ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS AND PROPERTY AND EQUIPMENT	9 Months Ended
Sep. 30, 2011
ADVANCES FOR PURCHASES
ADVANCES FOR PURCHASES	NOTE 5 - ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS AND PROPERTY AND EQUIPMENT In order to expand the number of medicines manufactured and marketed by the Company, the Company has entered into purchase contracts with independent laboratories and university laboratories. The contracts are for the purchase of established medical formulas for which the related patents have expired (generic medicines). Prior to entering into the contracts, the laboratories typically have completed all required research and development to determine the medical formula for and the method of production of the generic medicine. If the Company enters into a contract prior to the determination of the medical formula for a medicine, contract costs incurred to establish the medical formula are recognized as research and development expense. The contracts with the laboratories are primarily for certification of the manufacturing process and authorization by the State Food and Drug Administration ("SFDA") to sell the generic medicines. Under the terms of each contract, the Company is required to make progress payments to the laboratory; if however the SFDA production approval is not obtained for a medical formula, the Company has the right to choose to receive a refund of the payments for that formula, or the application of those payments to another formula. Payments made prior to the completion of the related process are recorded as advances for purchases of intangible assets. A typical SFDA approval process for the production of a new product involves a number of steps that generally requires three (3) to five (5) years. If we make our purchase at the point when the product receives the approval for clinical study, which is very typical for us, the clinical study that follows will usually take one-and-a-half (1.5) to three (3) years. After the clinical study is completed, the result is submitted to the SFDA and a production approval application is filed. In most cases the production approval will take somewhere between eight (8) to eighteen (18) months to complete after the completion of clinical study, and we can produce and sell the product after a production approval is obtained from the SFDA for the product. If during the clinical process we fail to reach the SFDA requirement or if we fail to receive the production approval from the SFDA taking reasonable efforts after completing the clinical study, management will determine that the process should stop and whether impairment should be recognized. We monitor the status of each formula on a regular basis in order to make these assessments. The laboratories from which we have purchased medical formulas are required under the contracts to obtain SFDA production approval of the medical formulas. If SFDA approval is not obtained for a medical formula, as stated above, the Company has the right to choose to receive a refund of the full amount of the payments for that formula or the application of those payments to another formula, which significantly reduces the risk to the Company of the need to recognize impairment. To date, no formula has failed to receive SFDA production approval nor has the Company been informed or become aware of any formula that may fail to receive such approval. As a result, no impairment of any medical formula has been recognized to date. However, there is no assurance that no impairment will be recognized in the future should any of the products we purchase fail to receive the production approval and we fail to enforce our contractual rights to receive the refund from the seller or get our payment applied to our other purchase with the same seller. The Company is also increasing production capabilities with new machinery and facilities. As is common in the PRC, the Company prepays for much of the machinery and construction supplies. The prepayments are capitalized as advances for purchases of property and equipment until the construction begins or the machinery is delivered to the Company.

NOTE 5 - ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS AND PROPERTY AND EQUIPMENT

In order to expand the number of medicines manufactured and marketed by the Company, the Company has entered into purchase contracts with independent laboratories and university laboratories. The contracts are for the purchase of established medical formulas for which the related patents have expired (generic medicines). Prior to entering into the contracts, the laboratories typically have completed all required research and development to determine the medical formula for and the method of production of the generic medicine. If the Company enters into a contract prior to the determination of the medical formula for a medicine, contract costs incurred to establish the medical formula are recognized as research and development expense. The contracts with the laboratories are primarily for certification of the manufacturing process and authorization by the State Food and Drug Administration ("SFDA") to sell the generic medicines. Under the terms of each contract, the Company is required to make progress payments to the laboratory; if however the SFDA production approval is not obtained for a medical formula, the Company has the right to choose to receive a refund of the payments for that formula, or the application of those payments to another formula. Payments made prior to the completion of the related process are recorded as advances for purchases of intangible assets.

A typical SFDA approval process for the production of a new product involves a number of steps that generally requires three (3) to five (5) years. If we make our purchase at the point when the product receives the approval for clinical study, which is very typical for us, the clinical study that follows will usually take one-and-a-half (1.5) to three (3) years. After the clinical study is completed, the result is submitted to the SFDA and a production approval application is filed. In most cases the production approval will take somewhere between eight (8) to eighteen (18) months to complete after the completion of clinical study, and we can produce and sell the product after a production approval is obtained from the SFDA for the product.

If during the clinical process we fail to reach the SFDA requirement or if we fail to receive the production approval from the SFDA taking reasonable efforts after completing the clinical study, management will determine that the process should stop and whether impairment should be recognized. We monitor the status of each formula on a regular basis in order to make these assessments. The laboratories from which we have purchased medical formulas are required under the contracts to obtain SFDA production approval of the medical formulas. If SFDA approval is not obtained for a medical formula, as stated above, the Company has the right to choose to receive a refund of the full amount of the payments for that formula or the application of those payments to another formula, which significantly reduces the risk to the Company of the need to recognize impairment. To date, no formula has failed to receive SFDA production approval nor has the Company been informed or become aware of any formula that may fail to receive such approval. As a result, no impairment of any medical formula has been recognized to date. However, there is no assurance that no impairment will be recognized in the future should any of the products we purchase fail to receive the production approval and we fail to enforce our contractual rights to receive the refund from the seller or get our payment applied to our other purchase with the same seller.

The Company is also increasing production capabilities with new machinery and facilities. As is common in the PRC, the Company prepays for much of the machinery and construction supplies. The prepayments are capitalized as advances for purchases of property and equipment until the construction begins or the machinery is delivered to the Company.