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Intangible Assets

12 Months Ended

Dec. 31, 2023

NOTE 4 - INTANGIBLE ASSETS

Intangible assets represent the cost of medical formulas approved for production by the NMPA, the intellectual property acquired from Chengdu Bonier Medical Technology Development Co., Ltd. (“Bonier Agreement”) and the Technology Transfer Agreement (the “Agreement”) with Tao Liu discussed below. The Company did not obtain NMPA production approval for any new medical formulas during the years ended December 31, 2023 and 2022 and no costs were reclassified from advances to intangible assets during the years ended December 31, 2023 and 2022, respectively. On August 9, 2023, the Company obtained the “Drug Supplementary Application Approval Notice” from the NMPA for the indicating that the Company’s existing formular Candesartan tablets have passed the quality and efficacy consistency evaluation of generic drugs.

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 $223,796 and $36,558 for the years ended December 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.

On December 15, 2023, the Company entered into a Technology Transfer Agreement (the “Agreement”) with Tao Liu (the “Transferor”). The Transferor owns an invention patent of a drug combination for the treatment of chronic obstructive pulmonary disease (the “Invention Patent”). Pursuant to the Agreement, the Transferor will transfer the ownership of the Invention Patent to Helpson. The Transferor or its designated third party shall provide relevant technical services in Haikou, which include but are not limited to product research and development, writing of registration materials, registration application and other technical services.

Effective December 15, 2023 China Pharma issued 3,000,000 shares of its common stock valued at $1,650,000 based on the closing market price of its common stock of $0.55 per share at that date. The Company recorded the amount as Intangible assets on the accompanying balance sheet at December 31, 2023. The value of the intangible asset will be amortized over its remaining useful life of approximately 14.8 years.

During the ten years after the product launches to the market, if and only if the product generates profit, Helpson shall pay 15% of the net profit of the sales in cash on an annual basis to the Transferor.

On November 28, 2022, the Company entered into a Technology Transfer Contract (the “Bonier Agreement”) with Chengdu Bonier Medical Technology Development Co., Ltd (“Bonier”). Bonier owns the know-how of a technical invention and creation of an ophthalmic oxygen enriched atomization therapeutic instrument, which has obtained a utility model patent (the “Utility Model Patent”) and applied for an invention patent (the “Invention Patent”) at the same time. Pursuant to the Agreement, Bonier will transfer the ownership of the Utility Model Patent of the technical invention and the Invention Patent application right of the invention to Helpson. Bonier or its designated third party shall provide relevant technical services in Haikou, which include but are not limited to product research and development, writing of registration materials, registration application and other technical services, with a term of ten years. Effective November 28, 2022 the Company issued 310,446 share of its common stock valued at $1,707,452 based on the closing market price of its common stock of $5.50 per share at that date. The Company recorded the amount as Intangible assets on the accompanying balance sheet at December 31, 2022. The value of the intangible asset will be amortized over its remaining useful life of approximately 9.7 years.

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.

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 years ended December 31, 2023 and 2022, respectively.

Intangible assets consisted of the following:

	December 31,			December 31,
	2023			2022
NMPA approved medical formulas	$	4,766,353		$	4,847,176
Technology from Bonier		1,726,497			1,707,452
Invention Patent		1,653,028			-
Accumulated amortization		(4,890,646	)		(4,747,142	)
Net carrying amount	$	3,255,232		$	1,807,486

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

Year	Amount
2024		327,050
2025		321,235
2026		292,156
2027		292,156
2028		292,156
Thereafter		1,730,479
Total	$	3,255,232