Intangible assets represent the cost of medical formulas approved for production by the CFDA. The Company did not obtain CFDA production approval for any medical formula during the year ended December 31, 2013 and no costs were reclassified from advances to intangible assets in 2013. During the year ended December 31, 2012, the Company received production approval from the CFDA for one medical formula and reclassified $507,174 from advances to intangible assets. The new medical formula is being amortized from the date CFDA approval was received over its estimated useful life of thirteen years and is not expected to have a residual value at the end of its useful life.

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 $766,318 and $611,724 for the years ended December 31, 2013 and 2012, 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. As a result of the evaluations, the Company determined that it is not likely that the carrying value of two medical formulas will be realized from future cash flows due to the failure to meet certain enhanced technical criteria for one formula and from pricing pressures on the other one. As a result, impairment losses relating to those intangible assets were $593,095 for the year ended December 31, 2012. No impairment losses were recognized during the year ended December 31, 2013.

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

	December 31,
	2013			2012
Gross carrying amount	$	5,524,785		$	5,357,580
Accumulated amortization		(3,812,992	)		(2,944,726	)
Net carrying amount	$	1,711,793		$	2,412,854

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

	Year		Amount
	2014		$ 515,810
	2015		452,229
	2016		284,292
	2017		152,841
	2018		46,390
	Thereafter		260,231
	Total		$ 1,711,793