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INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2016

INTANGIBLE ASSETS

INTANGIBLE ASSETS

NOTE 4 - INTANGIBLE ASSETS

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, 2016 and 2015 and no costs were reclassified from advances to intangible assets in 2016 and 2015, 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 $262,908 and $317,908 for the years ended December 31, 2016 and 2015, 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 discounted 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 undiscounted future net cash flows. An impairment loss of $104,544 was recognized during the year ended December 31, 2015. No impairment loss was recognized during the year ended December 31, 2016.

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

		December 31,				December 31,
		2016				2015
Gross carrying amount		$	4,861,766			$	5,201,079
Accumulated amortization			(4,327,084	)			(4,360,004	)
Net carrying amount		$	534,682			$	841,075

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

Year		Amount
2017		160,947
2018		109,872
2019		57,290
2020		35,412
2021		35,412
Thereafter		135,749
Total		$ 534,682