INTANGIBLE ASSETS

3 Months Ended

Mar. 31, 2017

INTANGIBLE ASSETS

INTANGIBLE ASSETS

NOTE 4 - INTANGIBLE ASSETS

Intangible assets represent the cost of medical formulas approved for production by the China Food and Drug Administration (“CFDA”). The Company did not obtain CFDA production approval for any medical formula during the three months ended March 31, 2017 and 2016 and no costs were reclassified from advances to intangible assets during the three months ended March 31, 2017 and 2016, respectively.

Approved medical formulas are amortized from the date CFDA approval is obtained over their individually identifiable estimated useful life, which range 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. Amortization expense relating to intangible assets was $50,780 and $66,941 for the three months ended March 31, 2017 and 2016, respectively, and was included in the general and administrative expenses. 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 fair value of the medical formula, which is determined by the estimated discounted future net cash flows. No impairment loss was recognized during the three months ended March 31, 2017 and 2016. 

Intangible assets consisted solely of CFDA approved medical formulas as follows:

	March 31,			December 31,
	2017			2016
Gross carrying amount	$	4,899,281		$	4,861,766
Accumulated amortization		(4,411,237	)		(4,327,084	)
Net carrying amount	$	488,044		$	534,682