ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS.	9 Months Ended
Sep. 30, 2014
ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS
ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS.	NOTE 6 – ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS In order to expand the number of medicines manufactured and marketed by the Company, it has entered into contracts with independent laboratories for the purchase of medical formulas. Although CFDA approval had not been obtained for certain medical formulas as of the dates of the respective contracts, the objective of the contracts is for the Company to purchase CFDA-approved medical formulas once the CFDA approval process is completed. Some of the medical formulas currently in the CFDA approval process also come with patents. As of September 30, 2014, the Company had received the title to two unexpired patents that relate to medical formulas currently in the CFDA approval process. Prior to entering into the contracts, the laboratories typically have completed all required researches and developments to determine the medical formula for and the method of production of the generic medicines. The application to the CFDA for production approval must be made by the facilities that will manufacture the related products. As a result, a contract typically provides that the Company purchases the medical formula from the laboratory and the laboratory is required to assist the Company in applying for and obtaining the production approval from the CFDA. A typical CFDA approval process for the production of a generic medical product involves a number of steps that generally require three to five years to complete. If the medical formula is purchased at the point when the generic medical product receives the CFDA’s approval for a clinical study, which is very typical for the Company, the clinical study that follows will usually take one and a half to three years to complete. After completing the clinical study, results are submitted to the CFDA and a production approval application would be filed. In most cases, it takes between eight to eighteen months from preparing and submitting the production approval application until obtaining CFDA’s approval. Upon approving, the CFDA would issue a production certificate and the Company can start producing and promoting the generic medical product. Therefore, it is expected to take five years from the dates of the medical formula contracts until acquiring CFDA’s approval. However, the actual time needed could be even longer due to the updated criteria in the drug registration process. Under the terms of the contracts, the laboratories are required to assist the Company in obtaining production approval for the medical formulas from the CFDA. Management monitors the status of each medical formula on a regular basis in order to assess whether the laboratories are performing adequately under the contracts. If a medical product is not approved by the CFDA, as evidenced by their issuance of a denial letter, or if the laboratory breaches the contract, the laboratory is obliged under the contract to provide a refund of the full payment to the Company. alternatively, the Company can require the application of those payments to another medical formula with the same laboratory. As a result of the refund right, the Company is ultimately purchasing an approved medical product. Accordingly, payments made prior to the issuance of production approval by the CFDA are recorded as advances for purchases of intangible assets. To date, no formula has failed to receive CFDA production approval nor has the Company been informed or become aware of any formula that may fail to receive such approval. However, there is no assurance that the medical products will receive production approval and if the Company does not receive such approval, it will enforce its contractual rights to receive the refund from the laboratory or have the payments applied to another medical formula with the same laboratory. At September 30, 2014, the Company was obliged to pay laboratories and others approximately $5.19 million upon completion of various phases of contracts to provide CFDA production approval of medical formulas.

ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS.

9 Months Ended

Sep. 30, 2014

ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS

ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS.

NOTE 6 – ADVANCES FOR PURCHASES OF INTANGIBLE ASSETS

In order to expand the number of medicines manufactured and marketed by the Company, it has entered into contracts with independent laboratories for the purchase of medical formulas. Although CFDA approval had not been obtained for certain medical formulas as of the dates of the respective contracts, the objective of the contracts is for the Company to purchase CFDA-approved medical formulas once the CFDA approval process is completed. Some of the medical formulas currently in the CFDA approval process also come with patents. As of September 30, 2014, the Company had received the title to two unexpired patents that relate to medical formulas currently in the CFDA approval process.

Prior to entering into the contracts, the laboratories typically have completed all required researches and developments to determine the medical formula for and the method of production of the generic medicines. The application to the CFDA for production approval must be made by the facilities that will manufacture the related products. As a result, a contract typically provides that the Company purchases the medical formula from the laboratory and the laboratory is required to assist the Company in applying for and obtaining the production approval from the CFDA.

A typical CFDA approval process for the production of a generic medical product involves a number of steps that generally require three to five years to complete. If the medical formula is purchased at the point when the generic medical product receives the CFDA’s approval for a clinical study, which is very typical for the Company, the clinical study that follows will usually take one and a half to three years to complete. After completing the clinical study, results are submitted to the CFDA and a production approval application would be filed. In most cases, it takes between eight to eighteen months from preparing and submitting the production approval application until obtaining CFDA’s approval. Upon approving, the CFDA would issue a production certificate and the Company can start producing and promoting the generic medical product. Therefore, it is expected to take five years from the dates of the medical formula contracts until acquiring CFDA’s approval. However, the actual time needed could be even longer due to the updated criteria in the drug registration process.

Under the terms of the contracts, the laboratories are required to assist the Company in obtaining production approval for the medical formulas from the CFDA. Management monitors the status of each medical formula on a regular basis in order to assess whether the laboratories are performing adequately under the contracts. If a medical product is not approved by the CFDA, as evidenced by their issuance of a denial letter, or if the laboratory breaches the contract, the laboratory is obliged under the contract to provide a refund of the full payment to the Company. alternatively, the Company can require the application of those payments to another medical formula with the same laboratory. As a result of the refund right, the Company is ultimately purchasing an approved medical product. Accordingly, payments made prior to the issuance of production approval by the CFDA are recorded as advances for purchases of intangible assets.

To date, no formula has failed to receive CFDA production approval nor has the Company been informed or become aware of any formula that may fail to receive such approval. However, there is no assurance that the medical products will receive production approval and if the Company does not receive such approval, it will enforce its contractual rights to receive the refund from the laboratory or have the payments applied to another medical formula with the same laboratory.

At September 30, 2014, the Company was obliged to pay laboratories and others approximately $5.19 million upon completion of various phases of contracts to provide CFDA production approval of medical formulas.