N. Revenue recognition The Company recognizes revenue when the amount of revenue can be reliably measured, it is probable that economic benefits will flow to the entity, and specific criteria have been met for each of the Company's activities as described below. Pharmaceutical sales Revenue from the sale of pharmaceuticals is recognized when it is both earned and realized. The Company's policy is to recognize the sale of pharmaceuticals when the title of the pharmaceuticals, ownership and risk of loss have transferred to the purchasers, and collection of the sales proceeds is reasonably assured, all of which generally occur when the patient receives the pharmaceuticals. Given the nature of this revenue source of the Company's business and the applicable rules guiding revenue recognition, the revenue recognition practices for the sale of pharmaceuticals do not contain estimates that materially affect results of operations nor does the Company have any policy for return of products. Patient Services In accordance with the medical licenses under which Jiarun operates, the scope of its approved medical patient service includes medical consulting, surgery, obstetrics and gynecology, pediatrics, anesthesia, clinic laboratory, medical imaging, and traditional Chinese medicine. Patient service revenue is recognized when it is both earned and realized. The Company's policy is to recognize patient service revenue when the medical service has been provided to the patient and collection of the revenue is reasonably assured. The Company provides services to both patients covered by social insurance and patients who are not covered by social insurance. The Company charges the same rates for patient services regardless of the coverage by social insurance. Patients who are not covered by social insurance are liable for the total cost of medical treatment. ? For out-patient medical services, revenue is recognized when the Company provides medical service to the patient. The Company collects payment before the patient leaves the hospital. ? For in-patient medical services, when a patient checks into the hospital, the Company estimates the approximate fee the patient will spend in the hospital based on patient's symptoms. At that time, the Company collects the estimated fees from the patient and records the payment as deposits received. During the in-patient services period, the Company recognizes revenue when the patient service is provided and deducts the cost of service from the deposit received. The Company records these transactions based on daily reports generated by the respective medical department. When medical services exceed patient deposits received the Company records revenue and accounts receivable when the patient services are provided. When a patient checks out from the hospital, the Company calculates and determines the remaining deposit, if any, and refunds the unused portion of the deposit to the patients. In the case where the patient has a balance in accounts receivable, accounts receivable are required to be paid in full at checkout. Patients covered by social insurance will receive a portion or full medical services reimbursed or paid by the social insurance agencies via prepaid cards or insurance claim settlement process. Settlement process The Company is a registered medical service vendor under the state social insurance system for various social insurance agencies. The insurance agencies include "Social Medical Insurance funded by PRC and Heilongjiang Province" and "Heilongjiang Province New Rural Cooperative Medical Care System". The Company utilizes an online system maintained by the social insurance agencies for patients who are covered by social insurance agencies. ? The Company records patients' information in the social insurance system at check in. The system determines the covered portion and amounts based on the information input to the system. ? At the time of check out, the Company collects payment for services the patients are liable for and records accounts receivable from the social insurance agencies for the portion of services covered by the social insurance. In the case that the patients have made payment during the in-patient services period, the Company refunds any amount in excess of the portion they are liable for. ? The Company is responsible for submitting supporting documents of patient services provided to the social insurance agencies for their review. The Company is also required to reconcile its records with the social insurance agencies once a month. Once the social insurance agencies approve the reconciliation, the insurance agencies will settle the accounts receivable balance in the next month following the approval.