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INTANGIBLE ASSETS
 9 Months Ended
Sep. 30, 2011
INTANGIBLE ASSETS  
INTANGIBLE ASSETS

NOTE 4 - INTANGIBLE ASSETS

 

Intangible assets represent the cost of medical formulas approved for production by the SFDA. During the nine months ended September 30, 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 $445,710 and $682,856 for the nine months ended September 30, 2011 and 2010, 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 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 nine months ended September 30, 2011 or 2010.

 

At September 30, 2011 and December 31, 2010, intangible assets consisted solely of SFDA approved medical formulas as follows:

 

 

 

Gross Carrying Amount

Accumulated  Amortization

Net Carrying Amount

September 30,2011

$ 6,095,686

$ 2,876,612

$ 3,219,074

December 31,2010

$ 5,889,845

$ 2,342,081

$ 3,547764

 

 

 

Estimated future amortization of SFDA approved medical formulas for the three months ended December 31, 2011 and for each of the following five years is as follows:

 

Year Ending December 31:

 

2011 (three months)

$ 172,305

2012

555,404

2013

553998

2014

539,365

2015

429,888

2016

394,060

Thereafter

574,054

 

$ 3,219,074