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Intangible Assets

3 Months Ended

Mar. 31, 2023

NOTE 4 - INTANGIBLE ASSETS

Intangible assets represent the cost of medical formulas approved for production by the NMPA and the intellectual property acquired in November 2022 relative to the creation of an ophthalmic oxygen enriched atomization therapeutic instrument, which has a utility model patent (the “Utility Model Patent”) and applied for an invention patent (the “Invention Patent”) . The Company did not obtain NMPA production approval for any new medical formulas during the three months ended March 31, 2023 and 2022 and no costs were reclassified from advances to intangible assets during the three months ended March 31, 2023 and 2022, respectively.

Approved medical formulas are amortized from the date NMPA 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 $55,161 and $9,680 for the three months ended March 31, 2023 and 2022, respectively which 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 will pay a service fee of 15% of the net profit of the corresponding product sales revenue, which will be paid in cash annually after it launches to the market, contingent on the successful authorization of the above mentioned Invention Patent. There were no service fees paid for the three months ended March 31, 2023 and 2022, respectively.

The Company evaluates each approved medical formula for impairment at the date of NMPA approval, when indications of impairment are present and also at the date of each financial statement. The Company’s evaluation is based on an estimated undiscounted net cash flow model, which considers 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. No impairment loss was recognized during the three months ended March 31, 2023 and 2022.

Intangible assets consisted of NMPA approved medical formulas, a Utility Model Patent and an Invention Patent as follows:

	March 31,			December 31,
	2023			2022
Gross carrying amount	$	6,692,217		$	6,554,628
Accumulated amortization		(4,866,288	)		(4,747,142	)
Net carrying amount	$	1,825,929		$	1,807,486