INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2015

INTANGIBLE ASSETS

INTANGIBLE ASSETS

NOTE 5 - INTANGIBLE ASSETS

Intangible assets represent the cost of medical formulas approved for production by the China Food and Drug Administration (“CFDA”). During the nine months ended September 30, 2015, the Company did not obtain CFDA production approval for any medical formula and therefore there were no costs reclassified from advances to medical formulas.

Approved medical formulas are amortized from the date CFDA approval is obtained over their individually identifiable estimated useful life, which ranges from ten to thirteen years.  It is at least reasonably possible that a change in the estimated useful lives of the medical formulas could occur in the near term due to changes in the demand for the drugs and medicines produced from these medical formulas. For the three and nine months ended September 30, 2015 and 2014, amortization expense relating to intangible assets was $73,498 and $96,382, $246,009 and $289,712, respectively. Medical formulas typically do not have a residual value at the end of their amortization period.

The Company evaluates each approved medical formula for impairment at the date of CFDA approval, when indications of impairment are present and at the date of each financial statement. The Company’s evaluation is based on an estimated undiscounted net cash flow model, considering currently available market data for the related drug and the Company’s estimated market share. If the carrying value of the medical formula exceeds the estimated future net cash flows, an impairment loss is recognized for the excess of the carrying value over the discounted estimated future net cash flows. As a result of the evaluation, the Company has determined that each medical formula continues to provide benefits to the Company and no impairment was recognized during the nine months ended September 30, 2015 or 2014.

As of September 30, 2015 and December 31, 2014, intangible assets consisted solely of CFDA approved medical formulas as follows:

	September 30,			December 31,
	2015			2014
Gross carrying amount	$	5,313,142		$	5,499,494
Accumulated amortization		(4,279,084	)		(4,182,273	)
Net carrying amount	$	1,034,058		$	1,317,221