INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2011

NOTE 4 - INTANGIBLE ASSETS

Intangible assets represent the cost of medical formulas approved for production by the State Food and Drug Administration (the "SFDA") in China. During the years ended December 31, 2011 or 2010, the Company did not obtain SFDA 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 SFDA approval is obtained over their individually identifiable estimated useful life, which are 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 $596,525 and $913,633 for the years ended December 31, 2011 and 2010, 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 SFDA 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 years ended December 31, 2011 or 2010.

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

	December 31,
	2011			2010
Gross carrying amount	$	6,124,475		$	5,889,844
Accumulated amortization		(3,041,804	)		(2,342,081	)
Net carrying amount	$	3,082,671		$	3,547,763

The estimated aggregate annual amortization expense for each of the next five years and thereafter is as follows:

Year	Amount
2012	$	605,642
2013		606,423
2014		591,149
2015		590,696
2016		416,437
Thereafter		272,324
Total	$	3,082,671

- Definition

The entire disclosure for all or part of the information related to intangible assets.

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