Document:

Exhibit 10.48

 Exhibit 10.48 
 CHINDEX MEDICAL LIMITED 
 AND SUBSIDIARIES 

CONSOLIDATED FINANCIAL STATEMENTS 
 AS OF DECEMBER 31, 2011 
 AND FOR THE YEAR THEN ENDED 

  
 1 

 Report of Independent Registered Public Accounting Firm 

Board of Directors and Stockholders 
 Chindex
Medical Limited 
 We have audited the accompanying consolidated balance sheet of Chindex Medical Limited (the Company) as of December 31,
2011 and the related consolidated statement of operations, stockholders’ equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audit. 
 We conducted our audit 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. We were not engaged to perform an audit
of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for
our opinion. 
 In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Chindex Medical Limited at December 31, 2011, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

 /s/ Ernst & Young Hua Ming 
 Beijing, PRC 
 March 9, 2012 

  
 2 

 CHINDEX MEDICAL LIMITED 

CONSOLIDATED BALANCE SHEET 
 (in thousands of U.S. Dollars except share data) 
  

					
	 	  	December 31, 2011	 
	ASSETS	  			
	 Current assets:
	  			
	 Cash and cash equivalents
	  	$	23,025	  
	 Restricted cash
	  	 	1,397	  
	 Investments
	  	 	2,162	  
	 Accounts receivable, less allowance for doubtful accounts of $1,676
	  	 	34,613	  
	 Receivables from affiliates
	  	 	2,896	  
	 Inventories, net
	  	 	33,178	  
	 Deferred income taxes
	  	 	622	  
	 Other current assets
	  	 	6,833	  
		  	  
	  
	 
	 Total current assets
	  	 	104,726	  
	 Restricted cash
	  	 	12	  
	 Investments in unconsolidated affiliate
	  	 	330	  
	 Property and equipment, net
	  	 	11,634	  
	 Noncurrent deferred income taxes
	  	 	3	  
	 Trade name and trademarks
	  	 	4,457	  
	 Prepaid land use rights and other assets
	  	 	1,825	  
		  	  
	  
	 
	 Total assets
	  	$	122,987	  
		  	  
	  
	 
		
	LIABILITIES AND STOCKHOLDERS’ EQUITY	  			
	 Current liabilities:
	  			
	 Short-term debt and current portion of long-term debt
	  	$	2,387	  
	 Accounts payable
	  	 	19,152	  
	 Payable to affiliates
	  	 	17,142	  
	 Accrued expenses and other current liabilities
	  	 	17,187	  
	 Deferred revenue
	  	 	3,186	  
	 Income taxes payable
	  	 	887	  
		  	  
	  
	 
	 Total current liabilities
	  	 	59,941	  
	 Long-term deferred revenue
	  	 	804	  
	 Long-term deferred tax liabilities
	  	 	735	  
		  	  
	  
	 
	 Total liabilities
	  	 	61,480	  
		  	  
	  
	 
	 Commitments and contingencies
	  			
	 Stockholders’ equity:
	  			
	 Ordinary shares, HKD$10.00 par value, 20,000,000 shares authorized, including 10,000,000 designated Class A and 10,000,000
designated Class B:
	  			
	 Ordinary Shares, Class A: 7,650,000 shares issued and outstanding at December 31, 2011
	  	 	9,815	  
	 Ordinary Shares, Class B: 7,350,000 shares issued and outstanding at December 31, 2011
	  	 	9,430	  
	 Additional paid-in capital
	  	 	31,506	  
	 Retained earnings
	  	 	7,921	  
	 Accumulated other comprehensive income
	  	 	2,690	  
		  	  
	  
	 
	 Total Chindex Medical Limited stockholders’ equity
	  	 	61,362	  
	 Noncontrolling interest stockholders’ equity
	  	 	145	  
		  	  
	  
	 
	 Total stockholders’ equity
	  	 	61,507	  
		  	  
	  
	 
	 Total liabilities and stockholders’ equity
	  	$	122,987	  
		  	  
	  
	 

  
 3 

 CHINDEX MEDICAL LIMITED 

CONSOLIDATED STATEMENT OF OPERATIONS 
 (in thousands of U.S. Dollars) 
  

					
	 	  	Year Ended
December 31, 2011	 
		
	 Revenues
	  	$	126,778	  
	 Cost of revenues
	  	 	89,273	  
		  	  
	  
	 
	 Gross profit
	  	 	37,505	  
		
	 Selling, general and administrative expenses
	  	 	31,669	  
	 Research and development expenses
	  	 	946	  
		  	  
	  
	 
		
	 Income from operations
	  	 	4,890	  
		
	 Other income and (expenses)
	  			
	 Interest income
	  	 	214	  
	 Interest expense
	  	 	(157	) 
		  	  
	  
	 
		
	 Income before income taxes
	  	 	4,947	  
	 Provision for income taxes
	  	 	(1,594	) 
		  	  
	  
	 
		
	 Net income
	  	 	3,353	  
		
	 Net income attributable to noncontrolling interest stockholders
	  	 	15	  
		  	  
	  
	 
		
	 Net income attributable to Chindex Medical Limited stockholders
	  	$	3,338	  
		  	  
	  
	 

  
 4 

 CHINDEX MEDICAL LIMITED 

CONSOLIDATED STATEMENT OF CASH FLOWS 
 (in thousands of U.S. Dollars) 
  

					
	 	  	Year Ended
December 31, 2011	 
	 OPERATING ACTIVITIES
	  			
	 Net income
	  	$	3,353	  
	 Adjustments to reconcile net income to net cash (used in) operating activities: 
	  			
	 Depreciation and amortization 
	  	 	877	  
	 Depreciation for demonstration inventory
	  	 	428	  
	 Inventory provision
	  	 	80	  
	 Provision for doubtful accounts
	  	 	(29	) 
	 Loss on disposal of property and equipment
	  	 	32	  
	 Deferred income taxes
	  	 	89	  
	 Stock based compensation
	  	 	1,224	  
	 Changes in operating assets and liabilities:
	  			
	 Restricted cash
	  	 	1,256	  
	 Accounts receivable
	  	 	(2,009	) 
	 Receivables from affiliates
	  	 	(2,896	) 
	 Inventories
	  	 	(10,608	) 
	 Other current assets and other assets
	  	 	(2,631	) 
	 Accounts payable, accrued expenses, other current liabilities and deferred revenue
	  	 	6,291	  
	 Payable to affiliates
	  	 	1,177	  
	 Income taxes payable
	  	 	220	  
		  	  
	  
	 
	 Net cash (used in) operating activities
	  	 	(3,146	) 
	 INVESTING ACTIVITIES
	  			
	 Purchase of 46% noncontrolling interest in STT
	  	 	(6,088	) 
	 Reduction in cash due to Qitian deconsolidation
	  	 	(29	) 
	 Deposit received from FosunPharma
	  	 	20,000	  
	 Refund of deposit received from FosunPharma
	  	 	(20,000	) 
	 Purchases of property and equipment
	  	 	(2,605	) 
		  	  
	  
	 
	 Net cash (used in) investing activities
	  	 	(8,722	) 
	 FINANCING ACTIVITIES
	  			
	 Repayment of debt
	  	 	(633	) 
		  	  
	  
	 
	 Net cash (used in) financing activities
	  	 	(633	) 
	 Effect of foreign exchange rate changes on cash and cash equivalents
	  	 	312	  
		  	  
	  
	 
	 Net (decrease) in cash and cash equivalents
	  	 	(12,189	) 
	 Cash and cash equivalents at beginning of year
	  	 	35,214	  
		  	  
	  
	 
	 Cash and cash equivalents at end of year
	  	$	23,025	  
		  	  
	  
	 
		
	 Supplemental disclosures of cash flow information:
	  			
	 Cash paid for interest
	  	$	157	  
	 Cash paid for taxes
	  	$	4,575	  
		
	 Non-cash investing and financing activities consist of the following:
	  			
	 Property and equipment additions included in accounts payable
	  	$	15	  

 The accompanying notes are an integral part of these consolidated financial statements. 

  
 5 

 CHINDEX MEDICAL LIMITED 

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY 
 For the Year Ended December 31, 2011 
 (in thousands of U.S. Dollars,
except share data) 
  

																																					
	 	  	 	 	  	 	 	  	 	 	  	 	 	  	Additional
Paid-in
Capital	 	 	Retained
Earnings	 	  	Accumulated
Other
Comprehensive
Income	 	  	Noncontrolling
Interests	 	 	Total	 
	 	  	Ordinary Shares	 	  	Ordinary Shares	 	  	 	  	  	 
	 	  	Class A	 	  	Class B	 	  	 	  	  	 
	 	  	Shares	 	  	Amount	 	  	Shares	 	  	Amount	 	  	 	  	  	 
										
	 Balance at December 31, 2010
	  	 	510	  	  	 	1	  	  	 	490	  	  	 	1	  	  	 	50,795	  	 	 	4,583	  	  	 	956	  	  	 	5,237	  	 	 	61,573	  
		  				  				  				  				  				 				  				  				 	  
	  
	 
	 Net income
	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	3,338	  	  	 	—  	  	  	 	15	  	 	 	3,353	  
	 Foreign currency translation adjustment
	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	—  	  	  	 	1,734	  	  	 	7	  	 	 	1,741	  
		  				  				  				  				  				 				  				  				 	  
	  
	 
	 Comprehensive income
	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	5,094	  
		  				  				  				  				  				 				  				  				 	  
	  
	 
	 Issuance of shares
	  	 	7,649,490	  	  	 	9,814	  	  	 	7,349,510	  	  	 	9,429	  	  	 	(19,243	) 	 	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	—  	  
	 Stock-based compensation
	  	 	—  	  	  	 	—  	  	  				  	 	—  	  	  	 	1,224	  	 	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	1,224	  
	 Acquisition of non-controlling interest in STT
	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	(1,270	) 	 	 	—  	  	  	 	—  	  	  	 	(4,817	) 	 	 	(6,087	) 
	 Deconsolidate Qitian due to equity interest below 50%
	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	—  	  	  	 	—  	  	  	 	(297	) 	 	 	(297	) 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 
	 Balance at December 31, 2011
	  	 	7,650,000	  	  	$	9,815	  	  	 	7,350,000	  	  	$	9,430	  	  	$	31,506	  	 	$	7,921	  	  	$	2,690	  	  	$	145	  	 	$	61,507	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 

 The accompanying notes are an integral part of these consolidated financial statements. 

  
 6 

 CHINDEX MEDICAL LIMITED 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 December 31, 2011 
 1. BACKGROUND AND ORGANIZATION 

Chindex Medical Limited (“CML” or “the Company”) is a joint venture that was formed effective at the close of business
on December 31, 2010, and it commenced operations on January 1, 2011. CML was formed by Shanghai Fosun Pharmaceutical (Group) Co., Ltd. (“FosunPharma”), a leading manufacturer and distributor of western and Chinese medical
devices throughout China and in export markets, and by Chindex International, Inc. (“Chindex”), an American distributor of medical products and provider of healthcare services in China. FosunPharma holds a 51 percent controlling equity
interest in CML, while Chindex holds a 49 percent equity interest in CML. The formation of the joint venture represents the basis of a strategic alliance between the two companies, which aims to capitalize on the long-term opportunity presented by
growing medical product sectors throughout China and abroad. 
 Business 

CML is a joint venture formed to independently operate certain medical device businesses, consisting initially of FosunPharma’s
medical device companies and Chindex’s Medical Products division (“MPD”). CML is focused on marketing, distributing, selling and servicing medical devices in China and Hong Kong, as well as activities in R&D and manufacturing of
medical devices for the Chinese and export markets. 
 The primary operating FosunPharma medical device companies contributed to
the CML joint venture were: 
  

	 	•	 	 Shanghai Transfusion Technology (“STT”), a manufacturer and distributor of devices for the collection of blood 

 

	 	•	 	 Huaiyin, a manufacturer and exporter of sutures and surgical blades 

 

	 	•	 	 Foshion Dental and Fuji Dental (90%-owned), distributors of dental equipment. 

The primary operations contributed to the CML joint venture by Chindex consisted of the former MPD division of Chindex, which included
marketing, distribution, sale, and service of select medical equipment, instrumentation and products for use in hospitals in China and Hong Kong in the following areas: 
  

	 	•	 	 Diagnostic color ultrasound imaging devices (primarily distribution of Siemens medical equipment) 

 

	 	•	 	 Robotic surgical systems and instrumentation (primarily the Intuitive da Vinci robotic system) 

 

	 	•	 	 Women’s health, including mammography and breast biopsy devices 

 

	 	•	 	 Other areas, including lasers for cosmetic surgery. 

 The former Chindex MPD division operates from offices in the United States, Germany, China and Hong Kong. In its role as an exporter from the United States and Germany, the CML U.S. and German companies
have been able, for certain contracts, to facilitate government-backed financing packages for its Chinese buyers. 
 In addition
to the medical equipment described above, CML expects to continue to expand the breadth of its product offerings over time, by a combination of additional distribution agreements, development and manufacture of new products, and potential
acquisitions or strategic investments. 

  
 7 

 Additional information on the organization, management, products and services of the CML
operating companies is available at www.chindexmedical.com. 
 Formation of the CML Joint Venture 

On June 14, 2010, Chindex and FosunPharma entered into an agreement regarding the formation of a joint venture, with Chindex
contributing its Medical Products division and FosunPhama contributing its medical device companies. The formation of the proposed joint venture, Chindex Medical Limited., was conducted through a series of definitive agreements as further described
below. 
 Chindex Medical Limited, is a Hong Kong limited liability company that was initially formed during 2010 as a
100%-owned subsidiary of Chindex International, Inc. Chindex subsequently transferred the ownership of its legal entities included in the Chindex Medical Products Division to CML. At the close of business on December 31, 2010, the first closing
(“Initial Closing”) of the formation of the joint venture was completed, in which FosunPharma acquired a 51% ownership interest in CML for its contribution of a secured note of $20 million to the joint venture, which was paid in cash in
January 2011. During the period between the Initial Closing of the joint venture in December 2010 and the issuance by the Chinese government of certain amended business licenses relating to the FosunPharma-contributed businesses on June 24,
2011, CML legally controlled and operated the FosunPharma medical device companies under an Entrustment Agreement. 
 At the
time of the Initial Closing, CML was the owner of the Chindex-contributed businesses (MPD), but not the FosunPharma-contributed businesses. On August 30, 2011, following the payment by CML of the purchase price for the FosunPharma-contributed
businesses, CML became the holder of legal title to the FosunPharma-contributed businesses. Notwithstanding this transfer and payment, the registration with and approval of State Administration of Foreign Exchange (“SAFE”) was required in
order for CML to obtain certain of the rights and benefits as shareholder of such businesses, including the right to receive dividends declared by the FosunPharma-contributed businesses or the proceeds of the sale of a company included in the
FosunPharma-contributed businesses. Until such registration was received on March 7, 2012, CML was entitled to such benefits on a contractual basis under the Entrustment Agreement and other agreements relating to the joint venture. Following
and based on the receipt of such registration on March 7, 2012, CML is entitled to such benefits as a matter of Chinese law as the registered owner of the FosunPharma-contributed businesses. 

As of December 31, 2010, CML owned the Chindex-contributed businesses (principally MPD) and was entitled to a pending and obligatory
final investiture of the FosunPharma-contributed businesses. The FosunPharma-contributed businesses were segregated and, until the issuance of the amended business licenses on June 24, 2011, were operated and managed by the joint venture under
the Entrustment Agreement. As of December 31, 2011, CML owns, operates and manages both the Chindex-contributed businesses and the FosunPharma-contributed businesses and is entitled to full management rights with respect to both the
Chindex-contributed businesses and the FosunPharma-contributed businesses. Upon the completion of the registration with and approval of SAFE, CML became entitled under Chinese law to receive dividends from and proceeds of any sale of the
FosunPharma-contributed businesses without regard to the Entrustment Agreement. It is expected that the formal closing with respect to the investiture of the FosunPharma-contributed businesses will occur and the Entrustment Agreement will terminate
in the first or second quarter of 2012. 

  
 8 

 The joint venture arrangement provides that FosunPharma has a 51% controlling voting
interest, a majority of the Board of Directors, certain key management roles, and other powers. Accordingly, FosunPharma has a controlling financial interest in CML. Given that FosunPharma is the controlling stockholder of the Company, the transfer
of FosunPharma-contributed businesses was accounted for as a transaction between entities under common control, with the net assets carried over at historical costs and reflected in the historical financial statements of the Company. The net assets
related to the Chindex-contributed businesses were recorded at fair value upon formation of the joint venture on December 31, 2010 because the transaction resulted in a change in control of the Chindex-contributed businesses. The fair value of
the net assets of MPD as of December 31, 2010 were as follows (in thousands of U.S. Dollars): 
  

					
	 Cash and short-term investments
	  	$	 27,606	  
	 Accounts receivable
	  	 	24,017	  
	 Inventories
	  	 	15,261	  
	 Tradename and trademark
	  	 	4,457	  
	 Other assets
	  	 	3,151	  
		  	  
	  
	 
	 Total assets
	  	 	74,492	  
	 Accounts payable
	  	 	(15,758	) 
	 Other liabilities
	  	 	(22,395	) 
		  	  
	  
	 
	 Fair value of net assets
	  	 	36,339	  
	 Book value of net assets
	  	 	31,882	  
		  	  
	  
	 
	 Excess of fair value over book value
	  	$	4,457	  
		  	  
	  
	 

 Trademark License 
 The Company was granted the right to use the “Chindex” name which is utilized in the name of the joint venture, together with related trademarks. The brand name and trademarks are owned by
Chindex, which has granted a perpetual license to the Company to use the brand name and trademark. The trademark license was recognized as an intangible asset upon the formation of the Company and has been recognized at its estimated fair value of
$4,457,000. The license does not require the payment of a royalty fee unless Chindex’s interest in the Company is reduced below 30%. Since the license is non-exclusive and terminates only upon (1) bankruptcy of the Company;
(2) violation of the terms of the license agreement; (3) breach of the minority rights provisions in the Joint Venture Governance and Shareholders Agreement (the “Shareholders Agreement”); or (4) the liquidation or
dissolution of the Company, the Company believes that the license would be viewed as a perpetual license as the Company does not have the unilateral ability to terminate the license. Thus, the intangible asset has an indefinite life for accounting
purposes, and, accordingly, will not be amortized but will be subject to periodic reviews for potential impairment. 
 2. SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES 
 Basis of Presentation and Use of Estimates 

The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting
principles (“U.S. GAAP”). 

  
 9 

 The preparation of consolidated financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses during the
reporting periods. Significant estimates and assumptions reflected in the Company’s financial statements include, but are not limited to, revenue recognition including estimates of selling prices for allocations of multiple-deliverable
contracts, allowance for doubtful accounts, useful lives of property, plant and equipment, inventory obsolescence, accrued expenses, deferred tax valuation allowances, and the valuation of the Company’s acquired tangible and intangible assets.
Actual results could materially differ from those estimates. 
 Consolidation 

The consolidated financial statements include the accounts of the Company and its subsidiaries. The Company does not have interests in
variable interest entities. All intercompany balances and transactions are eliminated upon consolidation. Entities in which the Company has less than a 50 percent ownership interest in, or does not have a controlling financial interest, but is
considered to have significant influence are accounted for using the equity method. 
 Foreign Currency Translation and Transactions

 The Company’s subsidiaries determine their functional currencies to be the Chinese Renminbi (“RMB”),
HongKong Dollar (“HKD”) or Euros (“Euro”) based on the criteria of ASC subtopic 830-10, Foreign Currency Matters, Overall. The Company has elected to use the US dollar (“USD”) as its reporting currency. The
Company uses the monthly average exchange rate for the year and the exchange rate at the balance sheet date to translate the operating results and financial position, respectively. Translation differences are recorded in accumulated other
comprehensive income, a component of shareholders’ equity. 
 Transactions denominated in foreign currencies are translated
into the functional currency at the exchange rates prevailing on the transaction dates. Foreign currency denominated financial assets and liabilities are remeasured at the exchange rates prevailing at the balance sheet date. Exchange gains and
losses are included in the consolidated statement of operations. 
 Cash and Cash Equivalents 

The Company considers unrestricted cash on hand, deposits in banks, certificates of deposit, money market funds and short-term marketable
securities with an original or remaining maturity at the date of acquisition of three months or less to be cash and cash equivalents. 

Restricted Cash 

Short-term and long-term restricted cash represent collateral required to be maintained pursuant to certain contractual financing
arrangements the Company has entered into with certain financial institutions. Restricted cash is not immediately available to the Company to meet its liquidity requirements (see Note 9). 

  
 10 

 Accounts Receivable and Allowance for Doubtful Accounts 

The Company considers many factors in assessing the collectibility of its receivables due from its customers, such as age of the amounts
due, the customer’s payment history, and credit-worthiness. An allowance for doubtful accounts is recorded in the period in which collection of the amount is no longer considered probable. Accounts receivable balances are written off after all
collection efforts have ceased. 
 Prepaid Land Use Rights 

Prepaid land use rights represent amounts paid for the right to use land in the People’s Republic of China (“PRC”) and are
recorded at purchase cost less accumulated amortization. Amortization is recorded on a straight-line basis over the term of the land use rights agreement. 
 Acquired Intangible Assets and Impairment Testing of Long-Lived Assets and Intangibles 
 Acquired intangible assets consist of the acquisition of the rights to use the Chindex brand name and trademarks. The asset consists of a perpetual license and was recorded at fair value at the inception
of the CML joint venture, which was also the date of acquiring control of CML. This intangible asset is not amortized, but is subject to impairment testing. No impairment charge has been recognized in 2011, as management did not believe that any
events or circumstances in 2011 indicated that the carrying amount of the assets might not be fully recoverable. 
 The Company
evaluates its long-lived assets or asset group including acquired intangibles with finite lives for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of
the assets) indicate that the carrying amount of a group of long-lived assets may not be fully recoverable. When these events occur, the Company evaluates the impairment by comparing the carrying amount of the assets to future undiscounted cash
flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Company recognizes an impairment loss based on the excess of
the carrying amount of the asset group over its fair value, generally based upon discounted cash flows. No impairment charge has been recognized in 2011, as management did not believe that any events or circumstances in 2011 indicated that the
carrying amount of the assets might not be fully recoverable. 
 Revenue Recognition 

The Company earns revenue primarily from sales of products used in healthcare services. In recognizing revenue, the Company follows the
four principles of Staff Accounting Bulletin No. 104, Revenue Recognition. Revenue from product sales is recognized when the title and risk of ownership has been transferred, provided that persuasive evidence of an arrangement exists,
the selling price is fixed or determinable, collectability is reasonably assured and the remaining obligations are insignificant, and not essential to functionality of the already delivered items. 

The evidence of an arrangement generally consists of an approved customer contract and purchase order. Transfer of title and risk of
ownership most often occurs when the product is shipped to the customer or less frequently when the customer receives the product. The selling price for all sales are fixed and agreed to with the customer in advance prior to shipment and are based
on established price lists or agreed quotes. The Company’s customers have no return rights or post-sale rights, other than limited warranty privileges. 

  
 11 

 Revenue related to the sale of medical equipment, instrumentation and products to customers
in China is recognized upon product shipment or, in certain cases, upon installation and/or acceptance by the end user when installation and/or customer acceptance is deemed as substantive. Revenue from sales to customers in Hong Kong is recognized
upon delivery. We provide installation, standard warranty, and training services for certain of our medical equipment and instrumentation sales. These services are viewed as perfunctory to the overall arrangement and are not accounted for separately
from the equipment sale except in the case of certain complex surgical systems where installation is considered essential to the functionality of the equipment, in which case, revenue is recognized upon the completion of the installation and receipt
of customer acceptance. Costs associated with installation, training and standard warranty are not significant and are recognized in cost of sales as they are incurred. Revenue from the sale of extended warranties is deferred and recognized over the
warranty period. 
 From time to time, the Company sells an extended warranty together with the medical equipment. The Company
also sells multiple medical equipment and instrumentation and products together which are delivered over a period of time. Such arrangements are treated as multiple-element arrangements with revenue being allocated to each unit of accounting using
relative fair value method in accordance with ASC 605-25, Multiple-Element Arrangements and recognized under the guidelines of Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition. 

On January 1, 2011, the Company adopted ASU 2009-13 issued by the Financial Accounting Standards Board for revenue arrangements with
multiple-elements. The Company adopted this guidance on a prospective basis applicable for transactions originating or materially modified after the date of adoption. This guidance changed the criteria for separating units of accounting in
multiple-element arrangements and the way in which an entity is required to allocate revenue to these units of accounting. Revenue is allocated to each unit of accounting on a relative fair value basis based on a selling price hierarchy. The selling
price for a deliverable is based on its vendor-specific objective evidence (“VSOE”) if available, third party evidence (“TPE”) if VSOE is not available, or best estimate of selling price (“BESP”) if neither VSOE nor TPE
is available. The Company determines VSOE primarily by considering the historical analysis of stand alone sales contract for the products where it is the vendor. The Company determines TPE primarily through use of market stand alone selling price
evidence obtained from the OEM of the products being valued. The Company determines BESP by considering multiple factors including but not limited to, competitive and market conditions, internal costs, gross margin objectives and pricing practices.
After considering all of these factors, BESP is established using a cost-plus margin approach. 
 Additionally, the Company
evaluates revenue from the sale of equipment and products in accordance with the provisions of ASC 605-45, Principal Agent Considerations, to determine whether such revenue should be recognized on a gross or a net basis. Pursuant to ASC
605-45, the Company recorded the gross amount of sales as revenue because the Company is the primary obligor in the arrangement, the Company has credit and inventory risk and the Company has latitude in establishing its own selling price. If the
Company serves as only an agent providing logistics services, it recognizes revenue on a net basis. For the year ended December 31, 2011, the Company has recognized revenue of approximately $511,000, on a net basis for its sales to a related
party (see Note 17) as the Company is not the primary obligor in these sales arrangements. 
 Shipping costs charged to
customers are included in revenues and the associated expense is included in cost of revenues in the consolidated Statement of Operations. Shipping costs charged to customers are not significant for the periods presented. 

  
 12 

 Sales of medical equipment often require protracted sales efforts, long lead times,
contingent on customers qualifying for suitable external financing arrangements, and other time-consuming steps. As a result of these factors impacting the timing of orders and related revenues, and therefore our operating results are expected to
vary from period to period and year to year. 
 Deferred Revenue and Warranties 

The Company provides its customers with the option to purchase an extended warranty on certain equipment that it sells. We determine the
deferred revenue depending on whether the warranty is sold on a stand-alone basis or whether it is sold as part of a multiple deliverable arrangement. For stand alone sales of an extended warranty, the deferred revenue is amortized on a
straight-line basis over the warranty term. In multiple deliverable arrangements, in which a customer purchases the equipment and an extended warranty, the deferred revenue related to the warranty is determined based on relative selling prices, and
the deferred revenue is amortized on a straight line basis over the warranty term. 
 Inventories 

Inventories include raw materials, work in progress, and finished goods, including those purchased to fill executed sales contracts,
consignments and items that were stocked for future sales, including sales demonstration units and service parts. Inventory is recorded at its actual cost when obtained, and a monthly weighted average cost method is used for inventory on hand or
issued from inventory. At the end of each period, the inventory is recorded at the lower of net realizable value and its historical cost. If the net realizable value is less than the cost, the difference is charged to an inventory valuation reserve.
Inventory valuation is reviewed on a quarterly basis, and adjustments are charged to the provision for inventory, which is a component of cost of revenues. Demonstration inventories are depreciated over their useful life of five years. 

Property and Equipment 
 Property and equipment are stated at historical cost. The costs of additions and improvements are capitalized, while maintenance and repairs are charged to expense as incurred. Depreciation is computed on
the straight line method over the estimated useful lives of the related assets. Buildings are depreciated over 40 years. Useful lives for office equipment, vehicles and furniture and fixtures range from 5 to 7 years. Leasehold improvements are
amortized on the straight-line method over the shorter of the estimated useful lives of the improvements or the lease term. 

Property, plant and equipment that are purchased or constructed which require a period of time before the assets are ready for their
intended use are accounted for as construction-in-progress. Construction-in-progress is recorded at acquisition cost, including installation costs and associated interest costs. Construction-in-progress is transferred to specific property and
equipment accounts and commences depreciation when these assets are ready for their intended use. The capitalization of interest costs, if any, commences when expenditures for the asset have been made, activities that are necessary to get the asset
ready for its intended use are in progress and interest cost is being incurred. The capitalization period ends when the asset is substantially complete and ready for its intended use. 

  
 13 

 The Company assesses the impairment of long-lived assets when indicators of impairment are
identified. The Company records impairment charges based upon the difference between the fair value and carrying value of the original asset when undiscounted cash flows indicate the carrying value will not be recovered. No impairment losses have
been recorded in the accompanying consolidated Statement of Operations. 
 Income Taxes 

The Company’s provision for income taxes is computed for each entity in the consolidated group at applicable statutory rates based
upon each entity’s income or loss, giving effect to temporary and permanent differences. 
 In accordance with ASC 740,
Income Taxes, provisions for income taxes are based upon earnings reported for financial statement purposes and may differ from amounts currently payable or receivable because certain amounts may be recognized for financial reporting purposes
in different periods than they are for income tax purposes. Deferred income taxes result from temporary differences between the financial statement amounts of assets and liabilities and their respective tax bases. A valuation allowance reduces the
net deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company recognizes, in its consolidated financial statements, the impact of a tax position if that position is not
more likely than not to be sustained upon examination, based on the technical merits of the position. It is our policy to recognize interest and penalties related to income tax matters provision for income taxes. 

Stock-Based Compensation 
 CML does not grant stock options or provide any other share-based payments to its employees. However, in cases where employees of Chindex provide services to CML, the services agreement between CML and
Chindex provides that certain compensation costs (including monetary and nonmonetary) of the specific Chindex employees will be charged to CML, which will include the cost of stock-based compensation on a noncash basis, if applicable. In addition,
certain former Chindex employees that are now employees of CML retained options to purchase Chindex’s common stock. These options are remeasured to fair value at each reporting date with an adjustment for fair value recorded to the current
period expense in order to properly reflect the cumulative expense based on the current fair value of the vested awards over the vesting periods. These costs are recorded in the Company’s consolidated statement of operations as selling, general
and administrative expenses with a corresponding credit to additional paid-in capital. 
 Recent Accounting Pronouncements

 In June 2011, the Financial Accounting Standard Board (“FASB”) issued ASU No. 2011-05, Presentation
of Comprehensive Income, ASU 2011-05 which eliminates the current option to report other comprehensive income (OCI) and its components in the statement of changes in stockholders’ equity. This guidance is effective for the Company’s
interim and annual periods after December 15, 2011. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter, with early adoption permitted. The Company
will early adopted ASU 2011-05 effective for the reporting period ending on December 31, 2012. This adoption will not have an impact on the Company’s financial position, results of operations or cash flows as it only requires a change in
the format of the Company’s current presentation. 

  
 14 

 3. INVESTMENTS 
 The Company’s current investments as of December 31, 2011 include available-for-sale securities at fair value of $2,162,000 of government bonds, with fixed interest rate of 0.02% issued by
M&T Bank, a large U.S. financial institution. The Company’s current investments are recorded at fair value, and the difference between fair value and amortized cost as of December 31, 2011 was de minimis. 

4. ACCOUNTS RECEIVABLE 
 (in thousands of
U.S. Dollars) 
  

					
	 	  	December 31, 2011	 
	 Product sales, other than government - secured sales
	  	$	23,686	  
	 Government-secured sales
	  	 	12,603	  
		  	  
	  
	 
	 Product sales receivables
	  	 	36,289	  
	 Less: Reserve for uncollectible accounts
	  	 	(1,676	) 
		  	  
	  
	 
	 Net accounts receivable
	  	$	34,613	  
		  	  
	  
	 

 CML facilitates government-secured sales contracts to help hospitals in China finance their purchases of
medical equipment. CML serves as a facilitator only, it does not borrow or loan money related to these projects and it does not guarantee any of the government-secured financing. In the past, such financing has included loans and loan guarantees
from the U.S. Export-Import Bank and the German KfW Development Bank as well as commercial financing that was guaranteed by the Chinese Government but without foreign government participation. 

5. INVENTORIES, NET 
 (in thousands of
U.S. Dollars) 
  

					
	 	  	December 31, 2011	 
	 Inventories, net, consist of the following:
	  			
	 Merchandise and finish goods inventory, net
	  	$	24,168	  
	 Consignment inventory, net
	  	 	818	  
	 Demonstration inventory, net
	  	 	949	  
	 Raw materials
	  	 	2,240	  
	 Work in process
	  	 	2,264	  
	 Spare parts, net
	  	 	2,739	  
		  	  
	  
	 
		  	$	33,178	  
		  	  
	  
	 

 During the year ended December 31, 2011, the Company recognized $508,000 in expense for inventory
valuation, which included amortization of demonstration inventory and provisions for obsolete or slow-moving inventories. 

  
 15 

 6. INVESTMENT IN UNCONSOLIDATED AFFILIATE 

As of January 1, 2011, investment in unconsolidated affiliates consisted of a 66.67 percent interest in Suzhou Qitian, a small
manufacturing company in China. In March 2011, the Company sold a 35 percent interest in Qitian to a third party for consideration of RMB2,100,000, thereby reducing its ownership interest in Qitian to 31.67 percent. As a result of the disposition,
the Company no longer had control of Qitian. Accordingly, Qitian was deconsolidated and is now accounted for using the equity method. The gain or loss resulted from the deconsolidation of Qitian was inconsequential. As of December 31, 2011, the
investment in Qitian was approximately $330,000, and net income recorded using the equity method accounting by CML for its interest in Qitian was $2,000. 
 7. PROPERTY AND EQUIPMENT, NET 
 (in thousands of U.S. Dollars) 

 

					
	 	  	December 31, 2011	 
	 Property and equipment, net consists of the following:
	  			
	 Buildings
	  	$	8,478	  
	 Plant and machinery
	  	 	4,331	  
	 Office equipment and furniture
	  	 	2,124	  
	 Vehicles
	  	 	758	  
	 Construction in progress
	  	 	1,352	  
	 Leasehold improvements
	  	 	446	  
		  	  
	  
	 
		  	 	17,489	  
	 Less: accumulated depreciation and amortization
	  	 	(5,855	) 
		  	  
	  
	 
		  	$	11,634	  
		  	  
	  
	 

 Construction in progress relates to development projects underway in the Dental subsidiaries in China.
There was no capitalized interest recorded in the period, as the amount would have been immaterial. 
 Depreciation and
amortization expense for property and equipment for the year ended December 31, 2011 was $877,000. 

  
 16 

 8. PREPAID LAND USE RIGHTS AND OTHER ASSETS 

(in thousands of U.S. Dollars) 
  

					
	 	  	December 31, 2011	 
	 Prepaid land use rights and other assets:
	  			
	 Prepaid land use rights - STT
	  	$	780	  
	 Prepaid land use rights - Huaiyin
	  	 	439	  
		  	  
	  
	 
		  	 	1,219	  
	 Less: prepaid land use rights amortization
	  	 	(183	) 
		  	  
	  
	 
		  	 	1,036	  
	 Other assets
	  	 	789	  
		  	  
	  
	 
		  	$	1,825	  
		  	  
	  
	 

 The prepaid land use rights for Shanghai Transfusion Technology are for land located in Shanghai. The
purchase cost was $780,000, which is being amortized over 48 years on a straight-line basis. 
 The prepaid land use rights for
Huaiyin are for land located in Jiangsu province, for its manufacturing operations. The purchase cost was $439,000, which is being amortized over 50 years on a straight-line basis. 

Other assets are primarily composed of security deposits in the amount of approximately $608,000. 

9. DEBT 
 The Company’s short-term
and long-term debt balances are (in thousands): 
  

									
	 	  	December 31, 2011	 
	 	  	Short term	 	  	Long term	 
	 Bank loan
	  	$	1,905	  	  	$	—  	  
	 Line of credit
	  	 	482	  	  	 	—  	  
		  	  
	  
	 	  	  
	  
	 
		  	$	2,387	  	  	$	—  	  
		  	  
	  
	 	  	  
	  
	 

 Bank loan 
 For STT, the company has a loan from Bank of China for RMB 12 million ($1,905,000) with an interest rate of 6.56% per annum which is collateralized by the five company buildings, and the term of
the loan is from August 19, 2011 to August 18, 2012. 
 Line of credit 

CML has a $1,750,000 credit facility with M&T Bank. The borrowings under that credit facility bear interest at 1.00% over the
three-month London Interbank Offered Rate (LIBOR). As of December 31, 2011, there was a $482,000 outstanding loan balance under the facility. Balances outstanding under the facility are payable on demand, fully secured and collateralized by
government securities acceptable to the Bank having an aggregate fair market value of not less than $1,945,000. As of December 31, 2011, there were $51,000 letters of credit outstanding. 

  
 17 

 Debt Payments Schedule and Restricted Cash 

The following table sets forth the Company’s debt obligations as of December 31, 2011: 

(in thousands of U.S. Dollars) 
  

																													
	 	  	Total	 	  	2012	 	  	2013	 	  	2014	 	  	2015	 	  	2016	 	  	Thereafter	 
								
	 Bank loan
	  	$	1,905	  	  	$	1,905	  	  	$	—  	  	  	$	—  	  	  	$	—  	  	  	$	—  	  	  	$	—  	  
	 Line of credit
	  	 	482	  	  	 	482	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total
	  	$	2,387	  	  	$	2,387	  	  	$	—  	  	  	$	—  	  	  	$	—  	  	  	$	—  	  	  	$	—  	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

 Restricted cash of $1,409,000 as of December 31, 2011, consists of $1,397,000 for collateral for
performance bonds issued in connection with the excution of certain contracts for the supply of medical equipment. Such bonds are fully collateralized and are required to be effective for the duration of the product warranty period under the
applicable contracts. 
 10. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES 
 Accrued expenses and other current liabilities consist of the following: 
 (in
thousands of U.S. Dollars) 
  

					
	 	  	December 31, 2011	 
	 Accrued expenses:
	  			
	 Accrued expenses- goods received not invoiced
	  	$	5,474	  
	 Accrued compensation
	  	 	3,930	  
	 Accrued expenses- other
	  	 	2,484	  
	 Accrued taxes payable other than income tax
	  	 	1,029	  
	 Customer deposits
	  	 	1,345	  
	 Other current liabilities
	  	 	2,925	  
		  	  
	  
	 
		  	$	17,187	  
		  	  
	  
	 

 11. DEFERRED REVENUE 
  

									
	 	  	December 31, 2011	 
	 	  	Short term	 	  	Long term	 
	 Deferred revenue, service contract and extended warranty
	  	$	3,186	  	  	$	804	  
		  	  
	  
	 	  	  
	  
	 

  
 18 

 12. STOCKHOLDERS’ EQUITY 
 Ordinary Stock and Stockholders’ Agreement 
 CML was
incorporated as a limited liability company under the Hong Kong Companies Ordinance. The authorized capital is HK$200 million divided into two classes, designated as 10 million “A” ordinary shares of HK$10 each and 10 million
“B” ordinary shares of HK$10 each. As of December 31, 2011, 7,650,000 Class A ordinary shares and 7,350,000 Class B ordinary shares have been issued and are outstanding. The Class A shares have been issued to Ample Up
Limited, a Hong Kong subsidiary of FosunPharma. The Class B ordinary shares have been issued to Chindex Medical Holdings (BVI) Limited, a subsidiary of Chindex, The rights and power of the shareholders are enumerated in the stockholders’
agreement. The Class A shares and Class B shares have equal voting rights with each share having one vote and equal economic rights in matters of dividend distribution and liquidation. 
 Entrustment Agreement 
 From January 1, 2011 until June 24,
2011, the FosunPharma-contributed businesses were managed by CML under the Entrustment Agreement (see Note 1). 
 Noncontrolling Interests

 As of December 31, 2011, all of the subsidiaries of CML are wholly owned, with the exception of one dental
subsidiary which is 90% owned. During January 2011, the Company purchased the 46% noncontrolling interest in STT for $6.1 million which increased its ownership percentage to 100%. As of December 31, 2010, CML owned a 66.67% interest in Suzhou
Qitian. In March 2011, CML sold a 35% ownership interest in Suzhou Qitian, reducing its ownership interest to 31.67%. Since the ownership interest of CML in Suzhou Qitian was reduced below 50%, Suzhou Qitian was deconsolidated, and the related
noncontrolling interest was eliminated from the CML consolidated financial statements. 
 Stock-Based Compensation 

On December 31, 2010, CML was formed. In connection with the transaction, certain employees of the Chindex became employees of CML.
Those individuals that transferred to CML retained 101,239 options to acquire Chindex’s common stock, of which 62,353 options were vested and 38,886 were nonvested stock options previously issued by Chindex. These costs are recorded in the
Company’s consolidated statement of operations as selling, general and administrative expenses 

  
 19 

 
with a corresponding credit to additional paid-in capital. In addition, certain Chindex employees provide services to the Company under a services agreement between the Company and Chindex. A
portion of their costs, including stock-based compensation is charged to the Company. For the year ended December 31, 2011, stock-based compensation charged to CML by Chindex International, Inc. was $1,224,000. This amount consists of
approximately $913,000 for services provided by Chindex International, Inc. employees under a services agreement with CML and approximately $311,000 for services provided directly by CML employees. 

13. INCOME TAXES 
 Income
before income taxes for the year ended December 31, 2011 was composed of the following (in thousands of U.S. Dollars): 
  

					
	 	  	December 31, 2011	 
	 People’s Republic of China (PRC)
	  	$	2,088	  
	 Non-PRC
	  	 	2,859	  
		  	  
	  
	 
	 Total
	  	 	4,947	  
		  	  
	  
	 

 For the year ended December 31, 2011, the provision for income taxes consists of the following (in
thousands): 
  

					
	 	  	December 31, 2011	 
		
	 Current:
	  			
	 PRC
	  	$	1,157	  
	 Non-PRC
	  	 	348	  
		  	  
	  
	 
	 Total current
	  	 	1,505	  
		
	 Deferred:
	  			
	 PRC
	  	 	78	  
	 Non-PRC
	  	 	11	  
		  	  
	  
	 
	 Total deferred
	  	 	89	  
		  	  
	  
	 
		
	 Total provision
	  	$	1,594	  
		  	  
	  
	 

  
 20 

 For the year ended December 31, 2011, the provision for income taxes differs from the
amount computed by applying the PRC statutory income tax rate to the Company’s income from operations before income taxes as follows: 
  

					
	 	  	December 31, 2011	 
	 Income tax expense at the China statutory rate
	  	 	25.0	% 
		
	 Foreign rate differentials
	  	 	(9.9	)% 
	 Change in valuation allowance
	  	 	8.7	% 
	 Other permanent differences
	  	 	8.4	% 
		  	  
	  
	 
		
		  	 	32.2	% 
		  	  
	  
	 

 Deferred income taxes reflect the net tax effects of the temporary differences between the carrying
amounts of the Company’s assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows as of
December 31, 2011 (in thousands of U.S. Dollars): 
  

					
	 	  	December 31, 2011	 
	 Deferred tax assets, net:
	  			
	 Allowance for doubtful accounts
	  	$	294	  
	 Inventory
	  	 	657	  
	 Accrued expenses
	  	 	734	  
	 Net operating loss carryforwards
	  	 	741	  
	 Depreciation and amortization
	  	 	3	  
	 Other
	  	 	51	  
		  	  
	  
	 
		  	 	2,480	  
		
	 Valuation allowance
	  	 	(1,855	) 
		  	  
	  
	 
	 Deferred tax assets, net of valuation allowance
	  	$	625	  
		  	  
	  
	 

 The Company has losses from China of which approximately $2.7 million will expire between 2012 and 2016.

 Management assessed the realization of its deferred tax assets throughout each of the quarters of the twelve month period
ended December 31, 2011. Management records a valuation allowance when it determines based on available positive and negative evidence, that it is more likely than not that some portion or all of its deferred tax assets will not be realized.
The valuation allowance as of December 31, 2011 was $1,855,000. 
 The new PRC Corporate Income Tax Law published in 2007
imposes a 10% withholding income tax, subject to reduction based on tax treaty where applicable, for dividends distributed by a foreign invested enterprise to its immediate holding company outside China. Such dividends were exempted from PRC tax
under the previous income tax law and regulations. The foreign invested enterprise will be subject to the withholding tax starting from January 1, 2008. 
 As of December 31, 2011, the Group intended to reinvest permanently the retained earnings of its PRC subsidiaries. The amount of unrecognized deferred tax liabilities for temporary differences
related to investments in foreign subsidiaries is not determined because such a determination is not practicable. 
 The
Company’s tax expense reflects the impact of varying tax rates in the different jurisdictions in which it operates. It also includes changes to the valuation allowance as a result of management’s judgments and
estimates concerning projections of domestic and foreign profitability and the extent of the utilization of net operating loss carry forwards. As a result, we have experienced significant fluctuations in our world-wide effective tax
rate. Changes in the estimated level of annual pre-tax income, changes in tax laws particularly related to the utilization of net operating losses in various jurisdictions, and changes resulting from tax audits can all affect the overall
effective income tax rate which, in turn, impacts the overall level of income tax expense and net income. 
 For the foreign
jurisdictions, the Company is no longer subject to local examinations by the tax authorities for years prior to 2006. 

  
 21 

 As of December 31, 2011, the Company had no unrecognized tax benefits, nor did it have
any that would have an effect on the effective tax rate. The Company’s policy is that it would recognize interest and penalties accrued on any unrecognized tax benefits as a component of provision for income taxes. As of December 31, 2011,
the Company had no accrued interest or penalties related to uncertain tax positions. 
 14. COMMITMENTS 

Leases 
 CML and
its subsidiaries lease office space and space for distribution and manufacturing operations under operating leases. Future minimum payments under these noncancelable operating leases as of December 31, 2011, consist of the following: (in
thousands): 
  

					
	 Year ending December 31:
	  			
	 2012
	  	$	1,408	  
	 2013
	  	 	878	  
	 2014
	  	 	772	  
	 2015
	  	 	705	  
	 Thereafter
	  	 	116	  
		  	  
	  
	 
	 Net minimum rental commitments
	  	$	3,879	  
		  	  
	  
	 

 Rental expense was approximately $1,779,000 for the year ended December 31, 2011. 

15. FAIR VALUE OF FINANCIAL INSTRUMENTS 
 The Company adopted ASC 820, which defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value
measurements. It clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based
measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the
inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3)
unobservable inputs in which there is little or no market data, which require us to develop our own assumptions. This hierarchy requires us to use observable market data, when available, and to minimize the use of unobservable inputs when
determining fair value. 
 The valuations of the investment securities are obtained from a financial institution that trades in
similar securities. 

  
 22 

 The following table presents the balances of investment securities as of December 31,
2011 measured at fair value on a recurring basis by level (in thousands of dollars): 
  

																	
	As of December 31, 2011:	  				  				  				  			
	 Description
	  	Total	 	  	Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)	 	  	Significant
Other
Observable
Inputs
(Level 2)	 	  	Significant
Unobservable
Inputs
(Level 3)	 
	 Assets
	  				  				  				  			
	 U.S. Government Sponsored Enterprises
	  	$	2,162	  	  	$	—  	  	  	$	2,162	  	  	$	—  	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total
	  	$	2,162	  	  	$	—  	  	  	$	2,162	  	  	$	—  	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

 The carrying amounts reported in the consolidated balance sheet for cash and cash equivalents, accounts
receivable, accounts payable, and short-term loans approximate fair value because of the short-term maturity of these instruments. 
 16.
CONCENTRATIONS OF RISK 
 Credit Risk 
 Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivables. Substantially all of the
Company’s cash and cash equivalents and restricted cash of $24.4 million at December 31, 2011 were held by ten Chinese banks and three international banks. 
 Supplier Risk 
 Supplier relationships which potentially subject the Company
to concentrations of supplier risk consist primarily of relationships where supply of raw materials may be in short supply or controlled by a limited number of channels, pricing for commodity products subject to market fluctuations or technologies
critical to the Company’s business are substantially controlled by one supplier with whom the Company has an exclusive, or restrictive, distribution rights. The Company has one significant supplier, Siemens, which accounted for 36% of total
product cost of goods sold. 
 Currency Convertibility Risk 
 Some of the Company’s operating activities are transacted in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the
People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory
institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts. 

Foreign Currency Exchange Rate Risk 
 The functional currency of certain entities of the Company is RMB, and the reporting currency is USD. Since July 21, 2005, RMB has been permitted by the PRC government to fluctuate within a managed
band against a basket of certain foreign currencies. The depreciation of the USD against RMB was 4.9% during the year ended December 31, 2011. Any significant revaluation of RMB may materially and adversely affect the cash flows, operating
results and financial position of the Company. 

  
 23 

 17. RELATED PARTY TRANSACTIONS 

CML is owned by two investors, FosunPharma and Chindex International, Inc. CML completed its first year of operations in 2011, and it has
used certain resources available from its two owners, as detailed below. 
 Services Agreement 

CML and Chindex entered into a services agreement, effective on January 1, 2011. Under the services agreement, Chindex provides
advisory and support services as requested by CML. The services include management and administrative support services for marketing, sales and order fulfillment activities conducted in the United States and China, order processing and exporting of
goods sold to customers in China, assistance with respect to the marketing of products sold in China by CML, analysis of sales opportunities and other assistance including services such as payroll, database administration, internal auditing,
accounting and finance that will assist CML in carrying out its activities in the United States and China. In 2011, the service expenses charged by Chindex to CML were $3,451,000. 
 Lease Agreements with Related Parties 
 CML leases office space in
Beijing from a real estate company affiliated with FosunPharma. Rent expense for this building was $579,000 in 2011. 
 Transactions with
Affiliates and Balances to/from Affiliates 
 Transactions with affiliated companies outside CML in 2011 was as follows: 

 

					
	 	  	December 31, 2011	 
	 Sales to affiliates
	  			
	 FosunPharma - Scientific Import & Export and Suzhou Laishi
	  	$	521	  
	 Chindex
	  	 	1,826	  
		  	  
	  
	 
	 Total
	  	$	2,347	  
		  	  
	  
	 
		
	 Purchases from affiliates
	  			
	 FosunPharma - Scientific Import & Export and Suzhou Laishi
	  	$	3,420	  
	 Chindex
	  	 	3,451	  
		  	  
	  
	 
		  	$	6,871	  
		  	  
	  
	 

  
 24 

 Balances with affiliated companies as of December 31, 2011 were as follows: 

 

					
	 	  	December 31, 2011	 
	 Receivables from affiliates
	  			
	 FosunPharma
	  	$	3	  
	 Chindex
	  	 	2,893	  
		  	  
	  
	 
	 Total
	  	$	2,896	  
		  	  
	  
	 
		
	 Payable to affiliates
	  			
	 FosunPharma
	  	$	6,168	  
	 Chindex
	  	 	10,974	  
		  	  
	  
	 
		  	$	17,142	  
		  	  
	  
	 

 18. SUBSEQUENT EVENTS 
 Subsequent events have been evaluated through March 9, 2012, which was also the date that the financial statements were available to be issued, and there were no subsequent events requiring
disclosure. 

  
 25EX-10.21

 Exhibit 10.21 

RESTRICTED STOCK AGREEMENT 
 UNDER THE YOUNG INNOVATIONS, INC. 
 2006 LONG-TERM INCENTIVE PLAN

  

					
	 Name of Grantee:
	  		  	
			
	 Social Security No.:
	  	N/A	  	
			
	 No. of Shares:
	  		  	
			
	 Grant Date:
	  	February 10, 2011	  	
			
	 Vested Shares
	  		  	
			
	 (from continuous service):
	  	33% on February 10, 2012	  	
		  	33% on February 10, 2013	  	
		  	34% on February 10, 2014	  	

 This Restricted Stock Agreement is between Young Innovations, Inc., a Missouri corporation (the
“Company”), and you, the Grantee named above. 
 This Agreement is effective as of the date of grant indicated above
(the “Grant Date”). 
 The Company wishes to award to you a number of shares of the Company’s Common Stock, par
value ($0.01) (the “Common Stock”), subject to certain restrictions as provided in this Agreement, in order to carry out the purpose of the Young Innovations, Inc. 2006 Long-Term Incentive Plan (the “Plan”). 

Accordingly, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and you hereby
agree as follows: 
  

	 	1.	Award of Restricted Stock. 

The Company hereby grants to you, effective as of the Grant Date, an Award of Restricted Stock for that number of shares of Common Stock
indicated above (the “Shares”), on the terms and conditions set forth in this Agreement and in accordance with the terms of the Plan. 
  

	 	2.	Rights with Respect to the Shares. 

 With respect to the Shares, you shall be entitled effective as of the Grant Date to exercise the rights of a shareholder of Common Stock of the Company, including the right to vote the Shares and the
right, subject to Section 8(b) below, to receive dividends on the Shares, unless and until the Shares are forfeited under Section 5 below. Notwithstanding the foregoing, you shall be subject to the transfer restrictions in Section 6.
Your rights with respect to the Shares shall remain forfeitable at all times prior to the date or dates on which such rights become vested under this Agreement. 
  

	 	3.	Vesting. 

 Subject to the
terms and conditions of this Agreement, Shares shall become vested in the amount or amounts set forth herein if you remain in continuous service of the Company or a Subsidiary until the respective date or dates described in this Agreement. Vesting
or becoming vested entitles you to transfer your Shares, and to retain your Shares after termination of service with the Company and its Subsidiaries subject to Section 10 below. Shares that vest under this Agreement are referred to as
“Vested Shares.” 
  

	 	4.	Change in Control. 

 In
the event of a Change in Control while you are in service hereunder, all of your Shares, to the extent then unvested, shall immediately prior to such Change in Control become Vested Shares. For purposes of this Agreement, “Change in
Control” shall have the same definition as set forth in the Plan. 

	 	5.	Forfeiture. 

 Your rights
to Shares that become Vested Shares shall not be subject to forfeiture. Your rights to Shares that are not Vested Shares shall be immediately and irrevocably forfeited upon your termination of service, including the right to vote such Shares and the
right to receive cash dividends on such Shares as provided in Section 8(b) of this Agreement; provided, however, that if your service terminates due to death, your Shares, to the extent not then vested, will immediately become Vested Shares. No
transfer by will or the applicable laws of descent and distribution of any Shares which vest by reason of your death shall be effective to bind the Company unless the Committee administering the Plan shall have been furnished with written notice of
such transfer and a copy of the will or such other evidence as the Committee may deem necessary to establish the validity of the transfer. 
  

	 	6.	Transfer Restrictions. 

 Notwithstanding anything to the contrary in Section 2 and 3 of this Agreement, the Shares may not be sold, assigned, transferred, pledged, or otherwise encumbered by you (collectively, the
“Transfer Restrictions”) during the period commencing on the Grant Date and terminating at the end of the Restricted Period. The Committee shall have the authority, in its discretion, to accelerate the time at which any or all of the
Transfer Restrictions shall lapse with respect to any Shares, or to remove any or all such restrictions, whenever the Committee may determine that such action is appropriate by reason of any changes in circumstances occurring after the commencement
of the Restricted Period. 
  

	 	7.	Issuance and Custody of Certificates. 

 (a) The Company shall cause the Shares to be issued in your name, either by book-entry registration or issuance of a stock certificate or certificates, which certificate or certificates shall be held by
the Company. The Shares shall be restricted from transfer during the Restricted Period and shall be subject to an appropriate stop-transfer order. If any certificate is issued, the certificate shall bear an appropriate legend referring to the
restrictions applicable to the Shares. 
 (b) If any certificate is issued, you shall be required to execute and deliver to the
Company a stock power or stock powers relating to the Shares. 
 (c) Upon vesting and upon your request, the Company shall
promptly cause your Vested Shares (less any Shares that may have been withheld to pay taxes) to be delivered to you, free of the restrictions and/or legend described in Section 7(a) hereof, either by book-entry registration or in the form of a
certificate or certificates, registered in your name or in the names of your legal representatives, beneficiaries or heirs, as applicable. 
  

	 	8.	Distributions and Adjustments. 

 (a) If any Shares vest subsequent to any change in the number or character of the Common Stock of the Company without additional consideration paid to the Company (through any stock dividend or other
distribution, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares or otherwise), you shall then receive upon such vesting the number and type of
securities or other consideration which you would have received if such Shares had vested prior to the event changing the number or character of the outstanding Common Stock. 
 (b) Payment of any cash dividend, additional share of Common Stock of the Company, any other securities of the Company and any other property distributed with respect to the Shares shall be nonforfeitable
and payable to you immediately, regardless of whether such Shares are vested. 
  

	 	9.	Taxes. 

 (a) You
acknowledge that you will consult with your personal tax advisor regarding the federal, state and local tax consequences of the grant of the Shares, payment of dividends on the Shares, the vesting of the Shares

 
and any other matters related to this Agreement. You are relying solely on your advisors and not on any statements or representations of the Company or any of its agents. You understand that you
are responsible for your own tax liability that may arise as a result of this grant of the Shares or any other matters related to this Agreement. You understand that Section 83 of the Code treats as taxable ordinary income the fair market value
of the Shares as of the date the Shares vest hereunder. Alternatively, you understand that you may elect to be taxed at the time the Shares are granted rather than when the Shares vest hereunder by filing an election under Section 83(b) of the
Code with the Internal Revenue Service within 30 days from the Grant Date. 
 (b) In order to comply with all applicable
federal, state or local income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all income and payroll taxes, which are your sole and absolute responsibility, are withheld or collected from you at the
minimum required withholding rate, subject to any minimum statutory withholding limits. In no event shall the amount withheld for taxes exceed the minimum statutory withholding limit. 

(c) In accordance with the terms of the Plan, and such rules as may be adopted by the Committee administering the Plan, the amount of
Shares to be paid to you will be reduced by the number of Shares with a Fair Market Value necessary to satisfy the minimum statutory federal and state withholding amounts triggered by your receipt of, or lapse of restrictions relating to, the Shares
(including property attributable to the Shares described in Section 8(b) above); provided, however, that you may elect, within 30 calendar days before the date that the amount of tax to be withheld is determined, to satisfy such withholding
requirements in cash. Fractional Shares, if any, will be paid in cash and applied towards withholding. 
  

	 	10.	General Provisions. 

 (a)
Interpretations. This Agreement is subject in all respects to the terms of the Plan. A copy of the Plan is available upon your request. Terms used herein which are defined in the Plan shall have the respective meanings given to such terms in
the Plan, unless otherwise defined herein. In the event that any provision of this Agreement is inconsistent with the terms of the Plan, the terms of the Plan shall govern. Any question of administration or interpretation arising under this
Agreement shall be determined by the Committee administering the Plan, and such determination shall be final, conclusive and binding upon all parties in interest. 
 (b) Integrated Agreement. This Agreement and the Plan constitute the entire understanding and agreement between you and the Company with respect to the subject matter contained herein and
supersedes any prior agreements, understandings, restrictions, representations, or warranties between you and the Company with respect to such subject matter other than those as set forth or provided for herein. 

(c) No Right to Employment. Nothing in this Agreement or the Plan shall be construed as giving you the right to be retained as an
employee of the Company or a Subsidiary of the Company. In addition, the Company or a Subsidiary of the Company may at any time dismiss you from employment free from any liability or any claim under this Agreement, unless otherwise expressly
provided in this Agreement. 
 (d) Securities Matters. The Company shall not be required to deliver any Shares until the
requirements of any federal or state securities or other laws, rules or regulations (including the rules of any securities exchange) as may be determined by the Company to be applicable are satisfied. 

(e) Headings. Headings are given to the sections and subsections of this Agreement solely as a convenience to facilitate
reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of this Agreement or any provision hereof. 
 (f) Saving Clause. If any provision(s) of this Agreement shall be determined to be illegal or unenforceable, such determination shall in no manner affect the legality or enforceability of any other
provision hereof. 
 (g) Governing Law. The internal law, and not the law of conflicts, of the State of Missouri will
govern all questions concerning the validity, construction and effect of this Agreement. 

 (h) Notices. You should send all written notices regarding this Agreement or the Plan
to the Company at the following address: 
 Young Innovations, Inc. 

500 N. Michigan Ave., Suite 2204 
 Chicago, IL 60611 
 Attn: Corporate Secretary 

(i) Benefit and Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their
respective successors, permitted assigns, and legal representatives. The Company has the right to assign this Agreement, and such assignee shall become entitled to all the rights of the Company hereunder to the extent of such assignment. 

[Signature Pages to Follow] 
 IN WITNESS WHEREOF, the Company has executed this Agreement in duplicate as of the day and year first above written. 
  

			
	 YOUNG INNOVATIONS, INC.

		
	 By:
	 	  

		
	 Its:
	 	Corporate Secretary

 Please indicate your acceptance of the terms and conditions of this Agreement by signing in the space provided below and
returning a signed copy of this Agreement to the Company. IF A FULLY EXECUTED COPY OF THIS AGREEMENT HAS NOT BEEN RECEIVED BY THE PRESIDENT AND SECRETARY OF THE COMPANY, THE COMPANY SHALL REVOKE ALL SHARES ISSUED TO YOU, AND AVOID ALL OBLIGATIONS,
UNDER THIS AGREEMENT. 
 The undersigned hereby accepts, and agrees to, all terms and provisions of this Agreement.

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