under same control of Mr. Hui Xiaobing. Amount is repayable on demand. Total outstanding as of December 31, 2007 was USD60,045.

(iii) Amount USD 6,854,386 represents the payment related to the acquisition of equity interest of Changdu Huiheng and USD 1,537,653 represents the payment related to the acquition of Wuhan Kangqiao from Huiheng Industry.

(iv) In August 2006, the Company acquired equity interest of Changdu Huiheng 99% from Huiheng Industry and 1% from Mr. Hui Xiaobing in consideration of USD6,207,002 and USD62,697 respectively (Note 15(b)).

(v) Amount represents the Company redeemed 957,265 shares of common shares from Clear Honest International Limited in January 2007.

F-30

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

15. Related Party Transactions

(b) Amounts due from/to related parties

Amount due from a related party

	2007		2006
	USD		USD
Huiheng Industry (i)		745,483		688,100
Amount due to related parties

	2007		2006
	USD		USD
Huiheng Industry (ii)		-		6,342,820
Hui Xiaobing		1,094		65,092
Clear Honest International Limited (iii)		116,068		-
		117,162		6,407,912

(i) USD685,438 in 2007 and USD640,690 in 2006 represents the acquisition of Changdu Huiheng in 2004. USD60,045 and USD47,410 represents interest-free advances to Huiheng Industry in 2007 and 2006 respectively . The amount is payable on demand.

(ii) In August 2006, the Company acquired equity interest of Changdu Huiheng 99% from Huiheng Industry and 1% from Mr. Hui Xiaobing in consideration of USD6,207,002 and USD62,697 respectively(Note 15(a)). Total of USD6,269,699 was recorded based on the exchange rate on the transaction date.

(iii) The amount represents the remaining outstanding balance of the redemption of the common shares issued by Allied Moral in January 2007 and other Allied Moral's expenses settled by Clear Honest International Limited.

F-31

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

16. Pension and Other Postretirement Benefits

Pursuant to the relevant laws and regulation in the PRC, the Company participates in defined contribution retirement plans for its employees arranged by a governmental organization. The Company makes contributions to the retirement scheme at the applicable rate based on the employees'salaries. The required contributions under the retirement plans are charged to the consolidated statements of operations on an accrual basis. The Company's contributions totalled USD 52,526 and USD 55,103 for the years ended December 31, 2006 and 2007 respectively.

The Company has no other obligation to make payments in respect of retirement benefits of its employees.

17. Derivative Financial Instruments and Hedging Activities

The Company did not enter into any derivative financial instruments for any purpose during the years presented. The Company does not hedge risk exposures or speculate using derivative instruments.

18. Fair Value of Financial Instruments

The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. The carryingamount of financial instruments, such as accounts receivable, other receivables, accounts payable, and other payables, approximates their fair values because of the short term maturity of these instruments.

F-32

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

19. Concentration of credit risk

(a) Customers and Credit Concentrations

Two customers accounted for 76% and three customers accounted for 89% of Revenue for the years ended December 31, 2007 and 2006 respectively. These customers also accounted for 79% and 82% of accounts receivable as of December 31, 2007 and 2006, respectively.As a result, a termination in relationship with or a reduction in orders from any of these customers could have a material impact on the Company’s results of operations and financial condition.

(b) Credit Risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents. As of December 31, 2007, all of the Company’scash and cash equivalents were held by major financial institutions locatedin the PRC, none ofwhich wereinsured orcollateralized. However, management believes those financial institutions are of high credit quality and has assessed the loss arising from the non-insured cash and cash equivalents from those financial institutions to be immaterial to the consolidated financial statements.

20. Foreign operations

(a) Operations

All of the Company’s operations are carried out and all of its assets are located in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC. The Company’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency fluctuation and remittances and methods of taxation, among other things.

F-33

HUIHENG MEDICAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007 AND 2006

20. Foreign operations (…/Cont'd)

(b) Dividends and Reserves

Under laws of the PRC, net income after taxation can only be distributed as dividends after appropriation has been made for the following: (i) cumulative prior years'losses, if any; (ii) allocations to the "Statutory Surplus Reserve" of at least 10% of net income after tax, as determined under PRC accounting rules and regulations, until the fund amountsto50% ofthe Company'sregisteredcapital;(iii)allocationsof5-10% ofincome after tax, as determined under PRC accounting rules and regulations, to the Company's "Statutory Common Welfare Fund", which is established for the purpose of providing employee facilities and other collective benefits to employees in China; and (iv) allocations to any discretionary surplus reserve, if approved by stockholders.

As of December 31, 2007, the Company established and segregated in retained earnings an aggregate amount for the Statutory Surplus Reserve and the Statutory Common Welfare Fund of USD 1,429,681.

21. Operating lease commitments

Rental expense for obligations under operating leases was USD 44,746 and USD 52,504 for the years ended December 31, 2006 and 2007, respectively. As of December 31, 2007, the total future minimum lease payments under non-cancellable operating leases in respect of premises are payable as follows:

	USD
December 31
2008		263,209
2009		263,209
2010		263,209
2011		263,209
2012		263,209
thereafter		3,904,255
		5,220,300

F-34

Part II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24

INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company has a provision in its Certificate of Incorporation at Article XI thereof providing for indemnification of its officers and directors as follows.

“The corporation shall indemnify all directors, officers, employees, and agents to the fullest extent permitted by Nevada law as provided within NRS 78.751 or any other law then in effect or as it may hereafter be amended.

The corporation shall indemnify each present and future director, officer, employee, or agent of the corporation who becomes a party or is threatened to be made a party to any suit or proceeding, whether pending, completed, or merely threatened, and whether said suit or proceeding is civil, criminal, administrative, investigative, or otherwise, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses, including but not limited to attorneys = fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit, or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

The expenses of directors and officers incurred in defending a civil or criminal action, suit, or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit, or proceeding if and only if the director or officer undertakes to repay said expenses to the corporation if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation.

The indemnification and advancement of expenses may not be made to or on behalf of any director or officer if a final adjudication establishes that the director’s or officer’s acts or omission involved intentional misconduct, fraud, or a knowing violation of the law and was material to the cause of action.”

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any such action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

ITEM 25

OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The Registrant is bearing all expenses in connection with this registration statement other than sales commissions, underwriting discounts and underwriter’s expense allowances designated as such. Estimated expenses payable by the Registrant in connection with the registration and distribution of the Common Stock registered hereby are as follows:

SEC Registration fee	$	1,060
* Accounting fees and expenses	$
* Legal fees and expenses	$
* Transfer Agent fees	$
* Blue Sky fees and expenses	$
* Miscellaneous expenses	$
Total	$

* Indicates expenses that have been estimated for filing purposes.

II-1

ITEM 26

RECENT SALES OF UNREGISTERED SECURITIES

During the three years preceding the filing of this post-effective amendment to Form SB-2, we issued securities without registration under the Securities Act on the terms and circumstances described in the following paragraphs:

To accomplish the Share Exchange with Allied Moral’s shareholders, we issued on May 15, 2007 an aggregate of 13,000,000 shares of our common stock in exchange for all of Allied Moral’s issued and outstanding common stock and we issued 266,666 shares of our Series A Preferred Stock in exchange for 2,666,667 shares of Allied Moral’s Series A Preferred Stock. The shares were issued to eight accredited investors. This issuance was pursuant to the exemption from registration under Section 4(2) of the Securities Act for issuances not involving any public offering.

On August 29, 2005, 9,500,000 shares of common stock were issued the Company’s President in exchange for all outstanding membership units of Pinewood Imports, LLC, in effect converting the Company from a limited liability company to a C corporation. On December 2, 2005, an additional 700,000 common shares were issued to 39 additional shareholders at $.001 per share for $700 in cash. These stockholders had an opportunity to ask questions of and receive answers from executive officers of Registrant and were provided with access to Registrant’s documents and records in order to verify the information provided. Each of these 39 shareholders who was not an accredited investor either alone or with his purchaser representative(s), if any, represented that he had such knowledge and experience in financial and business matters that he was capable of evaluating the merits and risks of the investment, and the Issuer had grounds to reasonably believe immediately prior to making any sale that such purchaser comes within this description. All transactions were negotiated in face-to-face or telephone discussions between executives of Registrant and the individual purchaser, each of whom, or their respective representative, indicated that they met the definition of “sophisticated” investor as defined in Regulation D, and Pinewood has made a determination that each of such investors are “sophisticated investors.” Because of sophistication of each investor as well as, education, business acumen, financial resources and position, each such investor had an equal or superior bargaining position in its dealings with Pinewood. In addition to providing proof that each shareholder paid for their shares as indicated in their respective investment letters, such letters also verify that each shareholder was told prior to and at the time of his or her investment, that he or she would be required to act independently with regard to the disposition of shares owned by them and each shareholder agreed to act independently. No underwriter participated in the foregoing transactions, and no underwriting discounts or commissions were paid, nor was any general solicitation or general advertising conducted. The securities bear a restrictive legend, and stop transfer instructions are noted on the stock transfer records of the Registrant.

The foregoing issuances of securities were effected in reliance upon the exemption from registration provided by section 4(2) under the Securities Act of 1933.

ITEM 27

EXHIBITS
*	1.1	Underwriting Agreement
**	3.1	Articles of Incorporation as revised (incorporated by reference to Company’s Form 10-KSB filed
	3.2	Amended and Restated By-Laws (incorporated by reference to Company’s registration statement on Form 10-KSB filed on April 10, 2008)
	4.1	Amended and Restated Certificate of Designations for Series A Preferred Stock (incorporated by reference to the exhibit to the Company's report on Form 8-K filed on January 16, 2008)
**	5.1	Opinion of Nevada counsel
	10.1	Securities Exchange Agreement dated May 15, 2007 (incorporated by reference to Company’s current report on Form 8-K filed on May 15, 2007)

II-2

*	10.2	Huiheng 2007 Share Plan
	10.3	Stock Purchase Agreement dated September 1, 2006 (incorporated by reference to Company’s Form 10-KSB filed on February 28, 2007)
*	10.4	Office Lease
	10.5	Investors’ Right Agreement among Allied Moral Holdings and the purchasers of Series A Preferred Stock
	10.6	Amendment to Investors’ Rights Agreement
*	10.7	Form of Equipment Sales Contract
	10.8	Purchase Contract for Cobalt-60 Radiation Sources Used in SGS-I
	10.9	Contract for Commissioned Manufacturing of Collimators and Tungalloy Parts
	10.10	Contract for Commissioned Manufacturing of SGS-I
	10.11	Capital Contribution Transfer Agreement
	10.12	Underwriter Purchase Option
	10.13	Creditor’s Rights and Liability Confirmation Agreement
	23.1	Consent of UHY ZTHZ HK CPA Limited
**	23.2	Consent of Nevada Counsel
*	99.1	Tax Notice
	99.2	Original Certificate of Designations for Series A Preferred Stock for Mill Basin Technologies, Inc.

* Previously filed

** To be filed by amendment

ITEM 28

UNDERTAKINGS

The Registrant undertakes:

1.Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

The Registrant is registering securities under Rule 415 of the Securities Act and hereby undertakes:

2.To file, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to:

(i)Include any prospectus required by Section 10(a)(3) of the Securities Act;

(ii)Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; and notwithstanding the forgoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation From the low or high end of the estimated maximum offering range may be reflected in the form of prospects filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

(iii)Include any additional or changed material information on the plan of distribution.

II-3

3.That, for the purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

4.To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

The undersigned Registrant hereby undertakes that:

5.For determining liability of the undersigned small business issuer under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned small business issuer undertakes that in a primary offering of securities of the undersigned small business issuer pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned small business issuer will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i)Any preliminary prospectus or prospectus of the undersigned small business issuer relating to the offering required to be filed pursuant to Rule 424;

(ii)Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned small business issuer or used or referred to by the undersigned small business issuer;

(iii)The portion of any other free writing prospectus relating to the offering containing material information about the undersigned small business issuer or its securities provided by or on behalf of the undersigned small business issuer; and

(iv)Any other communication that is an offer in the offering made by the undersigned small business issuer to the purchaser.

(v)That for the purpose of determining liability under the Securities Act to any purchaser:

6.Since the small business issuer is subject to Rule 430C

Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

7.Request for Acceleration of Effective Date. If the small business issuer (Registrant) requests acceleration of the effective date of this registration statement under Rule 461 under the Securities Act, it shall include the following:

“Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.”

In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the small business issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

II-4

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the registrant has caused this amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in Shenzhen, China on April 16, 2008.

Huiheng Medical, Inc.

/s/ Hui Xiaobing

By: Hui Xiaobing, Chairman and CEO

Pursuant to the requirements of the Securities Act of 1933, this amendment to the Registration Statement was signed by the following persons in the capacities and on the dates stated.

Signature(s)	Title(s)	Date
/s/ Hui Xiaobing Hui Xiaobing	Chairman and CEO (Principal Executive Officer)	April 16, 2008
/s/ Richard Shen Richard Shen	Chief Financial Officer (Principal Financial and Accounting Officer)	April 16, 2008
Jian Huang* Jian Huang	Director	April 16, 2008
Daxi Li* Daxi Li	Director	April 16, 2008
Joe Y. Chang* Joe Y. Chang	Director	April 16, 2008
Kenneth Borow* Kenneth Borow	Director	April 16, 2008
Peter Slate* Peter Slate	Director	April 16, 2008
Edward Meng* Edward Meng	Director	April 16, 2008

* By    /s/ Hui Xiaobing 

Attorney-in-fact

II-5

EX-10.6

AMENDMENT TO INVESTORS’ RIGHTS AGREEMENT

This Amendment to Investors’ Rights Agreement is entered into as of December 27, 2007, by and among Huiheng Medical, Inc., a Nevada corporation (the “Company”), and those holders of outstanding shares of Series A Preferred Stock issued by the Company (the “Series A Holders”) who execute this Amendment, with respect to the following:

A.Under the terms of the Securities Exchange Agreement dated as of May 15, 2007 (the “Exchange Agreement”) by and among the Company (then known as Mill Basin Technologies, Ltd.) and various other parties, including the shareholders of Allied Moral Holdings, Ltd. (with a portion of such shareholders receiving shares of Series A Preferred Stock of the Company), the Company agreed to assume the registration obligations of Allied Moral Holdings under the Investors’ Rights Agreement of January 11, 2007 (the “Rights Agreement”), subject to certain conditions;

B.As a result of the recent changes in Rule 144 promulgated by the Securities and Exchange Commission, and the lock up agreements that will be required by the underwriters of the currently contemplated public offering of the common stock of the Company, the Series A Holders and the Company contemplate that the Series A Holders will be able to sell their shares of common stock issuable upon conversion of the Series A Preferred Stock (the “Conversion Shares”) under Rule 144 simultaneously or shortly after the expiration of the 90 day lock up period set forth in the lock up agreements. As such, the Series A Holders and the Company believe that there is no longer any utility to require the Company to file a registration statement for the resale of the Conversion Shares; and

C.To remove any ambiguity relating to the terms of the Rights Agreement that remain in effect, the Series A Holders and the Company desire to confirm that any potential penalties associated with either the failure to obtain the registration of the Conversion Shares within the time specified in the Rights Agreement or the failure to maintain such registration in effect shall be waived and extinguished.

NOW, THEREFORE, for and in consideration of the forgoing and the following terms and conditions, the parties hereto agree as follows:

1.Termination of Registration Obligations. Any remaining obligations in the Rights Agreement that have been assumed by the Company under the Exchange Agreement are hereby terminated.

2.Waiver of Damages. Any damages related to the Rights Agreement that have accrued or may accrue in the future are hereby waived and extinguished.

3.Processing of Transfers. Within five business days after the business day on which the Company receives (i) a notice that the Conversion Shares have been sold pursuant to Rule 144 (or of the completion of a period during which the Conversion Shares need to bear a restricted securities legend under applicable securities laws), (ii) the original certificates representing the shares of Series A Preferred Stock (or Conversion Shares, as the case may be) that were issued with a restricted securities legend, and (iii) to the extent required by Rule 144, customary representation letters and/or broker letters concerning compliance with the requirements of Rule 144, the Company shall deliver (or cause to be delivered) to its transfer agent appropriate instruction and opinion letters directing the delivery of certificates for the Conversion Shares without legends. This obligation may be satisfied, when permitted by applicable legal requirements, by delivery of entries reflecting electronic transfers of the Conversion Shares to a brokerage account (designated by the applicable Series A Holder) with the Depository Trust Company through its Deposit Withdrawal Agent Commission System.

This Amendment may be executed in one or more counterparts, all of which when taken together shall constitute one in the same instrument, and shall be effective when it has been signed by the Company and the holders of more than a majority of the outstanding shares of Series A Preferred Stock.

HUIHENG MEDICAL, INC.
By:	/s/ Li Bo
	Li Bo, Secretary

Name:	Platinum Partners Value Arbitrage Fund L.P.
By:	/s/ Mark Nordlicht
Title:	Authorized Signatory
(If signing in a representative capacity)
Name:	Harborview Master Fund L.P.
By:	/s/ Navigator Management, Ltd.
Title:	Authorized Signatory
(If signing in a representative capacity)
Name:	Nicole Kubin
By:	/s/ Nicole Kubin
Title:	Authorized Signatory
(If signing in a representative capacity)
Name:	Atlas Master Fund, Ltd.
By:	/s/ Scott Schroeder
Title:	Authorized Signatory
(If signing in a representative capacity)
Name:	J Wild Fund, LP
By:	/s/ Jason Wild
Title:	JW GP LLC, Managing Member
(If signing in a representative capacity)
Name:	JW Partners, LP
By:	/s/ Jason Wild
Title:	JW GP LLC, Managing Member
(If signing in a representative capacity)
Name:	DKR SoundShore Oasis Holding Fund, Ltd.
By:	DKR Oasis Management Company LP, its Investment Manager
By:	/s/ Barbara Burger
Title:	Authorized Signatory
(If signing in a representative capacity)
Name:	Monarch Capital Fund, Ltd.
By:	/s/ Navigator Management, Ltd.
Title:	Authorized Signatory
(If signing in a representative capacity)
Name:	Orion KF Partners
By:	/s/ David Kohl
Title:	Authorized Signatory
Name:	Chardan China Investments
By:	Chardan China Management
Its:	Manager
By:	/s/ Daniel P. Beharry
Title:	Secretary

2

EX-10.8

Purchase Contract of Cobalt-60 Radiation Sources Used in SGS-I

Contract Number: Co-Y-05-01

Time of Signing: September 1, 2005

Place of Signing: Beijing, China

Party A: Shenzhen Hyper Technology Incorporation

Add.: Building 507, Block B, Yinglida Digital Garden, Golden Flower Road, Fu Tian Bonded Area, Shenzhen

Tel: 0755-25331326	Fax: 0755-25331366
Postcode: 518038

Party B: Beijing Atom High-Tech Co., Ltd.

Add.: Sub-Box 105, Mail Box 275, Beijing

Tel: 010 69358477	Fax: 010 69357294
Postcode: 102413

After friendly negotiation, Party A and Party B agrees to enter this Contract, under which Party A consigns Party B the matter related to processing and manufacture of Cobalt-60 radiation sources used in SGS-I

1. Subject Matter and Currency Amount:

Party A orders from Party B of 10 sets of Cobalt-60 radiation sources used in SGS-I. The price of each set is RMB720,000. The total amount of this contract is RMB7,200,000.

2. Responsibilities and obligations of Party A

(1) Party A shall provide one set of Cobalt source jacket drawings (appendix 1), one set of source cell (so-called “lift basket” for source loading) drawings (appendix 2), and “Technical Requirements for Cobalt-60 Radiation Sources Used in SGS-I” (appendix 3), one copy of “Quality Assurance Agreement of Cobalt-60 Radiation Sources Used in SGS-I” (appendix 4), and “Confidentiality agreement” (appendix 5).

(2) Party A shall provide the tungalloy parts used in the Cobalt source jacket.

(3) Party A shall provide the transportation for the above-mentioned Cobalt sources container.

(4) Party A shall provide the gauges for inspecting the Cobalt source jackets.

3. Responsibilities and obligations of Party B

(1) Party B shall examine and proof the sketch of Cobalt source jacket provided by Party A.

(2) Party B shall perform the welding tests for at least 5 simulation sources and profile cutting in order to check the welding techniques and quality.

(3) Party B is responsible for manufacturing the Cobalt source jackets.

(4) Party B is responsible for manufacturing, sealed packing, and inspecting the sources as per the “Technical requirements for Cobalt-60 radiation sources used in SGS-I” (appendix 3).

(5) Party B should place and store the Cobalt sources in the transporting source cell (so-called “lift basket”) and lead container according to the technical requirements offered by Party A.

(6) Party B should handle the Cobalt sources transportation formalities.

(7) Party B is responsible for shipping the Cobalt sources to the place designated by Party A. (The shipping cost would be paid by Party A).

(8) Party B should comply with the Confidential Agreement signed by both parties (appendix 5).

4. Date of delivery

Party A shall give Party B written notice of the exact date of delivery for each set of Cobalt sources two months before each source loading Party B shall guarantee the progress requirements.

5. Payment

(1) After the contract takes effect, Party A shall pay Party B 30% of the total amount for the sources involved as advance payment upon the installation plan determined by both parties.

(2) Upon the acceptance inspection by the two parties at the place where Party B locates, Party A shall pay Party B 60% of the total amount for such set of sources.

(3) Within 30 days upon the receipt of each set of the finished sources, acceptance inspection and completion of the installation of sources, Party A shall pay Party B the remaining payment for the set of sources.

(4) Within 1 week upon the receipt of the total amount for each set of sources, Party B shall issue formal value-added tax invoice to Party A as beneficiary.

2

6. Quality control and acceptance inspection

(1) Upon the completion of manufacture of Cobalt source jackets , Party B shall examine them as per the drawings with 100% certainty. When the Cobalt source jackets are confirmed to be qualified and approved through the recheck of Party A, sealed packing by welding can be processed.

(2) Before the Cobalt sources are installed into the lead container, Party A shall appoint someone to conduct the inspection according to relevant articles under the appendix 1, 2, 3 and 4 upon the receipt of the notification for acceptance inspection from Party B; meanwhile, the Cobalt sources shall be deemed as being delivered. If there are problems with the quantity, quality, and technical problems during the inspection process, Party A is entitled the right to request Party B to compensate for the loss.

(3) Product acceptance inspection shall be carried out in accordance with “Technical requirements for Cobalt-60 radiation sources used in SGS-I” (Appendix 3) and “Quality Assurance Agreement of Cobalt-60 Radiation Sources Used in SGS-I” (Appendix 4).

7. Delivery and transportation

(1) 15 days before the delivery of each set of the Cobalt sources, Party A shall send Party B a written notification of the place of delivery (in China only) and the evidence documents for the installation of the radiation sources approved by the relevant local authorized administration department where Cobalt sources is delivered.

(2) Party B shall transport the finished sources to the place designated by Party A. Before the shipment, Party B must provide Party A one duplicate of all the documents and information required for the sources transportation.

(3) Party A shall bear the for transportation fee for the sources from the place where Party B is located to the hospital.

8. Liabilities for breach of contract

If Party B delays in delivery, for each day of delay, Party B should pay to Party A 0.1% of the total amount for the goods delayed as a penalty. Any delay due to the Cobalt source quantity, quality or technical problems, it shall be deemed as the delay of Party B. If the reason of delay is because Party A can not pickup the goods on time, then after 30 days that Party B keep the Cobalt source free of charge. Party A shall pay Party B (__)% of the total amount for the goods delayed as the warehouse fee.

3

9. Force Majeure

In the event of earthquake, typhoon, flood, fire, war, or other unforeseen events, the happening and consequences of which are unpreventable and unavoidable, the affected party shall notify the other Party About the regarding the events of the force majeure in time by telegraph, and within 15 days thereafter, the affected party shall provide detailed information of the events and a valid document explaining the reason for its inability to perform the contract. Such valid document shall be issued by the local notary department where the event occurs. According to the effects of the event on the performance of the contract, both parties shall, through consultation, decide whether to terminate the contract, or to exempt part of obligations for implementation of the contract, or whether to delay the performance of the contract.

10. The Modification and Supplement of the Contract

After the contract takes effect, both parties are not allowed to modify or terminate it at will. In case of any matters not mentioned herein, both parties shall agree to reach an agreement through consultation, and only after both parties sign a supplemental contract modification or supplement of the contract shall come into effect.. The supplementary contract shall have the equal validity of the contract.

11. Arbitration

Any disputes arising from carrying out the contract, both parties should negotiate friendly for settlement. If negotiation fails to resolve the dispute, either party is entitled to file a suit related to the Cobalt source radioactivity to the National Institute of Metrology; other suits shall be filed to a People’s Court.

12. Reclamation of decommissioned sources

Party B is responsible for the reclamation of the decommissioned sources when the Cobalt sources involved in the contract complete their services. The disposal charge would be paid by Party A. The exact charge is subject to further negotiation.

13. Appendixes of contract

5 appendixes attached to the contract are the inseparable parts of the contract and have the equal validity of the contract.

Appendix 1: One set of the Cobalt source jacket drawings

Appendix 2: One set of the source cell drawings (source cell: so-called “lift basket” for source loading)

Appendix 3: “Technical requirements for Cobalt-60 radiation sources used in SGS-I”

Appendix 4: “Quality assurance agreement of Cobalt-60 radiation sources used in SGS-I”

Appendix 5: “Confidential agreement”

4

Party A: Shenzhen Hyper Technology Incorporation

Representative: /s/ HUANG JIAN

Date: September 1, 2005

Party B: Beijing Atom High-Tech Co., Ltd.

Representative: /s/ YANG RUIJIN

Date: August 30, 2005

5

Appendix 3:

Technical Requirements for Cobalt-60 Radiation Sources Used in SGS-I

1. The total radioactivity for each set of Cobalt-60 radiation sources is not less than 5400Ci+10%, and total 18 Cobalt source jackets are in sealed packing as 18 single sources, and the activity of each single source is 300Ci+10%.

2. Each single source is made up of the Cobalt grain with 220-240Ci/g in specific radioactivity, 1mm in diameter, and 1mm long, sealed packed in stainless jacket by welding. The radioactivity consistency of 18 sources meets the requirement that the difference between the max and min is not more than 10%.

3. The source jacket drawings (Appendix 1) are offered by Party A. Party B can make modification to the sketch drawings according to the welding techniques, the Cobalt grain actual specific activity and the heat expansion dimension of the source jacket based on experience and simulation experiments, but the final drawing has to be approved by Party A.

4. The measurement of the radioactivity of the sources must be standardized. Considering the self-absorption of the sources and the revision of the measurement environment, the uncertainty of the measurement is limited within +/-10%.

5. The safety of the sources needs to be inspected according to GB18871-2002.

6. The service life of the sources is ten years and within the service life, no radiation leakage or contamination is allowed.

7. Party B must have fairly accurate measurement of the source outside diameter and constant temperature in a hot cave, for example, by the gauge inspection, etc.

8. Party B must clean and remove the rust from the source cell (“lift basket”) which transports the Cobalt-60 radiation sources used in SGS-I, and Party B should offer Party A the source loading and source acquisition procedure.

9. For the sealed source to be installed into the SGS-I, the arrangement of the sources in the source cell, and the coupling of the source cell with the lead container, are designed by Party A specially according to the registration data of the sources, which would be presented to Party B.

10. Each sealed source must be registered by Party B for its radioactivity, safety class, manufacturing date and measurement date. And Party B should offer the measurement reports to Party A.

Party A: Shenzhen Hyper Technology Incorporation	Party B: Beijing Atom High-tech Co., Ltd.
Representative: /s/ HUANG JIAN	Representative: /s/ YANG RUIJIN
Date: September 1, 2005	Date: August 30, 2005

6

Appendix 4:

Quality Assurance Agreement of Cobalt-60 Radiation Sources Used in SGS-I

Shenzhen Hyper Technology Incorporation (Party A) and Beijing Atom High-tech Co., Ltd. (Party B) now comes to the agreement hereunder after friendly negotiation, in the respect of the quality assurance of the Cobalt-60 radiation sources used in SGS-I that Party A commissioned Party B to manufacture. The stipulated clauses in this agreement have to be strictly followed.

1. Party B shall manufacture the Cobalt sources strictly comply with the technical requirements for Cobalt-60 radiation resources used in SGS-I (appendix 3) and the Cobalt-60 radiation source jacket drawings (appendix 1) confirmed by both parties. Thus, Party B shall provide to Party A with qualified products.

2. Party B shall make detailed quality plan as for the Cobalt-60 radiation sources manufacturing, and provide a copy of the plan before the start of the manufacturing s. After review and check of the plan according to the related requirements of the quality management procedure, Party A has the right to present opinions and request Party B to make change accordingly. The quality plan shall include at least the following contents:

a. Quality assurance measure

b. Quality control procedure

c. Organization structure and scope of authority

c. Quality elements, quality standard and application documents.

3. Party A is entitled to send someone to do the quality follow-up check on the site where Party B manufactures the devices. Party B should provide on-site cooperation and convenience to assist Party A to complete the check. The objective for Party A to do such quality follow-up check is to monitor and control the quality during the manufacture process, but such monitor and control shall neither exempt nor reduce Party B’s responsibilities under this Contract and the appendixes hereunder on quality, delivery schedule and etc..

4. Party B should do classified designing and performance test strictly following the classification requirements in the ANSI N542-1997 for sealed radiation sources, and keep the test records. Party A is entitled to review these test records during the process of the ex-works inspection on the Cobalt sources.

5. It’s a mandatory procedure to take welding tests for at least 10 simulation sources, and do profile cutting in order to check the welding technique and quality.

6. Party B shall provide Party A with the radioactivity measurement or calculation methods, error analysis, leakage test methods, and contamination test methods of single Cobalt source.

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7. After the manufacture of the Cobalt source jacket completes, Party B shall set up quality hold point. Before the process of sealed packing by welding starts, it is mandatory to perform the following procedures strictly and step over the hold point discretionarily is not allowed.

a. Party B shall inspect all parts as per the drawings requirements with 100% completion, and record inspection in details.

b. The heat and cool dimension of the outmost layer jacket of each Cobalt source should be measured strictly inside a hot cave(room?). The dimension shall be kept consistent with the requirements indicated in drawings.

c. With under qualified products, Party B shall print permanent obvious mark on such products and separate them from outside.

d. Party A shall recheck the products which have been passed the examination by Party B and shall signed recognition an on the Party B’s examination report, upon the satisfaction of the recheck.

Until the above procedures complete and the standards meet the above mentioned requirements completely , the products are not allowed to transfer to the sealed packing.

8. It is mandatory to measure the normal temperature of each Cobalt source when each has been done with sealed packing by welding but not been loaded into the source cell (“lift basket”). At least 5 single sources need to be measured and the average of the result should be recorded in the test report.

9. Upon the acceptance examination of first set of Cobalt sources, Party B shall provide Party A with the following documents:

a. Quality plan

b. Sealed source classified design, test methods and results

c. Welding technique and quality examination records

d. The heat and cool dimension of the outmost layer jacket

e. The normal temperature of single source

f. Radioactivity measurement methods and error analysis

g. Radioactivity measurement certification

h. Leakage inspection certification

i. Contamination inspection certification

j. The test results of the exposed dose after the loading into the lead container

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k. Quality Certificate

For the subsequent Cobalt sources, Party B shall provide Party A the “g” and “k” of the above documents only.

10. After Cobalt sources are shipped to the place of delivery designated by Party A, Party A shall notify Party B of the exact date of source loading. Party B is entitled to send someone to take part in the Cobalt source replacement for SGS-I and measurement process, and to have the delivery inspection of the Cobalt sources together with Party A. Party A shall offer convenience at work for the people designated by Party B. When the delivered sources are qualified after examination, the two parties sign the check acceptance certificate, the Cobalt sources thus being regarded as delivered. If Party B is unable to send someone to take part in the acceptance examination, the examination result from Party A is still considered effective. During the inspection, Party A is entitled to refuse the acceptance of the sources or lodge a claim under quality problems such as the Cobalt source total radioactivity does not meet the required specification, and the source jacket heat expansion leads to difficulties in source replacement or quantity is in shortage, etc.

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Party A: Shenzhen Hyper Technology Incorporation	Party B: Beijing Atom High-tech Co., Ltd.
Representative: /s/ HUANG JIAN	Representative: /s/ YANG RUIJIN
Date: September 1, 2005	Date: August 30, 2005

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Appendix 5 :

Confidentiality Agreement

Shenzhen Hyper Technology Incorporation (Party A) and Beijing Atom High-tech Co., Ltd. (Party B) came to the following agreements for the confidentiality of the Cobalt-60 radiation sources used in SGS-I that Party A commissioned Party B to manufacture.

1. For the completion of the manufacturing of Cobalt-60 radiation sources used in SGS-I as per the requirements of Party A, Party A provides Party B the related technical information and technical requirements (“info.” hereafter)

2. Party B guarantee that the info, shall only be used for Party A to the manufactures the Cobalt-60 radiation sources used in SGS-I, and shall not be for any other purposes. The Cobalt-60 radiation sources involved in the confidential agreement are the products that Party A ordered exclusively from Party B. Without written consent from Party A, Party B shall not be allowed to provide the product to any other party.

3. The info, mentioned in the first clause of the agreement is provided only for the personnel who take part in the manufacturing and designing of the Cobalt-60 radiation sources used in SGS-I. Others, except the above mentioned personnel, shall not be allowed to have any contact with such info. Party B shall guarantee to adopt all the effective measures to keep strict confidentiality of all the info. (including the written, oral info., fax, or storage data, etc.), and guarantee that all the personnel who participate in shall not disclose the info, to anybody else as well.

4. Without the written consent from Party A, Party B shall not be allowed to copy or transcribe the info.

5. after Party B finishes the manufacturing of all the radiation sources, or both parties terminate the Purchasing Contract, Party B shall return Party A all the info.. (including the copies or floppy disks, etc. which are made with the consent of Party A.).

6. If Party B violates the stipulations of the agreement, Party B shall agree to undertake the responsibility for breach of this Agreement, and compensate Party A for the loss.

Party A: Shenzhen Hyper Technology Incorporation	Party B: Beijing Atom High-tech Co., Ltd.
Representative: /s/ HUANG JIAN	Representative: /s/ YANG RUIJIN
Date: September 1, 2005	Date: August 30, 2005

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EX-10.9

Contract for Commissioned Manufacturing of Collimators and Tungalloy Parts

No. of Contract:

Party A	Shenzhen Hyper Technology Incorporation
Add.:	No. 507 Block B, Yingdali Digital Park,	Postcode	518038
	Hongmian Road
	Futian Free Trade Zone, Shenzhen
Tel:		Fax:	0755-25331366
Party B	Xian Fengrui New Materials Co., Ltd.
Add.:	Tanlong Building, No. 66 Huzhu Road, Xian City	Postcode	710048
Tel:	29-83285725	Fax:	029-83285499

After friendly negotiation, Party A and Party B agreed to execute this Contract, under with Party A will commission Party B to manufacture the collimators and tungalloy parts used in SGS-I according to the drawings provided by Party A.

1.Contract object and amount:

Party B would manufacture the following products according to the drawings provided by Party A:

No.	Name	Drawing	Quantity/set	Total(15sets)
1	No. 15 collimator	SGS.5.3	18	270
2	No. 25 collimator	SGS.5.4	18	270
3	Shielding stopper	SGS.5.5	18	270
4	No. 40 collimator	SGS.5.7	18	270
5	No. 55 collimator	SGS.5.8	18	270
6	Shielding bar	SGS.1.2.1-2	18	270
7	Tungsten shielding	SGS.l.1.1-2	2	30
8	Tungsten counter-weight	SGS.1.1.3-3	1	15
9	Locating sleeve	SGS.1.2.1-5A	1	15
10	Collimator carrier tungalloy insert block	SGS.1.2.1-6	2	30
11	Pre-collimator	SGS.1.3.1-1	18	270
12	Tungsten cover	SGS.1.3.1-3	18	270
13	Tungsten end closure	SGS.1.3.1-4	18	270

The currency amount for a single set is RMB 185,000. The contract total amount is RMB2,775,000, including the transportation cost and tax.

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2. Date and place of delivery

1)Party A shall notify Party B the manufacturing plan for the necessary products one month in advance, and would pay in advance 80% of the total amount as planned. Party B shall provide qualified products to Party A within one month.

2)After both parties take a joint acceptance the check of the products at the location of Party B according to the drawings and technical requirements provided by Party A, it is Party B's responsibilities of to transport the products to the place designated by Party A. The transportation cost shall be paid by Party A.

3. Payment

The remaining payment shall be paid within one week after the products have been qualified at acceptance inspection and picked up., Party B shall issue a formal value-added tax invoice with Party A as beneficiary within one week after it receives the payment.

4. Technical materials

Party B shall keep confidential the drawings and technical documents provided by Party A, and shall not be allowed to disclose the same to any third party by any way. in addition, after competition of manufacturing all the products, Party B shall return all the drawings and technical documents to Party A.

5. Quality requirements and inspection acceptance of products

1)Party B must prepare the materials required in the drawings for the manufacturing the products, and make sure that the product can meet the quality requirements in the drawings, and provide relevant product quality certificate after products are qualified at check. At the time of delivery, both parties shall take a joint acceptance inspection according to the drawings and technical requirements provided by Party A.

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2)Party B offers a warranty period of 12 months for the products manufactured. The warranty period starts from the date the products are qualified at the acceptance inspection by Party A. If there are any quality problems occurs with regarding to the processing or defect of the materials within the warranty period, Party B shall repair or change on time, the cost shall be undertaken by Party B.

6. Package and transportation

1)Party B shall be responsible for the proper packing of the products as well as the cost of packing. The packing should be well enough so that the products wouldn't be damaged during the transportation, and Party B shall be charged for any loss due to improper packing during transportation.

2)Party B shall be responsible for the transportation. Party B shall transport the products safely to the designated place, and the transportation cost shall be borne by Party B.

7. Liability for breach of contract

1)If Party B delays in delivery, for each 10 days' delay, Party B should pay 2% of total delayed amount as penalty. For delay up to 2 month, Party A has the right to terminate the contract, and request Party B to return all the paid payment and pay penalty. Any delay due to manufacturing quality shall be deemed as delay for delivery by Party B.

2)If Party A delays in payment, for the delayed amount, Party A should pay Party B fines according to the related regulations of the People's Bank of China.

3)I the delay is because of the design problems of Party A, it shall be the of Party A's responsibility and the date of delivery can be delayed accordingly.

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8. Arbitration

Any disputes arising from the implementation of the contract shall be resolved through friendly negotiation between the parties. If negotiation fails to resolve the disputes, either party is entitled to file a suit to the People's Court of the place where the contract has been executed..

9. Appendix of contract

There is one appendix of the contract, which is a very important part of the contract and holds the same legal force as the contract itself.

Appendix 1: Product design drawings.

10. Contract wording

This contract has four (4) original copies, which shall be effective after being sealed by both Parties and being executed by the legal representatives or authorized agents of both Parities. Each Party shall keep two (2) copies of this contract.

Party A: Shenzhen Hyper Technology Incorporation   Representative: /s/ HUANG JIAN   Date: August 15, 2005 Party B: Xian Fengrui New Materials Co., Ltd.   Representative: /s/ HE JIANPING   Date: August 15, 2005

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EX-10.10

Contract for Commissioned Manufacturing of SGS-I

(No. of contract: P2005-002 )

Place of Execution: Shenzhen, China

Party A: Shenzhen Hyper Technology Incorporation

Legal Representative: Hui Xiaobing

Add.: 5 fl, Block B, Yinglida Digital Garden, Golden Flower Road, Fu Tian Bonded Area, Shenzhen Postcode:

Tel: 86-755-25331366 Fax: 86-755-25331366

Party B: Chengdu Space Mould & Plastic Co., Ltd.

Legal Representative: Zhang Jicai Add.: Hangtian North Road, Longquan

District,Chengdu,SichuanProvince

Postcode:

Tel: 86-28-84805603 Fax: 86-28-84850143

Based on mutual benefit and long-term cooperation, after friendly consultation, for Party A’s commission to Party B to manufacture the mainframe of the SGS-I invented by Party A, now Party A and Party B both agree to sign the contract hereunder:

1. Subject Matter:

Party A now commissions Party B to prepare the materials, custom the techniques and prepare the tool equipment by itself for manufacturing 4 sets of the mainframe of the SGS-I (hereafter referred to as “devices”). For details of the subject matter, see the appendix 1 of the contract “Detailed rules of the contract for commissioned manufacturing of SGS-I”

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2. Contract Price

The price for each device is RMB (________), and the total price for the devices is RMB (________), both of which include VAT.

3. Supply of technical information and drawings, and confidential requirements

1)Party A supplies party B with 5 copies of the whole set of the design drawings and technical information of the mainframe of the SGS-I, attached as appendix 3 hereof.

2)Party B shall design and manufacture according to the drawings and technical information supplied by Party A. In the process of manufacture, should Party B has any questions or suggestions about the drawings or information, Party B shall present them in writing to Party A in time. Party A shall respond in writing within 5 working days upon receipt of such questions or suggestions. Without the written permission of Party A, Party B shall not alter the information and drawings by itself.

3)For any scraps of parts due to alteration of design or mistakes in drawings, the loss shall be borne by Party A.

4)Party B assures that:

a.The technical information and drawings supplied by Party A would only be used in the manufacturing of the SGS-I, and would not be for any other use. Without the permission of Party A, no copy of them is allowed.

b.The technical information and drawings supplied by Party A would only be used by the personnel in the manufacturing and designing of the SGS-I, and nobody else are allowed to read them or inquire about the content of them.

c.Party B has adopted effective measures to keep the confidentiality of all the information supplied by Party B, and would not disclose them to any third party under any circumstances. And Party B assures that the personnel in the manufacturing and designing of the SGS-I would not disclose them to anybody else either.

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d.When the contract has been fulfilled or both parties agree to terminate the contract, unless permitted by Party A in writing, Party B should return all the technical information and drawings as well as their copies to Party A.

e.The SGS-I is special custom-made by Party B on the request of Party A, Party B is not allowed to offer the product to any third party.

f.If Party B violates the above stipulations to disclose confidential information and cause damages, Party A can pursue damage against Party B for such disclosure.

4. Production organization and equipment

1)Party B should organize specific persons to be responsible for the manufacturing of the SGS-I, and make sure the manufacture can be completed without any interference or influences by any outside factors.

2)The special tool equipment used for the devices belongs to Party A. When the contract has been fulfilled, the special tool equipment would be kept and maintained by Party B on the behalf of Party A, and the cost occurred due to the maintenance would be paid by Party B. Party B is not allowed to lend or transfer the above mentioned tool and equipment to any other parties. Party A needs to modify the above mentioned tool and equipment due to design improvement, Party B should cooperate actively, and the incidental cost is subject to further negotiation. The term of the maintenance would be expired by the time that both parties decide not to continue the cooperation of the project.. Such specific tool and equipment is not allowed be lent to other units for production.

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5. Date and place of delivery

1)Party B would finish the testing of 2 sets of the devices and deliver them out of factory on (). And the time for the other 2 sets would be informed with further notice.

2)Place of delivery: a place in China designated by Party A.

6. Payment

Party A would make payment to Party B as per the following:

1)When the contract takes effect, Party A pays Party B () for the 4 sets devices as advance payment. When the devices are ready for installation, Party A pays Party B () as progress payment. When the devices are accepted as qualified after ex-works acceptance inspection, Party A pays Party B () as delivery payment.

2)When each set of the devices is accepted as qualified after the testing and delivered out of factory, Party B shall offer a one-year warranty. When the warranty time expires, Party A would pay Party B () as quality guarantee money.

3)When Party B receives all the payment except for the quality guarantee money, Party B should issue the invoice for the total price of all sets of the devices, on the basis of VAT. The invoice should be issued under the name and address of Party A.

7. Packing, marks and shipment

1)Before the shipment of devices, Party B shall guarantee that the packing is done properly according to the Party A’s requirements, and that the packing is appropriate for the devices. The packing should be suitable for long-distance inland transportation, damp-proof, moisture-proof, rust-proof, and endurable for loading and unloading. The articles inside the packing should be fixed to guarantee the devices not to be damaged during transportation due to improper packing, and the devices can be safely transported to the place of installation. The loss due to improper packing would be paid by Party B.

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2)Party B should label each part in bulk pack inside the packing, indicating the mainframe number, name of part, and number of part. It is also necessary to label the spare parts with indication “spare parts” in addition to the above content.

3)Party B should print the following marks on the four sides of each packing, using colorfast paint and bold standard Chinese:

a.Mainframe number

b.Consignor and address

c.The contact and phone number of the consignor

d.Shipping destination and consignee

e.The contact and phone number of the consignee

f.Total packages/pieces and package number/piece number

g.Gross weight/net weight (kg)

h.Dimension (l*w*h, mm)

i.“Damp-proof, “Handle with care”, “This side up” etc. and marks

j.Position of lifting ropes

4)Each package should be provided with detailed packing list and quality certificate.

5)3 days before the shipment of the devices, Party B should present one copy of the detailed packing list, quality certificate and attached documents each to the representative of Party A to sign for acceptance.

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6)Party B is responsible for handling all the transportation, but the transportation cost and insurance fee would be paid in time by Party A. The shipping method rests with Party A.

8. Quality control and inspection

1)The quality control and inspection should be carried out as per the Appendix 2 “Quality assurance agreement of trial manufacturing of SGS-I”.

2)Any claim on the quality issues shall be pursued in accordance with Appendix 2 “Quality assurance agreement of trial manufacturing of SGS-I”.

9. Liabilities for breach of contract

1)If party A delays for more than 15 days in payment, for each day of delay, Party A should pay () to Party B of the total amount due as penalty; meanwhile, Party B can postpone the delivery accordingly.

2)If Party B delays for more than 15 days in delivery, for each day of delay, Party B should pay () to Party A of the total price of the delayed delivery as penalty.. Any delay for 2 months in delivery due to Party B, Party A is entitled to terminate the contract and request Party B to refund the advance payment and paid payment for the goods, and payParty A () as penalty. Within 7 days upon the receipt of the notice from Party A, Party B shall refund all the advance payment and paid payment for the goods, and shall pay penalty to Party A as well.

3)Any delay due to manufacturing quality and technology, shall be regarded as delay in delivery by Party B. The liability for any delay due to change of the designing shall be borne by Party A.

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10. Force majeure

In case of earthquake, typhoon, flood, fire, war, or other unforeseeable, unpreventable, and unavoidable accidents due to force majeure, the affected party should inform the other party about the details of the accident in time by telegraph/fax, and within 15 days since the occurrence of the accident, the affected party should offer the detailed description of the accident, reasons and effective evidence documents for failing to carry out the contract. The evidence documents should be issued by the notary organ at the place of the accident. Both Parties shall negotiate according to the influence of the accident on the performance of the contract, whether to cancel the contract, or exempt the responsibilities to undertake the contract partly, or postpone the implementation of the contract.

11. Contract Modification or Supplement

After the contract takes effect, both parties shall not modify or cancel it at will. In case of any matter uncovered hereunder, it is necessary for both parties to reach an agreement through negotiation and sign a supplemental contract/agreement to make it effective. The supplemental contract/agreement has equal legal effect as the contract.

12. Arbitration

Any disputes arising from the implementation of the contract shall be resolved through friendly negotiation between the parties. If negotiation fails to resolve the disputes, either party is entitled to file a suit to the People’s Court of the place where the contract has been executed.

13. Appendixes to the contract

There are 3 appendixes to the contract, which are the integral parts of the contract and have equal legal effect as the contract.

Appendix 1: “Detailed rules of the contract for commissioned manufacturing of SGS-I”

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Appendix 2: “Quality assurance agreement of trial manufacturing of SGS-I”

Appendix 3: The drawings and technical information of SGS-I

14. Counterparts

This contract has four (4) original copies, which shall be effective after being sealed by both Parties and being executed by the legal representatives or authorized agents of both Parities. Each Party shall keep two (2) copies of this contract.

Party A: Shenzhen Hyper Technology Incorporation	Party B: Chengdu Space Mould & Plastic Co., Ltd.
Representative: /s/ HUANG JIAN	Representative: /s/ WANG HUANSEN
Date: January 17, 2005	Date: January 8, 2005

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Appendix 1 to “Contract for Commissioned Manufacturing of SGS-I”:

Detailed Rules of the Subject Matters of the Contract for Commissioned

Manufacturing of SGS-I

1.To undertake the mechanical manufacturing of the mainframe of SGS-I The details include:

1.1Radiation unit (collimator carrier rotary module and driving device, source carrier module and driving device, rotary bearings, gantry, etc.)

1.2Source storage (storage body module, shielding door module and driving device, source box driving mechanism, source box lock mechanism, source storage stand, etc.)

1.33D treatment couch (Y axis motion module and driving device, X axis motion module and driving device, Z axis motion module and driving device, safety protection rings, etc.)

1.4Mainframe base, collimator lib and the ground cover board

1.5The accessories for installation of electric elements on the machine.

2.To undertake the purchase/quality inspection of the outsourced mechanical components of SGS-L The cost of the outsourced mechanical components is included in the contract.

3.The linear guide way, ball screw and relevant parts are provided by Hyper co. (the supplier is Shenzhen Xiangao company)

4.The outsourced decelerators for the motors are provided by Hyper co.

5.Electric cabinet, motors, and electric elements are provided by Hyper co.

6.Two large bearings, collimator bars, and all tungalloy parts are provided by Hyper co.

7.To be responsible for the installation of the mainframe motors and switches, and electric wiring.

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8.To cooperate in the electro-mechanical combined testing in hardware of the SGS-I, and offer necessary place and tools.

9.To be responsible for the manufacturing and assembly of the external decorative parts (including outside casing of glass fiber reinforced plastic, and carbon fiber couch) (provided by Hyper co.) and of the connecting parts of the mainframe.

10.To be responsible for the surface treatment of the device and parts.

10.1The anti-rust and paint of the internal surface of the mainframe parts.

10.2The treatment and paint of the external surface of the mainframe device.

11.To be responsible for the design of the packing of the mainframe and electric cabinet in accordance with the designing requirements from Hyper co.

12.To be responsible for making the packing of the mainframe and electric cabinet. The cost for the packing is included in the contract.

13.Shipment: to be responsible for transporting from the factory of Party A to the designated hospital. The transportation cost and insurance fee shall be paid separately by Hyper co..

14.It is necessary to designate certain staff to cooperate with Hyper co. in the installation and commissioning at the place of installation of the hospital. The travel expenses of the installation staff shall be paid by Party B.

15.For the installation and commissioning of exported devices, the travel expenses shall be paid by Party A.

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16.The costs for satisfying special requirements or designing changes shall be charged separately.

Party A: Shenzhen Hyper Technology Incorporation	Party B: Chengdu Space Mould & Plastic Co., Ltd.
Representative: /s/ HUANG JIAN	Representative: /s/ WANG HUANSEN
Date: January 17, 2005	Date: January 8, 2005

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Appendix 2 to “Contract for Commissioned Manufacturing of SGS-I”:

Quality Assurance Agreement of Trial Manufacturing of SGS-I

Shenzhen Hyper Technology Incorporation ( “Party A” hereafter) and Chengdu Space Mould & Plastic Co., Ltd. (“Party B” hereafter), for the quality assurance of the SGS-I mechanical parts that Party A commissioned Party B to manufacture, now come to the agreement hereunder by friendly negotiation and agree to comply with the agreement hereof.

1. Party B should manufacture the SGS-I strictly following the design drawings and technical information supplied by Party A, and Party B should take rigorous control of the manufacturing quality during manufacturing and provide qualified products to Party A.

2. Party B should prepare the written “Quality assurance plan of SGS-I” according to the technical information and design drawings and quality requirements, for the trial manufacturing of the SGS-I. The quality assurance plan must clearly define the specific quality control procedure, inspection methods, and corrective procedure for NG items, for every stage from materials, outsourcing, working, assembly, testing, to delivery. The quality assurance plan should be presented to Party A within 30 days since the contract takes effect and Party A offers the design drawings of the key and important parts. After approved by Party A and signed by both parties, the quality plan should be strictly complied with by Party B to take quality control.

3. Party B should prepare the complete set of the technical skill documents for all the manufacturing and assembly, in accordance with the design drawings supplied by Party A.

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4. `Party B should take the important procedure control of the key and important parts, as well as class A and B quality characteristic parameters, according to the “List of Key and Important Parts of SGS-I” and “Classification List of Quality Characteristic of SGS-I”, to determine the key and important procedures, make the quality control documents for them, make their work instructions, which shall be strictly complied with after Party A’s approval.

5. When Party B purchases materials and auxiliary materials, or selects the supplier for outsourced parts, all the suppliers for the products involving the class A and B quality characteristic parameters, shall be examined and approved by Party A. Party B should be responsible for the quality of the products from the suppliers. All the materials and outsourced parts must be provided with quality certificate and must be qualified through the recheck in the factory, and the quality records should also be kept.

6. During manufacturing, all parts should be provided with work flow quality record card, and when each work procedure is finished and before the next procedure begins, it is important to take the quality records. The final size, size tolerance, form and position tolerance, and the content of the technical requirements for all the parts should be 100% inspected (if there is special provisions, such provisions shall be complied with). After the final manufacturing and inspection, the work flow quality record card of the part would be stored with the part. The inspection data of the technical skill parameters of the key and important work procedure, as well as class A and B quality characteristic parameters, should be kept in detailed records, and one copy of the inspection records should be presented to the people of Party A in factory.

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7. During manufacturing, Party A has the right to send people or to appoint agents to take quality follow-up control of the whole process of manufacturing, and take follow-up inspection now and then on Party B’s actual implementation of manufacturing techniques, the quality control of the key and important work procedures, and the quality assurance system. Party B should assign one quality control person to be responsible for contacting and negotiating with the people sent by Party A, and providing convenience at work for them, for example, to supply the technical information, drawings, inspection tools and instruments, and allow the people sent by Party A to read and use the related quality documents and inspection records, test records, etc. The aim for Party A’s appointment of persons is to take quality follow-up control, but the follow-up control does not remit or reduce Party B’s responsibilities under the contract and its appendixes in quality, delivery schedule and others.

8. When Party A needs to make some changes to the technical information and design drawings for improvement, Party A should notify Party B in writing. After receipt of Party A’s notice Party B should cooperate actively and change the related technical skill, technical documents and in-process products in time.

9. If products during manufacturing do not meet specifications as the drawings and technical information require, Party B should find out the reasons and make corrections before the next procedure begins. The people in factory sent by Party A have the right to stop the working of the products if the problems have not been solved.

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10. For unqualified product during manufacturing, if it is key and important, or class A and B quality characteristic, and if Party B applies for recycle, it is necessary to fill in the “Report for recycle of unqualified products” in detail and Party B is not allowed to recycle it until Party A signs for approval. If Party A decides it can’t be recycled anymore, Party B should scrap the unqualified product. For the recycle of the unqualified product which is not key and important, or class A and B quality characteristic, Party B can undergo the recycle procedures according to the unqualified product approval procedure for recycle formalities of Party B’s factory, provided that a copy of the recycle report signed with final disposal opinion shall be supplied to Party A for record, and Party A has the veto right for such recycling. For all the scraps determined by Party B or Party A, Party B should put bold permanent marks on them to separate them.

11. Party B should cooperate actively with the people sent by Party A, determine the inspection content for assembly testing according to the technical information and design drawings, and prepare the inspection documents for assembly testing. After the inspection documents have been signed by Party A, during the assembly testing of parts and the whole machine, Party B should take inspection strictly following the stipulated content of the documents to make sure the assembly quality of the whole machine. After the assembly testing inspection turns out to be qualified, Party B should present one copy of the inspection records of a whole set of assembly testing to Party A, and the people sent by Party A would have an acceptance inspection. If there is any quality problem during the acceptance inspection, Party B is responsible for correcting it in time.

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12. Party B should cooperate actively with Party A to have electro-mechanical combined testing, and make corrections to those mechanical problems detected in the testing. After the electro-mechanical combined testing turns out to be qualified, Party B should present the quality certificate of the mainframe and ex-works inspection report, and product performance self-check report to Party A, as the evidence of the quality assurance for the subject matter of the contract. After Party A signs on the ex-works inspection report, Party B would be responsible for packing the devices, and shipping them to the place designated by Party A.

13. Party A has the right to recheck on the inspection results done by Party B. If Party A thinks Party B is unqualified for inspection, Party A has the right to deny the inspection results done by Party B, and offer practical and feasible inspection methods. In case disputes arising from such kind of problems, a third party approved by both parties may carry out the inspection and arbitrate the disputes. If the third party thinks the products are not qualified in quality, Party B should be responsible for repair or remanufacturing and for the loss. If the third party thinks the products are qualified in quality, the related costs shall be borne by Party A.

14. After the devices have been shipped to the place of installation designated by Party A, within 5 days at the receipt of the notice, Party B should send someone together with the people sent by Party A to have an open-package inspection of the devices, and finish the mechanical installation and commissioning. When the inspection as well as installation and commissioning turn out to be qualified, Party A shall issue “Product Acceptance Certificate” to Party B, and it is regarded that Party B has delivered the devices.

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15. During the inspection and installation and commissioning, if there are problems about product quantity or quality, Party B should make up, repair or change within 15 days, and bear all the cost incurred.

16. Party A retains the right to assess the quality assurance system of Party B according to ISO9001, to make sure the quality system of Party B is in accordance with the contract. Party A shall bear the cost for such assessment.

17. In the event that the product is correctly packed, operated and maintained, Party B should give a warranty period of 12 months to the subject matter of the contract. The warranty begins from the date of delivery out of factory. Within the warranty period, any defects due to manufacturing quality and material problems, within 5 days after receiving the written notice of Party A, Party B should go on site to repair for free, or change the defective parts. Otherwise, Party A retains the right to deduct the quality guarantee money or to file a claim.

18. The agreement has four (4) original copies, and each Party keeps two (2) of them. This agreement is attached to “Contract for Commissioned Manufacturing of SGS-I” as an appendix, and has equal legal effect as the contract after sealed and signed by both parties.

Party A: Shenzhen Hyper Technology Incorporation	Party B: Chengdu Space Mould & Plastic Co., Ltd.
Representative: /s/ HUANG JIAN	Representative: /s/ WANG HUANSEN
Date: January 17, 2005	Date: January 8, 2005

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EX-10.11

Capital Contribution Transfer Agreement

Transferor:	Shenzhen Huiheng Industry Co. Ltd.
Legal Representative: Registered Place: Registered Address:	Hui Xiaobing China No. 506 Block B, Yingdali Digital Park, Hongmian Road Futian Free Trade Zone, Shenzhen, Guangdong
Transferor: ID No.: Address:	Hui Xiaobing 110105531204181 30-D, Yinhu Jinbiyuan, Shenzhen, Guangdong
Transferee:	Allied Moral Holdings Limited
Authorized Representative: Registered Place: Address:	Huang Jian British Virgin islands (BVI) P.O. Box 957, Offshore Incorporation Center, Road Town, Tortola, British Virgin Islands

Whereas:

1.Tibet Changdu Shengfeng Industry Development Co., Ltd. (“Tibet Changdu”), a limited liability company which legally established on November 30, 2004 and duly existing;

2.The Transferors legally owns RMB50 million capital contribution in Tibet Changdu (“Designated Contribution” hereunder), which is 100% registered capital of Tibet Changdu;

3.The Transferors agree to transfer to the Transferee the Designated Contribution.

After friendly consultations, Transferors and Transferee hereby execute this capital contribution transfer agreement (“Agreement” hereunder) upon matters related to the transfer of the Designated Contribution.

Article 1.Warranties and Representations of the Parties

1.The Transferors hereby warrant and represent as follows:

(1)   the Transferors has full legal right, approval and authority to execute this Agreement and to perform its obligations hereunder;

(2)   the execution and performance of this Agreement do not and will not violate any other legitimate obligations assumed by Transferors;

(3)   the Designated Contribution was legally acquired by the Transferors, free from any pledge or encumbrance;

(4)   no any third party claims any rights on Designated Contribution.

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2.The Transferee hereby represents and warrants that:

(1)   the Transferee has full legal right, approval and authority to execute this Agreement and to perform its obligations hereunder;

(2)   the execution and performance of this Agreement do not and will not violate any other legitimate obligations assumed by Transferee.

Article 2.Transfer of Designated Contribution

1.In accordance with the terms and conditions of this Agreement, the Transferors agree to transfer to Transferee the Designated Contribution held by Transferors in Tibet Changdu, and Transferee agrees to acquire such Designated Contribution transferred by Transferors under the terms and conditions hereunder.

2.After the transfer of the Designated Contribution, Transferor shall no longer have any equity investment in Tibet Changdu.

Article 3.Transfer Price and Its Payment

1.The Transfer Price for the Designated Contribution shall be RMB50 million. The Transferee shall bear its duties and obligations in Tibet Changdu proportionate to the actually paid up contribution.

2.Transferor shall pay up the Transfer Price within 180 days since the day of approval.

Article 4.Registration Procedures and Fees for Transfer

1.After the Transferee's acquisition of the Designated Contribution, Tibet Changdu shall become a wholly foreign-owned enterprise. Transferors shall urge and cause Tibet Changdu to properly finish the procedures for Designated Contribution's approval and modification within 20 business days since the effective day of this Agreement.

2.Fees for undertaking the procedures for the Designated Contribution's approval and modification shall be borne by Tibet Changdu.

Article 5.Special Agreements

1.After modification registration procedure for the Designated Contribution has been completed and the Transfer Price has been fully paid up by Transferee, the shareholder's rights and obligations in Tibet Changdu originally enjoyed and borne by Transferors for the Designated Contribution shall be completely assumed by Transferee accordingly.

2.The Transferee shall guarantee that after the transfer of the Designated Contribution, the recruitment, engagement, dismissal, salary, welfare and other matters related to the employees of Tibet Changdu shall be still governed by Chinese Laws and the company regulations of Tibet Changdu. The Transferee should not intervene by any way into the management of employment of Tibet Changdu.

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3.The Transferee shall guarantee that after the transfer of the Designated Contribution, Tibet Changdu shall undertake its already existing credits and debts.

Article 6.Liabilities for Breach of Contracts

Any party in violation of the provisions of this agreement shall compensate for all economic losses induced to the other party who has fulfilled its obligations.

Article 7.Applicable Law and of Dispute Settlement

1.This agreement shall be governed by Chinese Laws.

2.All disputes under this Agreement, if not settled through friendly negotiation, the dispute shall be submitted for arbitration under the auspices of Shenzhen Arbitration Committee in accordance with its arbitration rules.

Article 8.Effectiveness and Miscellaneous

1.This Agreement shall be executed on the date of the signing and sealing by the Transferors and the signing of the authorized representatives by the Transferee respectively.

2.This Agreement shall be executed in 8 counterparts, two shall be kept by the parties, one shall be kept in the archives of Tibet Changdu, one for record at the registration department of relevant administration for industry and commerce of China, the rest shall be submitted to the approval authority.

Transferor: Shenzhen Huiheng Industry Ltd. Co.

by Legal/Authorized Representative: /s/ HUI XIAOBING

Transferor: Hui Xiaobing

Transferee: Allied Moral Holdings Ltd. Co.

by Legal/Authorized Representative: /s/ HUANG JIAN

Place of Signing:Shenzhen, Guangdong

Date of Signing:August 21st, 2006

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EX-10.12

THE REGISTERED HOLDER OF THIS PURCHASE OPTION BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE OPTION EXCEPT AS HEREIN PROVIDED.

NOT EXERCISABLE PRIOR TO ___________, 2008. VOID AFTER 5:00 P.M. EASTERN TIME, _________, 20013.

PURCHASE OPTION

FOR THE PURCHASE OF UP TO

_______________ SHARES OF COMMON STOCK

OF

HUIHENG MEDICAL, INC.

(A NEVADA CORPORATION)

1.Purchase Option.

In consideration of $100.00 duly paid by or on behalf of ____________________ (“Holder”), as registered owner of this Purchase Option, to Huiheng Medical, Inc. (“Company”), Holder is entitled, at any time or from time to time at or after ____________, 2008 (“Commencement Date”), and at or before 5:00 p.m., Eastern Time, ____________, 2013 (“Expiration Date”), but not thereafter, to subscribe for, purchase and receive, in whole or in part, up to ________ (7% of Offering) shares of Common Stock of the Company, $0.001 par value (“Common Stock”). If the Expiration Date is a day on which banking institutions are authorized by law to close, then this Purchase Option may be exercised on the next succeeding day which is not such a day in accordance with the terms herein. During the period ending on the Expiration Date, the Company agrees not to take any action that would terminate the Purchase Option. This Purchase Option is initially exercisable at $______ per share of Common Stock purchased (115% of the initial public offering (“Offering”) price per share of Common Stock registered under the registration statement on Form SB-2 (No. 333-146975)), provided, however, that upon the occurrence of any of the events specified in Section 6 hereof, the rights granted by this Purchase Option, including the exercise price and the number of shares of Common Stock to be received upon such exercise, shall be adjusted as therein specified. The term “Exercise Price” shall mean the initial exercise price or the adjusted exercise price, depending on the context.

2.Exercise.

2.1Exercise Form. In order to exercise this Purchase Option, the exercise form attached hereto must be duly executed and completed and delivered to the Company, together with this Purchase Option and payment of the Exercise Price in cash or by certified check or official bank check for the shares of Common Stock being purchased. If the subscription rights represented hereby shall not be exercised at or before 5:00 p.m., Eastern time, on the Expiration Date, this Purchase Option shall become and be void without further force or effect, and all rights represented hereby shall cease and expire.

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2.2Legend. Each certificate for shares of Common Stock purchased under this Purchase Option shall bear a legend as follows unless such shares of Common Stock have been registered under the Securities Act of 1933, as amended (“Act”):

“The shares of Common Stock represented by this certificate have not been registered under the Securities Act of 1933, as amended (“Act”) or applicable state law. The shares may not be offered for sale, sold or otherwise transferred except pursuant to an effective registration statement under the Act, or pursuant to an exemption from registration under the Act and applicable state law.”

2.3Conversion Right.

2.3.1Determination of Amount. In lieu of the payment of the Exercise Price in the manner required by Section 2.1, the Holder shall have the right (but not the obligation) to convert any exercisable but unexercised portion of this Purchase Option into shares of Common Stock (“Conversion Right”) as follows. Upon exercise of the Conversion Right, the Company shall deliver to the Holder (without payment by the Holder of any of the Exercise Price in cash) that number of shares of Common Stock equal to the quotient obtained by dividing (x) the “Value” (as defined below), at the close of trading on the next to last trading day immediately preceding the exercise of the Conversion Right, of the portion of the Purchase Option being converted by (y) the “Market Price” (as defined below). The “Value” of the portion of the Purchase Option being converted shall equal the remainder derived from subtracting (a) the Exercise Price multiplied by the number of shares of Common Stock underlying that portion of the Purchase Option being converted from (b) the Market Price of the Common Stock multiplied by the number of shares of Common Stock underlying that portion of the Purchase Option being converted. As used herein, the term “Market Price” at any date shall be deemed to be the last reported sale price of the Common Stock on such date, or, in case no such reported sale takes place on such day, the last reported sale price for the immediately preceding trading day, in either case as officially reported by the principal securities exchange on which the Common Stock is listed or admitted to trading, or, if the Common Stock is not listed or admitted to trading on any national securities exchange or if any such exchange on which the Common Stock is listed is not its principal trading market, the last reported sale price as furnished by the The Financial Industry Regulatory Authority (“FINRA”) through the NASDAQ Global Market or NASDAQ Capital Market, or, if applicable, the OTC Bulletin Board, or if the Common Stock is not listed or admitted to trading on any of the foregoing markets, or similar organization, as determined in good faith by resolution of the Board of Directors of the Company, based on the best information available to it.

2.3.2Mechanics of Conversion. The Conversion Right may be exercised by the Holder on any business day on or after the Commencement Date and not later than the Expiration Date by delivering the Purchase Option with a duly executed exercise form attached hereto with a completed Conversion Right section to the Company, exercising the Conversion Right and specifying the total number of shares of Common Stock that the Holder will purchase pursuant to such Conversion Right.

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3.Transfer.

3.1General Restrictions. The registered Holder of this Purchase Option, by its acceptance hereof, agrees that it will not sell, transfer or assign or hypothecate this Purchase Option prior to the Commencement Date to anyone other than (i) an officer or partner of such Holder, (ii) an officer of either Chardan Capital Markets, LLC, the representative of the underwriters (“Underwriters”) of the Offering with respect to which this Purchase Option has been issued, or an officer or partner of the underwriting syndicate or any selected dealer in connection with the Company's public offering with respect to which this Purchase Option has been issued, or any selected dealer or member of the underwriting syndicate . On and after the Commencement Date, transfers to others may be made subject to compliance with or exemptions from applicable securities laws. In order to make any permitted assignment, the Holder must deliver to the Company the assignment form attached hereto duly executed and completed, together with the Purchase Option and payment of all transfer taxes, if any, payable in connection therewith. The Company shall immediately transfer this Purchase Option on the books of the Company and shall execute and deliver a new Purchase Option or Purchase Options of like tenor to the appropriate assignee(s) expressly evidencing the right to purchase the aggregate number of shares of Common Stock purchasable hereunder or such portion of such number as shall be contemplated by any such assignment.

3.2Restrictions Imposed by the Act. This Purchase Option and the shares of Common Stock underlying this Purchase Option shall not be transferred unless and until (i) the Company has received an opinion of counsel for the Holder that this Purchase Option or the shares of Common Stock, as the case may be, may be transferred pursuant to an exemption from registration under the Act and applicable state law, the availability of which is established to the reasonable satisfaction of the Company (the Company hereby agreeing that an opinion of Loeb & Loeb LLP shall be deemed satisfactory evidence of the availability of an exemption), or (ii) a registration statement relating to such Purchase Option or shares of Common Stock, as the case may be, has been filed by the Company and declared effective by the Securities and Exchange Commission (“Commission”) and in compliance with applicable state law.

4.New Purchase Options to Be Issued.

4.1Partial Exercise or Transfer. Subject to the restrictions in Section 3 hereof, this Purchase Option may be exercised or assigned in whole or in part. In the event of the exercise or assignment hereof in part only, upon surrender of this Purchase Option for cancellation, together with the duly executed exercise or assignment form and funds sufficient to pay any Exercise Price and/or transfer tax, the Company shall cause to be delivered to the Holder without charge a new Purchase Option of like tenor to this Purchase Option in the name of the Holder evidencing the right of the Holder to purchase the aggregate number of shares of Common Stock purchasable hereunder as to which this Purchase Option has not been exercised or assigned.

4.2Lost Certificate. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Purchase Option and of reasonably satisfactory indemnification, the Company shall execute and deliver a new Purchase Option of like tenor and date. Any such new Purchase Option executed and delivered as a result of such loss, theft, mutilation or destruction shall constitute a substitute contractual obligation on the part of the Company.

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5.Registration Rights.

5.1Demand Registration.

5.1.1Grant of Right. The Company, upon written demand (“Initial Demand Notice”) of the Holder(s) of at least 51% of the Purchase Options and/or the underlying shares of Common Stock (“Majority Holders”), agrees to register on one occasion, all or any portion of the Purchase Options requested by the Majority Holders in the Initial Demand Notice and all of the shares of Common Stock underlying such Purchase Options (collectively the “Registrable Securities”). On such occasion, the Company will file a registration statement covering the Registrable Securities within sixty (60) days after receipt of the Initial Demand Notice and use its best efforts to have the registration statement declared effective promptly thereafter. If the Company fails to comply with the provisions of this Section 5.1.1, the Company shall, in addition to any other equitable or other relief available to the Holder(s), be liable for any and all incidental, special and consequential damages sustained by the Holder(s). The demand for registration may be made at any time during the five year period commencing after the closing of the Offering (“Closing”). The Company covenants and agrees to give written notice of its receipt of any Initial Demand Notice by any Holder(s) to all other registered Holders of the Purchase Options and/or the Registrable Securities within ten days from the date of the receipt of any such Initial Demand Notice.

5.1.2Terms. The Company shall bear all fees and expenses attendant to registering the Registrable Securities, but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. The Company agrees to use its best efforts to cause the filing required herein to become effective promptly and to qualify or register the Registrable Securities in such States as are reasonably requested by the Holder(s); provided, however, that in no event shall the Company be required to register the Registrable Securities in a State in which such registration would cause (i) the Company to be obligated to register or license to do business in such State or submit to general service of process in such State, or (ii) the principal stockholders of the Company to be obligated to escrow their shares of capital stock of the Company. The Company shall cause any registration statement filed pursuant to the demand right granted under Section 5.1.1 to remain effective for a period of at least twelve consecutive months from the date that the Holders of the Registrable Securities covered by such registration statement are first given the opportunity to sell all of such securities.

5.2“Piggyback” Registration.

5.2.1Grant of Right. In addition to the demand right of registration, the Holders of the Purchase Options shall have the unlimited right during the five year period commencing after the Closing, to include the Registrable Securities as part of any other registration of securities filed by the Company (other than in connection with a transaction contemplated by Rule 145(a) promulgated under the Act or pursuant to Form S-8 or any equivalent form) as long as such registration covers securities with a market value on the date of the initial filing of such registration statement in excess of $200,000; provided, however, that if, in the written determination of the Company's managing underwriter or underwriters, if any, for such offering, the inclusion of the Registrable Securities, when added to the securities being registered by the Company or the selling stockholder(s), will exceed the maximum amount of the Company's securities which can be marketed (i) at a price reasonably related to their then current market value, or (ii) without materially and adversely affecting the entire offering, the Company shall nevertheless register all or any portion of the Registrable Securities required to be so registered but such Registrable Securities shall not be sold by the Holders until 90 days after the registration statement for such offering has become effective and provided further that, if any securities are registered for sale on behalf of other stockholders in such offering and such stockholders have not agreed to defer such sale until the expiration of such 90 day period, the number of securities to be sold by all stockholders in such public offering during such 90 day period shall be apportioned pro rata among all such selling stockholders, including all holders of the Registrable Securities, according to the total amount of securities of the Company owned by said selling stockholders, including all holders of the Registrable Securities.

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5.2.2Terms. The Company shall bear all fees and expenses attendant to registering the Registrable Securities, but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. In the event of such a proposed registration, the Company shall furnish the then Holders of outstanding Registrable Securities with not less than thirty (30) days written notice prior to the proposed date of filing of such registration statement. Such notice to the Holders shall continue to be given for each registration statement filed by the Company until such time as all of the Registrable Securities have been sold by the Holder. The holders of the Registrable Securities shall exercise the “piggyback” rights provided for herein by giving written notice within twenty (20) days of the receipt of the Company's notice of its intention to file a registration statement. The Company shall cause any registration statement filed pursuant to the above “piggyback” rights to remain effective for at least twelve months from the date that the Holders of the Registrable Securities are first given the opportunity to sell all of such securities. The demand and “piggyback” rights set forth in this Section 5 shall cease at such time that the underlying shares of common stock are saleable under Rule 144(k) promulgated under the Act.

5.3General Terms.

5.3.1Indemnification. The Company shall indemnify the Holder(s) of the Registrable Securities to be sold pursuant to any registration statement hereunder and each person, if any, who controls such Holders within the meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), against all loss, claim, damage, expense or liability (including all reasonable attorneys' fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which any of them may become subject under the Act, the Exchange Act or otherwise, arising from such registration statement but only to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the Underwriters contained in Section 5 of the underwriting agreement (“Underwriting Agreement”) between the Underwriters and the Company, dated the effective date of the Offering. The Holder(s) of the Registrable Securities to be sold pursuant to such registration statement, and their successors and assigns, shall severally, and not jointly, indemnify the Company against all loss, claim, damage, expense or liability (including all reasonable attorneys' fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which they may become subject under the Act, the Exchange Act or otherwise, arising from information furnished by or on behalf of such Holders, or their successors or assigns, in writing, for specific inclusion in such registration statement to the same extent and with the same effect as the provisions contained in Section 5 of the Underwriting Agreement pursuant to which the underwriters have agreed to indemnify the Company.

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5.3.2Exercise of Purchase Options. Nothing contained in this Purchase Option shall be construed as requiring the Holder(s) to exercise their Purchase Options prior to or after the initial filing of any registration statement or the effectiveness thereof.

5.3.3Documents Delivered to Holders. The Company shall furnish to each Holder participating in any of the foregoing offerings and to each underwriter of any such offering, if any, a signed counterpart, addressed to such Holder or underwriter, of (i) an opinion of counsel to the Company, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, an opinion dated the date of the closing under any underwriting agreement related thereto), and (ii) a “cold comfort” letter dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, a letter dated the date of the closing under the underwriting agreement) signed by the independent public accountants who have issued a report on the Company's financial statements included in such registration statement, in each case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of such accountants' letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to underwriters in underwritten public offerings of securities. The Company shall also deliver promptly to each Holder participating in the offering requesting the correspondence and memoranda described below and to the managing underwriter copies of all correspondence between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to the registration statement and permit each Holder and underwriter to do such investigation, upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary to comply with applicable securities laws or rules of FINRA. Such investigation shall include access to books, records and properties and opportunities to discuss the business of the Company with its officers and independent auditors, all to such reasonable extent and at such reasonable times as any such Holder shall reasonably request.

5.3.4Underwriting Agreement. The Company shall enter into an underwriting agreement with the managing underwriter(s) selected by any Holders whose Registrable Securities are being registered pursuant to this Section 5, which managing underwriter shall be reasonably satisfactory to the Company. Such agreement shall be reasonably satisfactory in form and substance to the Company, each Holder and such managing underwriters, and shall contain such representations, warranties and covenants by the Company and such other terms as are customarily contained in agreements of that type used by the managing underwriter. The Holders shall be parties to any underwriting agreement relating to an underwritten sale of their Registrable Securities and may, at their option, require that any or all the representations, warranties and covenants of the Company to or for the benefit of such underwriters shall also be made to and for the benefit of such Holders. Such Holders shall not be required to make any representations or warranties to or agreements with the Company or the underwriters except as they may relate to such Holders, their shares and their intended methods of distribution.

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5.3.5Documents to Be Delivered by Holder(s). Each of the Holder(s) participating in any of the foregoing offerings shall furnish to the Company a completed and executed questionnaire provided by the Company requesting information customarily sought of selling securityholders.

6.Adjustments.

6.1Adjustments to Exercise Price and Number of Securities. The Exercise Price and the number of shares of Common Stock underlying the Purchase Option shall be subject to adjustment from time to time as hereinafter set forth:

6.1.1Stock Dividends - Recapitalization, Reclassification, Split-Ups. If after the date hereof, and subject to the provisions of Section 6.2 below, the number of outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock or by a split-up, recapitalization or reclassification of shares of Common Stock or other similar event, then, on the effective date thereof, the number of shares of Common Stock issuable on exercise of the Purchase Option shall be increased in proportion to such increase in outstanding shares of Common Stock.

6.1.2Aggregation of Shares. If after the date hereof, and subject to the provisions of Section 6.2, the number of outstanding shares of Common Stock is decreased by a consolidation, combination or reclassification of shares of Common Stock or other similar event, then, upon the effective date thereof, the number of shares of Common Stock issuable on exercise of the Purchase Option shall be decreased in proportion to such decrease in outstanding shares.

6.1.3Adjustments in Exercise Price. Whenever the number of shares of Common Stock purchasable upon the exercise of this Purchase Option is adjusted, as provided in this Section 6.1, the Exercise Price shall be adjusted (to the nearest cent) by multiplying such Exercise Price immediately prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Common Stock purchasable upon the exercise of this Purchase Option immediately prior to such adjustment, and (y) the denominator of which shall be the number of shares of Common Stock so purchasable immediately thereafter.

6.1.4Replacement of Securities upon Reorganization, etc. In case of any reclassification or reorganization of the outstanding shares of Common Stock other than a change covered by Section 6.1.1 hereof or which solely affects the par value of such shares of Common Stock, or in the case of any merger or consolidation of the Company with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and which does not result in any reclassification or reorganization of the outstanding shares of Common Stock), or in the case of any sale or conveyance to another corporation or entity of the property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the Holder of this Purchase Option shall have the right thereafter (until the expiration of the right of exercise of this Purchase Option) to receive upon the exercise hereof, for the same aggregate Exercise Price payable hereunder immediately prior to such event, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or other transfer, by a Holder of the number of shares of Common Stock of the Company obtainable upon exercise of this Purchase Option immediately prior to such event; and if any reclassification also results in a change in shares of Common Stock covered by Section 6.1.1, then such adjustment shall be made pursuant to Sections 6.1.1, 6.1.3 and this Section 6.1.4. The provisions of this Section 6.1.4 shall similarly apply to successive reclassifications, reorganizations, mergers or consolidations, sales or other transfers.

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6.1.5Changes in Form of Purchase Option. This form of Purchase Option need not be changed because of any change pursuant to this Section, and Purchase Options issued after such change may state the same Exercise Price and the same number of shares of Common Stock as are stated in the Purchase Options initially issued pursuant to the Underwriting Agreement. The acceptance by any Holder of the issuance of new Purchase Options reflecting a required or permissive change shall not be deemed to waive any rights to a prior adjustment or the computation thereof.

6.2Elimination of Fractional Interests. The Company shall not be required to issue certificates representing fractions of shares of Common Stock upon the exercise or transfer of the Purchase Option, nor shall it be required to issue scrip or pay cash in lieu of any fractional interests, it being the intent of the parties that all fractional interests shall be eliminated by rounding any fraction up or down to the nearest whole number of shares of Common Stock.

7.Reservation and Listing. The Company shall at all times reserve and keep available out of its authorized shares of Common Stock, solely for the purpose of issuance upon exercise of the Purchase Options, such number of shares of Common Stock or other securities, properties or rights as shall be issuable upon the exercise thereof. The Company covenants and agrees that, upon exercise of the Purchase Options and payment of the Exercise Price therefor, all shares of Common Stock and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any stockholder. As long as the Purchase Options shall be outstanding, the Company shall use its best efforts to cause all shares of Common Stock issuable upon exercise of the Purchase Options to be listed and/or quoted (subject to official notice of issuance) on all securities exchanges (or, if applicable on NASDAQ) on which the Common Stock issued to the public in connection herewith are then listed and/or quoted.

8.Certain Notice Requirements.

8.1Holder's Right to Receive Notice. Nothing herein shall be construed as conferring upon the Holders the right to vote or consent or to receive notice as a stockholder for the election of directors or any other matter, or as having any rights whatsoever as a stockholder of the Company. If, however, at any time prior to the expiration of the Purchase Options and their exercise, any of the events described in Section 8.2 shall occur, then, in one or more of said events, the Company shall give written notice of such event at least fifteen days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the stockholders entitled to such dividend, distribution, conversion or exchange of securities or subscription rights, or entitled to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall specify such record date or the date of the closing of the transfer books, as the case may be.

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8.2Events Requiring Notice. The Company shall be required to give the notice described in this Section 8 upon one or more of the following events: (i) if the Company shall take a record of the holders of its shares of Common Stock for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company, or (ii) the Company shall offer to all the holders of its Common Stock any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option, right or warrant to subscribe therefor, or (iii) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or merger) or a sale of all or substantially all of its property, assets and business shall be proposed.

8.3Notice of Change in Exercise Price. The Company shall, promptly after an event requiring a change in the Exercise Price pursuant to Section 6 hereof, send notice to the Holders of such event and change (“Price Notice”). The Price Notice shall describe the event causing the change and the method of calculating same and shall be certified as being true and accurate by the Company's President and Chief Financial Officer.

8.4Transmittal of Notices. All notices, requests, consents and other communications under this Purchase Option shall be in writing and shall be deemed to have been duly made on the date of delivery if delivered personally or sent by overnight courier, with acknowledgement of receipt to the party to which notice is given, or on the fifth day after mailing if mailed to the party to whom notice is to be given, by registered or certified mail, return receipt requested, postage prepaid and properly addressed as follows: (i) if to the registered Holder of the Purchase Option, to the address of such Holder as shown on the books of the Company, or (ii) if to the Company, to its principal executive office.

9.Miscellaneous.

9.1Amendments. The Company and the Underwriters may from time to time supplement or amend this Purchase Option without the approval of any of the Holders in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company and the Underwriters may deem necessary or desirable and which the Company and the Underwriters deem shall not adversely affect the interest of the Holders. All other modifications or amendments shall require the written consent of the party against whom enforcement of the modification or amendment is sought.

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9.2Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Purchase Option.

9.3Entire Agreement. This Purchase Option (together with the other agreements and documents being delivered pursuant to or in connection with this Purchase Option) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.

9.4Binding Effect. This Purchase Option shall inure solely to the benefit of and shall be binding upon, the Holder and the Company and their respective successors, legal representatives and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Purchase Option or any provisions herein contained.

9.5Governing Law; Submission to Jurisdiction. This Purchase Option shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of laws. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Purchase Option shall be brought and enforced in the courts of the State of New York or of the United States of America for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to DLA Piper US LLP, 4365 Executive Drive, Suite 1100, San Diego, CA 92121, Attention: Doug Rein. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim. The Company and the Holder, by acceptance hereof, agree that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys' fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor.

9.6Waiver, etc. The failure of the Company or the Holder to at any time enforce any of the provisions of this Purchase Option shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Purchase Option or any provision hereof or the right of the Company or any Holder to thereafter enforce each and every provision of this Purchase Option. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Purchase Option shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.

10

IN WITNESS WHEREOF, the Company has caused this Purchase Option to be signed by its duly authorized officer as of the ____________ day of ____________, 2008.

HUIHENG MEDICAL, INC.
By:
	Hui Xiaobing Chief Executive Officer

11

Form to be used to exercise Purchase Option:

HUIHENG MEDICAL, INC.

Date:_________________, 20__

The undersigned hereby elects irrevocably to exercise the within Purchase Option and to purchase ____ shares of Common Stock of Huiheng Medical, Inc. and hereby makes payment of $____________ (at the rate of $_________ per share of Common Stock and $______ per Warrant) in payment of the Exercise Price pursuant thereto. Please issue the Common Stock as to which this Purchase Option is exercised in accordance with the instructions given below.

OR

The undersigned hereby elects irrevocably to exercise the within Purchase Option and to purchase _________ shares of Common Stock of Huiheng Medical, Inc. by surrender of the unexercised portion of the within Purchase Option (with a “Value” of $_______ based on a “Market Price” of $__________.) Please issue the Common Stock as to which this Purchase Option is exercised in accordance with the instructions given below.

Signature

NOTICE: THE SIGNATURE TO THIS FORM MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE WITHIN PURCHASE OPTION IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.

INSTRUCTIONS FOR REGISTRATION OF SECURITIES

Name
	(Print in Block Letters)
Address

12

Form to be used to assign Purchase Option:

ASSIGNMENT

(To be executed by the registered Holder to effect a transfer of the within Purchase Option):

FOR VALUE RECEIVED,__________________________________ does hereby sell, assign and transfer unto _______________________ the right to purchase _______________________ shares of Common Stock of Huiheng Medical, Inc. (“Company”) evidenced by the within Purchase Option and does hereby authorize the Company to transfer such right on the books of the Company.

Dated: _________________________, 20__

	Signature
Signature Guaranteed

NOTICE: THE SIGNATURE TO THIS FORM MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE WITHIN PURCHASE OPTION IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A BANK, OTHER THAN A SAVINGS BANK, OR BY A TRUST COMPANY OR BY A FIRM HAVING MEMBERSHIP ON A REGISTERED NATIONAL SECURITIES EXCHANGE.

13

EX-10.13

Creditor’s Rights and Liability Confirmation Agreement

Party A: Tibet Changdu Huiheng Development Co., Ltd.

Party B: Shenzhen OUR International Technology Development Co., Ltd.

Party C: Shenzhen Jiancheng Investment Co., Ltd.

1. Whereas: both Party A and Party B are shareholders of Shenzhen Hyper Technology Incorporation (“Shenzhen Hyper” hereinafter), Party A holds 75% equity interest while Party B holds 25% equity interest of Shenzhen Hyper; By the end of December 31, 2007, Party C still owes Party A 5 million RMB.

2. Whereas: Party A, B and C agreed in early 2006 on the following: Party B would transfer its 25% equity interest of Shenzhen Hyper to Party A; Party C would pay 5 million RMB to Party B on behalf of Party A.

3. Whereas Party B can not execute the equity interest transfer up to now, Party A, B and C reach an agreement by negotiation: the equity interest transaction between Party A and B should be suspended, Party B still keeps the 25% equity interest of Shenzhen Hyper, and Party C would pay back by 5 million RMB to Party A by installment. The specific repayment schedule is as follows:

By the end of June, 2008: pay back 1.5 million RMB;

By the end of August, 2008: pay back 1.5 million RMB;

By the end of October, 2008: pay back 1 million RMB;

By the end of December, 2008: pay back the balance of 1 million RMB;

4. The agreement should come into effective after signed and sealed by Party A, B and C. Three copies of the agreement should be signed, and each party should hold one copy.

5. Should any dispute arise for the execution of the agreement, Party A, B and C should go for a settlement through negotiation. If no agreement can be made through negotiation, any party can place an arbitration the place of signing the agreement. The result of arbitration is considered to be final.

Party A: Tiber Changdu Huiheng Development Co., Ltd.

By: /s/ Richard Shen  

Representative: Mr. Richard Shen

Party B: Shenzhen OUR International Technology Development Co., Ltd.

By: /s/ Jin Hong  

Representative: Ms. Jin Hong

Party C: Shenzhen Jiancheng Investment Co., Ltd.

By: /s/ Li Jun  

Representative: Mr. Li Jun

Date of signing:	Place of signing:
January 3, 2008	Shenzhen, Guangdong, PRC

EX-23.1

Consent of Independent Registered Public Accounting Firm

We consent to the inclusion in this Amendment to the Registration Statement on Form S-1 to Form SB-2 for Huiheng Medical, Inc. (the “Company”) of our report, dated March 28, 2008, of the consolidated financial statements of the Company for the years ending December 31, 2007 and 2006.

Furthermore, we also consent to the reference to us under the heading “Experts” in this Amendment to the Registration Statement.

/s/ UHY ZTHZ HK CPA Limited          

UHY ZTHZ HK CPA LIMITED

April 18, 2008

EX-99.2

CERTIFICATE OF DESIGNATIONS

OF RIGHTS AND PREFERENCES OF THE

SERIES A 7% CONVERTIBLE PREFERRED STOCK

OF

MILL BASIN TECHNOLOGIES, LTD.

Pursuant to the authority expressly granted and vested in the Board of Directors (the "Board of Directors" or the "Board") of Mill Basin Technologies, Ltd. (the "Company") by the Nevada Private Corporations Law (the "Corporation Law") and the provisions of the Company’s Certificate of Incorporation, as amended, the Board of Directors adopted the following resolution setting forth the designations, powers, preferences and rights of its Series A 7% Convertible Preferred Stock (the "Certificate of Designations") on May 14, 2007:

RESOLVED: That the designations, powers, preferences and rights of the Series A Convertible Preferred Stock be, and they hereby are, as set forth below:

I. DESIGNATION AND AMOUNT

The designation of this series, which consists of 300,000 shares of Preferred Stock, par value $.001 per share, is the Series A 7% Convertible Preferred Stock (the "Designated Preferred Stock").

II. CERTAIN DEFINITIONS

For purposes of this Certificate of Designations, the following terms shall have the following meanings:

"Acceptable Trading Market" means any one or more of (i) the New York Stock Exchange, (ii) the American Stock Exchange or (iii) the NASDAQ Capital Market, Global Market or Global Select Market.

"Commencement Date" means the date of issuance of the Designated Preferred Stock to a Holder.

"Common Stock" means the Company’s common stock, par value $.001 per share.

"Conversion Rate" has the meaning ascribed to it in Paragraph A of Article IV hereof.

"Conversion Shares" means the shares of Common Stock issuable on conversion of the Designated Preferred Stock.

"Converted Share" means a share of Designated Preferred Stock submitted for conversion at any time.

"Holder" means a person or entity holding shares of the Designated Preferred Stock.

"Junior Securities" means (i) any class or series of capital stock of the Company authorized prior to the filing of this Certificate of Designations that, by its terms, ranks junior to the Designated Preferred Stock as to distribution of assets upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary and (ii) all classes or series of capital stock of the Company authorized after the filing of this Certificate of Designations, unless consented to as provided herein in each instance, each of which shall rank junior to the Designated Preferred Stock as to distribution of assets upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary.

"Liquidation Preference" means, with respect to shares of Unconverted Preferred Stock held by a Holder, an amount equal to the Stated Value thereof, plus all accrued but unpaid dividends.

"Pari Passu Securities" means any class or series of capital stock of the Company hereafter created specifically ranking, by its terms, on parity with the Designated Preferred Stock as to distribution of assets upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary.

"Registered Agent" means the transfer agent designated by the Company for the Designated Preferred Stock.

"Securities" means the shares of Designated Preferred Stock or the Common Stock of the Company into which such shares are converted or convertible, as contemplated hereby.

"Senior Securities" means each class or series of capital stock of the Company authorized prior to the original filing of this Certificate of Designations that, by its terms, is senior to the Designated Preferred Stock as to distribution of assets upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary if, but only if, securities from such class or series have been issued prior to the Commencement Date.

"Stated Value" for each share of the Designated Preferred Stock shall be $37.50.

"Unconverted Preferred Stock" means, as of the relevant date, the shares of Designated Preferred Stock for which a Notice of Conversion has not yet been submitted.

III. DIVIDENDS

A. Generally. The Holders of the Designated Preferred Stock shall be entitled to receive a dividend at the rate of 7% per annum on the outstanding Stated Value, payable on the (i) the occurrence of a Liquidation Event (as defined below) or (ii) a redemption of the Unconverted Preferred Stock, as provided herein (the due date of any such dividend, a "Dividend Payment Date"). Dividends shall calculated on a daily basis from the date of issuance of the Designated Preferred Stock or the last date of payment of a dividend thereon, whichever is later, until the date of payment, but shall be fully cumulative on an annual basis. Such dividends shall be payable in preference to dividends on any Common Stock or stock of any class ranking, as to dividend rights, junior to the Designated Preferred Stock, and shall be junior as to payment of dividends to the Senior Securities. Dividends shall accrue (whether or not declared and whether or not there shall be funds legally available for the payment of dividends) daily (based on a 365-day year), and shall be payable on the Dividend Payment Date unless such payment would be in violation of the Corporation Law.

B. Limitations on Other Dividends and Distributions by Company. So long as any shares of Designated Preferred Stock shall be outstanding, no dividend, whether in cash or property, shall be paid or declared, nor shall any other distribution be made, on any Common Stock or other Junior Securities, nor shall any shares of Common Stock or other Junior Security be purchased, redeemed or otherwise acquired for value by the Company (except for acquisitions of shares of Common Stock by the Company pursuant to agreements which permit the Company to repurchase such shares upon termination of services to the Company) until all accrued dividends on the Designated Preferred Stock shall have been paid or shall have been declared and set apart.

IV. CONVERSION AND REDEMPTION

A. Voluntary Conversions by the Holder.

(i)Each Holder of shares of Designated Preferred Stock may, at any time and from time to time after the Commencement Date, convert each of its shares of Designated Preferred Stock into a number of fully paid and nonassessable shares of Common Stock equal to the Conversion Rate.

(ii)The term "Conversion Rate" initially means 10.5042 shares of Common Stock for each Converted Share; provided, however, that the Conversion Rate shall be equitably adjusted in the event of a forward or reverse stock split of the Common Stock of the Company or a stock dividend.

(iii)The Conversion Rate of the Designated Preferred Stock will be subject to adjustment to reduce dilution suffered by the holders of the Designated Preferred Stock in the event that the Company issues Common Stock or securities convertible into Common Stock at less than the Conversion Price (a "Dilutive Issuance"). The initial Conversion Price shall be set at $3.57 per share. In the event that the Conversion Price is adjusted, the Conversion Rate shall be recomputed to equal the quotient of $37.50 divided by the adjusted Conversion Price. In the event of a Dilutive Issuance, the then-effective Conversion Price of the Designated Preferred Stock shall be reduced to the lowest price paid or payable for such newly-issued shares. The Conversion Price of the Designated Preferred Stock shall not be adjusted because of (a) conversion of the Designated Preferred Stock; (b) securities issued to a commercial lender or lessor which is approved by a vote of the Board of Directors, (c) the sale or grant of options to employees, directors or consultants to purchase up to 1,566,667 Common Shares (as adjusted for stock splits, stock dividend, combination, recapitalization and similar transactions) at or above fair market value at the time of the grant (as determined in good faith by the board of directors) and approved by the board; (d) issuances of capital stock in connection with an acquisition of another company or assets approved by the Board; (e) the exercise of any warrants or options outstanding on the date hereof; or (f) the issuance of up to 1,238,100 Incentive Shares to holders of the Company’s Common Stock.

B. Mechanics of Voluntary Conversion. Each Holder of Designated Preferred Stock who desires to convert shares thereof into shares of Common Stock pursuant to Article IV(A) shall surrender the certificate or certificates therefor, duly endorsed, at the offices of the Company’s Transfer Agent and shall give written notice to the Company that such Holder elects to convert the same. Such notice shall state the number of Converted Shares being converted. Thereupon, the Company shall promptly issue and deliver at such office to such Holder a certificate or certificates for the remaining balance of shares of Designated Preferred Stock which have been submitted, but which are not being converted, and shall promptly pay in cash or, to the extent sufficient funds are not then legally available to make a cash payment to the Holder, in shares of Common Stock the accrued but unpaid dividends on the Converted Shares. Such conversion shall be deemed to have been made at the close of business on the date of such surrender of the certificates representing the Converted Shares, and the person or entity entitled to receive the Conversion Shares shall be treated for all purposes as the record holder of such Conversion Shares on such date.

C. Automatic Conversion.

(i)All of the Unconverted Preferred Stock shall be automatically converted into shares of Common Stock at the Conversion Rate in the event that (x) Holders of a majority of the Unconverted Preferred Stock consent in writing to such conversion; or (y) there is a closing of an underwritten public offering of shares of the Common Stock of the Company at a public offering with gross proceeds of not less than US$24,000,000 (less the total of all private sales of securities of the Company from the date of the filing of this Certificate of Designations through and up to such underwritten public offering) at a public offering price (prior to underwriting commissions and expenses) of not less than $6.38 per share (as adjusted for stock splits, stock dividends, and similar reclassifications) but not until the resale of the shares of Common Stock underlying the Designated Preferred Stock is covered by an effective registration statement; or (z) a merger or business combination with a publicly traded company, whose securities are listed or quoted on any Acceptable Trading Market.

(ii)Upon the occurrence of an automatic conversion event specified in this Article IV(C), the Unconverted Preferred Stock shall be converted automatically without any further action by the Holders thereof and whether or not the certificates representing such shares are surrendered to the Company or its Transfer Agent; provided, however, that the Company shall not be obligated to issue certificates evidencing the Conversion Shares issuable upon such conversion unless the certificates representing the relevant Unconverted Preferred Stock are either delivered to the Company or its Transfer Agent as provided herein, or the Holder notifies the Company or its transfer agent that such certificates have been lost, stolen or destroyed and such Holder executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates. Upon the occurrence of such automatic conversion of Unconverted Preferred Stock, the Holders of such shares shall surrender the certificates representing such shares at the office of the Company or the Transfer Agent. Thereupon there shall be issued to such Holder promptly at such office and in its name as shown on such surrendered certificate or certificates, a certificate or certificates for the number of shares of Common Stock in which such Unconverted Preferred Stock were convertible on the on which such automatic conversion occurred.

D. No Fractional Shares. If any conversion of Designated Preferred Stock would result in the issuance of a fractional share of Common Stock, such fractional share shall be disregarded and the number of shares of Common Stock issuable upon conversion of the Designated Preferred Stock shall be rounded up or down to the nearest whole share, it being understood that .5 of one share shall be rounded up to the next highest share.

E. Redemption.

(i)Commencing January 31, 2008, the holders of outstanding Designated Preferred Stock may, voting together as a single class, require the Company, to the extent it may lawfully do so, to redeem all or part of the outstanding Designated Preferred Stock by paying in cash a sum equal to the Stated Value, together with all accrued and unpaid dividends on the Designated Preferred Stock (the "Redemption Price").

(ii)At least sixty (60) days prior to the date fixed for any redemption of Designated Preferred Stock (the "Redemption Date"), written notice shall be mailed, postage prepaid, to each holder of record of Designated Preferred Stock to be redeemed at the postal address last shown on the records of the Company, to redeem such shares, specifying the Redemption Date and the date on which such holder’s conversion rights as set out in Article IV(A) as to such Designated Preferred Stock terminate and calling upon such holder to surrender to the Company, in the manner and place designated, the certificate or certificates representing the Designated Preferred Stock to be redeemed (the "Redemption Notice"). On or after the Redemption Date, each holder of Designated Preferred Stock to be redeemed shall surrender his certificate or certificates representing the Designated Preferred Stock to the Company, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof, and each surrendered certificate shall be cancelled. In the event that less than all the outstanding Designated Preferred Stock represented by the relevant certificate(s) are to be redeemed, a new certificate shall be issued representing the unredeemed shares. From and after the Redemption Date, unless there shall have been a default in payment of the Redemption Price, all dividends on the Designated Preferred Stock designated for redemption in the Redemption Notice shall cease to accrue, and all rights of the holders of such Designated Preferred Stock (except the right to receive the Redemption Price without interest upon surrender of their certificate or certificates) shall cease and terminate with respect to such Designated Preferred Stock, and such shares shall not thereafter be transferred on the books of the Company or be deemed to be outstanding for any purpose whatsoever.

(iii)If the Company does not have sufficient funds legally available to redeem all shares to be redeemed at the Redemption Date, then it shall redeem such Designated Preferred Stock pro rata (based on the portion of the aggregate Redemption Price payable to them) to the extent possible and shall redeem the remaining Designated Preferred Stock to be redeemed as soon as sufficient funds are legally available to the Company.

(iv)On or prior to the Redemption Date, the Company shall deposit the Redemption Price of all shares of Designated Preferred Stock designated for redemption in the Redemption Notice and not yet redeemed with a bank or trust company having aggregate capital and surplus in excess of US$100,000,000 as a trust fund for the benefit of the respective holders of the shares designated for redemption and not yet redeemed. Any moneys deposited by the Company pursuant to this Article IV(E) for the redemption of shares thereafter converted into Common Shares pursuant to Article IV(A) hereof no later than the fifth (5th) day preceding the Redemption Date shall be returned to the Company forthwith upon such conversion. The balance of any moneys deposited by the Company pursuant to this Article IV(E) remaining unclaimed at the expiration of one (1) year following the Redemption Date shall thereafter be returned to the Company upon its request expressed in a resolution of its directors.

V. RESERVATION OF SHARES OF COMMON STOCK

A. Reserved Amount. Upon the initial issuance of the shares of Designated Preferred Stock and thereafter as long as there are any shares of Designated Preferred Stock outstanding, the Company shall reserve out of the authorized but unissued shares of Common Stock for issuance upon conversion of the then outstanding Designated Preferred Stock such number of shares at least equal to one hundred and twenty five percent (125%) of the number of shares of Common Stock issuable as may be required to satisfy the conversion rights of the Holders of all outstanding Designated Preferred Stock. If, at any time, the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then Unconverted Preferred Stock, the Company will take such corporation action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

B. Insufficient Shares in Reserved Amount. If, at any time, the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then Unconverted Preferred Stock, the Company will take undertake to obtain the appropriate approval of shareholders of the Company as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

VI. LIQUIDATION PREFERENCE

A. Liquidation Event. If the Company shall commence a voluntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in an involuntary case under any law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Company shall be entered by a court having jurisdiction in the premises in an involuntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law resulting in the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of sixty (60) consecutive days and, on account of any such event, the Company shall liquidate, dissolve or wind up, or if the Company shall otherwise liquidate, dissolve or wind up, including, but not limited to, the sale or transfer of all or substantially all of the Company’s assets in one transaction or in a series of related transactions, or if there shall be a merger or consolidation of the Company in which the stockholders of the Company immediately before the transaction thereafter own less than 50% of the voting securities of the combined or surviving entity (each, a "Liquidation Event"), no distribution shall be made to the holders of any shares of capital stock of the Company (other than Senior Securities and Pari Passu Securities) upon liquidation, dissolution or winding up unless prior thereto the Holders of shares of Designated Preferred Stock shall have received the Liquidation Preference with respect to each share. If, upon the occurrence of a Liquidation Event, the assets and funds available for distribution among the Holders of the Designated Preferred Stock and holders of Pari Passu Securities shall be insufficient to permit the payment to such holders of the preferential amounts payable thereon, then the entire assets and funds of the Company legally available for distribution to the Designated Preferred Stock and the Pari Passu Securities shall be distributed ratably among such shares in proportion to the ratio that the Liquidation Preference payable on each such share bears to the aggregate Liquidation Preference payable on all such shares.

B. Exclusions. The purchase or redemption by the Company of stock of any class, in any manner permitted by law, shall not, for the purposes hereof, be regarded as a liquidation, dissolution or winding up of the Company. Neither the consolidation or merger of the Company with or into any other entity in which the stockholders of the Company immediately before the transaction own at least 50% of the voting securities of the combined or surviving entity nor the sale or transfer by the Company of less than substantially all of its assets shall, for the purposes hereof, be deemed to be a liquidation, dissolution or winding up of the Company.

VII. VOTING RIGHTS

A. Generally. The Holders of Designated Preferred Stock shall vote separately as a class on all matters and proposals which may adversely alter, reduce or affect the preferences, rights, privileges or powers of, or the restrictions provided for the benefit of, any of the Designated Preferred Stock, or which may increase or decrease the number of authorized shares of Designated Preferred Stock.

B. Actions Requiring Vote of Holders of Designated Preferred Stock. Notwithstanding any rights or powers which any one or more of the Board of Directors or of the holders of any other class of stock of the Company (including, but not necessarily limited to, Common Stock or any other class or series of preferred stock) may otherwise have, the Company will not deem as validly authorized, and the Company shall not effect or otherwise consummate or agree or consent to, any of the following actions without the affirmative vote or consent of the Holders of a majority of the then outstanding shares of Designated Preferred Stock, voting as a class (as provided in Section C of this Article):

(i)selling, transferring or disposing of all or substantially all of the Company’s undertakings or assets;

(ii)the entering into any partnership or joint venture with any person to which the Company devotes or commits to devote a majority of its assets or resources;

(iii)the declaration and payment of any dividend, payable in cash or property (rather than stock), of the Company with respect to any shares other than the Designated Preferred Stock;

(iv)passing any resolution for the Company’s winding up or dissolution or any petition for administration;

(v)the licensing by the Company of its technology or other rights in such a manner as to have the same economic effect as a sale or disposition of all or substantially all of the assets of the Company;

(vi)except as provided herein, authorizing any consolidation, merger or other business combination or amalgamation of the Company;

(vii)the making or permitting of any material alteration (including cessation) to the general nature of the Company’s business;

(viii)authorizing and approving any issuance of shares that have rights, preference or privileges that are senior to any of the rights, preferences or privileges of the Designated Preferred Stock or other securities, to the extent the consent of the Company to the specific transaction is required to effectuate the same; or

(ix)the repurchase by the Company of any of its issued and outstanding shares, other than repurchase of shares of Common Stock from employees or consultants upon termination of their employment or service to the Company pursuant to agreements providing for such repurchase.

C. Class Voting. To the extent that under the Corporation Law or under the provisions hereof, the vote of the Holders of the Designated Preferred Stock, voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the Holders of at least a majority of the then outstanding shares of the Designated Preferred Stock represented at a duly held meeting at which a quorum is present or by written consent of the Holders of at least a majority of the then outstanding shares of Designated Preferred Stock (except as otherwise may be required under the Corporation Law, a "Required Interest") shall constitute the approval of such action by the class. To the extent that under the Corporation Law Holders of the Designated Preferred Stock are entitled to vote on a matter with holders of Common Stock, voting together as one class, each share of Designated Preferred Stock shall be entitled to a number of votes equal to the number of shares of Common Stock into which it is then convertible using the record date for the taking of such vote of shareholders as the date as of which the Conversion Rate is determined.

VIII. MISCELLANEOUS

A. Rank. The Designated Preferred Stock shall rank (i) prior to the Company’s Common Stock; (ii) prior to any Junior Securities; (iii) junior to any Senior Securities; and (iv) pari passu with any Pari Passu Securities; provided, however, that as of the date of the initial filing of this Certificate of Designations, there are no Senior Securities and thereafter no additional Senior Securities or Pari Passu Securities shall be created without the written consent of a Required Interest.

B. Cancellation of Designated Preferred Stock. If any shares of Designated Preferred Stock are converted or redeemed pursuant to this Certificate of Designations, the shares so converted shall be canceled, shall return to the status of authorized, but unissued preferred stock of no designated series, and shall not be issuable by the Company as Designated Preferred Stock.

C. Lost or Stolen Certificates. Upon receipt by the Company of (i) evidence of the loss, theft, destruction or mutilation of any Designated Preferred Stock certificate(s) and (ii) (y) in the case of loss, theft or destruction, of indemnity (without any bond or other security) reasonably satisfactory to the Company, or (z) in the case of mutilation, upon surrender and cancellation of the Designated Preferred Stock certificate(s), the Company shall execute and deliver new Designated Preferred Stock certificate(s) of like tenor and date. However, the Company shall not be obligated to reissue such lost or stolen Designated Preferred Stock certificate(s) if the Holder contemporaneously requests the Company to convert such Designated Preferred Stock.

D. Allocation of Reserved Amount. The initial Reserved Amount shall be allocated pro rata among the Holders of Designated Preferred Stock based on the number of shares of Designated Preferred Stock issued to each Holder. Each increase to the Reserved Amount shall be allocated pro rata among the Holders of Designated Preferred Stock based on the number of shares of Designated Preferred Stock held by each Holder at the time of the increase in the Reserved Amount. In the event a Holder shall sell or otherwise transfer any of such Holder’s shares of Designated Preferred Stock, each transferee shall be allocated a pro rata portion of such transferor’s Reserved Amount. Any portion of the Reserved Amount which remains allocated to any person or entity which does not hold any Designated Preferred Stock shall be allocated to the remaining Holders of shares of Designated Preferred Stock, pro rata based on the number of shares of Designated Preferred Stock then held by such Holders.

E. Preemptive Rights. Holders of Designated Preferred Stock shall not have preemptive rights.

F. Payment in Cash. All references to dollar amounts in this Certificate of Designations shall be deemed to refer to United States Dollars, whether or not so indicated.

G. Status as Stockholder. Upon submission of a Notice of Conversion by a Holder of Designated Preferred Stock, (i) the shares covered thereby shall be deemed converted into shares of Common Stock and (ii) the holder’s rights as a Holder of such converted shares of Designated Preferred Stock shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Company to comply with the terms of this Certificate of Designations.

H. Amendments. This Certificate of Designations may only be amended with the written consent of the Holders of a majority of the outstanding Designated Preferred Stock and the vote or action of any other party or class entitled to vote or act thereon.